**Exhibit 4.1**EXECUTION VERSION  PURCHASE AND SALE AGREEMENTby and amongANP ERCOT ACQUISITION, LLCas BuyerandTOPAZ POWER GROUP GP, LLCandTOPAZ POWER GROUP LP, LLCas Sellers Dated as of April 18, 2006   
 

 
         ARTICLE I      PURCHASE AND SALE OF THE UNITS           Section 1.1 Time and Place of Closing  1 Section 1.2 Purchase and Sale of Units  2 Section 1.3 Purchase Price Adjustment  3 Section 1.4 Purchase Price Allocations  5 Section 1.5 Preliminary Information  6 Section 1.6 Sellers’ Closing Deliverables  6 Section 1.7 Buyer’s Closing Deliverables  7          ARTICLE II      REPRESENTATIONS AND WARRANTIES CONCERNING EACH SELLER           Section 2.1 Organization; Etc  7 Section 2.2 Authority Relative to this Agreement  8 Section 2.3 Ownership of Equity Interests  8 Section 2.4 Consents and Approvals; No Violations  8 Section 2.5 Brokers; Finders and Fees  9          ARTICLE III      REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY           Section 3.1 Organization; Etc  9 Section 3.2 Authority Relative to this Agreement  10 Section 3.3 Capitalization  10 Section 3.4 Consents and Approvals; No Violations  11 Section 3.5 Reports and Financial Statements  12 Section 3.6 Absence of Undisclosed Liabilities  12 Section 3.7 Absence of Certain Changes  12 Section 3.8 Litigation  13 Section 3.9 Compliance with Law  13 Section 3.10 Labor and Employment Matters  13 Section 3.11 Taxes  14 Section 3.12 Title, Ownership and Related Matters  15 Section 3.13 Environmental  16 Section 3.14 Intellectual Property  18 Section 3.15 Contracts  19 
i

 
       Section 3.16 Insurance  20 Section 3.17 Regulatory Matters  20 Section 3.18 Affiliate Transactions  21 Section 3.19 Brokers; Finders and Fees  21          ARTICLE IV      REPRESENTATIONS AND WARRANTIES OF BUYER           Section 4.1 Organization; Etc  21 Section 4.2 Authority Relative to this Agreement  22 Section 4.3 Consents and Approvals; No Violations  22 Section 4.4 Litigation  22 Section 4.5 Compliance with Law  22 Section 4.6 Investment  23 Section 4.7 Financial Ability  23 Section 4.8 Brokers; Finders and Fees  23          ARTICLE V      COVENANTS OF THE PARTIES           Section 5.1 Operating Covenants of the Company  23 Section 5.2 Access to Information  25 Section 5.3 Consents; Cooperation  26 Section 5.4 Reasonable Best Efforts  28 Section 5.5 Public Announcements  29 Section 5.6 Employees; Employee Benefits  29 Section 5.7 Tax Matters  31 Section 5.8 Escrow Agreement  33 Section 5.9 Mutual Release  33 Section 5.10 SES PPA  33 Section 5.11 Intercompany Arrangements  33 Section 5.12 Casualty  34 Section 5.13 Transition Services Agreement  34          ARTICLE VI      CONDITIONS TO CONSUMMATION OF THE ACQUISITION           Section 6.1 Conditions to Buyer’s and Sellers’ Obligations to Consummate the Acquisition  34 Section 6.2 Further Conditions to Sellers’ Obligations  34 
ii

 
       Section 6.3 Further Conditions to Buyer’s Obligations  35          ARTICLE VII      TERMINATION AND ABANDONMENT           Section 7.1 Termination  36 Section 7.2 Procedure for and Effect of Termination  36          ARTICLE VIII      MISCELLANEOUS PROVISIONS           Section 8.1 Representations and Warranties and Covenants  37 Section 8.2 Amendment and Modification  37 Section 8.3 Entire Agreement; Assignment  37 Section 8.4 Severability  38 Section 8.5 Notices  38 Section 8.6 Governing Law  40 Section 8.7 Descriptive Headings  40 Section 8.8 Counterparts  40 Section 8.9 Fees and Expenses  40 Section 8.10 Interpretation  41 Section 8.11 Third-Party Beneficiaries  42 Section 8.12 No Waivers  42 Section 8.13 Specific Performance  42          EXHIBITS AND SCHEDULES           Exhibit A Form of Escrow Agreement    Exhibit B Form of Amendment to SES PPA    Exhibit C [Reserved]    Exhibit D-1 [Reserved]    Exhibit D-2 Surviving Intercompany Arrangements    Exhibit E Buyer’s Parent Guarantee and Lender Commitment    
iii

 
**INDEX OF TERMS**     **Term** **Page** **Acquisition**  1 **Action**  13 **Adjustment Amount**  3 **Adjustment Statement**  3 **Affiliate**  41 **Agreement**  1 **Allocation**  5 **Approval**  8 **Approvals**  8 **Benefits Maintenance Period**  29 **Buyer**  1 **Buyer Benefit Plans**  29 **Buyer Material Adverse Effect**  21 **Capital Expenditure Account**  3 **Capital Expenditure Account Balance**  3 **Cash Consideration**  2 **Closing**  1 **Closing Date**  1 **Closing Date Capital Expenditure Account Balance**  3 **Closing Date Net Working Capital**  3 **Code**  5 **Company**  1 **Company Affiliate Contracts**  21 **Company Contracts**  19 **Company Insurance Policies**  20 **Company IP**  41 **Company Material Adverse Effect**  9 **Company Securities**  11 **Conclusive Adjustment Amount**  5 **Conclusive Adjustment Statement**  4 **Conclusive Statement**  4 **Confidentiality Agreement**  26 **Consideration**  2 **Contract**  8 **Contracts**  8 **Credit Agreement**  6 **Derivative Product**  20 **Disclosure Letter**  9 **DOJ**  27 **Environmental Claim**  17 **Environmental Law**  18 **Environmental Permits**  16 **ERCOT ISO**  8 **ERISA**  14 **Escrow Account**  2 **Escrow Agent**  2 **Escrow Agreement**  2 **Escrow Amount**  2 **Estimated Closing Date Capital Expenditure Account Balance**  3 **Estimated Net Working Capital**  3 **Final Allocation**  5 **Financial Statements**  12 **FTC**  27 **GAAP**  11 **Governmental Authority**  9 **Hazardous Substance**  18 **HSR Act**  11 **Indebtedness**  11 **Intellectual Property**  41 **Intercompany Arrangement**  33 **Law**  12 **Laws**  12 **Leased Real Property**  15 **Leases**  15 **Liabilities**  12 **Liens**  10 **Modified Net Working Capital**  2 **Neutral Accounting Arbitrator**  4 **Optional Termination Date**  36 **Order**  11 **Other Regulations**  26 **Owned Real Property**  15 **Parties**  1 **Party**  1 **Pay-Off Letters**  6 **Permits**  13 **Permitted Liens**  16 **Person**  41 **Plant**  1 **Preliminary Statement**  3 **PUC**  12 **PURA**  12 
iv

 
     **Term** **Page** **Real Property**  15 **Release**  18 **Released Claims**  33 **Released Parties**  33 **Remedial Action**  18 **Representatives**  26 **Required Approvals**  11 **Resolution Period**  4 **Securities Act**  23 **Seller**  1 **Sellers**  1 **Sellers Benefit Plans**  14 **Sellers Employees**  14 **Sellers’ Statement**  4 **Sempra**  14 **SES PPA**  33 **SES PPA Amendment**  6 **Sharing Percentage**  2 **Statement**  3 **STS**  14 **STS Employees**  14 **Subsidiary**  41 **Surviving Intercompany Arrangement**  33 **Target Modified Net Working Capital**  3 **Tax Return**  15 **Taxes**  15 **Termination Date**  36 **Title Commitment**  16 **Topaz GP**  1 **Topaz LP**  1 **Topaz Power Group**  13 **Topaz Power Partners**  6 **TPG Employees**  13 **TPG Transferred Employee**  29 **Transition Services Agreement**  34 **Units**  1 
v

 
**PURCHASE AND SALE AGREEMENT**     PURCHASE AND SALE AGREEMENT, dated as of April 18, 2006 (this “**Agreement**”), by and among ANPERCOT ACQUISITION, LLC, a Delaware limited liability company (“**Buyer**”), TOPAZ POWER GROUP GP, LLC(“**Topaz GP**”), a Delaware limited liability company, and TOPAZ POWER GROUP LP, LLC (“**Topaz LP**”), aDelaware limited liability company (each of Topaz GP and Topaz LP a “**Seller,**” and together the“**Sellers**”). Buyer and Sellers are hereinafter collectively referred to as the “**Parties**” and eachindividually as a “**Party**.”     WHEREAS, as of the date of this Agreement, Sellers own in the aggregate 100% of the issued andoutstanding partnership units (the “**Units**”) of Coleto Creek Power, LP, a Texas limited partnership(the “**Company**”), which partnership units constitute all of the issued and outstanding equityinterests in the Company;     WHEREAS, the Company owns that certain coal fired power plant located in Goliad County, Texas,commonly known as the Coleto Creek Generating Facility (the “**Plant**”);     WHEREAS, Buyer desires to purchase from Sellers 100% of the Units (the “**Acquisition**”); and     WHEREAS, the Board of Directors of Buyer have approved and deem it advisable and in the bestinterest of Buyer to consummate the transactions contained in this Agreement;     NOW, THEREFORE, in consideration of the foregoing and the representations, warranties,covenants and agreements contained in this Agreement, and intending to be legally bound, theParties agree as follows:ARTICLE IPURCHASE AND SALE OF THE UNITS     Section 1.1 *Time and Place of Closing*. Unless this Agreement shall have been terminated andthe transactions herein contemplated shall have been abandoned pursuant to Section 7.1, and subjectto the satisfaction or waiver of the conditions set forth in Article VI, the closing of theAcquisition (the “**Closing**”) will take place at the offices of Cleary Gottlieb Steen & Hamilton LLP,One Liberty Plaza, New York, New York at 9:00 a.m. (local time) on the fifth business day followingthe date on which all of the conditions set forth in Article VI (other than those that by theirnature are intended to be satisfied at the Closing) have been satisfied or waived, or at such otherdate, place or time as Sellers and Buyer may agree (the “**Closing Date**”). The transactionscontemplated by this Agreement shall be deemed to be effective at 12:01 a.m. (local time) on theClosing Date.     Section 1.2 *Purchase and Sale of Units*.     (a) At the Closing, upon the terms and subject to the conditions of this Agreement, eachSeller hereby agrees to sell to Buyer, and Buyer hereby agrees to purchase from such Seller, allUnits owned by such Seller as of the Closing Date, in each case free and clear of any and all
1

 
Liens(other than Liens in favor of Buyer), for aggregate consideration from Buyer in respect of theUnits equal to the sum of the following (together, the “**Consideration**”):          (i) cash in an amount equal to the Cash Consideration plus          (ii) the Escrow Amount.     (b) At the Closing, Buyer shall pay the Consideration as follows:          (i) cash in an amount equal to $10,000,000 (the “**Escrow Amount**”), which amount shall be paidby wire transfer of immediately available funds to the account (the “**Escrow Account**”) designated byan escrow agent selected by Sellers and reasonably acceptable to Buyer (the “**Escrow Agent**”)pursuant to an escrow agreement substantially in the form of Exhibit A hereto, with suchmodifications, if any, as shall be requested by the Escrow Agent and mutually acceptable to Sellersand Buyer (the “**Escrow Agreement**”) and which Escrow Amount shall be released to Sellers and/orBuyer, as the case may be, pursuant to Section 1.3; and          (ii) each Seller shall receive from Buyer its Sharing Percentage of the Cash Consideration bywire transfer of immediately available U.S. funds.     The “**Sharing Percentage**” of each Seller shall be equal to the “**Sharing Percentage**” set forthopposite such Seller’s name on Annex A hereto. All deliveries and payments to be made byBuyer to Sellers under this Agreement shall be made in accordance with the Sharing Percentages setforth on Annex A attached hereto, as amended, and Buyer shall not be liable for theallocation of particular deliveries and payments among Sellers so long as such deliveries andpayments are made in accordance with Annex A.     (c) For the purposes of this Agreement, the following terms shall be defined as follows:          (i) The “**Cash Consideration**” shall mean cash in an amount equal to (i) $1,132,500,000 plus(ii) the Estimated Modified Net Working Capital minus Target Modified Net Working Capital (whichamount, for the avoidance of doubt, may be a negative number) plus (iii) the positive amount of theEstimated Closing Date Capital Expenditure Account Balance.          (ii) “**Modified Net Working Capital,**” as of a particular date, shall mean the current assets ofthe Company specified in Section 1.2 of the Disclosure Letter as of such date less the currentliabilities of the Company specified in Section 1.2 of the Disclosure Letter as of such date, allas determined pursuant to,and using, the same accounting principles, methodologies and policies specified in Section 1.2of the Disclosure Letter for determining Target Modified Net Working Capital and, to the extent notspecified therein, in accordance with GAAP as applied in the preparation of the FinancialStatements; provided, that, in furtherance and not in limitation of Section 1.2 of theDisclosure Letter in determining Modified Net Working Capital, current maturities of long-termIndebtedness and related interest and amounts payable under interest rate swaps shall be excluded.
2

 
          (iii) “**Target Modified Net Working Capital**” shall have the meaning given such term in Section1.2 of the Disclosure Letter.          (iv) “**Capital Expenditure Account Balance,**” as of a particular date, shall mean the amountavailable in the capital expenditures reserve account, Account No. 30574195, with Citibank, N.A.(the “**Capital Expenditure Account**”), as of such date; provided that, at Closing, (A) the amount inthe Capital Expenditure Account shall not exceed $40,000,000 and (B) all funds in the CapitalExpenditure Account shall be transferred to Buyer.     Section 1.3 *Purchase Price Adjustment*.     (a) Sellers shall, at least five (5) business days prior to the Closing Date, cause to beprepared and delivered to Buyer a statement (the “**Preliminary Statement**”), setting forth Sellers’good faith estimate of each of the Modified Net Working Capital as of the Closing Date (the“**Closing Date Modified Net Working Capital**”) and the Capital Expenditure Account Balance as of theClosing Date (the “**Closing Date Capital Expenditure Account Balance**”). The estimate of ClosingDate Modified Net Working Capital is referred to herein as the “**Estimated Modified Net WorkingCapital**” and the estimate of the Closing Date Capital Expenditure Account Balance is referred toherein as the “**Estimated Closing Date Capital Expenditure Account Balance**.”     (b) Within forty-five (45) calendar days after the Closing Date, Buyer shall cause to beprepared and delivered to Sellers a statement (the “**Statement**”) setting forth Buyer’s calculationsof Closing Date Modified Net Working Capital, the Closing Date Capital Expenditure Account Balanceand the components and calculation of each, which comments and calculations shall be included andmade in accordance with Section 1.2 of the Disclosure Letter and, to the extent not provided fortherein, GAAP (in each case as and to the same extent determined pursuant to Section 1.2(c)(ii)).At the same time, Buyer shall also cause to be prepared and delivered to Sellers a statement (the“**Adjustment Statement**”) setting forth the calculation (whether a positive or negative number) of(i) the amount of the Closing Date Modified Net Working Capital as shown on the Statement minus theEstimated Modified Net Working Capital plus (ii) the Closing Date Capital Expenditure AccountBalance minus the Estimated Closing Date Capital Expenditure Account Balance (the sum of suchamounts, whether a positive or negative number, the “**Adjustment Amount**”). Buyer shall provideSellers and their accountantswith access to the relevant books and records of the Company and the Sellers Employees to theextent required in connection with their review of and any dispute with respect to the Statementand the Adjustment Statement and shall furnish Sellers with any other information that might berelevant to the calculation of Closing Date Modified Net Working Capital or the Closing DateCapital Expenditure Account Balance. If, at any time prior to the final resolution of all disputeditems on the Statement or the Adjustment Statement, additional information shall become known toBuyer or Sellers that would change the amount of the Closing Date Modified Net Working Capital orthe Closing Date Capital Expenditure Account Balance shown on the Statement or the calculationthereof, then Buyer shall amend the Statement and Adjustment Statement to reflect such additionalinformation. Buyer or Sellers shall promptly notify Sellers or Buyer, as applicable, upon becomingaware of any additional information prior to the end of the Resolution Period.
3

