Exhibit 4.4


 


 


CONTRACT FOR THE SALE OF
SHARES IN

ELECTRA DE VIESGO, S.L.


 


 


BETWEEN


 


 


ENEL S.P.A.


 


 


Y


 


 


ENDESA GENERACIÓN, S.A.


 


ENDESA DISTRIBUCIÓN,
S.A.


 


ENDESA, S.A.


 


September 19, 2001


 

















 


SHARE PURCHASE
AGREEMENT


 


 


September 19, 2001


 


PARTY OF THE FIRST PART,


 


ENDESA, S.A., a Spanish
company, with head offices in Madrid, at 187 calle Principe de Vergara, Tax
Identification Number A-28023430, registered in the Madrid Mercantile Register,
in general volume number 736, folio 196, page number 434, entry No. 18,
represented in this matter by Mr. Rafael Miranda Robredo, current National
Identity Card No. 13.045.173-X, in his capacity as Legal Representative, as
shown in the public document authorized by Madrid Notary, Mr. Santiago Rubio
Liniers, dated April 10, 2001, entered as number 855 in his official records.


 


ENDESA GENERACIÓN, S.A., a Sole Proprietorship, registered in Spain,
with head offices in Madrid, at 187 calle Principe de Vergara, Tax
Identification Number A-82434697, registered in the Madrid Mercantile Register,
in volume 14535, folio 1, page number M 240618, represented in this matter by
Mr. Rafael Miranda Robredo, current National Identity Card No. 13.045.173-X,
given special powers to act in this matter, as shown in the public document
authorized by Madrid Notary, Mr. Santiago Rubio Liniers, dated September 17,
2001, entered as number 1,794 in his official records.


 


ENDESA DISTRIBUCIÓN, S.A., a Sole Proprietorship, registered in
Spain, with head offices in Madrid, at 187 calle Principe de Vergara, Tax
Identification Number A-82434663, registered in the Madrid Mercantile Register,
in volume 14534, folio 1, page number 
240617, represented in this matter by Mr. Rafael Miranda Robredo,
current National Identity Card No. 13.045.173-X, given special powers to act in
this matter, as shown in the public document authorized by Madrid Notary, Mr.
Santiago Rubio Liniers, dated September 17, 2001, entered as number 1,795 in
his official records


 


Hereinafter, ENDESA GENERACIÓN, S.A. and ENDESA DISTRIBUCIÓN, S.A.
shall be jointly called the “Sellers.”


 


AND PARTY OF THE
SECOND PART,


 


ENEL S.p.A. with head offices at 137, Viale Regina Margherita, Rome,
Italy, incorporated pursuant to Italian laws, and recorded in the Rome Business
Register,  assigned Tax Code No.
00811720580, REA number 756032 (hereinafter the “Buyer,”) represented in this
matter by Mr. Francesco Tatò, holder of current Italian passport


 


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number 719274K, in his capacity as Legal Representative, expressly
authorized to act in this matter by a power of attorney issued on August 1,
2001, before Roman Notary Dr. Matilde Atlante.


 


Together the Sellers and the Buyer shall be jointly called the
“Parties” and individually the “Party.”


 


The Parties state that they acknowledge each other’s capacity to commit
themselves to the terms of this Agreement (hereinafter the “Contract”) and


 


STATE


 


I.                                         That Endesa Generación, S.A. is a company
involved in the business of generating electrical power in Spain (hereinafter
“Endesa Generación”) and Endesa Distribución, S.A. is a company indirectly
involved, through its holdings in other companies, in the business of
distributing electrical power in Spain (hereinafter “Endesa Distribución.”)
Both companies have initiated a process for the sale of a group of companies
called the Grupo Viesgo, to be defined below, which has concentrated part of
the electricity generation business on the one hand, and distribution of
electrical power on the other, involving Endesa Generación and Endesa
Distribución respectively.


 


II.                                     “Electra de Viesgo I, S.A. Sole
Proprietorship” (hereinafter Viesgo Distribución), is a limited liability
company with shareholder capital of € 63,106,270.96  divided into 10,500,000 shares with a par value of € 6.010121
each, incorporated by a public document issued on December 23, 1998, before
Burgos Bar Association Attorney Mr. José María de Prada Díez, entered as number
4,130 in his official records, and recorded in the Cantabria Mercantile
Register on January 18, 1999, in volume 667, folio 143, section 8, in book 0,
page number S-9601, entry number 1. Its Tax Identification No. is A-39450093.
Prior to the transfer described in Point V, Endesa Distribución was holder of
the 10,500,000 shares with a par value of € 6.010121 each, representing one
hundred percent of Viesgo Distribución’s shareholder capital.


 


III.                                 On June 30, 2001, in a public document
issued before Madrid Notary, Santiago Rubio Liniers, entry number 1,323 in his
official records, Endesa Generación created a limited liability company called
“Viesgo Generación, S.L.” with corporate offices in Santander, at 12 calle
Medio, recorded in the Cantabria Mercantile Register in volume 737, folio 91,
page number S-12183, entry number 1, Tax Identification Number B39507926, by a
non-cash business transfer made up of the assets and liabilities listed in the
said document (this new company is hereinafter called “Viesgo Generación.”)
Endesa Generación


 


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received 430,137,183 company shares with a par value of € 1 each,
representing 100% of Viesgo Generación’s shareholder capital, with a transfer
premium of € 1 for each share, as compensation for the non-cash business
transfer described above.


 


IV.                                In a public document issued before Madrid
Notary, Mr. Santiago Rubio Liniers on June 30, 2001, entry number 1,324 in his
official records, Endesa Distribución created a new limited liability company
called “Electra de Viesgo, S.L.” with corporate offices in Santander, at 12 Calle
Medio, recorded in the Cantabria Mercantile Register in volume 737, folio 81,
page S-12182, entry number 1, Tax Identificaton Number B39507934 (hereinafter
the “Company,”) with a cash subscription of 3,010 corporate shares with a par
value of € 1 each.


 


V.                                    To create Grupo Viesgo, the parent company
of which is the Company, the Sellers transferred their respective holdings in
Viesgo Generación and Viesgo Distribución to the Company as follows:


 


•                                Endesa Distribución transferred one hundred
percent of its holdings in Viesgo Distribución to the Company, and as
compensation for this non-cash transfer, it received a total of 148,611,922
shares, representing 25.68% of the Company’s shareholder capital, each with a par
value of €1, with a transfer premium of € 1 each.  This transfer was recorded in a public document before Madrid
Notary Mr. Santiago Rubio Liniers on July 27, 2001, entry number 1,575 in his
official records.


 


•                                For its part, Endesa Generación transferred one
hundred percent of its holdings in Viesgo Generación to the Company, and as
compensation for this non-cash transfer, it received a total of 430,137,183
shares, representing 74.32% of the Company’s shareholder capital, each with a
par value of € 1, with a transfer premium of € 1 each. This transfer was
recorded in a public document before Madrid Notary Mr. Santiago Rubio Liniers
on July 27, 2001, entry number 1,575 in his official records.


 


As a result of the foregoing, the
Company holds all the shareholder capital and shares, representing one hundred
percent of the shareholder capital of Viesgo Generación and Viesgo
Distribución.


 


Hereinafter, all the 578,752,115
company shares, each with a par value of € 1, representing one hundred percent
of the Company’s shareholder capital, owned by Endesa Distribución and Endesa
Generación, shall be called the “Shares.”


 


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For the purposes of this Agreement,
Grupo Viesgo shall be understood to mean the group of companies, of which the
main company is the Company, made up of the following companies:


 


•             The Company, which holds 100% of the shares and holdings making up the
shareholder capital of Viesgo Distribución and Viesgo Generación respectively;


 


•             Viesgo Generación;


 


•             Viesgo Distribución which holds shares representing 54.9339% of Barras
Eléctricas Galaicoasturianas, S.A.


 


•             Barras Eléctricas Galaicoasturianas, S.A. (hereinafter “Begasa”) which
holds 100% of the shares making up the shareholder capital of Barras Eléctricas
de Generación, S.L.; and


 


•             Barras Eléctricas de Generación, S.L. (hereinafter “Barras Generación.”)


 


VI.                      The Buyer participated in the sale process
for Grupo Viesgo, and presented the appropriate purchase offer, after examining
and analyzing, either directly or through its advisors, the information
provided to it on the Grupo Viesgo by the Sellers, directly or through their
advisors.


 


VII.                   The Buyer is a company of recognized
reputation, and belongs to a group including companies with wide experience in
the electricity sector, with knowledge of the electricity generating and
distribution business in Spain, including knowledge of Spanish and Community
regulatory requirements of all kinds.


 


VIII.               In view of the foregoing, the Sellers wish to sell
and transfer to the Buyer, who wishes to buy and acquire, Grupo Viesgo, for
which purpose both parties are signing this SHARE PURCHASE AGREEMENT
(hereinafter the “Agreement”) for Electra Viesgo, S.L. pursuant to the
following


 


5

















 


CLAUSES


 


1.                            DEFINITIONS


 


Without prejudice to the fact that particular expressions are defined
throughout the Agreement, they are also repeated in Appendix I, said Appendix I
forming an integral part of this Agreement.


 


2.                            SHARE PURCHASE


 


Subject to the terms and conditions
of this Agreement, and particularly in fulfillment of the conditions precedent
referred to in Clause 3, the Buyer buys the Shares from the Sellers, who sell
them, free of charges, liens, options or restrictions of any kind.  The execution of the transfer of the shares
and the payment of the price shall be carried out on the Closing Date under the
terms of this Agreement.


 


3.                            CONDITIONS PRECEDENT


 


3.1                     The purchase and therefore the transfer of the Shares covered by this
Agreement is subject to fulfillment of the following conditions precedent
(hereinafter the “Conditions precedent”):


 


3.1.1.                              Receiving administrative authorization from the
Under-Secretariat of the Economy of the Ministry of the Economy, or any competent
agency in the future, for the sale to the Buyer of the Shares, pursuant to the
provisions of Law 5/1995, dated March 23, including legal regulations for the
transfer of public shares in particular companies, in its execution
regulations, and Royal Decree 929/1998, dated May 14, in application of the
prior administrative authorization regulations to Endesa, S.A., and particular
companies in its group.


 


3.1.2.                              If this transaction
has to be reported to the applicable authorities of the European Union, the declaration
that the concentration operation being reported is compatible with the common
market, pursuant to the provisions of Regulation EEC 4064/89,
by the Council, on December 21, 1989 (hereinafter Regulation EEC 4064/89”)
shall be a condition precedent.


 


(i)                 The condition
precedent stipulated in this clause 3.1.2 shall be understood as met if the
European Commission has taken a


 


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decision pursuant to letters a) or b) of
Article 6.1 of Regulation EEC 4064/89.


 


(ii)              If the European
Commission adopts a decision pursuant to letter c) of Article 6.1 of Regulation
EEC 4064/89, declaring that the concentration operation being reported falls
within the scope of application of above-mentioned Regulations, and that it has
serious questions regarding its compatibility with the common market, the
Parties agree to fulfill all conditions which may be necessary for the European
Commission to declare that the operation is compatible with the common market
within the scope of the provisions of point 1.bis of Article 6 of Regulation
EEC 4064/89, or point 2 of Article 8 of the same Regulation, without prejudice
to the provisions of clause 3.4 below. 
In this case, the condition precedent set forth in this clause 3.1.2
shall be taken as met if the European Commission declares that the modified
operation is compatible with the common market pursuant to the foregoing.