 
     (c) After receipt of the Statement and the Adjustment Statement, Sellers will have thirty (30)calendar days from receipt to review the Statement and the Adjustment Statement together with theworkpapers used in their preparation. Unless Sellers deliver to Buyer written notice setting forthin reasonable detail the specific items disputed by Sellers and a written statement setting forthSellers’ calculation of each line item shown on the Statement so disputed and the amount in dispute(the “**Sellers’ Statement**”) on or prior to the thirtieth (30th) day after receipt of the Statementand the Adjustment Statement, Sellers will be deemed to have accepted and agreed to the Statementand the Adjustment Statement and such agreement will be final, binding and conclusive. Any itemson the Statement or Adjustment Statement as to which Sellers have not given notice of theirobjection and provided an alternative calculation on Sellers’ Statement will be deemed to have beenagreed upon by the Parties, subject to the penultimate sentence of Section 1.3(b). If Sellers sonotify Buyer of their objections to any of the Statement or the Adjustment Statement and provideBuyer with Sellers’ Statement in a timely manner, Buyer and Sellers will, within thirty (30)calendar days following such notice (the “**Resolution Period**”), attempt to resolve theirdifferences. Any resolution by Buyer and Sellers during the Resolution Period as to any disputedamounts will be final, binding and conclusive. If the amount claimed by Buyer on the AdjustmentStatement to be owed by Sellers is less than the Escrow Amount, then, promptly after delivery ofthe Adjustment Statement, any amount on deposit in the Escrow Account that is in excess of theamount claimed by Buyer to be owed by Sellers under this Section shall be distributed from theEscrow Account to Sellers in accordance with the Escrow Agreement, and Buyer agrees to reasonablycooperate with Sellers in any necessary joint instruction to the Escrow Agent. Money released fromthe Escrow Account to Sellers shall be distributed to Sellers in accordance with the SharingPercentages set forth on Annex A.     If Buyer and Sellers do not resolve all disputed items by the end of the Resolution Period,then all items remaining in dispute will be submitted within ten (10) days after the expiration ofthe Resolution Period to a national independent accounting firm mutually acceptable to Buyer andSellers (the **“Neutral Accounting Arbitrator**”); it being understood that no member of the NeutralAccounting Arbitrator’s engagement team shall have an existing professional relationship with Buyeror any of its Affiliates. The Neutral Accounting Arbitrator shall act as an arbitrator todetermine only those items in dispute. All fees and expenses relating to the work, if any, to beperformed by the Neutral Accounting Arbitrator will be allocated between Buyer, on the one hand,and Sellers, on the other hand, in inverseproportion as they shall prevail on the amounts of such disputed items so submitted (asfinally determined by the Neutral Accounting Arbitrator). The Neutral Accounting Arbitrator willdeliver to Buyer and Sellers a written determination (such determination to include a work sheetsetting forth all material calculations used in arriving at such determination and to be basedsolely on information provided to the Neutral Accounting Arbitrator by Sellers and Buyer) of thedisputed items within thirty (30) days of receipt of the disputed items (or as soon as practicablethereafter), which determination will be final, binding and conclusive. The final, binding andconclusive Statement and Adjustment Statement, which either are agreed upon by Buyer and Sellers orare delivered by the Neutral Accounting Arbitrator in accordance with this Section 1.3, will be the“**Conclusive Statement**” and the “**Conclusive Adjustment Statement**,” respectively. In the event thateither Buyer or Sellers fails to submit its statement regarding any items remaining in disputewithin the time determined by the Neutral Accounting Arbitrator, then the Neutral AccountingArbitrator shall
4

 
render a decision based solely on the evidence timely submitted to the NeutralAccounting Arbitrator by Buyer and/or Sellers.     (d) If the Adjustment Amount as shown on the Conclusive Adjustment Statement (the “**ConclusiveAdjustment Amount**”) is a negative number, then the Cash Consideration will be reduced by the amountof the Conclusive Adjustment Amount, but not in excess of the Escrow Amount, and Buyer shall beentitled to payment of such amount from the Escrow Account by wire transfer of immediatelyavailable funds to an account or accounts designated by the Party entitled to receive such funds(and Sellers agree to cooperate reasonably in facilitating such payment, including by executing anddelivering an appropriate joint instruction to the Escrow Agent). If the Conclusive AdjustmentAmount is a positive number, then the Cash Consideration will be increased by the amount of theConclusive Adjustment Amount, but not in excess of the Escrow Amount, and Buyer shall pay toSellers cash equal to such amount, to be paid to an account or accounts designated in writing bySellers prior to the date when such payment is due. All payments to be made pursuant to thisSection 1.3(d) will be made on the fifth business day following the date on which Buyer and Sellersagree to, or the Neutral Accounting Arbitrator delivers, the Conclusive Statement and theConclusive Adjustment Statement and, in the case of payment to Buyer, instruct the Escrow Agent byjoint written instruction accordingly. If the Conclusive Adjustment Amount is a positive number,or is a negative amount that is less than the amount remaining on deposit in the Escrow Account,then, promptly after determination of the Conclusive Adjustment Amount, any amount remaining ondeposit in the Escrow Account that is in excess of the lesser of the Conclusive Adjustment Amountand the Escrow Amount shall be distributed from the Escrow Account to Sellers in accordance withthe Escrow Agreement, and Buyer agrees to reasonably cooperate with Sellers in any necessary jointinstruction to the Escrow Agent. Money released from the Escrow Account to Sellers shall bedistributed to Sellers in accordance with the Sharing Percentages set forth on Annex A.     (e) Buyer acknowledges and agrees that its sole and exclusive remedy for any amount due to itpursuant to this Section 1.3 shall be its right to payment from the Escrow Account in an amount notto exceed the Escrow Amount. Sellers acknowledge and agree that their sole and exclusive remedyfor any amount due to them pursuant to this Section 1.3 shall be the right to payment from Buyer inan amount not to exceed the Escrow Amount.     Section 1.4 *Purchase Price Allocations*. Sellers and Buyer agree that the Consideration shallbe allocated for federal income tax purposes in accordance with Section 1060 of the InternalRevenue Code of 1986, as amended (the “**Code**”). Buyer shall, within sixty (60) days after theConclusive Adjustment Amount is determined, prepare and deliver to Sellers for their review aschedule allocating the Consideration (and any other items that are required for federal income taxpurposes to be treated as part of the purchase price of the Units) among the purchased assets (suchschedule, the “**Allocation**”). Sellers shall review such Allocation and provide any objections toBuyer within thirty (30) days after the receipt thereof. In the event Sellers do not object toPurchaser’s Allocation, such Allocation shall be final (the “**Final Allocation**”) and Buyer andSellers shall report such Final Allocation for Tax purposes and file Tax Returns (including Form8594 under Section 1060 of the Code) in a manner consistent with such mutually agreed FinalAllocation. If Sellers raise any objection to the Allocation, the Parties will negotiate in goodfaith to resolve such objection(s). If the Parties are unable to agree on the Allocation withinsixty (60) days after Sellers raise such objections, then Sellers and
5

 
Buyer shall not be bound bythe Allocation and each Party shall allocate the Purchase Price to the purchased assets as suchParty determines is proper.     Section 1.5 *Preliminary Information*. At least five (5) business days prior to the ClosingDate, Sellers shall deliver to Buyer instructions designating the account or accounts to which theCash Consideration shall be deposited by federal funds wire transfer of immediately available fundson the Closing Date.     Section 1.6 *Sellers’ Closing Deliverables*. At the Closing, Sellers shall deliver to Buyer:     (a) all certificates representing the Units, together with duly executed unit powers ofSellers, as applicable, transferring title of the Units, free and clear of any Liens (other thanLiens in favor of Buyer), to Buyer;     (b) the Escrow Agreement, duly executed by Sellers;     (c) an amendment to the Master Power Purchase and Sale Agreement, dated June 28, 2004, betweenSempra Energy Solutions and Coleto Creek WLE, LP, in the form of Exhibit B (the “**SES PPAAmendment**”), duly executed by Sempra Energy Solutions;     (d) the officer’s certificate required by Section 6.2(c);     (e) written resignations (or removals), effective as of the Closing, of the officers andmanagers of the Company identified by Buyer no less than five (5) business days prior to theClosing;     (f) a duly executed and acknowledged certificate, in form and in substance reasonablyacceptable to Buyer and in accordance with the Code and the Treasury Regulations, certifying thenon-foreign status as provided under Treasury Regulation Section 1.1445-2(b)(2) of Topaz PowerPartners, LLC (“**Topaz Power Partners**”), a Delaware limited liability company and sole member ofeach of Sellers;     (g) duly executed pay-off letters (including appropriate documents and instruments for therelease or termination of all Liens securing Indebtedness of the Company) (the “**Pay-Off Letters**”)acknowledging repayment in full of all Indebtedness of the Company, including but not limited toIndebtedness outstanding pursuant to the Amended and Restated Credit Agreement (as amended andrestated from time to time, the “**Credit Agreement**”), dated as of July 30, 2004, among the Company,the Lenders (as defined in the Credit Agreement), the Revolving Issuing Bank (as defined in theCredit Agreement) and the Term Issuing Bank (as defined in the Credit Agreement) in the formcustomarily provided by such Lenders; and     (h) in each case (a) to the extent owned by the Company and in the possession of the Companyor its Affiliates (b) not subject to attorney-client privilege to the extent delivery to Buyerwould reasonably be expected to cause such privilege to be waived and (c) not primarily related toPersons retained by the Sellers or their respective Affiliates (other than the Company), any andall books and records of the Company including for the avoidance of doubt documents necessary topermit Buyer to determine periods of service for vesting and benefits purposes and
6

 
payments ofbenefits deductibles during 2006, all corporate, limited liability company or partnership books andrecords, documents, drawings, existing as built drawings, reports, operating data (includinghistorical data in electronic form), employment data and demographic data relating to employees,operating safety and maintenance manuals, preventive and predictive maintenance records, inspectionreports, calibration and test reports, non-destructive examination reports, engineering designplans, blueprints, specifications and procedures and similar items, located at the Plant or in thepossession and control of Sellers or any of their respective Affiliates and relating to the Plantor otherwise relating to the Company or its business.     Section 1.7 *Buyer’s Closing Deliverables*. At the Closing, Buyer shall deliver to Sellers:     (a) the Cash Consideration, to be paid by Buyer to Sellers in accordance with the instructionspursuant to Section 1.2;     (b) the SES PPA Amendment, acknowledged by Buyers;     (c) the Escrow Agreement, duly executed by Buyer; and     (d) the officer’s certificate required pursuant to Section 6.3(c).     At the Closing, Buyer shall further deliver the Escrow Amount into the Escrow Account inaccordance with Section 1.2(b)(i) and the Escrow Agreement.ARTICLE IIREPRESENTATIONS AND WARRANTIES CONCERNING EACH SELLER     Each Seller, severally and jointly, represents and warrants to Buyer as of the date hereof andas of the Closing Date (except to the extent that such representations and warranties speak as ofan earlier date, in which case such representations and warranties are made only as of such date),as follows:     Section 2.1 *Organization; Etc*. Such Seller, (a) is duly organized, validly existing and ingood standing under the laws of its jurisdiction of organization, (b) has all requisite limitedliability company power and authority to execute and deliver this Agreement and all otheragreements and instruments executed in connection herewith or delivered pursuant hereto, to performits obligations hereunder and to consummate the transactions contemplated by this Agreement and allother agreements and instruments executed in connection herewith or delivered pursuant hereto and(c) is duly qualified or licensed to do business, and is in good standing in each jurisdiction inwhich the nature of its business or the ownership, operation or leasing of its properties makessuch qualification or licensing necessary, except where the failure to be so qualified or licensedwould not reasonably be expected to, individually or in the aggregate, prevent or materially impairor delay the ability of such Seller to perform its obligations hereunder.     Section 2.2 *Authority Relative to this Agreement*. The execution, delivery and performance ofthis Agreement and all other agreements and instruments executed in connection
7

 
herewith ordelivered pursuant hereto by each Seller, and the consummation of the transactions contemplated bythis Agreement and all other agreements and instruments executed in connection herewith ordelivered pursuant hereto have been duly and validly authorized by all requisite limited liabilitycompany action on the part of each Seller and no other limited liability company actions orproceedings on the part of such Seller are necessary to authorize the execution, delivery andperformance by such Seller of this Agreement and all other agreements and instruments executed inconnection herewith or delivered pursuant hereto by such Seller or for such Seller to consummatethe transactions so contemplated. This Agreement and all other agreements and instruments executedin connection herewith or delivered pursuant hereto have been, or will be, duly and validlyexecuted and delivered by such Seller and, with respect to this Agreement and any other suchagreement, assuming it has been duly authorized, executed and delivered by any other party,constitutes, or will constitute when executed, a valid and binding agreement of such Seller,enforceable against such Seller in accordance with its terms, except that (a) enforcement may besubject to any bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or otherlaws, now or hereafter in effect, relating to or limiting creditors’ rights generally, and (b)enforcement of this Agreement, including, among other things, the remedy of specific performanceand injunctive and other forms of equitable relief, may be subject to equitable defenses and to thediscretion of the court before which any proceeding therefor may be brought.     Section 2.3 *Ownership of Equity Interests*. Such Seller owns beneficially and of record theUnits set forth opposite such Seller’s name on Section 2.3 of the Disclosure Letter, which Unitsconstitute all of the issued and outstanding equity interests in the Company. At the Closing Dateand prior to the Closing, all of the outstanding Units will be owned beneficially and of record bya Seller.     Section 2.4 *Consents and Approvals; No Violations*. Except for the Required Approvals (asdefined in Section 3.4), none of the execution, delivery and performance of this Agreement and anyother agreements and instruments executed in connection herewith or delivered pursuant hereto bysuch Seller, nor the consummation by such Seller of the transactions contemplated by this Agreementor any other agreement or instrument executed in connection herewith or delivered pursuant hereto,will (a) conflict with, violate or result in anybreach of any provision of the certificate of formation, limited liability company agreement,bylaws or similar documents, as applicable, of such Seller, (b) result in a violation or breach of,or constitute (with or without due notice or lapse of time or both) a default (or give rise to anyright of termination, amendment, cancellation or acceleration or any right or obligation topurchase or sell securities or assets) under, or require any consent under, any written contract,agreement, note, bond, mortgage, indenture or lease (collectively, “**Contracts**” and individually, a“**Contract**”) to which such Seller is a party or by which it or any of its businesses, properties ormaterial assets are bound, (c) violate any Order, Law or Permit that is currently in effectapplicable to such Seller or its business, properties or assets, or (d) require of any Seller anypermit, license, authorization, certification, consent, approval or concession from, action by,filing with or notification to (collectively, “**Approvals**” and, individually, an “**Approval**”), anyforeign, Federal, state, or local government or regulator or any court, arbitrator, administrativeagency, regional transmission organization, the Electric Reliability Council of Texas independentsystem operator (the “**ERCOT ISO**”), or commission or other governmental, quasi-governmental, taxingor regulatory (including a stock exchange or other self-regulatory body)
8

 
authority, official oragency (including a public utility commission, public services commission or similar regulatorybody), domestic, foreign or supranational (a “**Governmental Authority**”), except in the case ofclauses (b), (c) and (d) of this Section 2.4, those which would not reasonably be expected to,individually or in the aggregate, (i) prevent or materially impair or delay the ability of suchSeller or Buyer to perform its obligations hereunder, or (ii) have a Company Material AdverseEffect.     Section 2.5 *Brokers; Finders and Fees*. Except as described in Section 2.5 of the disclosureletter delivered by Sellers to Buyer concurrently with the execution hereof (the “**DisclosureLetter**”), neither such Seller nor its Affiliates has employed, engaged or entered into a Contractwith any investment banker, broker, finder, other intermediary or any other Person or incurred anyliability for any investment banking, financial advisory or brokerage fees, commissions, finders’fees or any other fee in connection with this Agreement or the transactions contemplated by thisAgreement.ARTICLE IIIREPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY     Each Seller, severally and jointly, represents and warrants to Buyer as of the date hereof andas of the Closing Date (except to the extent that such representations and warranties speak as ofan earlier date, in which case such representations and warranties are made only as of such date),as follows:     Section 3.1 *Organization; Etc*. The Company (a) is duly organized, validly existing and ingood standing under the laws of its jurisdiction of organization, (b) has all requisite partnershippower and authority to own, lease and operate all of its properties and assets and to carry on itsbusiness substantially as it is now being conducted, and (c) is duly qualified or licensed to dobusiness, and is in good standing in each jurisdiction in which the nature of its business or theownership, operation or leasing of its properties makes such qualification orlicensing necessary, except where the failure to be so qualified or licensed would notreasonably be expected to, individually or in the aggregate, have a Company Material AdverseEffect.     As used in this Agreement, the term “**Company Material Adverse Effect**” means any change,development, event, effect, condition or occurrence that would reasonably be expected to bematerially adverse to the assets, properties, or condition (financial or otherwise) of the Companytaken as a whole; provided, however, that any adverse change (or changes taken together) or effectattributable to any of the following, in each case shall not constitute a Company Material AdverseEffect: (a) any adoption, implementation, promulgation, repeal, modification, reinterpretation orproposal of any rule, regulation, ordinance, Order, protocol or any other Law of or by anyGovernmental Authority (including, for the avoidance of doubt, the ERCOT ISO), (b) changes ordevelopments in international, national, regional, state or local wholesale or retail markets forpower or fuel, including, without limitation, changes in commodity prices, related products, oravailability or costs of transportation, (c) changes or developments in national, regional, stateor local wholesale or retail power prices, (d) system-wide changes or developments in national,regional or state electric transmission or distribution systems, (e) the announcement, pendency orconsummation of the transactions contemplated by
9

 
this Agreement (including any decrease in customerdemand, any reduction in revenues, any disruption in supplier, partner or similar relationships, orany loss of employees) and (f) changes or developments in financial or securities markets or theeconomy in general. Furthermore, for the purposes of this Agreement, any determination as towhether any Laws, changes and/or developments have a Company Material Adverse Effect shall be madeonly after taking into account (i) all effective insurance coverage and effective indemnificationswith respect to such Laws, changes and developments and (ii) the extent to which any such Laws,changes and developments are cured (including by the payment of money) before the earlier of theClosing or the termination of this Agreement.     Section 3.2 *Authority Relative to this Agreement*. The execution, delivery and performance ofthis Agreement and all other agreements and instruments executed in connection herewith ordelivered pursuant hereto by the Company and the consummation of the transactions contemplated bythis Agreement and all other agreements and instruments executed in connection herewith ordelivered pursuant hereto have been duly and validly authorized by all requisite partnership actionon the part of the Company and no other actions or proceedings on the part of the Company arenecessary to authorize the execution, delivery and performance of this Agreement and all otheragreements and instruments executed in connection herewith or delivered pursuant hereto by theCompany. Other than approvals received on or prior to the date hereof, no vote of the holders ofUnits is necessary to approve this Agreement or to consummate the transactions contemplated hereby.This Agreement and all other agreements and instruments executed in connection herewith ordelivered pursuant hereto have been, or will be, duly and validly executed and delivered by theCompany and, with respect to this Agreement and any other such agreement, assuming it has been dulyauthorized, executed and delivered by any other party, constitutes, or will constitute whenexecuted, a valid and binding agreement of the Company, enforceable against the Company inaccordance with its terms, except that (a) enforcement may be subject to any bankruptcy,insolvency, reorganization, moratorium, fraudulent transfer or other laws, now or hereafter ineffect, relating to or limiting creditors’ rights generally, and (b) enforcement of this Agreement,including, among other things, the remedy of specific performance and injunctive and other forms ofequitable relief, may besubject to equitable defenses and to the discretion of the court before which any proceedingtherefor may be brought.     Section 3.3 *Capitalization*.     (a) As of the date hereof, the outstanding equity interests of the Company consist of 1,000Units. Section 3.3(a)(i) of the Disclosure Letter sets forth the name, jurisdiction oforganization and capitalization of the Company. All outstanding Units are validly issued, fullypaid and nonassessable, and owned by a Seller free of preemptive (or similar) rights and free andclear of any security interests, liens, claims, pledges, limitations in voting, dividend ortransfer rights, charges or other similar encumbrances (“**Liens**”), except for Liens pursuant to theCredit Agreement (which shall be released on the Closing Date). Except as set forth in Section3.3(a)(i) of the Disclosure Letter and the first sentence of this Section 3.3(a), there are not (A)any capital stock or other equity interests or voting securities, in the Company issued oroutstanding, (B) any securities convertible into or exchangeable or exercisable for shares of anycapital stock or equity interests or voting securities in the Company, (C) any subscriptions,options, warrants, calls, rights, convertible securities or other Contracts or commitments of anycharacter obligating the
10

 
Company to issue, transfer or sell any of its capital stock or otherequity interests or voting securities, or (D) any equity equivalents, interests in the ownership orearnings or similar rights, or any agreements, arrangements or understandings granting any Personany rights in the Company similar to capital stock or other equity interests or voting securities(the items in clauses (A), (B), (C) or (D), collectively, “**Company Securities**”). Except as setforth in Section 3.3(a)(ii) of the Disclosure Letter, there are no (1) outstanding obligations ofthe Company to repurchase, redeem or otherwise acquire any Company Securities or (2) outstandingobligations of the Company to provide funds to or make any investment (in the form of a loan,capital contribution or otherwise) in the Company or any other Person, including as a result of thetransactions contemplated by this Agreement.     (b) The Company has no direct or indirect equity interest in any Person.     (c) Section 3.3(c)(i) of the Disclosure Letter sets forth a true and complete list of eachContract in effect on the date of this Agreement pursuant to which any Indebtedness of the Companyin excess of $250,000 is outstanding or may be incurred. No Contract pursuant to which anyIndebtedness of the Company is outstanding or may be incurred provides for the right to vote (or isconvertible into, or exchangeable for, securities having the right to vote) on any matters on whichthe equityholders of the Company may vote. “**Indebtedness**” means (A) indebtedness, liabilities orobligations for or related to borrowed money or for or related to the deferred purchase price ofproperty or services (other than current trade liabilities incurred in the ordinary course ofbusiness and payable in accordance with customary practices), including indebtedness evidenced by anote, bond, debenture or similar instrument, (B) obligations required to be classified andaccounted for as a liability (other than current trade liabilities incurred in the ordinary courseof business and payable in accordance with customary practices) on a balance sheet under UnitedStates generally accepted accounting principles (“**GAAP**”), (C) obligations in respect of outstandingletters of credit, acceptances and similar obligations created for the account of such Person, (D)obligations under interest rate cap agreements, interest rate swap agreements, foreign currencyexchangeagreements and other similar agreements (but for clarification, in all events excludingcommodity swaps, caps and similar agreements) and (E) guarantees of any of the foregoing of anotherPerson.     Section 3.4 *Consents and Approvals; No Violations*. Except for applicable requirements of theHart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “**HSR Act**”), or as set forthin Section 3.4 of the Disclosure Letter (collectively, the “**Required Approvals**”), none of theexecution, delivery and performance of this Agreement by Sellers, nor the consummation by Sellersof the transactions contemplated by this Agreement and any other agreements and instrumentsexecuted in connection herewith or delivered pursuant hereto, will (a) conflict with, violate orresult in any breach of any provision of the certificate of formation, limited partnershipagreement, regulations, bylaws or similar documents, as applicable, of the Company, (b) result in aviolation or breach of, or constitute (with or without due notice or lapse of time or both) adefault (or give rise to any right of termination, amendment, cancellation or acceleration or anyright or obligation to purchase or sell securities or assets) under, or require any consent orresult in a material loss of a material benefit to the Company under, any Contract to which theCompany is a party or by which the Company or its businesses, properties or assets are bound, (c)violate any order, judgment, writ, injunction, decree, settlement, stipulation or award of aGovernmental Authority (each an “**Order**”) or statute, rule or regulation of a
11

 
Governmental Authority(collectively, “**Laws**”, and individually, a “**Law**”) or Permit applicable to the Company or any of itsbusinesses, properties or assets, or (d) require the Company to obtain any Approvals from or by anyGovernmental Authority, except in the case of clauses (b), (c) and (d) of this Section 3.4 forthose which would not reasonably be expected to, individually or in the aggregate, have a CompanyMaterial Adverse Effect, or which become applicable solely as a result of the business oractivities in which Buyer is engaged.     Section 3.5 *Reports and Financial Statements*.     (a) The Company has timely filed with the Public Utility Commission of Texas (the “**PUC**”) andany other Governmental Authority with jurisdiction all material forms, reports, schedules,registrations, declarations and other filings required to be filed by it under all applicable Laws,including the Texas Public Utility Regulatory Act, and the respective rules and regulationsthereunder (“**PURA**”), all of which, as amended if applicable, complied in all material respects withall applicable requirements of the appropriate act and the rules and regulations promulgatedthereunder. Each of the (i) audited financial statements as of and for the six-month period endedDecember 31, 2004 and (ii) audited financial statements as of and for the twelve-month period endedDecember 31, 2005 (including in each case the notes related thereto) of the Company set forth inSection 3.5 of the Disclosure Letter (together, the “**Financial Statements**”) was prepared from, andis in accordance with, the books and records of the Company, which books and records have beenmaintained, and which Financial Statements were prepared, in accordance with GAAP applied on aconsistent basis throughout the periods involved (except as may be indicated therein or in thenotes thereto) and fairly presented in all material respects the financial position of the Companyas of the dates thereof and the results of their operations, cash flows and changes in financialposition for the periods reported.     Section 3.6 *Absence of Undisclosed Liabilities*. Except (a) for liabilities and obligationsincurred in the ordinary course of business and consistent with past practice since December 31,2005, or (b) as otherwise disclosed in the Financial Statements, or in Section 3.6 of theDisclosure Letter, the Company has not incurred any liabilities, debts or obligations of any nature(whether direct, indirect, accrued, asserted, unasserted, contingent, known or unknown, determinedor determinable, matured or unmatured or otherwise) (“**Liabilities**”) in excess of $500,000 that,individually or in the aggregate, would be required to be reflected or reserved against in thebalance sheet of the Company prepared in accordance with GAAP as used in preparing the December 31,2005 balance sheet. Except as set forth in Section 3.6 of the Disclosure Letter, the Company doesnot have any Liabilities required to be reflected or reserved against in the balance sheet of theCompany prepared in accordance with GAAP as used in preparing the December 31, 2005 balance sheetthat would reasonably be expected to, individually or in the aggregate, have a Company MaterialAdverse Effect.     Section 3.7 *Absence of Certain Changes*. Except as set forth in Section 3.7 of the DisclosureLetter, since December 31, 2005 and until the date of this Agreement, the Company has conducted itsbusiness only in the ordinary course and in a manner consistent with past practice. Except as setforth in Section 3.7 of the Disclosure Letter, since December 31, 2005 there has not been any stateof facts, change, development, event, effect, condition or occurrence that has or would reasonablybe expected to, individually or in the aggregate, have a Company Material Adverse Effect. SinceDecember 31, 2005, except as (i) specifically contemplated by
12

 
this Agreement or (ii) set forth inSection 3.7 of the Disclosure Letter, there has not occurred any action, development, event oroccurrence or failure to act that, if it had occurred after the date of this Agreement, would haverequired the consent of Buyer under Section 5.1.     Section 3.8 *Litigation*. Except as set forth in Section 3.8 of the Disclosure Letter, there isno litigation, suit, claim, action, administrative, arbitral or other proceeding, inquiry, audit,hearing petition, grievance, complaint or governmental or regulatory investigation (each an“**Action**”) pending or, to the knowledge of Sellers, threatened against the Company, nor are thereany outstanding Orders that affect or bind the Company or its businesses, properties or assets thatwould reasonably be expected to, individually or in the aggregate, have a Company Material AdverseEffect. There are no Actions pending or, to the knowledge of Sellers, threatened by the Companyagainst any of Sellers.     Section 3.9 *Compliance with Law*. Except as set forth in Section 3.9 of the Disclosure Letter:     (a) The Company is, and since December 31, 2005 has been, in compliance with all applicableLaws and the Company has not received any notice (including through any Action), and there has beenno Action filed, commenced or, to the knowledge of Sellers, threatened against the Company,alleging any violation of Law, except for any noncompliance or violation that would not reasonablybe expected to, individually or in the aggregate, have a Company Material Adverse Effect.     (b) Except as would not reasonably be expected to, individually or in the aggregate, have aCompany Material Adverse Effect, (1) the Company holds all Approvals, authorizations, certificates,licenses, consents and permits of Governmental Authorities (“**Permits**”) necessary for the Company toown, lease and operate its properties and assets as currently owned, leased or operated and tocarry on business as currently conducted, and (2) all such Permits are in full force and effect.Except as would not reasonably be expected to, individually or in the aggregate, have a CompanyMaterial Adverse Effect, (1) during the period in which Sellers have owned the Plant, there hasoccurred no breach of or default under (with or without notice or lapse of time or both) any suchPermit, and the Company has not received any notice (including through any Action) of any suchbreach or default, and (2) there has been no Action filed, commenced or threatened against it,alleging any such breach or default or otherwise seeking to revoke, terminate, suspend or modifyany Permit or impose any fine, penalty or other sanctions for violation of any Laws relating to anyPermit.     Section 3.10 *Labor and Employment Matters*.     (a) Section 3.10(a) of the Disclosure Letter sets forth, as of the date hereof, a true,accurate and complete list of all employees (including individuals on vacation, short-termdisability or similar leave) of Topaz Power Group, LLC (“**Topaz Power Group**”), a Delaware limitedliability company, who are employed as part of the operating staff at the Plant (the “**SellersEmployees**”), which such Section 3.10(a) of the Disclosure Letter shall be amended as of the ClosingDate to include such employees so employed immediately prior to the Closing Date. Such Section3.10(a) of the Disclosure Letter shall also include a description of each
13

 
Sellers Employee’scurrent base salary, target bonus for the 2006 fiscal year (if any), position and date of hire.     (b) Section 3.10(b) of the Disclosure Letter sets forth a list of those employees employed bySempra Texas Services, LP (“**STS**”), a Texas Limited Partnership, who support the business of theCompany as of the date of this Agreement (the “**STS Employees**” ). Section 3.10(b) of the DisclosureLetter shall also include a description of each STS Employee’s current base salary, target bonusfor the 2006 fiscal year (if any), position and date of hire.     (c) None of the Sellers Employees are covered by any collective bargaining or union contracts.Except as set forth in Section 3.10(c) of the Disclosure Letter and except for such matters whichwould not reasonably be expected, individually or in the aggregate, to have a Company MaterialAdverse Effect, Topaz Power Group, with respect to the Sellers Employees, are in compliance withall applicable Laws respecting labor and labor practices, employment and employment practices,terms and conditions of employment and wages and hours. To the knowledge of Sellers, noorganizational efforts are presently being made or threatened by or on behalf of any labor unionwith respect to the Sellers Employees.     (d) Section 3.10(d) of the Disclosure Letter sets forth a true, accurate and complete list ofall material written “employee benefit plans” (within the meaning of Section 3(3) of the EmployeeRetirement Income Security Act of 1974, as amended (“**ERISA**”)), including multi-employer planswithin the meaning of Section 3(37) of ERISA, and all stock purchase, stock option, employment,change-in-control, collective bargaining, incentive, employee loan, deferred compensation, pension,profit-sharing, retirement, bonus, retention bonus, severance and other employee benefit or fringebenefit plans, agreements, programs, policies or other arrangements, whether or not subject toERISA, which are maintained by, orwith respect to which contributions are made by or on behalf of, Sempra Energy (“**Sempra**”), aCalifornia corporation, Topaz Power Group, Sellers, the Company or their respective Affiliates andin which the Sellers Employees participate (the “**Sellers Benefit Plans**”).     (e) Within the past 90 days, none of the Sellers nor the Company has engaged in any plantclosing, workforce reduction, or other action related to any Sellers Employee that has resulted inliability under or has required issuance of notice pursuant to the Worker Adjustment and RetrainingNotification Act of 1988 (collectively, the “**WARN Act**”).     Section 3.11 *Taxes*. Except as set forth in Section 3.11 of the Disclosure Letter:     (a) Sellers and the Company have filed all material Tax Returns that are required to be filedby each of them with respect to any Tax relating to the Company or the business or propertiesthereof, and Sellers have paid all material Taxes that have become due as indicated thereon, exceptwhere such Tax is being contested in good faith by appropriate proceedings and for which adequatereserves have been maintained in accordance with GAAP. All Tax Returns relating to the Company aretrue and complete in all material respects.     (b) (i) There is no material action, suit, proceeding, audit, written claim or assessmentpending or, to the knowledge of Sellers, proposed with respect to Taxes of the Company or withrespect to any Tax Return of the Company and (ii) there are no material Liens for Taxes upon the
14