 


(iii)           Likewise, the
condition precedent set forth in this clause 3.1.2 shall be taken as met, if
the conditions in Article 10.6 of Regulation EEC 4064/89 are met. For the
purposes of calculating the deadlines referred to in this item, the reasons for
suspension of the deadlines set forth in Article 9 of Regulation EEC 447/98 by
the Commission, dated March 1, 1998, regarding notifications, deadlines and
hearings provided for in Regulation EEC 4064/89 shall be taken into account.
And assuming that the Commission decides to issue an express declaration
regarding the operation, the Parties agree to meet any conditions that may be
required, without prejudice to the provisions of clause 3.4 below.


 


(iv)          If the European
Commission decides that the concentration operation being reported must be
presented to the Spanish anti-trust authorities, under the scope of Article 9
of Regulation EEC 4064/89, the condition precedent provided for in this clause
3.1.2 shall be taken as met when these authorities give their express or tacit
approval to this transaction or aspects relating to it referred by the European
Commission, even if the approval is subject to the observance of any
conditions, pursuant to the provisions of Spanish law as described in clause
3.1.3. below, without prejudice to clause 3.4 below.


 


3.1.3.                              If a notification regarding this
transaction has to be sent to the Spanish anti-trust authorities, the Administration’s expressed or assumed
non-opposition to it shall be a condition precedent, even if the non-opposition
is subject to the observance of any conditions, all pursuant to


 


7

















 


the
provisions of Chapter II of Law 16/1989, dated July 17, on Anti-Trust
(hereinafter “Law 16/1989”) and other regulations, without prejudice to the
provisions of Clause 3.4.


 


It is
understood that non-opposition by the Administration to the operation is tacit
if a period of one month has passed since the notification was made, with no
declaration from the Anti-Trust Department, unless the notification has been
found incomplete or the deadline has been suspended because of a request for
additional information, or the deadline has been extended, in which case it
shall be understood that the authorization is tacit, if the extended deadline
has passed, and the file has not been sent to the Anti-Trust Tribunal, all the
foregoing pursuant to the provisions of Article 15.bis of Law 16/1989.


 


If the
Ministry of the Economy sends the file to the Anti-Trust Tribunal, the
condition shall be considered met if the Council of Ministers decides not to
oppose the concentration operation, even if the non-opposition is subject to
the observance of any conditions, either expressly within one month from
receipt of the order from the Anti-Trust Tribunal, or tacitly if one month has
passed since (i) receipt of the Report from the Anti-Trust Tribunal, or (ii)
the passing of the two-month deadline set for the Anti-Trust Tribunal to issue
its ruling, and the Council of Ministers has not approved a decision, pursuant
to the provisions of Article 17 of Law 16/1989.


 


3.1.4.                              In the event
that, simultaneously with the signing of this Agreement, the Buyer notifies the
Sellers in writing (notification attached as Appendix  3.1.4), that the application
of the provision of point 1 of Additional Provision Twenty-Seven of Law
55/1999, dated December 29, on Fiscal, Administrative and Social Order
Measures, requires receipt of an express decision by the Council of Ministers
recognizing the exercise of the corresponding political rights, pursuant to the
provisions of points 2 and 3 of said Additional Provision, this shall be a
condition precedent.


 


3.2                     Each of the Parties agrees to exercise its best efforts to perform as
many actions and procedures as may be required for the speedy fulfillment of
the conditions precedent set forth in this clause, and particularly:


 


a.                             Endesa Generación, Endesa Distribución  and
the Buyer agree to file the application for the administrative authorization
referred to in clause 3.1.1 with the Under-Secretariat for the Economy at the
Ministry of the Economy in a timely and proper manner.


 


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b.                            The Buyer agrees to file the relevant
notifications in a timely and proper manner, for the purposes provided for in
clauses 3.1.2 and 3.1.3 as may be required, in the opinion of either of the
Parties, pursuant to the provisions of the applicable regulation.


 


c.                             The Buyer has informed the Sellers that
the provisions of point 1 of Additional Provision Twenty-Seven of Law 55/1999,
dated December 29, on Fiscal, Administrative and Social Order Measures, are
applicable, and agrees to report this operation to the Secretariat of State for
the Economy, Energy and Small and Medium-Sized Businesses, in the terms set
forth in point 2 of the above-mentioned Additional Provision.


 


Within a maximum of eight days from
the signing of this Agreement, both Parties must send each other the drafts of
the respective applications and/or notifications, unless the applicable
regulation sets a shorter deadline, in which case the Parties must send each
other the respective drafts at least two days prior to the applicable deadline.


 


The application for authorizations,
decisions, or administrative acts referred to in clause 3.1 must be filed
within ten days from the signing of this Agreement, unless the applicable
regulation sets a shorter deadline, in which case the latter shall apply.


 


3.3                     The Parties shall keep each other mutually informed of the
corresponding files being processed pursuant to the clauses above, and must
consult each other prior to providing any data or information required in
relation to the transaction covered by this Agreement, and agree in any case to
perform all necessary actions to obtain the decisions leading to fulfillment of
the conditions set out in this clause as quickly as possible.  Likewise, the Parties agree to notify each other
as soon as possible regarding oral or written communications received in
relation to the files opened to meet the conditions precedent, as well as
giving the other Party copies of the decision or resolution proving fulfillment
of the condition, upon receipt thereof.


 


3.4                     Regarding the provision of clauses 3.1.2 and 3.1.3 of this Agreement
regarding the Parties’ obligation to accept any conditions, ordered by
Community or Spanish anti-trust authorities, to which the concentration
authorization may be subject, if these authorities make the operation
conditional upon the Buyer not buying part of Grupo Viesgo’s shares, the
Parties shall renegotiate the changes to this Agreement in good faith, as well
as the corresponding adjustment to the Purchase Price, and the operations which
may be necessary to fulfill the requirements set by the said authorities.


 


9

















 


4.                            PURCHASE PRICE


 


4.1                     Purchase Price


 


The Initial Purchase Price of the Shares is set at the total amount of
ONE BILLION EIGHT HUNDRED SEVENTY MILLION EUROS (€ 1,870,000,000) (the “Initial
Purchase Price,”) that is, THREE POINT TWO THREE ONE ZERO EIGHT NINE SEVEN ZERO
FOUR EUROS (€ 3.231089704) per share.