 
assets of or interests in the Company, except for Liens for Taxes not yet due and payable or Liensfor Taxes being contested in good faith through appropriate proceedings and for which adequatereserves have been maintained in accordance with GAAP.     (c) The Company is treated as a disregarded entity for federal income tax purposes and alimited partnership for state and local income tax purposes, and has not made an election to betreated as an association for federal income tax purposes.     (d) Except as set forth in Section 3.11 of the Disclosure Letter, no waiver of or agreement toextend any statute of limitations in respect of any Tax of the Company or the business orproperties thereof has been granted.     (e) The Company is not a party to or bound by, and does not have any obligation under, any Taxallocation, sharing, indemnity or similar agreement or arrangement.     (f) For purposes of this Agreement, “**Taxes**” means all taxes, assessments, charges, duties,fees, levies and other governmental charges, including income, franchise, capital stock, realproperty, personal property, tangible, withholding, employment, payroll, social security, socialcontribution, unemployment compensation, disability, transfer, sales, use, excise, gross receipts,value-added and all other taxes of any kind, and any charges, interest, additions to tax, orpenalties imposed by any Governmental Authority, and “**Tax Return**” shall mean any return,declaration, report, claim for refund or information return or statement relating to Taxes,including any schedule or attachment thereto, and including any amendment thereof.     Section 3.12 *Title, Ownership and Related Matters*. The Company has good title to, or rightsby license, lease or other agreement to use, all real and material personal properties and assets(or rights thereto) (other than cash, cash equivalents and securities and except as contemplated inthis Agreement) necessary to permit the Company to conduct its business as currently conducted,including those items set forth in Section 3.12 of the Disclosure Letter. To the knowledge ofSellers, each item of material personal property owned by the Company is owned free and clear ofall Liens, other than Permitted Liens. Without limiting the generality of the foregoing:     (a) The Title Commitment lists and identifies all material real property owned by the Company(such real property, together with all the buildings, improvements, structures and fixtures now orsubsequently located thereon, collectively, the “**Owned Real Property**”). Section 3.12(a)(ii) of theDisclosure Letter lists all material agreements other than easements or rights of way (togetherwith any amendments, modifications or supplements thereto, the “**Leases**”) pursuant to which theCompany leases, subleases, licenses or otherwise occupies (whether as tenant, subtenant orlicensee) any real property or interest in real property that is material to the business of theCompany taken as a whole (collectively, the “**Leased Real Property,**” together with the Owned RealProperty, the “**Real Property**”). With respect to each parcel of the Real Property, except as setforth in Section 3.12(a)(iii) of the Disclosure Letter or except as would not reasonably beexpected to, individually or in the aggregate, have a Company Material Adverse Effect:
15

 
          (i) the Company has good and indefeasible fee simple title to the Owned Real Property, freeand clear of all Liens other than Permitted Liens;          (ii) there are no pending or, to the knowledge of Sellers, threatened condemnation,expropriation or taking proceedings against the Real Property; and          (iii) there are no outstanding options or rights of first refusal to purchase or lease theReal Property, or any portion thereof or interest therein.     (b) Section 3.12(b) of the Disclosure Letter sets forth a true and complete list of allmaterial real property sold, transferred or disposed of since the effective date of the TitleCommitment (December 22, 2005).     (c) For purposes of this Agreement, “**Permitted Liens**” means (i) Liens for current propertytaxes and similar governmental charges and assessments which are not yet due and payable or thevalidity of which are being contested in good faith by appropriate proceedings and reserved for inaccordance with GAAP, (ii) all exceptions set forth in Schedule B to the commitment for titleinsurance with an effective date of December 22, 2005 (the “**Title Commitment**”) issued by FirstAmerican Title Insurance Company, which has been made available by Sellers to Buyer, (iii) allexceptions, restrictions, easements, charges, rights-of-way and monetary and non-monetary Lienswhich are set forth in any permit, (iv) inchoate mechanics’ materialmens’, laborers’ carriers’workers’, repairers’ and other similar Liens and the rights of customers, suppliers, contractorsand subcontractors in each case arising or incurred in the ordinary course of business, (v)purchasemoney security interests in respect of personal property arising or incurred in the ordinarycourse of business to the extent reflected or reserved against in the Company’s most recent balancesheet included in the Financial Statements, (vi) zoning, entitlement, conservation restrictions andother land use and environmental regulations of any Governmental Authority, (vii) matters shown onthe survey which has been delivered, (viii) restrictions and regulations imposed by anyGovernmental Authority or any local, stated, regional, national or international reliabilitycouncil, including the ERCOT ISO, (ix) Liens created by or resulting from the acts or omissions ofBuyer, (x) the Required Approvals, and (xi) such other encumbrances to, imperfections in orfailures of title that, individually or in the aggregate, would not reasonably be expected tomaterially interfere with the conduct of business of the Company taken as a whole.     Section 3.13 *Environmental*. Except as set forth in Section 3.13 of the Disclosure Letter, oras would not reasonably be expected to, individually or in the aggregate, have a Company MaterialAdverse Effect:     (a) To the knowledge of Sellers, the Company is in compliance with all applicableEnvironmental Laws, and has not received any written communication from any Governmental Authoritythat alleges that the Company is not or has not been in compliance with applicable EnvironmentalLaws.     (b) To the knowledge of Sellers, the Company has obtained and possesses all Permits requiredpursuant to any applicable Environmental Law (collectively, the “**Environmental Permits**”) necessaryfor the operation of its facilities or the conduct of its business as currently
16

 
conducted, and allsuch Environmental Permits are in good standing or, where applicable, a renewal application hasbeen timely filed and is pending approval by any Governmental Authority, and the Company is incompliance with all terms and conditions of the Environmental Permits.     (c) There are no Environmental Claims (i) pending or, to the knowledge of Sellers, threatenedagainst the Company or (ii) pending or, to the knowledge of Sellers, threatened against any real orpersonal property or operations that the Company owns, leases or uses, in whole or in part,including any off-site facility used by the Company for the treatment, storage and disposal of anyHazardous Substance.     (d) Schedule 3.13(d) lists the amount of each type of all Emission Allowances currently heldby the Plant or the Company under currently applicable Environmental Laws for use in the currentcalendar year or future calendar years (the “**Available Emission Allowances**”). Except as set forthin Schedule 3.13(d), no such Available Emission Allowances have been sold, exchanged ortransferred.     (e) To the knowledge of Sellers, there have been no Releases of any Hazardous Substances andthere have been no threatened Releases of any Hazardous Substances that have formed or wouldreasonably be expected to form the basis of (i) any Environmental Claim against the Company oragainst any Person whose liability for such claim the Company has or may have retained or assumed,either by operation of Law or by Contract, or (ii) any current requirement on the part of theCompany to undertake Remedial Action now or in the future.     Notwithstanding anything to the contrary in this Agreement, no provisions of Article III otherthan this Section 3.13 address or shall be deemed to address Environmental Law, HazardousSubstances, Environmental Claims or other environmental matters.     For purposes of this Agreement:     “**Emissions Allowance**” means tradable emissions credits, allowances or other authorizations toemit specified units of pollutants or Hazardous Substances from the Plant, which units areestablished by the Governmental Authority with jurisdiction over the Plant under (i) any airpollution control and emission reduction program designed to mitigate interstate or intrastatetransport of air pollutants, (ii) any program designed to mitigate impairment of surface waters,watersheds, or groundwater, or (iii) any pollution reduction program with a similar purpose, ineach case regardless of whether the Governmental Authority establishing such authorizationsdesignates such authorizations by a name other than “allowances.”     “**Environmental Claim**” means any and all Actions, demands, demand letters, directives, Liens ornotices of noncompliance or violation by any Person (including any Governmental Authority) allegingpotential liability (including potential responsibility for or liability for enforcement costs,investigatory costs, cleanup costs, governmental response costs, removal costs, remedial costs,natural-resources damages, property damages, personal injuries, fines or penalties) arising out of,based on or resulting from (A) the presence, or Release or threatened Release into the environment,of any Hazardous Substances at any location, whether or not owned, operated, leased or managed bythe Company; (B) circumstances forming the basis
17

 
of any violation, or alleged violation, of anyEnvironmental Law; or (C) any and all Actions by any third party seeking damages, contribution,indemnification, cost recovery, compensation or injunctive relief resulting from the presence orRelease of any Hazardous Substances;     “**Environmental Law**” means all Laws relating to pollution, the environment (including ambientair, surface water, groundwater, land surface or subsurface strata) or protection of human healthas it relates to the environment, including Laws relating to Releases or threatened Releases of anyHazardous Substance, or otherwise relating to the manufacture, processing, distribution, use,treatment, storage, disposal, transport or handling of any Hazardous Substance including theComprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. Section 9601 etseq.), the Hazardous Materials Transportation Act (49 U.S.C. Section 1801 et seq.), the ResourceConservation and Recovery Act (42 U.S.C. Section 6901 et seq.), the Clean Water Act (33 U.S.C.Section 1251 et seq.), the Clean Air Act (33 U.S.C. Section 7401 et seq.), the Toxic SubstancesControl Act (15 U.S.C. Section 7401 et seq.), the Federal Insecticide, Fungicide, and RodenticideAct (7 U.S.C. Section 136 et seq.) and the regulations promulgated pursuant thereto, and any suchapplicable state or local statutes, and the regulations promulgated pursuant thereto, as such Lawshave been and may be amended or supplemented to the date of this Agreement;     “**Hazardous Substance**” means any substance listed, defined or classified as hazardous, toxic orradioactive pursuant to any applicable Environmental Law, including petroleum and any derivative orby-product thereof, and any other substanceregulated pursuant to, or the presence or exposure to which may form the basis for liabilityunder, any applicable Environmental Law;     “**Release**” means any spilling, emitting, leaking, pumping, pouring, emptying, injecting,escaping, dumping, disposing, discharging, or leaching into the environment, or into or out of anyproperty owned, operated or leased by the applicable party; and     “**Remedial Action**” means all actions, including any capital expenditures, required by aGovernmental Authority or required under any applicable Environmental Law to (a) clean up, remove,treat, or in any other way ameliorate or address any Hazardous Substance in the environment; (b)prevent the Release or threat of Release, or minimize the further Release of any HazardousSubstance so it does not endanger or threaten to endanger the public health or welfare of theindoor or outdoor environment; (c) perform pre-remedial studies and investigations or post-remedialmonitoring and care pertaining or relating to a Release; or (d) bring the applicable party intocompliance with any applicable Environmental Law.     Section 3.14 *Intellectual Property*. Except as set forth in Section 3.14 of the DisclosureLetter, or as would not reasonably be expected to, individually or in the aggregate, have a CompanyMaterial Adverse Effect: (i) the Company owns or has the valid right to use all the IntellectualProperty necessary or desirable to conduct its business as currently conducted and consistent withpast practice free and clear of all Liens; (ii) the Company IP is valid, enforceable and unexpired,has not been abandoned, and does not infringe, impair, misappropriate, dilute, make unauthorizeduse of, or otherwise violate the Intellectual Property of any third party; (iii) no Action or Orderis outstanding or pending, or to the knowledge of Sellers, threatened that seeks to cancel, limitor challenge the ownership, use, value, validity or enforceability of any Company IP, and to theknowledge of Sellers, there is no valid basis for
18

 
same; (iv) the Company has taken all necessarysteps (including executing non-disclosure and intellectual property assignment agreements andfiling for statutory protections) to protect, preserve, police, maintain and safeguard the value,validity and their ownership of the Company IP, including any material confidential Company IP; and(v) the Company has executed all appropriate agreements with current and past employees,contractors and agents to assign to the Company all of their right, title and interest in anyCompany IP.     Section 3.15 *Contracts*. Section 3.15 of the Disclosure Letter contains a true and completelist as of the date hereof of the following Contracts to which the Company is a party or by whichany Company properties are bound or affected as of the date of this Agreement:     (a) Contracts containing covenants restricting the payment of dividends or limiting thefreedom in any material respect of the Company to engage in any line of business or compete withany Person or operate at any location;     (b) Joint venture agreements and limited liability company agreements, partnership agreementsor similar agreements with third parties;     (c) Contracts (other than Derivative Products) involving expenditures (capital or otherwise),liabilities or revenues to the Company which are reasonably expected to be in excess of $1,000,000per annum or $5,000,000 in the aggregate;     (d) Contracts (other than Derivative Products) with terms of one year or longer, unlessexpenditures, liabilities or revenues to the Company are not reasonably expected to be in excess of$1,000,000 per annum;     (e) Derivative Products involving expenditures, liabilities, exposures or revenues to theCompany which are reasonably expected to be in excess of $1,000,000 in the aggregate, including anyverbal confirmations of such Derivative Products not yet subject to a written confirmation,including identification of any such counterparty granted a second priority Lien in some or all ofthe Company’s assets;     (f) Each lease of personal property (i) requiring lease payments equal to or exceeding$100,000 per annum or (ii) the loss of which would reasonably be expected to, individually or inthe aggregate with other such losses, have a Company Material Adverse Effect;     (g) Contracts for the purchase or sale of coal and/or Contracts for the transportation of coalfor which delivery is required on or after the date hereof;     (h) Contracts for the purchase, sale and lease of railcars; and     (i) Contracts otherwise material to the Company.     True and complete copies of the written Contracts required to be identified in Sections3.3(c), 3.15, 3.16 and 3.18 of the Disclosure Letter (all such Contracts, whether now or hereafterexisting, collectively, the “**Company Contracts**”) (and true and complete written summaries of anysuch oral Contracts) have been made available to Buyer, except as set forth in Section 3.15 of theDisclosure Letter. Section 3.15 of the Disclosure Letter includes notations identifying
19

 
DerivativeProducts under which the counterparty has a mark-to-market exposure to the Company of $10 millionor more as of the date hereof.     Except as would not reasonably be expected, individually or in the aggregate, to have aCompany Material Adverse Effect, the Company is not and, to the knowledge of Sellers, no otherparty is in default under, or in breach or violation of, any Company Contract and, to the knowledgeof Sellers, no event has occurred which would result in the right of termination under, or resultin the creation of a Lien on any of the properties or assets of the Company (in each case, with orwithout notice or lapse of time or both) in connection with, any Company Contract, and each CompanyContract is valid, binding and enforceable against the applicable Company in accordance with itsterms and is in full force and effect.     For purposes of this Agreement, “**Derivative Product**” means (i) any swap, cap, floor, collar,futures contract, forward contract, option and any other derivative financial instrument orContract, based on any commodity, security, instrument, asset, rate or index of any kind or naturewhatsoever, whether tangible or intangible, including electricity (including capacity and ancillaryservices products related thereto), natural gas, crude oil, coal and other commodities, emissionsallowances, renewable energy credits, currencies,interest rates and indices and (ii) forward contracts for delivery of electricity (includingcapacity and ancillary services products related thereto), natural gas, crude oil, petcoke,lignite, coal and other commodities and emissions and renewable energy credits.     Section 3.16 *Insurance*. Section 3.16 of the Disclosure Letter contains a true and completelist of the material insurance policies and surety bonds of or for the benefit of the Company orits assets, businesses, operations, employees, officers or directors (the “**Company InsurancePolicies**”). Each of the Company Insurance Policies is valid, enforceable, existing and binding,and the premiums due thereon have been timely paid. There are no outstanding unpaid claims underany of the Company Insurance Policies with respect to the Company, except in the ordinary course ofbusiness consistent with past practice. Since September 30, 2005, the Company has not receivednotice of cancellation, termination or non-renewal of any Company Insurance Policy or been deniedinsurance coverage. The Company Insurance Policies are sufficient for compliance with applicableLaw and all Contracts to which the Company is a party or by which it or any of its assets arebound, and are in such amounts, against such risks and losses, and on such terms and conditions asare consistent with industry practice in the business of the Company. Buyer acknowledges andagrees that, with respect to the Company, none of the Company Insurance Policies will remain ineffect after the Closing Date.     Section 3.17 *Regulatory Matters*. The Company is subject to regulation (i) under Texas utilityLaw as a “power generation company” (as such term is defined under PURA), and (ii) under the ERCOTprotocols as a “resource entity” (as such term is defined in the ERCOT protocols). Except as setforth in the immediately preceding sentence, the Company is not and has not been subject toregulation as a public utility, public utility holding company or public service company (orsimilar designation) by any Governmental Authority. The Company is not and has not been engaged inthe sale of electricity in interstate commerce. The Company is an “exempt wholesale generator”within the meaning of the Public Utility Holding Company Act of 2005.
20