 


The Initial Purchase Price was agreed bearing in mind that the Closing
Date will be December 31, 2001, so that if, for any reason:


 


(i)                         the Closing Date falls any time after December
31, 2001, the Initial Purchase Price will increase with interest accrued on
said Initial Purchase Price from December 31, 2001 to the Closing Date
(hereinafter, “Credit Interest”) in accordance with the Formula contained in Appendix 4.1;
or, alternatively,


 


(ii)                        the Closing Date falls any time
before December 31, 2001, the Initial Purchase Price will be reduced by
interest calculated on the basis of said Initial Purchase Price for the period
between the Closing Date and December 31, 2001 (hereinafter, “Interest on a
Debt”) pursuant to the formula contained in Appendix 4.1.


 


The Initial Purchase Price, increased by the Credit Interest or reduced
by the Interest on a Debt, whichever is the case, will hereinafter be called
the “Adjusted Initial Price.”


 


Subsequent to the Closing, the Adjusted Initial Price will be changed
in accordance with the provisions of clause 4.4 (the “Closing Adjustment.”)  The Adjusted Initial Price plus or minus the
Closing Adjustment will hereinafter be called the “Purchase Price.”  Similarly, the Purchase Price may be subject
to new adjustments based on the provisions of clauses 9.1.(iv) and 9.2.(vii)
and 9.2.(ix).


 


The Initial Purchase Price, the Adjusted Initial Price, the Closing
Adjustment and any other adjustment to the Purchase Price derived from this
Agreement, will be distributed among the Sellers pro-rata based on their stake
in the Company.


 


4.2                               Advance


 


4.2.1                        Advance


 


In this act, the Buyer pays the Sellers, pro-rata based on their stake
in the Company, the amount of NINETY-THREE MILLION FIVE HUNDRED


 


10

















 


THOUSAND EUROS (€ 93,500,000), which represents 5 percent of the
Initial Purchase Price (hereinafter, the “Advance.”)


 


4.2.2                        Penalty


 


If the Buyer fails to appear under the terms set in clause 7 or is in
breach of its obligations as set forth in that clause, the Sellers will have
the right to keep the Advance, by way of penalty, without prejudice to its
right to file related legal action for breach of contract, and, in any event,
to demand compensation for legal damages.


 


4.3                               Form of Payment


 


The Advance will be paid by the Buyer to the Sellers through bank
transfer in liquid funds effected in favor of the Sellers, in the accounts the
Buyer has previously identified for that purpose, today, with value date today
also, for the amount in Euros net of expenses and charges as well as any tax
withheld, and this Agreement will constitute the most formal receipt.


 


The Adjusted Initial Price less the Advance will be paid by the Buyer
to the Sellers on the Closing Date, through bank transfer in liquid funds
effected by the Buyer in favor of the Sellers in the accounts that must be
identified for that purpose at least three Business Days in advance of the
Closing Date, for the amount in Euros net of expenses and charges as well as
any tax withheld.


 


The Closing Adjustment will be due and payable within five Business
Days of the Determination Date. The Party obligated to pay the Closing
Adjustment must make the payment through bank transfer in liquid funds and with
a value date of the fifth Business Day after the Determination Date, in the
current account(s) that must be identified by the Party that is the beneficiary
of the payment within two Business Days following the Determination Date, for
the amount in Euros net of expenses and charges as well as any tax withheld.


 


4.4                               Closing Adjustment


 


4.4.1                        Closing Adjustment


 


The Closing Adjustment will be equal to the difference between (i) the
amount of € 225,121,100 with a negative sign and (ii) the Sum of the Working
Capital Fund and Net Liabilities based on the Closing Balance Sheet, under the
terms defined below.


 


For purposes of the provision in this clause, what is understood by Sum
of the Working Capital Fund and Net Liabilities based on the Closing Balance
Sheet is the difference between the arithmetical sum of the asset items and the
liability, as listed in Appendix 4.4.1, as taken from the Closing
Balance Sheet.


 


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In the event that the Closing Adjustment is positive, it will be
payable by the Sellers to the Buyer. If it is negative, its absolute value will
be payable by the Buyer to the Sellers. In any event, the Parties expressly
agree that no payment whatsoever will be required in the event that the
absolute value of the Closing Adjustment, determined as provided in the
following clause, is less than € 1,000,000.


 


4.4.2                        Procedure for determining the
Closing Adjustment


 


Within a period of thirty days as of the Closing Date, which may not be
extended, the Buyer will arrange for the Company to prepare and send to the
Sellers a Grupo Viesgo Consolidated Balance Sheet as of the Closing Date (the
“Closing Balance Sheet.”) It will include Viesgo Generación and Viesgo
Distribución on a fully consolidated basis, and Begasa and Barras Generación
consolidated proportionally with 54.93% consolidation. It must be drawn up in
accordance with accounting principles generally accepted in Spain, using the
approach established in the standards for adapting the General Chart of
Accounts to companies in the electric power industry, approved by Royal Decree
437/1998, of March 20.


 


Once the Closing Balance Sheet is received, the Sellers will ask an
independent auditor (hereinafter, the “Auditor”) to perform an audit of the
Closing Balance Sheet items listed in Appendix 4.4.1 in accordance with
accounting principles generally accepted in Spain and send it to the Buyer and
the Sellers within a maximum period of 45 days as of the date when the Sellers
are sent the Closing Balance Sheet, the audit report on the Closing Balance
Sheet and a certification (the “Auditor’s Certification”) with their calculation
of the Sum of the Working Capital Fund and the Net Liabilities based on the
Closing Balance Sheet and the related Closing Adjustment, in accordance with
their auditing work.


 


For these purposes, the Buyer agrees to cooperate fully with the Auditor
and specifically agrees to provide the Auditor full access to all the documents
and information it may require, in its judgment, with no restrictions
whatsoever.


 


During a 15-day period as of the date on which the Auditor sends the
Parties its audit report and the Auditor’s Certification, the Buyer and its
accountants will have the opportunity to review the calculations effected. To
that end, the Sellers must request that the Auditor cooperate fully and in a
speedy, efficient way with the Buyer and its accountants, and that it allow
said Buyer or its appointed advisors to review its work papers.


 


12

















 


If within the 5-day period following the conclusion of the 15-day
period to which the prior paragraph refers, the Buyer does not formally notify
the Sellers of any disagreement with the calculation of the Closing Adjustment
effected by the Auditor or formally notifies the Sellers that it accepts the
Closing Adjustment, the Closing Adjustment will be that established in the
Auditor’s Certification. In this case, the Closing Adjustment will be
understood to have been determined on the date on which the aforementioned
5-day period expires, or the date on which the Buyer formally notified the
Sellers of its acceptance of the Closing Adjustment established in the
Auditor’s Certification, in advance. In this case, it will be understood to
have been determined on the date of said notification (the “Determination
Date.”)


 


If the Buyer disagrees with the calculation of the Closing Adjustment,
within the 5-day period set forth in the prior paragraph, it must formally
notify the Sellers of its disagreement, stating the precise amount of the
Closing Adjustment according to its calculations (the “Notification of
Disagreement.”) Starting on the date of reception by the Sellers of the
Notification of Disagreement and during the 30 following days, the Parties will
try to reconcile their differences. In this regard, the Auditor and the Buyer’s
accountant will have access to the work documents of the other party with
respect to the materials that are the subject of the dispute. Similarly, they
will have the right to carry out additional audits. If the Parties reach a full
agreement in the aforementioned 30-day period, the Closing Adjustment will be
that agreed upon by the Parties, and the Determination Date will be the date on
which they reach that agreement.


 


If the Parties do not reach a full agreement on the Closing Adjustment
calculated by the Auditor within the aforementioned 30-day period, the
following procedure will be applicable:


 


(i)                           If the Parties reached a
partial agreement regarding the Closing Adjustment calculated by the Auditor
within the aforementioned 30-day period, that portion will be understood to be
payable for purposes of the provisions in the last paragraph of clause 4.3,
above, and it must be paid under the terms set forth in said paragraph, with
the understanding that the Determination Date is the date on which said 30-day
period terminates.


 


(ii)                        Regarding that portion of the
Closing Adjustment calculated by the Auditor on which an agreement is not
reached between the Parties (or the full amount, in the event of total lack of
agreement), the Parties will submit the matter to an accounting expert (the
“Arbitrator”) appointed by mutual agreement within a period of 5 days following
the termination of the aforementioned 30-day negotiation period.  If the Parties do not arrive at an agreement
on the selection of the Arbitrator during the aforementioned period, each Party
will propose and notify the other, on the following Business Day, of a short
list of experts chosen from among the following auditing firms with recognized
international prestige: Arthur Andersen, PriceWaterhouseCoopers, KPMG Peat
Marwick, Ernst&Young and Deloitte Touche, listed in order of preference,
assigned a value of 3 for the first choice, 2 for the second and 1 for the
third. Comparing the two short lists


 


13

















 


provided, only those experts that appear on both notification lists
will be kept on the list, and they will thus proceed to add up the points
earned by each one.  As a result of the
foregoing, the expert among the above-mentioned four who receives the most
points will be appointed Arbitrator.  In
the event of a tie, the Arbitrator will be appointed by lot among those experts
with the most points that are tied.


 


As quickly as possible after his appointment, and, in any event, within
a maximum period of 30 days as of said appointment, the Arbitrator will issue a
report that will exclusively address the quantification of the matters that are
the subject of the dispute.  The
quantification of the matters that are the subject of the dispute by the
Arbitrator will be final, binding and definitive for the Parties and may not be
the subject of an appeal or any other form of recourse.  In this case, in the portion related to the
matters that are the subject of the dispute, the Closing Adjustment will be
that resulting from the Arbitrator’s report, and the Determination Date will be
the date on which said Arbitrator issues his report.


 


The fees and expenses of the Auditor will be for the account of the
Sellers, and those related to the Buyer’s accountant will be for the account of
the Buyer. The fees and expenses of the Arbitrator will be sustained half by
the Buyer, on the one hand, and half for the Sellers, on the other.


 


5.                            EVENTS BETWEEN AGREEMENT DATE AND
CLOSING DATE


 


5.1                     Between
the dates this
Agreement is signed and the Closing Date, the Sellers agree that the Companies
that make up the Grupo Viesgo will not perform any transaction outside the
ordinary course of their business.


 


Specifically,
between the dates this Agreement is signed and the Closing Date, they will not:


 


(i)                           Issue, or agree to issue, shares,
participations, options, warrants or any other securities


 


(ii)                        Incur any obligation or liability, real or
contingent, outside the ordinary course of their business (including, but not
limited to, acquisition of property or services, paid for in cash or over time,
financial leases or other agreements that are not reflected on the balance
sheet), nor may they carry out transactions under any terms and conditions
other than those of the market, unless stipulated in this Agreement or arising
from the articles of incorporation of Viesgo Generación and from the process of
incorporating Grupo Viesgo described in Explanation V.


 


14

















 


(iii)                     Sell, transfer or dispose of in
any way, or submit to any burden or encumbrance, any of their assets, whether
tangible or intangible, unless stipulated in this Agreement or arising from the
articles of incorporation of Viesgo Generación and from the process of
incorporating Grupo Viesgo described in Explanation V.


 


(iv)                    Change their corporate bylaws.


 


(v)                       Distribute dividends or effect
any other distribution of capital or reserves in favor of shareholders that
entails a reduction of the Grupo Viesgo’s equity.


 


(vi)                    Establish subsidiaries or agree to
the dissolution and/or liquidation of the Companies that make up the Grupo
Viesgo.