 
     Section 3.18 *Affiliate Transactions*.     (a) Section 3.18(a) of the Disclosure Letter sets forth a list of all Contracts ortransactions between the Company, on the one hand, and any Affiliate, officer, manager or directorof the Company or any Affiliate of any such officer, manager or director, on the other hand (allsuch Contracts and transactions, “**Company Affiliate Contracts**”).     (b) Except as set forth in Section 3.18(b) of the Disclosure Letter, each Company AffiliateContract listed in Section 3.18(a) of the Disclosure Letter was entered into in the ordinary courseof business and on terms no less favorable than would have been reached on an arms-length basis,except those of a type available to Sellers Employees generally.     Section 3.19 *Brokers; Finders and Fees*. Except for fees to the entities described in Section3.19 of the Disclosure Letter, which fees will be paid by Sellers or their Affiliates, the Companyand its respective controlled Affiliates have not employed, engaged or entered into a Contract withany investment banker, broker, finder, other intermediary or any other Person orincurred any liability for any investment banking, financial advisory or brokerage fees,commissions, finders’ fees or any other fee in connection with this Agreement or the transactionscontemplated by this Agreement.ARTICLE IVREPRESENTATIONS AND WARRANTIES OF BUYER     Buyer hereby represents and warrants to Sellers as follows:     Section 4.1 *Organization; Etc*. Buyer (a) is duly organized, validly existing and in goodstanding under the laws of its jurisdiction of incorporation, (b) has all requisite corporate powerand authority to own, lease and operate all of its properties and assets and to carry on itsbusiness substantially as it is now being conducted, and to execute and deliver this Agreement andall other agreements and instruments executed in connection herewith or delivered pursuant hereto,to perform its obligations hereunder and to consummate the transactions contemplated by thisAgreement and all other agreements and instruments executed in connection herewith or deliveredpursuant hereto and (c) is duly qualified or licensed to do business, and is in good standing ineach jurisdiction in which the nature of its business or the ownership, operation or leasing of itsproperties makes such qualification or licensing necessary, except where the failure to be soqualified or licensed would not reasonably be expected to, individually or in the aggregate, have aBuyer Material Adverse Effect. As used in this Agreement, the term “**Buyer Material Adverse Effect**”means any state of facts, change, development, event, effect, condition or occurrence materiallyadverse to the business, assets, properties, liabilities or condition (financial or otherwise) orresults of operations of the Buyer and its Subsidiaries taken as a whole or that, directly orindirectly, prevents or materially impairs or delays the ability of Buyer to perform itsobligations hereunder.     Section 4.2 *Authority Relative to this Agreement*. The execution, delivery and performance ofthis Agreement and all other agreements and instruments executed in connection herewith ordelivered pursuant hereto, by Buyer and the consummation of the transactions
21

 
contemplated by thisAgreement and all other agreements and instruments executed in connection herewith or deliveredpursuant hereto have been duly and validly authorized by all requisite corporate and stockholderaction on the part of Buyer and no other corporate actions or proceedings on the part of Buyer arenecessary to authorize the execution, delivery and performance of this Agreement and all otheragreements and instruments executed in connection herewith or delivered pursuant hereto by Buyer orto consummate the transactions so contemplated. This Agreement and all other agreements andinstruments executed in connection herewith or delivered pursuant hereto have been, or will be,duly and validly executed and delivered by Buyer and, with respect to this Agreement and any othersuch agreement, assuming it has been duly authorized, executed and delivered by any other party(other than an Affiliate of Buyer), constitutes, or will constitute when executed, a valid andbinding agreement of Buyer, enforceable against Buyer in accordance with its terms, except that (a)enforcement may be subject to any bankruptcy, insolvency, reorganization, moratorium, fraudulenttransfer or other laws, now or hereafter in effect, relating to or limiting creditors’ rightsgenerally, and (b) enforcement of this Agreement, including, among other things, the remedy ofspecificperformance and injunctive and other forms of equitable relief, may be subject to equitabledefenses and to the discretion of the court before which any proceeding therefor may be brought.     Section 4.3 *Consents and Approvals; No Violations*. Except for the applicable requirements ofthe HSR Act or as set forth in Section 4.3 of the Disclosure Letter, none of the execution,delivery and performance of this Agreement by Buyer, nor the consummation by Buyer of thetransactions contemplated by this Agreement or any other agreements and instruments executed inconnection herewith or delivered pursuant hereto, will (a) conflict with, violate or result in anybreach of any provision of the certificate of formation, certificate of incorporation, regulations,bylaws or similar documents, as applicable, of Buyer, (b) result in a violation or breach of, orconstitute (with or without due notice or lapse of time or both) a default (or give rise to anyright of termination, amendment, cancellation or acceleration or any right or obligation topurchase or sell securities or assets) under, or require any consent or result in a material lossof a material benefit to Buyer under, any contract to which Buyer is a party or by which any of itsbusinesses, properties or assets are bound, (c) violate any Law or Permit applicable to Buyer orits business, properties or assets, or (d) require any Approval from or by any GovernmentalAuthority, except in the case of clauses (b), (c) and (d) of this Section 4.3 for those which wouldnot reasonably be expected to, individually or in the aggregate, have a Buyer Material AdverseEffect.     Section 4.4 *Litigation*. Except as set forth in Section 4.4 of the Disclosure Letter, ordisclosed in the Buyer Reports filed and publicly available prior to the date of this Agreement,there is no Action pending or, to the knowledge of Buyer, threatened against Buyer or any of itsSubsidiaries by or before any Governmental Authority, nor are there any outstanding Orders thataffect or bind any of them or any of their respective businesses, properties or assets which wouldreasonably be expected to, individually or in the aggregate, have a Buyer Material Adverse Effect.     Section 4.5 *Compliance with Law*.     (a) Each of Buyer and its Subsidiaries is, and since December 31, 2005, has been, incompliance with all applicable Laws and has not received any notice (including through any
22

 
Action),and there has been no Action filed, commenced or, to the knowledge of Buyer, threatened againstBuyer or any of its Subsidiaries, alleging any violation of Law, except for any noncompliance orviolation that would not reasonably be expected to, individually or in the aggregate, have a BuyerMaterial Adverse Effect.     (b) Except as would not reasonably be expected to, individually or in the aggregate, have aBuyer Material Adverse Effect, (1) Buyer and its Subsidiaries hold all Permits necessary for Buyerand its Subsidiaries to own, lease and operate their properties and assets and to carry on theirbusinesses as currently conducted, and (2) all such Permits are in full force and effect. Except aswould not reasonably be expected to, individually or in the aggregate, have a Buyer MaterialAdverse Effect, (1) there has occurred no breach of or default under (with or without notice orlapse of time or both) any such Permit, and none of Buyer nor any of its Subsidiaries has receivedany notice (including through any Action) of any such breach or default, and (2) to the knowledgeof Buyer, there has been no Action filed, commenced or threatened against it, alleging any suchbreach or default or otherwise seeking to revoke, terminate, suspend or modifyany Permit or impose any fine, penalty or other sanctions for violation of any Laws relatingto any Permit.     Section 4.6 *Investment*. Buyer is purchasing the Units for investment for its own account, andnot with a view to, or for the offer or sale in connection with, any distribution thereof. Buyeracknowledges that the Units have not been registered under the Securities Act of 1933, as amended(the “**Securities Act**”), or any state securities Laws and that the Units may not be transferred orsold except pursuant to the registration provisions of the Securities Act and any applicable statesecurities Laws or pursuant to an applicable exemption therefrom.     Section 4.7 *Financial Ability*. Buyer has, and at the Closing will have, the cash resourcesnecessary to consummate the transactions contemplated by this Agreement and all other transactionsnecessary for such consummation, as evidenced by (i) the agreement by International Power plc toguarantee the performance and payment of all of Buyer’s obligations hereunder as set forth in theGuarantee Agreement attached as Exhibit E hereto and (ii) the Second Amended and RestatedCommitment Letter, dated April 17, 2006, of Credit Suisse and Goldman Sachs Credit Partners L.P.,which is attached hereto as Exhibit E.     Section 4.8 *Brokers; Finders and Fees*. No broker, finder, investment banker or other Personwhose fees or expenses would be payable by Sellers or the Company may be entitled to any brokerage,finder’s or other fee or commission in connection with the transactions contemplated by thisAgreement based upon arrangements made by or on behalf of Buyer.ARTICLE VCOVENANTS OF THE PARTIES     Section 5.1 *Operating Covenants of the Company*. During the period from the date of thisAgreement to the Closing, unless otherwise expressly contemplated by this Agreement, as set forthin Section 5.1 of the Disclosure Letter or required by applicable Law or unless Buyer gives itsprior written consent, Sellers shall cause the Company to, (1) conduct its businesses only in, andnot take any action except in, the ordinary course of business, in a manner consistent
23

 
with pastpractice and in compliance with applicable Laws (including by making payments due and owing underthe Engineering, Procurement and Construction Contract, dated March 10, 2006, between Alstom PowerInc. and the Company for construction and installation of a baghouse), (2) preserve substantiallyintact its business organization, to preserve its assets and properties in good repair andcondition and to preserve its present relationships with Governmental Authorities, customers,suppliers and other Persons with which it has business relations and use reasonable best efforts tokeep available the services of the present officers and key Sellers Employees and (3) in theordinary course of business make those capital expenditures contemplated in Section 5.1–A of theDisclosure Letter, to the extent commercially reasonable, and any amounts due and owing in respectthereof shall be paid as and when due and owing. In furtherance and not in limitation of theforegoing, during the period from the date of this Agreement to the Closing, Sellers agree that theCompany shall not directly or indirectly do, or propose, authorize or commit to do, any of thefollowing, and with respect to Section 5.1(g), Sellers shall not directly or indirectly do any ofthe following, in each case unless otherwiseexpressly contemplated by this Agreement, as set forth in Section 5.1 of the Disclosure Letteror without the prior written consent of Buyer, which consent shall not be unreasonably withheld ordelayed:     (a) amend or otherwise change the Company’s certificate of limited partnership or bylaws (orsimilar organizational documents);     (b) except as required under a Contract in force as of the date of this Agreement, and thedisposition of “Scheduled Assets” as set forth in Section 5.1 of the Disclosure Letter, issue,deliver, sell, lease, sell and leaseback, pledge, license, transfer, mortgage, encumber, dispose ofor otherwise subject to any Lien (i) the Company Securities (including, for the avoidance of doubt,the Units) or (ii) any property or assets, whether tangible or intangible, of the Company, otherthan assets or services sold, leased, pledged, licensed, transferred, disposed of or encumbered inthe ordinary course of business and in a manner consistent with past practice;     (c) declare, set aside, make or pay any dividend or other distribution by the Company, payablein cash, stock or other equity interests, property or otherwise, other than distributions intendedto cover Taxes related to the operations of the Company for any period prior to Closing and cashdistributions by the Company not in excess of the net proceeds from the disposition of “ScheduledAssets”;     (d) reclassify, combine, split, subdivide or redeem, purchase or otherwise acquire, directlyor indirectly, any of the Company Securities;     (e) incur any Indebtedness or issue any securities in respect of Indebtedness or assume,guarantee or endorse, or otherwise as an accommodation become responsible for, the obligations orIndebtedness of any Person, in excess of $1,000,000 in the aggregate, other than revolving creditborrowings and reborrowings and letter of credit issuances in a manner consistent with pastpractice under the Credit Agreement;     (f) (i) amend in any material respect, terminate, cancel or renew any Company Contract oragreement recorded against the Real Property, or enter into any Contract that would be a CompanyContract if it had been in effect on the date of this Agreement, provided that, for
24

 
the avoidanceof doubt, to the extent any such Contract is entered into after the date of this Agreement inaccordance with this Agreement, such Contract shall be deemed to be a Company Contract for purposesof this Agreement, (ii) acquire (including by merger, consolidation or acquisition of stock orassets) any assets (other than in the ordinary course of business), business or any corporation,partnership, limited liability company, association or business organization or division thereof(other than acquisitions prior to the Closing having an aggregate consideration of not more than$1,000,000) other than fuel, supplies, maintenance materials and other inventory items in theordinary course of business consistent with past practice, or (iii) authorize or make any capitalexpenditures, except such expenditures made prior to the Closing Date (x) in an amount not inexcess of $1,000,000 individually or $5,000,000 in the aggregate and emergency or (y) ordinarycourse capital expenditures in accordance with clause (3) of Section 5.1 of this Agreement;     (g) except to the extent required under applicable Law or the terms of any Sellers BenefitPlan existing as of the date of this Agreement, materially increase or otherwise materially amendthe compensation or fringe benefits of any Sellers Employee (except for increases in salary orhourly wage rates, in the ordinary course of business consistent with past practice);     (h) pay, discharge or satisfy any material claims, liabilities or obligations (absolute,accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge orsatisfaction when due or otherwise in the ordinary course of business and consistent with pastpractice of liabilities reflected or reserved against in the balance sheet of the Company as ofDecember 31, 2005 or incurred in the ordinary course of business and consistent with past practiceafter December 31, 2005;     (i) make any loans, advances or capital contributions (including any “keep well” or otherContract to maintain any financial statement condition of another Person) to, or investments in,any other Person; or     (j) fail to maintain in full force and effect insurance policies covering the Company and itsproperties, assets and business in a form and amount consistent with the Company’s currentinsurance program, including the Company Insurance Policies (except in the ordinary course ofbusiness to the extent any such policies expire in accordance with their term and they are replacedwith policies consistent with good practice for independent power companies, subject to insurancemarket conditions).     For purposes of clarification, the Company shall be entitled to, and nothing in this Agreementshall restrict the Company’s right to, declare, make and pay prior to the Closing Date, QuarterlyTax Distributions and cash distributions of the proceeds from the disposition of “ScheduledAssets.”     Section 5.2 *Access to Information*.     (a) From the date of this Agreement to the Closing, Sellers will, and will cause theirSubsidiaries and their Subsidiaries’ respective officers, directors, employees, accountants,auditors, counsel, financial advisors and other agents and representatives (collectively,
25

 
“**Representatives**”) to (i) give to Buyer and its Representatives reasonable access during normalbusiness hours to the officers, Sellers Employees, agents, properties, offices, plants and otherfacilities and to the books, personnel, Contracts and records of the Company, (ii) permit Buyer andits Representatives to make such copies and inspections thereof as the other may reasonablyrequest, and (iii) furnish Buyer and its Representatives with such financial, trading, marketingand operating data and other information concerning the business, properties, Contracts, assets,liabilities, personnel and other aspects of the Company, as Buyer and its Representatives may fromtime to time reasonably request, provided, however, that any access to properties of the Companyshall be conducted at Buyer’s expense, at a reasonable time, under the reasonable supervision ofthe Company’s personnel and in such a manner as to not interfere unreasonably with the operation ofthe businesses of the Company; provided, further, that the Company shall not berequired to provide access to any information (i) that is subject to attorney-client privilege tothe extent doing so would reasonably be expected to causesuch privilege to be waived or (ii) that is subject to contractual prohibition againstdisclosure to the extent doing so would violate such prohibition. Notwithstanding the foregoing,Buyer shall not have the right to conduct testing or sampling of water, soil or other media, otherintrusive environmental testing or sampling, without the prior written consent of Sellers.     (b) All such information and access shall be subject to the terms and conditions of theconfidentiality letter agreement dated December 22, 2005 (the “**Confidentiality Agreement**”) betweenTopaz Power Partners and American National Power, Inc., until the Closing Date.     Section 5.3 *Consents; Cooperation*.     (a) Sellers and Buyer shall cooperate, and use reasonable best efforts, to take, or cause tobe taken, all actions, and to do, or cause to be done, and to assist and cooperate with the otherParty in doing, all things necessary, proper or advisable to consummate and make effective thetransactions contemplated hereby as promptly as practicable, including, but not limited to makingall filings (including filing with the PUC) and obtaining all Approvals and third party consentsnecessary to consummate the transactions contemplated by this Agreement; provided, however, that,with respect to the foregoing, (i) such efforts shall not require Sellers or Buyer or any of theirrespective Subsidiaries to make any payment to obtain any such Approval or third-party consent,other than nominal transfer fees or filing fees and/or the costs and expenses of third partiespursuant to the terms of any Contract, (ii) except as required by Law, the Company shall not bepermitted to consent to any action or to make or offer to make any substantive commitment orundertaking or incur any liability or obligation with respect to the Company without the consent ofBuyer, which shall not be unreasonably withheld and (iii) without limiting the generality of theforegoing, the actions of Sellers and Buyer with respect to filings, approvals and other matterspursuant to the HSR Act and any local, state, federal (other than the HSR Act) or foreign antitruststatute, antitrust law, antitrust regulation or antitrust rule applicable to Sellers, the Companyor Buyer (“**Other Regulations**”) shall also be governed by subsections (b), (c), (d) and (e) of thisSection 5.3. Without limiting the generality of the foregoing and except as required to consummatethe transaction contemplated hereby, Buyer will not, and agrees to cause its Subsidiaries not to,take any action, including incurring any indebtedness, issuing any capital stock or acquiring(including by merger, consolidation or acquisition of stock of assets) or disposing of any assetsor securities, in each case that would reasonably be expected to have an adverse effect on thereceipt or timing of receipt of any Required Approval.
26