 


(vii)                 Enter into strategic Agreements of
association or cooperation or agreements to establish joint ventures.


 


To carry out activities outside the ordinary course of their business
under the terms indicated in this Clause, except as indicated above in
paragraphs (ii) and (iii), prior consent of the Buyer will be necessary, except
for those activities that cannot be postponed, due to their urgent nature,
without risk of damage to the Grupo Viesgo. In this case, the Buyer will be
notified immediately, with the understanding that, in any event, the foregoing
has been done properly, if agreement or awareness of the person referred to in
paragraph 5.2, below, was considered.


 


5.2                     If
the Buyer so requests, on behalf of this Agreement, the Sellers will allow the
Buyer to appoint one individual to become part of the Company and/or its
Subsidiaries from this date in order to have direct knowledge of the progress
of Grupo Viesgo’s business. The Sellers retain the right to veto the
appointment of the person designated, an authority that the Sellers must use
reasonably, always maintaining a professional, businesslike approach in this
regard. Until the Closing Date, the person appointed by the Buyer in accordance
with the foregoing will have no right to any compensation whatsoever from any
of the Grupo Viesgo Companies or from the Sellers. His expenses will be for his
own account, and he must sign a confidentiality agreement under the terms
established in Appendix  5.2. These
obligations will be understood to be assumed by the Buyer under the exact same
terms.


 


By the mere fact of appointing the individual to which the prior
paragraph refers, the Buyer assumes jointly and severally, as well as
personally, any liability and or obligation to indemnify any breach of that
individual’s confidentiality agreement.


 


If the sale of the Shares is not carried out before the Termination
Date, the duties of the aforementioned individual will cease on that date,
without prejudice to


 


15

















 


fulfillment of the aforementioned confidentiality agreement.


 


6.                            CLOSING


 


6.1                     The
Closing will take place within thirty Business Days of the date on which all
the Conditions precedent have been fulfilled.


 


The Sellers will notify the Buyer (the “Notification of Closing,”)
indicating the day, which must be within the aforementioned 30 Business Days,
when it must appear before the Notary of Madrid indicated in this notification
in order to carry out the activities provided in this clause and therefore
execute the sale of the Shares. The Notification of Closing must be carried out
at least 7 days in advance of the date indicated by the Sellers for effecting
the Closing.


 


The date on which the sale of the shares is executed pursuant to the
provisions of this Agreement will be called the “Closing Date.”


 


6.2                     On
the Closing Date, the Parties will proceed to execute the sale and therefore to
transmit ownership of the Shares and payment of the Purchase Price, with the
involvement of aforementioned public notary indicated, by issuing a notarized
instrument whose model is attached as Appendix 6.2. They will carry out or
oversee carrying out the actions provided in this clause simultaneously, as a
part of a single transaction. The performance of this Agreement cannot be
considered complete until all the actions provided in this clause have been
fully carried out.


 


6.3                     To
this end, the Sellers will deliver to the Buyer or to the public notary, for
his involvement as required by law:


 


(i)                           The notarized instruments
that are proof of ownership of the Shares, (with taxes duly paid, and recorded
in the related registries), in other words,  (i) Instrument recording contribution to
the Company, by Endesa Distribución and Endesa Generación, of their shares in
Viesgo Distribución and Viesgo Generación, respectively, and (ii) the Company
Articles of Incorporation.


 


(ii)                        Powers of attorney of their
representatives, sufficient in the opinion of the public notary involved.


 


(iii)                     Certificate
issued by the Secretary to the Company’s Board of Directors confirming that the
provisions of the bylaws have been met, or are not applicable, to allow the
sale of the Shares to the Buyer under the terms of this Agreement.


 


16

















 


(iv)                    The Minute Books, Books of Account,
and Register of Partners in the Company.


 


(v)                       The Directors’ letters of
resignation from the Company, Viesgo Generación y Viesgo Distribución, with an
express statement that they are current in the receipt of all their
compensation or considerations and have no basis for any claim against said
companies


 


(vi)                    A certificate issued by an attorney
for Sellers having sufficient power to certify that Sellers have fully complied
with the provisions of Provision 5.1 hereof.


 


6.4                     By
the same token, on the Closing Date Purchaser:


 


(i)                           Shall pay the Adjusted
Initial Price less the Advance, as prescribed in Provision 4.


 


(ii)                        Shall give Sellers, or the
public notary for his intercession, as appropriate, a power of attorney
sufficient in said notary’s judgment, conferred upon Purchaser’s
representative.


 


7.                            TERMINATION


 


This Agreement may be cancelled
and declared terminated by any Party if the Closing does not occur prior to the
expiration of a twelve-month period from the signing date hereof, or prior
thereto if any of the Conditions precedent cannot be fulfilled (the
“Termination Date,”) unless said impossibility is due to any default by the
Party seeking to cancel the Agreement and declare it terminated.


 


In the event this Agreement is
cancelled by virtue of the previous paragraph’s provisions, Sellers shall be
obligated to refund the Advance to Purchaser within the ten Business Days
subsequent to the termination, plus interest on said amount from the date
hereof to the date of refund of the Advance, based on the formula prescribed in
Appendix 4.1. Notwithstanding the foregoing, if this Agreement’s cancellation
and termination stems from any default by Purchaser, Sellers shall be entitled
to definitely retain the Advance as a penalty, without prejudice to their right
to take the appropriate legal actions for default, and in any event, to demand
compensation for the damages arising therefrom.


 


17

















 


8.                            REPRESENTATIONS AND WARRANTIES


 


8.1.                  Sellers’
representations and warranties


 


Sellers jointly represent and warrant to Purchaser, as of the date
hereof, the following representations and warranties, which shall be understood
to be repeated as of the Closing Date, following necessary adaptation to the
circumstances then prevailing (except insofar as any representation or warranty
is provided as to a particular date, in which case it shall be understood as
made only as of that date):


 


(A)                    Sellers’ incorporation and legal
standing


 


(i)                                     Endesa Generación,
S.A. is a corporation duly incorporated and registered in the Madrid Mercantile
Registry, which has full legal status in accordance with Spanish law and is not
in a state of dissolution, bankruptcy, or suspension of payments.