 
     (b) Sellers and Buyer shall file with (i) the United States Federal Trade Commission (the“**FTC**”) and the United States Department of Justice (the “**DOJ**”), the notification and report formrequired for the transactions contemplated by this Agreement and any supplemental informationrequested in connection with such notification and report form pursuant to the HSR Act, and (ii)any other applicable Governmental Authority, all filings, reports, information and documentationrequired for the consummation of the transactions contemplated by this Agreement pursuant to theOther Regulations. Sellers and Buyer shall furnish to each other’s counsel such necessaryinformation and reasonable assistance as the other Party may reasonably request in connection withits preparation of any filing or submission that is necessary under the HSR Act and OtherRegulations. Sellers and Buyer shallconsult with each other as to the appropriate time of making such filings and submissions andshall use reasonable best efforts to make such filings and submissions at the agreed upon time.     (c) Sellers and Buyer shall keep each other apprised of the status of any communications with,and any inquiries or requests for additional information from, the FTC and the DOJ and othergovernmental or regulatory entities in connection with the transactions contemplated hereby andshall comply promptly by responding to any such inquiry or request.     (d) Sellers and Buyer shall use reasonable best efforts to vigorously defend, mitigate andrescind the effect of any Action materially and adversely affecting this Agreement or the abilityof the parties to consummate the transactions contemplated by this Agreement, including promptlyappealing any adverse Order.     (e) Sellers and Buyer shall take any and all commercially reasonable steps necessary to avoidor eliminate each and every impediment under the HSR Act and any Other Regulations that may beasserted by any Governmental Authority with respect to the transactions contemplated by thisAgreement so as to enable the Closing to occur as soon as reasonably possible; provided, however,that Buyer shall not be required to take, or refrain from taking, any action pursuant to thisSection 5.3 to the extent that such action or inaction would reasonably be expected to result in amaterial adverse effect on Buyer or its Affiliates.     (f) With respect to any agreements for which any required Approval or third-party consent isnot obtained prior to the Closing Date, as applicable, Sellers and Buyer will each use reasonablebest efforts to obtain any such consent or approval after such date until such consent or approvalhas been obtained.     (g) Sellers shall keep Buyer reasonably apprised of the status of matters relating to thecompletion of the transactions contemplated hereby and shall promptly furnish Buyer with copies ofall notices or other communications received by Sellers or by the Company or its or theirRepresentatives from any third party and/or any Governmental Authorities with respect to thetransactions contemplated hereby. Sellers shall promptly furnish to Buyer such necessaryinformation and reasonable assistance as Buyer may request in connection with the foregoing andshall promptly provide counsel for Buyer with copies of all filings made by the Company, and allcorrespondence between the Company (and its Representatives) with any Governmental Authority andany other information supplied by the Company (and its Representatives) to a Governmental Authorityin connection herewith and the transactions contemplated hereby. Sellers shall, subject toapplicable Law, permit counsel for Buyer reasonable opportunity to
27

 
review in advance, and considerin good faith the views of Buyer in connection with, any proposed written communication by Sellersor the Company to any Governmental Authority in connection with the transactions contemplatedhereby. Sellers agree not to participate, or to permit the Company to participate, in anysubstantive meeting or discussion, either in person or by telephone, with any GovernmentalAuthority in connection herewith and the transactions contemplated hereby unless it consults withBuyer in advance and, to the extent not prohibited by such Governmental Authority, gives Buyer andits counsel the opportunity to attend and participate.     (h) Buyer shall keep Sellers reasonably apprised of the status of matters relating to thecompletion of the transactions contemplated hereby and shall promptly furnish Sellers with copiesof all notices or other communications received by Buyer or its Representatives from any thirdparty and/or any Governmental Authorities with respect to the transactions contemplated hereby.Buyer shall promptly furnish to Sellers such necessary information and reasonable assistance asSellers may request in connection with the foregoing and shall promptly provide counsel for Sellerswith copies of all filings made by Buyer, and all correspondence between Buyer (and itsRepresentatives) with any Governmental Authority and any other information supplied by Buyer (andits Representatives) to a Governmental Authority in connection herewith and the transactionscontemplated hereby. Buyer shall, subject to applicable Law, permit counsel for Sellers reasonableopportunity to review in advance, and consider in good faith the views of Sellers in connectionwith, any proposed written communication by Buyer to any Governmental Authority. Buyer agrees notto participate in any substantive meeting or discussion, either in person or by telephone, with anyGovernmental Authority in connection herewith and the transactions contemplated hereby unless itconsults with Sellers in advance and, to the extent not prohibited by such Governmental Authority,gives Sellers and their respective counsel the opportunity to attend and participate.     Section 5.4 *Reasonable Best Efforts*. Sellers and Buyer shall cooperate, and use reasonablebest efforts to take, or cause to be taken, all action, and to do, or cause to be done, all thingsnecessary, proper or advisable to cause the conditions to the Closing set forth in Article VI to besatisfied and to consummate the transactions contemplated by this Agreement. Without limiting theforegoing, after the Closing, each of the Parties, at the reasonable request of the other shallexecute and deliver, or cause to be executed and delivered, such assignments, deeds, bills of saleand other instruments of transfer as any Party reasonably may request as necessary, proper oradvisable in order to effect or further evidence the Acquisition and the other transactionscontemplated thereby, and Buyer shall assist Sellers in connection with any third party claimsbrought against Sellers or their respective Affiliates by providing Sellers and their respectiveAffiliates and Representatives reasonable access during normal business hours to the officers,Sellers Employees, agents, properties, offices, plants and other facilities and to the books,personnel, Contracts and records of the Company; provided, however, that any access to propertiesof the Company pursuant to the foregoing sentence shall be conducted at Sellers’ expense, at areasonable time, under the reasonable supervision of Buyer’s personnel and in such a manner as tonot interfere unreasonably with the operation of the businesses of the Company.     Section 5.5 *Public Announcements*. Prior to the Closing, except as otherwise agreed to by theParties, no Party shall issue any report, statement or press release or otherwise make any publicstatements with respect to this Agreement and the transactions contemplated by
28

 
this Agreement,except as described in the following sentence and in the reasonable judgment of a Party that it maybe required by Law (including in connection with regulatory proceedings) or in connection with itsobligations as a publicly-held, exchange-listed or Nasdaq-quoted company, to do so, in which casethe Parties will use their reasonable best efforts to reach mutual agreement as to the language ofany such report, statement or press release. Upon the execution of this Agreement and upon theClosing, the Parties shall mutually agree upon the form of, and shall issue, a joint press releasewith respect to this Agreement and the transactions contemplated by this Agreement.     Section 5.6 *Employees; Employee Benefits*.     (a) Buyer agrees to make an offer of employment to each Sellers Employee on or before theClosing Date. Each such offer of employment shall (i) be effective as of the Closing Date, (ii)include a rate of base pay no less than the rate of base pay payable to each Sellers Employee, asset forth on Section 3.10(a) of the Disclosure Letter, and (iii) have a principal place of workthat is no greater than fifty (50) miles from such Sellers Employee’s principal place of workimmediately prior to the Closing Date. Each Sellers Employee who accepts such offer of employmentshall be hereinafter referred to as a “**Transferred Employee**.” Unless otherwise agreed betweenBuyer and a Transferred Employee, offers of employment shall be on an at-will basis.     (b) For the one-year period commencing on the Closing Date (the “**Benefits MaintenancePeriod**”), the Buyer shall (i) provide each Transferred Employee with at least the same rate of basepay and same bonus opportunities to which each such Transferred Employee is entitled immediatelyprior to the Closing Date as set forth on Section 3.10(a) and Section 3.10(b) of the DisclosureLetter, as applicable, and (ii) provide the Transferred Employees with employee benefits(including, for the avoidance of doubt, retirement, retiree medical, welfare and fringe benefits)that are, in the aggregate, at least equal in value to the benefits provided to the TransferredEmployees under the Sellers Benefit Plans immediately prior to the Closing Date. Any employeebenefit plans, programs or policies of Buyer or its Affiliates or Subsidiaries in which TransferredEmployees become eligible to participate after the Closing Date shall be referred to hereinafteras, the “**Buyer Benefit Plans**.” Neither Buyer nor any Buyer Benefit Plan shall receive assets fromthe Sellers Benefit Plans or any other benefit plan maintained by Sempra, Topaz Power Group, STS,Sellers or their respective Affiliates. In addition, Sempra, Topaz Power Group, STS, Sellers ortheir respective Affiliates, successors or assigns, as applicable, shall retain any liabilities orobligations relating to Sellers Employees under any Sellers Benefit Plan or any other benefit planmaintained by Sempra, Topaz Power Group, STS, Sellers or their respective Affiliates that haveaccrued prior to the Closing Date.     (c) To the extent that service is relevant for any purpose, including eligibility toparticipate, vesting credit, eligibility to commence benefits, benefit accrual, early retirementsubsidies, and severance benefits, under a Buyer Benefit Plan, Buyer shall credit, effective as ofthe Closing Date and under the applicable Buyer Benefit Plans, each Transferred Employee with suchTransferred Employee’s service with, or recognized by, Sempra, Topaz Power Group, STS, Sellers, theCompany or their respective Affiliates (including their predecessors) prior to or on the ClosingDate, to the same extent as if such service were with Buyer; provided, however, that
29

 
such serviceshall not be required to be recognized to the extent that such recognition would result in aduplication of benefits.     (d) Buyer shall provide at least the same amount and type of severance benefit as thatdescribed in Section 5.6(d) of the Disclosure Letter to any Transferred Employee who, during theBenefits Maintenance Period, (i) is terminated without cause or (ii) elects to terminate his or heremployment with Buyer or its Subsidiaries within seven (7) days after Buyer notifies suchTransferred Employee of Buyer’s intent to (1) reduce such Transferred Employee’s rate of base payor bonus opportunity or (2) assign such Transferred Employee to a principal place of workthat is greater than fifty (50) miles from such Transferred Employee’s principal place of workimmediately prior to the Closing Date. In addition, Buyer agrees to indemnify Sempra, Topaz PowerGroup, STS, Sellers and their Affiliates for any severance pay, termination pay or similar pay towhich a Sellers Employee may become entitled in the event (i) Buyer fails to make an offer ofemployment to such Sellers Employee (excluding, for purposes of this Section 5.6(d)(i) only, anySTS Employee) or (ii) any offer of employment by Buyer to such Sellers Employee fails to complywith the terms and conditions of Section 5.6(a) of this Agreement.     (e) With respect to any Buyer Benefit Plans, except to the extent otherwise required byapplicable law, Buyer shall (i) waive, or cause the waiver of, all pre-existing conditions,exclusions and waiting periods with respect to participation and coverage requirements applicableto the Transferred Employees and their eligible dependents, and (ii) for purposes of satisfying anydeductible or out-of-pocket requirements, provide each Transferred Employee and their eligibledependents with credit for any co-payments and deductibles paid prior to the date hereof under theanalogous Sellers Benefit Plan. Sellers will furnish Buyer with such information concerning theamount of such co-pays and deductibles as may be reasonably necessary to enable Buyer to complywith the provisions of this Section 5.6(e)     (f) In accordance with the elections made pursuant to Section 401(a)(31) of the Code byTransferred Employees and to the extent permissible under any applicable Law, Sellers shallfacilitate the transfer of assets held in the respective accounts of such Transferred Employeesfrom the Sempra Energy Retirement Savings Plan to a defined contribution benefit plan or plansdesignated by Buyer. Buyer agrees to cause such Buyer defined contribution plan or plans to acceptintact rollovers of cash and loans associated with such Transferred Employee accounts and Buyerwill cooperate with Sellers to enable such rollovers to occur before any such loans becomedefaulted.     (g) Buyer agrees to provide any required notice under the WARN Act and to otherwise complywith the WARN Act or any similar law with respect to any “plant closing” or “mass layoff” (asdefined in the WARN Act) affecting Sellers Employees and occurring on or after the Closing Date.     (h) After the date of this Agreement and prior to the Closing Date, Buyer shall have the rightto meet with Sellers Employees, as a group and not on an individual one-on-one basis, from time totime to discuss post-Closing employment matters; provided, however, that Buyer shall notify Sellersat least two (2) business days prior to the date on which a meeting is proposed to be held, andSellers shall have the right to have one or more Representatives of Sellers or their Affiliates(except any Sellers Employees) attend such meeting. If any materials are to be
30

 
provided or usedduring a meeting, Buyer shall provide copies of such materials to Sellers at least two (2) businessdays prior to such meeting, and the use or provision of such materials during the meeting will besubject to Sellers’ reasonable consent.     (i) After the date of this Agreement and prior to the Closing Date, Buyer shall have theright, with the consent of Sellers, to meet with those STS Employees who Buyer determines in goodfaith are reasonably necessary for its operation of the business of the Company, to discusspotential employment with Buyer from and after the Closing Date; provided, however, that Buyershall notify Sellers of the STS Employees with which Buyer would like to meet atleast five (5) business days prior to the date on which a meeting is proposed to be held andSellers shall have the right to have one or more Representatives of Sellers or their Affiliatesattend such meeting. If any materials are to be provided or used during a meeting, Buyer shallprovide copies of such materials to Sellers at least two (2) business days prior to such meetingand the use or provision of such materials during the meeting will be subject to Sellers’ consent(not to be unreasonably withheld or delayed). Notwithstanding anything herein to the contrary, theparties acknowledge and agree that nothing in this Section 5.6(i) shall obligate the Buyer to makeany offer of employment to any STS Employee or obligate Sellers to make any STS Employee availableto Buyer for employment. In addition, in the event Buyer does make an offer of employment to anSTS Employee, Buyer agrees to treat such STS Employee as a Seller Employee (and to the extent suchSTS Employee accepts such offer, a Transferred Employee) for purposes of the provisions of thisSection 5.6 (including, without limitation, the offer of employment conditions set forth in Section5.6(a), but excluding Section 5.6(h)). Furthermore, with respect to any STS Employee who is notoffered employment by Buyer prior to the Closing Date, (i) Sellers and their Affiliates will retainliability for any severance pay, termination pay or similar pay to which any such STS Employee maybecome entitled and (ii) Buyer will not, and will not cause its Affiliates to, directly orindirectly, for the six (6) month period from the Closing Date, for Buyer’s or such Affiliate’saccount or for the account of any Person, solicit or induce, or assist a third party in solicitingor inducing, any such STS Employee, to leave or cease their employment relationship with Sellers,STS or their respective affiliates, for any reason whatsoever, or hire or otherwise engage, orassist a third party in hiring or otherwise engaging, any such STS Employee.     Section 5.7 *Tax Matters*.     (a) Sellers shall prepare and file, or cause to be prepared and filed, any Tax Returns of theCompany for any taxable period ending on or before the Closing. Buyer shall prepare and file, orcause to be prepared and filed, all Tax Returns of the Company for any taxable period ending afterthe Closing Date (for purposes of the Texas Franchise Tax the terms “taxable period” or “period”that appear in this Section 5.7 shall mean the “privilege period” as that term is used inadministering the Texas Franchise Tax), including all Tax Returns that relate to periods beginningbefore and ending after the Closing Date (“**Straddle Returns**”). All Straddle Returns shall beprepared on a basis consistent with existing procedures and practices of the Company for filingsuch Tax Returns. Buyer shall not, or allow the Company to, amend a Tax Return (or extend thestatute of limitations for assessment or collection of any Taxes with respect to a Tax Return) thatrelates to any period (portion thereof) ending on or before the Closing Date without the priorwritten permission of Seller (which will not be unreasonably withheld). Seller shall have the rightto review Straddle Returns and shall be entitled to fully participate in that
31