 


(ii)                                  Endesa Distribución,
S.A. is a corporation duly incorporated and registered in the Madrid Mercantile
Registry, which has full legal status in accordance with Spanish law and is not
in a state of dissolution, bankruptcy, or suspension of payments.


 


(iii)                               Sellers have full
authority to execute and perform this Agreement, which does not infringe their
corporate Bylaws or any legal or administrative provision, agreement, contract,
or undertaking by which they are bound, without prejudice to the need to obtain
the appropriate authorizations as set forth herein.


 


(iv)                              Sellers have adopted all
the resolutions by means of their governing bodies as are necessary for the
execution and performance of this Agreement.


 


(B)                      Due incorporation of the Company
and the Subsidiaries


 


(i)                                     The Company is a
limited liability company duly incorporated and registered in the Cantabria
Mercantile Registry, has full legal status in accordance with Spanish law and
is not in a state of dissolution, bankruptcy, or suspension of payments.


 


(ii)                                  The Company has not
determined the Closing Date for its dissolution, transformation, merger, or
separation.


 


(iii)                               The Subsidiaries are
companies duly incorporated and registered in the appropriate Mercantile
Registries, have full legal status in accordance with Spanish law and are not
in a state of dissolution, bankruptcy, or suspension of payments.


 


18

















 


(iv)                              The Subsidiaries have not
determined, nor shall they determine, the Closing Date for their dissolution,
transformation, merger, or separation.


 


(C)                      Capital composition


 


(i)                                     The Holdings
represent the Company’s entire capital stock. All of them have been validly
created and assumed, as well as totally disbursed. There are no options or
other rights empowering the partners or third parties to subscribe or acquire
holdings in the Company or rights thereover.


 


(ii)                                  Viesgo Generación’s
entire capital stock is represented by 430,137,183 holdings with a par value of
€ 1 per holding, all of which have been validly created and assumed, and
totally disbursed. There are no options or other rights empowering the partners
or third parties to subscribe or acquire holdings in the company or rights thereover.


 


(iii)                               Viesgo Distribución’s
entire capital stock is represented by 10,500,000 common shares with a par
value of € 6.010121 per share, validly issued, subscribed for, and totally
disbursed. There are no options or other rights empowering the shareholders or
third parties to subscribe or acquire shares in Viesgo Distribución or rights
thereover.


 


(iv)                              Begasa’s entire capital
stock is represented by 5,221,125 common shares with a par value of 500 pesetas
per share, validly issued, subscribed, and totally disbursed. Neither Viesgo
Distribución nor Begasa has granted options or other rights empowering the
shareholders or third parties to subscribe or acquire shares in Begasa or
rights thereover.


 


(v)                                 Barras Generación’s
entire capital stock is represented by 228,637 holdings with a par value of
1,000 pesetas per holding, validly created, assumed, and totally disbursed.
There are no options or other rights empowering the partners or third parties
to assume or acquire holdings in Barras Generación or rights thereover.


 


(D)                     Bylaws


 


The Bylaws of the Company and the Subsidiaries are those registered
with the Mercantile Registry, whose content has undergone no amendment or
modification whatsoever.


 


19

















 


(E)                       Subsidiaries


 


The shares/holdings representing the capital stock of each and all of
the companies comprising the Grupo Viesgo are validly issued or created, fully
subscribed or assumed, and totally disbursed, free and clear of any charges or
liens and not subject to any constraints whatsoever on their transfer.


 


(F)                       Ownership of Holdings and
Subsidiaries


 


Sellers are the legitimate and sole owners of the Holdings.


 


Ownership of the Holdings, free and clear of all charges of liens, is
recorded in the Company’s Partners’ Register.


 


The Company is the legitimate and sole owner of all the shares
representing one hundred percent of the capital stock of Viesgo Generación and
Viesgo Distribución, free and clear of all charges or liens.


 


Viesgo Distribución is the legitimate
and sole owner of shares representing 54.93 percent of Begasa’s capital stock,
free and clear of all charges or liens.


 


Begasa is the legitimate and sole owner of all the holdings
representing one hundred percent of Barras Generación’s capital stock, free and
clear of all charges or liens.


 


(G)                      Going concern


 


The Subsidiaries’ business is a
going concern, which has been operating continuously in accordance with the
normal practice of the electric power industry in Spain, and no events or
situations have occurred which materially impede or constrain the normal
conduct of said business. The assets reflected in the Financial Statements are
appropriate and sufficient to continue the Grupo Viesgo’s activities in the
manner in which they have been conducted up to the date hereof, and there is no
circumstance known to Sellers (including the signing and performance of this
Agreement) which alters that situation or might lead to the loss of said
assets.


 


(H)                     Partners’ agreements


 


All the rights and obligations of the
partners in the Company and Subsidiaries, respectively, stemming from the
foregoing, are reflected in the Bylaws, and there are other rights, obligations
or undertakings of any kind relating to said rights and obligations that are
not reflected therein.


 


20

















 


(I)                          Directors. Auditors. Powers
of Attorney


 


(i)                                     The governing
organ and Directors of the Company and the Subsidiaries, and their dates of
appointment, are those recorded in the Mercantile Registry. No resignation or
cessation of said directors is pending registration, nor is the appointment of
any new director.


 


(ii)                                  The Company and the Subsidiaries have designated the Auditors of
Accounts listed in Appendix 8.1 (I).(ii),
where the duration of their respective designations is likewise indicated.


 


(iii)                               Appendix
8.1 (I).(iii) lists the
principal powers of attorney for representation conferred by the Company and
the Subsidiaries. No other powers of attorney by which they might be obligated
or bound have been conferred, with the exception of general powers of attorney
for litigation conferred by the Subsidiaries.