 
portion of anyproceedings or audits relating to Taxes with respect to which Sellers may incur Tax liability.Buyer agrees to cooperate with Sellers, and Sellers agree to cooperate with Buyer, to provide anyinformation requested by Sellers or Buyer, as the case may be, in order to prepare such returns.     (b) Sellers shall be liable for, and shall indemnify and hold Buyer harmless from, any taxesimposed on the Company with respect to any period ending on or before the Closing Date, which shallinclude Sellers’ pro-rata portions of any Straddle Period Taxes, as determined under Section 5.7(c)or taxes based upon real or personal property as determined under Section 5.7(d).Buyer’s shall be liable for, and shall indemnify and hold Sellers harmless from, any Taxesimposed on the Company with respect to any period beginning after the Closing Date, which shallinclude Buyer’s pro-rata portions of any Straddle Period Taxes, as determined under Section 5.7(c)or taxes based upon real or personal property as determined under Section 5.7(d).     (c) In the case of any taxable period beginning before and ending after the Closing Date (the“**Straddle Period**”), the Party liable for the payment of and indemnification for Taxes related tosuch period and the amount of Tax allocated to such Party shall be determined on a per diem basis.     (d) All real or personal property Taxes assessed on an annual basis shall be prorated betweenSellers and Buyer as of the Closing Date based on the assumption that an equal amount of Taxesapplies to each day of the year, regardless of how any installment payments are billed or made,except that Buyer will bear all supplemental or other state and local real and personal propertyTaxes which arise out of a change in ownership of the Companies. Sellers shall cause the Companyto pay their portion of such real and personal property Taxes to the Buyer on or prior to theClosing, and except as provided in the next sentence, shall have no further liability or obligationwith respect to such Taxes. If the amount of all real and personal property Taxes due for the 2006year (commencing January 1, 2006) has not been assessed by the taxing authorities as of the ClosingDate, then the amount of real and personal property Taxes as prorated between Sellers and Buyer forthe 2006 tax will be estimated on the basis of the 2005 tax year’s real and personal taxes and suchamount will be subject to a true-up adjustment after the Closing Date based upon the actual amountof Taxes assessed.     (e) After the Closing Date in the case of any audit, examination, or other proceeding withrespect to Taxes (“Tax Proceeding”) for which Sellers are or may be liable hereunder, Buyer shallinform Sellers within thirty (30) days of the receipt of any notice of such proceeding and shallkeep Sellers informed of the progress of such proceedings. Seller shall be entitled to fullyparticipate in any proceeding. Buyer shall not agree to any adjustments which affect taxableperiods for which Sellers are liable for payment of Tax without first receiving the consent ofSellers, which consent shall not be unreasonably withheld.     (f) All excise, sales, use, transfer (including real property transfer or gains), stamp,documentary, filing, recordation and other similar taxes, together with any interest, additions orpenalties with respect thereto and any interest in respect of such additions or penalties,resulting directly from the Acquisition (the “**Transfer Taxes**”), shall be paid by Buyer.
32

 
     Section 5.8 *Escrow Agreement.*On or prior to the Closing Date, Buyer and Sellers will executeand deliver, and will use reasonable best efforts to cause the Escrow Agent to execute and deliver,the Escrow Agreement.     Section 5.9 *Mutual Release.*Effective as of the Closing, Sellers, on the one hand, and Buyeron the other hand, hereby unconditionally and irrevocably and forever releases and discharges theother, its respective Affiliates, successors and assigns, and any present or former directors,managers, officers, employees or agents of the other (collectively, the respective “**ReleasedParties**”), of and from, and hereby unconditionally and irrevocably waives, any and all claims,debts, losses, expenses, proceedings, covenants,liabilities, suits, judgments, damages, actions and causes of action, obligations, accounts,and liabilities of any kind or character whatsoever, known or unknown, suspected or unsuspected, incontract, direct or indirect, at law or in equity (collectively, the respective “**Released Claims**”)that such Party ever had, now has or ever may have or claim to have against any Released Party, foror by reason of any matter, circumstance, event, action, inaction, omission, cause or thingwhatsoever arising prior to the Closing and to the extent based upon the applicable Sellers’capacity as a holder of Units, including without limitation any Released Claims arising underEnvironmental Law, and regardless of whether the released claims are the result of the sole, gross,active passive concurrent or comparative negligence, strict liability or other fault or violationof any law of or by and Released Party; provided, however, that this release does not extend toReleased Claims to enforce the terms or any breach of this Agreement or any of the provisions setforth herein. Following the Closing, Buyer shall cause the Company to release Sellers to the sameextent Sellers have been released by Buyer in accordance with this Section 5.9.     Section 5.10 *SES PPA*. Simultaneously with and effective as of the Closing, Buyer shall (orshall cause the Company to) deliver Security (as defined in the Master Power Purchase and SaleAgreement, dated as of June 28, 2004, by and between the Company and Sempra Energy Solutions (asamended pursuant to the SES PPA Amendment, the “**SES PPA**”)) in the amount of Party A’s SecurityAmount (as defined in the SES PPA) in accordance with the SES PPA.     Section 5.11 *Intercompany Arrangements*. Sellers shall cause all Intercompany Arrangements,excluding any Surviving Intercompany Arrangements, to be terminated concurrently with the Closing.For purposes of this Agreement, (a) “**Intercompany Arrangement**” means any contract, agreement orarrangement in respect of any intercompany transaction between the Company, on the one hand, andeither Seller or any of its Affiliates, on the other hand, whether or not such transaction relatesto any contribution to capital, loan, the provision of goods or services, tax sharing arrangements,payment arrangements, intercompany advances, charges or balances or the like and (b) “**SurvivingIntercompany Arrangement**” means any Intercompany Arrangements listed in Exhibit D-2. Forthe avoidance of doubt, no such termination of an Intercompany Agreement pursuant to this Section5.11 (including with respect to termination of the Amended and Restated Asset Management Agreement(Topaz) dated as of July 1, 2004, by and between Coleto Creek Power, LP and Sempra Texas Services,LP.) shall in any way modify, release or otherwise extinguish any rights or obligations explicitlysurviving the termination of such Intercompany Agreement pursuant to the terms thereof.
33

 
     Section 5.12 *Casualty.*Sellers will (a) on or prior to Closing, promptly file or cause to befiled, in the ordinary course of business and in accordance with its customary practices andprocedures, all insurance claims relating to any damage to or destruction of all or any portion ofthe Plant occurring prior to the Closing, and (b) pay or cause to be paid to the Company, allproceeds of insurance claims (other than claims for business interruption insurance and amountspaid or accrued in respect of Liabilities reflected on or contemplated by the financial statementsof the Company) filed on or prior to the Closing, not otherwise payable to the Company and relatingto damage or destruction of all or a portion of the plant occurring prior to the Closing.     Section 5.13 *Transition Services Agreement*. Sellers agree to provide the services describedin Section 5.13 of the Disclosure Letter, subject to terms and conditions to be mutually agreed bythe Sellers and Buyer. The Parties shall use commercially reasonable efforts to enter into aTransition Services Agreement within thirty (30) Business Days of the date hereof, which TransitionServices Agreement shall become effective on the Closing Date. “**Transition Services Agreement**”means that certain agreement, dated not later than the Closing Date, between Seller and Purchaserfor the provision by Seller of the services described in Section 5.13 of the Disclosure Letter.ARTICLE VICONDITIONS TO CONSUMMATION OF THE ACQUISITION     Section 6.1 *Conditions to Buyer’s and Sellers’ Obligations to Consummate the Acquisition*. Therespective obligations of Buyer and Sellers to consummate the Acquisition are subject to thesatisfaction on or prior to the Closing Date of each of the following conditions:     (a) No Law or Order shall exist or shall have been enacted, entered, promulgated or enforcedby any Governmental Authority which prohibits or makes illegal consummation of the Acquisition orany of the other transactions related thereto.     (b) Any waiting period applicable to the Acquisition under the HSR Act shall have expired orbeen terminated.     (c) All consents or approvals under Section 39.158 of Chapter 39 of the Texas Utilities Coderequired to be given or made by the Public Utility Commission of Texas in order to consummate theAcquisition shall have been obtained.     Section 6.2 *Further Conditions to Sellers’ Obligations*. The obligations of Sellers toconsummate the Acquisition are further subject to satisfaction or, if permitted by applicable Law,waiver by each applicable Seller, on or prior to the Closing Date of each of the followingconditions:     (a) Representations and Warranties. Each of the representations and warranties ofBuyer set forth in Article IV of this Agreement shall be true and correct as of the date of thisAgreement and on and as of the Closing Date as though such representations and warranties were madeon and as of such date, except for representations and warranties which speak as of an earlier dateor period which shall be true and correct as of such date or period; provided, however, that forpurposes of this clause, such representations and warranties shall be deemed to
34

 
be true and correctunless the failure or failures of all such representations and warranties to be so true andcorrect, without giving effect to any qualification as to materiality or Buyer Material AdverseEffect set forth in such representations or warranties, would reasonably be expected, in theaggregate, to have a Buyer Material Adverse Effect.     (b) Performance Obligations of Buyer. Buyer shall have performed in all materialrespects all obligations required to be performed by it under this Agreement at or prior to theClosing.     (c) Officer’s Certificate. Sellers shall have received a certificate, dated theClosing Date, signed on behalf of Buyer by either the Chief Executive Officer or Chief FinancialOfficer of Buyer certifying as to the matters described in Sections 6.2(a) and 6.2(b).     Section 6.3 *Further Conditions to Buyer’s Obligations*. The obligation of Buyer to consummatethe Acquisition shall be further subject to the satisfaction or, if permitted by applicable Law,waiver by Buyer, on or prior to the Closing Date, of each of the following conditions:     (a) Representations and Warranties of Sellers. Each of the representations andwarranties of Sellers (i) set forth in Article II (other than Section 2.3) and Article III of thisAgreement shall be true and correct as of the date of this Agreement and as of the Closing Date asthough such representations and warranties were made on and as of such date, except forrepresentations and warranties that speak as of an earlier date or period which shall be true andcorrect as of such date or period; provided, however, that for purposes of this clause, suchrepresentations and warranties shall be deemed to be true and correct unless the failure orfailures of all such representations and warranties to be so true and correct, without givingeffect to any qualification as to materiality or Company Material Adverse Effect set forth in suchrepresentations or warranties, would reasonably be expected, in the aggregate, to have a CompanyMaterial Adverse Effect and (ii) set forth in Section 2.3 shall be true and correct as of the dateof this Agreement and as of the Closing Date as though made on and as of the Closing Date, exceptfor representations and warranties which speak as of an earlier date or period which shall be trueand correct as of such date or period.     (b) Performance Obligations. Each of Sellers and the Company shall have performed inall material respects all obligations required to be performed by them under this Agreement at orprior to the Closing Date.     (c) Officer’s Certificate. Buyer shall have received a certificate, dated the ClosingDate, signed on behalf of Sellers by either the Chief Executive Officer or Chief Legal Officer ofeach Seller, certifying as to the matters described in Section 6.3(a) and 6.3(b).     (d) No Material Adverse Effect. Since the date hereof, there shall not have occurredany state of facts, change, development, event, effect, condition or occurrence that, individuallyor in the aggregate, has or would reasonably be expected to have a Company Material Adverse Effect.     (e) Payment of Outstanding Amounts Under the Credit Agreement. At or prior to theClosing, the Company shall have received and delivered to Buyer the Pay-Off Letters.
35

 
ARTICLE VIITERMINATION AND ABANDONMENT     Section 7.1 *Termination*. This Agreement may be terminated and the transactions contemplatedhereby may be abandoned at any time prior to the Closing Date, as follows (the date of any suchtermination, the “**Termination Date**”):     (a) by mutual written consent of Sellers and Buyer;     (b) by Sellers or Buyer if the Closing shall not have been consummated on or before September25, 2006 (the “**Optional Termination Date**”); provided, however, that the right to terminate thisAgreement pursuant to this Section 7.1(b) shall not be available to Sellers, if their failure toperform, or Buyer, if its failure to perform, its obligations under this Agreement has been thecause of, or resulted in, the failure of the Acquisition to have been consummated on or before theTermination Date;     (c) by Sellers, on the one hand, or Buyer, on the other hand, if there shall have been amaterial breach of any of the covenants or agreements or any of the representations or warrantiesset forth in this Agreement on the part of Buyer, in the case of termination by Sellers, or any ofSellers, in the case of a termination by Buyer, which breach, individually or together with allother such breaches, would constitute, if occurring or continuing on the Closing Date, the failureof any of the conditions set forth in Section 6.2 or 6.3, as the case may be, and which is notcured within thirty (30) days following written notice to the Party committing such breach or byits nature or timing cannot be cured prior to the Closing Date;     (d) by Sellers or Buyer if (i) a Governmental Authority shall have issued an Order or takenany other action permanently restraining, enjoining or otherwise prohibiting the transactionscontemplated by this Agreement and such Order shall have become final and non-appealable or (ii) aGovernmental Authority of competent jurisdiction shall have denied or otherwise failed to grant aRequired Approval and such failure or denial shall have become final and non-appealable, as aresult of which the conditions set forth in Section 6.1 shall become incapable of being satisfied;or     (e) by Buyer, if there shall have been a Company Material Adverse Effect which is not curedwithin thirty (30) days following written notice thereof by Buyer to Sellers.     Section 7.2 *Procedure for and Effect of Termination*. In the event of termination of thisAgreement and abandonment of the transactions contemplated by this Agreement by either Party asprovided under Section 7.1 of this Agreement, written notice thereof shall be given by a Party soterminating to the other Party and this Agreement shall forthwith become void and have no effect,and the transactions contemplated by this Agreement shall be abandoned without further action bySellers or Buyer, without any liability or obligation on the part of Sellers or Buyer, other thanthe provisions of Section 5.2(b), this Section 7.2, and Article VIII. If this Agreement isterminated under Section 7.1:     (a) each Party shall redeliver all documents, work papers and other materials of the otherparties relating to the transactions contemplated by this Agreement which have not been
36

 
consummated as of the date of termination, whether obtained before or after the execution ofthis Agreement, to the Party furnishing the same, and all confidential information received by anyParty hereto with respect to the other Party shall be treated in accordance with theConfidentiality Agreement and Section 5.2(b);     (b) all filings, applications and other submissions made pursuant hereto shall, to the extentpracticable, be withdrawn from the agency or other Person to which made, to the extent theapplicable transaction has not been consummated; and     (c) there shall be no liability or obligation under this Agreement on the part of Sellers orBuyer or any of their respective Representatives, and no breach of any representation, warranty,covenant or agreement contained herein shall give rise to any right on the part of Buyer orSellers, after the consummation of the purchase and sale of the Units contemplated by thisAgreement, to rescind this Agreement or any of the transactions contemplated hereby; except thatnothing contained in this Section 7.2 shall relieve any Party from liability for its willful orintentional breach of representations, warranties, covenants or agreements set forth in thisAgreement; and except that the obligations provided for in Section 5.2(b), this Section 7.2 andArticle VIII shall survive any such termination.ARTICLE VIIIMISCELLANEOUS PROVISIONS     Section 8.1 *Representations and Warranties and Covenants*. All representations and warrantiesin Articles II, III and IV of this Agreement or in any instrument delivered pursuant to thisAgreement shall not survive and shall terminate at the Closing Date or, subject to Section 7.2(c),upon termination of this Agreement pursuant to Article VII, as the case may be, and each partyhereby waives its right to bring any claim in respect thereof following such Closing Date ortermination of this Agreement, as the case may be; provided, however, that therepresentations and warranties in Sections 2.2, 2.3, 3.2 and 3.3(a) shall survive for a period ofone (1) year following the Closing Date. Each covenant contained in Article V of this Agreementthat is required to be performed in whole or in part following the Closing shall survive theClosing Date or termination of this Agreement, as the case may be, until the expiration of theapplicable statute of limitations therefor.     Section 8.2 *Amendment and Modification*. This Agreement may be amended, modified orsupplemented at any time by the Parties to this Agreement, under an instrument in writing signed byall Parties.     Section 8.3 *Entire Agreement; Assignment*. This Agreement (including the Disclosure Letter,which constitutes a part of this Agreement), Annexes and Exhibits hereto, the Letter Agreement,dated as of the date hereof, by and between Buyer and Carlyle/Riverstone Energy Partners II, L.P.and the Confidentiality Agreement (a) constitute the entire agreement between the partiesconcerning the subject matter of this Agreement and supersede other prior agreements andunderstandings, both written and oral, between the parties concerning the subject matter of thisAgreement, and (b) shall not be assigned, by operation of Law or otherwise, by a Party, without theprior written consent of the other parties, and any such assignment without
37

 
such prior written consent shall be null and void provided that (i) Buyer may assignin whole or in part its rights and interests and delegate its obligations hereunder to one or morewholly-owned, direct or indirect subsidiaries of Buyer upon written notice to Sellers, (ii) Buyer(or any permitted assignee) may pledge its rights and interests hereunder pursuant to securitydocumentation granted in favor of any Person or Persons (or any agent acting on behalf of suchPerson or Persons) providing financing to Buyer (or any permitted assignee) in connection with thetransactions contemplated by this Agreement and (iii) Buyer (or any permitted assignee) may assignits rights and interests hereunder to any Person in connection with any foreclosure or otherexercise of remedies by any Person in respect of the security documentation and financing describedin the foregoing clause (ii); and provided, further that no such assignment or pledge byBuyer shall relieve Buyer of its obligations hereunder.     Section 8.4 *Severability*. The invalidity or unenforceability of any term or provision of thisAgreement in any situation or jurisdiction shall not affect the validity or enforceability of theother terms or provisions of this Agreement or the validity or enforceability of the offending termor provision in any other situation or in any other jurisdiction and the remaining terms andprovisions shall remain in full force and effect, unless doing so would result in an interpretationof this Agreement which is manifestly unjust.     Section 8.5 *Notices*. Unless otherwise provided in this Agreement, all notices and othercommunications under this Agreement shall be in writing and may be given by any of the followingmethods: (a) personal delivery; (b) facsimile transmission; (c) registered or certified mail,postage prepaid, return receipt requested; or (d) overnight delivery service. Such notices andcommunications shall be sent to the appropriate Party at its address or facsimile number givenbelow or at such other address or facsimile number for such Party as shall be specified by noticegiven under this Agreement (and shall be deemed given upon receipt by such Party or upon actualdelivery to the appropriate address, or, in case of a facsimile transmission, upon transmission bythe sender and issuance by the transmitting machine of a confirmation slip that the number of pagesconstituting the notice have been transmitted without error; in the case of notices sent byfacsimile transmission, the sender shall contemporaneously mail a copy of the notice to theaddressee at the address provided for above; provided, however, that such mailing shall in no wayalter the time at which the facsimile notice is deemed received): (a) if to any Seller, to    Topaz Power Partners, LLCc/o Sempra Energy Partners, LLC101 Ash StreetSan Diego, California 92101Attention: Mark AllmanTelephone: 619-696-4694Facsimile: 619-696-4000    with copies to    Sempra Global101 Ash StreetSan Diego, California 92101
38

 
   Attention: Kevin SagaraTelephone: 619-696-4345Facsimile: 619-696-4310    and    Carlyle/Riverstone Energy Partners II, L.P.712 Fifth AvenueNew York, New York 10019Attention: Michael HoffmanTelephone: 212-993-0091Facsimile: 212-993-0077    and    Cleary Gottlieb Steen & Hamilton LLPSuite 43001 Liberty PlazaNew York, New York, 10006Attention: Richard J. Cooper, Esq.Telephone: (212) 225-2276Facsimile: (212) 225-3999  (b) if to Buyer, to    ANP ERCOT Acquisition, LLC62 Forest StreetSuite 102Marlborough, MA 01752Attention: General CounselTelephone: (508) 382-9300Facsimile: (508) 382-9431    with a copy to    American National Power, Inc.62 Forest StreetSuite 102Marlborough, MA 01752Attention: Vice President-Business DevelopmentTelephone: (508) 382-9300Facsimile: (508) 382-9400    and    Jones Day222 East 41st Street
39

 
   New York, NY 10017-6702Attention: William F. Henze II, Esq.Telephone: (212) 326-3603Facsimile: (212) 755-7306     Section 8.6 *Governing Law*. This Agreement shall be governed by, and construed in accordancewith, the laws of the State of New York. All Actions arising out of or relating to this Agreementshall be heard and determined in any state or federal court sitting in the City of New York, andthe parties hereby irrevocably submit to the exclusive jurisdiction of such courts in any suchAction and irrevocably waive the defense of an inconvenient forum to the maintenance of any suchAction. Each Party irrevocably consents to the service of any and all process in any such Actionby the mailing of copies of such process to such Party at its address specified in Section 8.5.The parties agree that a final judgment in any such Action shall be conclusive and may be enforcedin other jurisdictions by suit on the judgment or in any other manner provided by Law. Nothing inthis Section 8.6 shall affect the right of any Party to serve legal process in any other mannerpermitted by Law. The consents to jurisdiction set forth in this Section 8.6 shall not constitutegeneral consents to service of process in the State of New York and shall have no effect for anypurpose except as provided in this Section 8.6 and shall not be deemed to confer rights on anyPerson other than the parties. EACH PARTY HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENTPERMITTED BY LAW, ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHERBASED UPON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THETRANSACTIONS CONTEMPLATED HEREBY.     Section 8.7 *Descriptive Headings*. The table of contents and descriptive headings used in thisAgreement are inserted for convenience of reference only and shall in no way be construed todefine, limit, describe, explain, modify, amplify, or add to the interpretation, construction ormeaning of any provision of, or scope or intent of, this Agreement nor in any way affect thisAgreement.     Section 8.8 *Counterparts*. This Agreement may be executed in counterparts, each of which shallbe deemed an original, but any of which together shall constitute one and the same instrument.     Section 8.9 *Fees and Expenses*. Whether or not this Agreement and the transactionscontemplated by this Agreement are consummated, and except as otherwise expressly set forth in thisAgreement, all costs and expenses (including legal and financial advisory fees and expenses)incurred in connection with, or in anticipation of, this Agreement and the transactionscontemplated by this Agreement shall be paid by the Party incurring such expenses. Each ofSellers, on the one hand, and Buyer, on the other hand, shall indemnify and hold harmless the otherParty from and against any and all claims or liabilities for financial advisory and finders’ feesincurred by reason of any action taken by such Party or otherwise arising out of the transactionscontemplated by this Agreement by any Person claiming to have been engaged by such Party.
40

 
     Section 8.10 *Interpretation*.     (a) The phrase “to the knowledge of” any Person or any similar phrase shall mean such factsand other information which as of the date of determination are actually known to any executiveofficer of such Person, after due inquiry; it being understood that those Persons listed in Section8.10 of the Disclosure Letter shall be deemed to have knowledge. In the event an ambiguity orquestion of intent or interpretation arises, this Agreement shall be construed as if draftedjointly by the parties and no presumption or burden of proof shall arise favoring or disfavoringany Party by virtue of the authorship of any provisions of this Agreement. When a reference ismade in this Agreement to Sections, Exhibits, the Disclosure Letter or an Annex, such referenceshall be to Sections, Exhibits, the Disclosure Letter or an Annex of this Agreement, respectively,unless otherwise indicated. Whenever the words “include”, “includes” or “including” are used inthis Agreement, they shall be deemed to be followed by the words “without limitation”. The words“hereof”, “herein” and “hereunder” and words of similar import when used in this Agreement shallrefer to this Agreement as a whole and not to any particular provision of this Agreement. The term“or” is not exclusive. The definitions contained in this Agreement are applicable to the singularas well as the plural forms of such terms. References to a Person are also to its permittedsuccessors and assigns. Whenever the context may require, any pronoun shall include thecorresponding masculine, feminine and neuter forms.     (b) For purposes of this Agreement, the term: (i) “**Affiliate**” means, unless otherwiseindicated, any Person that directly, or indirectly through one or more intermediaries, controls, iscontrolled by or is under common control with the Person specified; (ii) “**Company IP**” means allmaterial Intellectual Property owned, held or used by the Company, including all material patent,copyright, trademark and service mark registrations and applications and domain names issued to,assigned to and filed by the Company; (iii) “**Intellectual Property**” means all U.S. intellectualproperty, including: (a) patents, inventions, discoveries, processes, designs, techniques,developments, technology, and related improvements and know-how, whether or not patented orpatentable; (b) copyrights and works of authorship in any media, including computer hardware,software, firmware, applications, files, systems, networks, databases and compilations,documentation and related textual works, graphics, advertising, marketing and promotionalmaterials, photographs, artwork, drawings, articles, textual works, and Internet site content; (c)trademarks, service marks, trade names, brand names, corporate names, domain names, logos tradedress and other source indicators and the goodwill of any business symbolized thereby; and (d)trade secrets, drawings, blueprints and all non-public, confidential or proprietary information,documents, materials, analyses, reach and lists; (iv) “**Person**” means any individual, corporation,partnership, limited liability company, firm, joint venture, association, joint-stock company,trust, unincorporated organization, representative office, branch, Governmental Authority or othersimilar entity such determination; and (v) “**Subsidiary**” means, with respect to any Person, anyother Person of which such Person (either alone or through or together with any other Subsidiary)owns, directly or indirectly, 50% or more of the outstanding equity securities or securitiescarrying 50% or more of the voting power in the election of the board of directors or othergoverning body of such Person.     (c) The inclusion of any matter in any Section of the Disclosure Letter in connection with anyrepresentation, warranty, covenant or agreement that is qualified as to materiality is notan admission by the Party making such disclosure that such matter is material or would (or
41

 
would be reasonably expected to) impair the ability of such Party to consummate the transactionscontemplated by this Agreement. Matters disclosed in one Section or subsection of the DisclosureLetter are deemed to be disclosed with respect to each Section or subsection of the DisclosureLetter.     Section 8.11 *Third-Party Beneficiaries*. Except for the provisions of Section 5.9, thisAgreement is solely for the benefit of Sellers and their respective successors and permittedassigns, with respect to the obligations of Buyer under this Agreement, and for the benefit ofBuyer, and its successors and permitted assigns, with respect to the obligations of Sellers, underthis Agreement. Notwithstanding anything contained in this Agreement to the contrary, nothing inthis Agreement, expressed or implied, is intended to confer on any Person other than the parties ortheir respective successors and assigns any rights, remedies, obligations or liabilities under orby reason of this Agreement.     Section 8.12 *No Waivers*. Except as otherwise expressly provided in this Agreement, no failureto exercise, delay in exercising, or single or partial exercise of any right, power or remedy byany Party, and no course of dealing between the parties, shall constitute a waiver of any suchright, power or remedy. No waiver by a Party of any default, misrepresentation, or breach ofwarranty or covenant under this Agreement, whether intentional or not, shall be deemed to extend toany prior or subsequent default, misrepresentation, or breach of warranty or covenant under thisAgreement or affect in any way any rights arising by virtue of any prior or subsequent suchoccurrence. No waiver shall be valid unless in writing and signed by the Party against whom suchwaiver is sought to be enforced.     Section 8.13 *Specific Performance*. The parties to this Agreement agree that if any of theprovisions of this Agreement were not performed in accordance with their specific terms or wereotherwise breached, irreparable damage would occur, no adequate remedy at law would exist anddamages would be difficult to determine, and that the parties shall be entitled to specificperformance of the terms of this Agreement and immediate injunctive relief, without the necessityof proving the inadequacy of money damages as a remedy, in addition to any other remedy at law orin equity.
42

 
     IN WITNESS WHEREOF, each of the undersigned has caused this Agreement to be duly signed as ofthe date first above written.       SELLERS:       TOPAZ POWER GROUP GP, LLC       By:           Name:    Title:       By:           Name:    Title:       TOPAZ POWER GROUP LP, LLC       By:           Name:    Title:       By:           Name:    Title:       BUYER:       ANP ERCOT ACQUISITION, LLC       By:           Name:    Title:
43

 
EXHIBIT D-2Surviving Intercompany Arrangements1. Master Power Purchase and Sale Agreement, dated June 28, 2004, between Sempra EnergySolutions and Coleto Creek WLE, LP, as amended by the SES PPA Amendment as of the ClosingDate.2. Electricity Sales and Purchase Agreement dated as of July, 2004 between Sempra EnergyServices and Coleto Creek WLE, LP.
1

 
Buyer’s Parent Guarantee and Lender Commitment
1

 
**Continuationof Exhibit 4.1**EXECUTION VERSIONDISCLOSURE LETTER**PURCHASE AND SALE AGREEMENT****by and among****ANP ERCOT ACQUISITION, LLC****as Buyer****and****TOPAZ POWER GROUP GP, LLC****and****TOPAZ POWER GROUP LP, LLC****as Sellers** **Dated as of April 18, 2006**
 

 
DISCLOSURE LETTER**INTRODUCTION**     This Disclosure Letter to the Purchase and Sale Agreement, dated as of April 18, 2006, by andamong ANP ERCOT ACQUISITION, LLC, a Delaware limited liability company, TOPAZ POWER GROUP GP, LLC,a Delaware limited liability company, and TOPAZ POWER GROUP LP, LLC, a Delaware limited liabilitycompany (the “**Agreement**”), is set forth on the following pages. All capitalized terms used and nototherwise defined in this Disclosure Letter shall have the meanings ascribed to such terms in theAgreement.     To the extent that any representation or warranty contained in the Agreement is limited orqualified by the materiality of the matters that are the subject of such representation orwarranty, the inclusion of any matter in this Disclosure Letter shall not constitute adetermination by Sellers that such matter is material. Nor in such cases where a representation orwarranty is given or other information is provided shall the disclosure of any matter in thisDisclosure Letter imply that any other, undisclosed matter having a greater value or othersignificance is material.     The inclusion in this Disclosure Letter of any matter or document shall not imply anyrepresentation, warranty or undertaking not expressly given in the Agreement, nor shall suchdisclosure be taken as extending the scope of any such representation or warranty. Nothing in thisDisclosure Letter constitutes an admission of any liability or obligation of Sellers to any thirdparty or an admission against Sellers’ interests.     All references in this Disclosure Letter to section numbers are to sections of the Agreement,unless otherwise stated.     The fact that any item of information is disclosed in any section of this Disclosure Lettershall not be construed to mean that such disclosure is required by the Agreement, including withoutlimitation in order to render any representation or warranty true or correct.     The inclusion in any section of this Disclosure Letter of any matter or document shallconstitute its inclusion in all sections of this Disclosure Letter to which such matter or documentis relevant, to the extent the relevance is reasonably apparent.     The headings and descriptions in this Disclosure Letter of any representations, warranties orcovenants expressly given in the Agreement are for descriptive purposes and convenience ofreference only and shall be deemed not to affect such representations, warranties or covenants orto limit the exceptions made hereby or the provisions hereof.     The date of each section of this Disclosure Letter is the date set forth above, unlessspecified otherwise.
1

 
**Section 1.2 of Disclosure Letter****Net Working Capital****Target Modified Net Working Capital**     **Current Assets** $(000)Cash and cash equivalents1  7,900 Accounts receivable, net  11,900 Accounts receivable – affiliates, net2  4,900 Materials and operating supplies  3,700 Fuel stock  9,400 Prepayments3  1,000 **Total Current Assets**  **38,800**      **Current Liabilities**    Accounts payable – trade  7,100 Property tax liability  3,200 Current liabilities – other  0 **Total Current Liabilities**  **10,300**           **Target Modified Net Working Capital**  **28,500**      Certain accounting principles, methodologies and policies:See notes to the audited financial statements of the Company for the period ended December 31, 2005included in Section 3.5 of the Disclosure Letter for applicable accounting principles,methodologies and policies; provided, that such principles, methodologies and policiesshall be modified as set forth in the footnotes to the table above.4 1 “Cash and cash equivalents” shall exclude the Capital Expenditure AccountBalance. 2 “Accounts receivable – affiliates, net” shall exclude amounts payable to TopazPower Group, LLC and Sempra Texas Services, LP. 3 “Prepayments” shall exclude prepayments of insurance premiums. 4 Any cash that is restricted by the terms of the Credit Agreement from use in theday to day operating of the Company (and that is or is required to be categorized as “RestrictedCash” in the Financial Statements), but is available to satisfy certain of its obligations, may bedistributed by the Company prior to or simultaneously with the Closing.
2

 
**Section 2.3 of Disclosure Letter**Ownership of Equity Interests   **Seller** **Number of Units Owned**Topaz Power Group GP, LLC 1   Topaz Power Group LP, LLC 999
3

 
**Section 2.5 of Disclosure Letter**Brokers; Finders and Fees**•** Engagement Letter by and between Topaz Power Partners, LLC and Goldman, Sachs & Co., datedas of November 30, 2005.
4

 
**Section 3.3(a)(i) of Disclosure Letter****Capitalization – Liens**           **Jurisdiction**  **Name of Entity** **Form of Entity** **of Formation** **Capitalization***ColetoCreek Power, LP Limited Partnership Texas General Partner Interest: 1 Unit