 


(J)                         Financial Statements


 


(i)                                    The proforma consolidated financial statements of
the Company and the Subsidiaries as of December 31, 2000, together with a
review report issued by Arthur Andersen and Cía., S. Com. (the “Financial
Statements”) are attached hereto as Appendix
8.1.(J).(i). The Financial Statements, which include the balance
sheet, statement of income, and notes to the financial statements, incorporate
the effect the Company and the Subsidiaries would have experienced had the
transactions and other hypotheses detailed in said Financial Statements – and
in particular in note 2 thereto – been carried out as described therein.


 


In accordance with the terms stated in the preceding
paragraph, the Financial Statements provide a true image of the Grupo Viesgo’s
equity, financial position, and business results, in all material respects as
of December 31, 2000 and in conformity with generally accepted accounting
standards and principles in Spain, always taking into account the
aforementioned notes to the financial statements.


 


By the same token, Appendix 8.1.(J).(i) includes
the audited financial statements of Viesgo Distribución y Begasa for the fiscal
year ended December 31, 2000.


 


(ii)                                 Neither the Company nor the Subsidiaries have
owned or pledged holdings or shares of their own or in their parent company,
nor have they provided any financial assistance for the acquisition of shares
or holdings of their own or of their parent company, nor have they created
reciprocal holdings, all the foregoing either directly or through
intermediaries.


 


21

















 


(iii)                              Neither the Company nor the Subsidiaries have put
up endorsements, security guarantees, or bonds in favor of third parties other
than the Company itself and the Subsidiaries, except for those identified in
the Financial Statements.


 


(iv)                             The Company and the Subsidiaries keep their
accounts up to date as prescribed in current legislation.


 


(v)                                Between the date of the Financial Statements and
that of entering into this Agreement, the Company and the Subsidiaries, except
in relation to the transactions provided for herein and those indicated in note
2 to the Financial Statements:


 


(a)                        Have performed their activity
in the ordinary course of business.


 


(b)                       Have not issued or resolved to
issue shares, holdings, obligations, options, warrants, or any other
securities.


 


(c)                        Have not declared, resolved to
declare, or distributed any dividend whatsoever, or any other payments, to
their shareholders/partners implying a reduction of own funds of the Grupo
Viesgo, previous shareholders/partners, or Board members, nor have they
acquired own shares/holdings or reduced their capital, except for compensation
paid to their directors, as indicated in Appendix 8.1.(J).(v) and the distribution of Viesgo Distribución dividends on earnings in the
fiscal year ended December 31, 2000, in the amount of 451,500,000 pesetas.


 


(d)                       They have not amended their
bylaws.


 


(K)                     The Company’s status


 


The Company is a holding company whose corporate object is the
subscription and acquisition, holding, and divestiture of, any fixed or
variable-income personal securities and holdings of all kinds in companies, and
especially in companies whose object is the performance of electric power
generating, transmission, marketing, and distribution activities. The
performance of management activities for its business group, based on the
Company’s holdings in other companies or entities, including the provision of
support and managerial services for the companies in which it holds equity,
shall likewise be part of the Company’s object. The Company has no other
assets, contracts, liabilities, or debts unrelated to its regular activity or
not identified herein.


 


(L)                       Contracts


 


(i)                                     Appendix
8.1.(L).(i) contains a list
of the most important contracts, agreements, or undertakings to which the
Company, Viesgo Distribución, or Viesgo Generación are party. Said contracts’ terms


 


22

















 


and conditions are lawful, valid, and
efficacious, reflect market conditions, and have not been breached by the
Company, Viesgo Distribución or Viesgo Generación. Sellers have no knowledge of
any default on said contracts by the other parties thereto. The other parties
to said contracts shall not be entitled to request advance cancellation thereof
as a result of the execution of this Agreement, because there are no clauses
providing for advance cancellation due to change of control, or if said clauses
exist, because consent has been obtained in advance, all the foregoing except
as provided for in Appendix 8.1. (N).


 


(ii)                                  The Company and the
Subsidiaries have not entered into contracts and have no undertakings in force
with entities of the Endesa Group, nor with directors or executives thereof, or
companies or societies in which any of them has an interest, other than those
listed in Appendix
8.1.(L).(i).


 


(M)                  Litigation


 


Except as expressly indicated in Appendices 8.1.(M). and 8.1.(Q).(ii), there is no legal action, judicial or
extrajudicial litigation, claim, or arbitration proceeding whatsoever against
the Company or the Subsidiaries that might materially affect them or the
transactions provided for herein, nor are there any judicial or administrative
proceedings under way which, if adversely resolved, might materially affect the
business, rights, properties, or financial position of the Company or the
Subsidiaries, or the transactions provided for herein. To Sellers’ knowledge,
they have not been threatened with any such litigation or proceedings against
the Company or the Subsidiaries.


 


The Company and the Subsidiaries have not been convicted by any
judgment, award, or judicial ruling or administrative act pending execution,
and they are not obligated to take measures which might adversely affect their
business, transactions, or assets, as a result of any such judgment, award,
judicial ruling, or administrative act.


 


(N)                     Absence of adverse consequences


 


The Company and the Subsidiaries are not party to any contract or
agreement which, as a result of the conclusion of this Agreement and the
performance of the transactions provided for herein, might be rescinded or
cancelled by the other party or by virtue of which third-party rights would
arise, or which might be adversely affected in any other fashion, resulting in
material economic injury to the Company or the Subsidiaries, except as
indicated in Appendix 8.1.(N).


 


23

















 


(O)                     Taxes


 


(i)                                     The Company and
the Subsidiaries have regularly and punctually filed all the tax returns to
which they are obligated, and have correctly calculated their amounts. Endesa
Generación has regularly and punctually filed all the tax returns relating to
the business contributed to Viesgo Generación.


 


Originals or copies of all the tax documentation, including data on the
properties and businesses contributed to Viesgo Generación, are available at
the respective Grupo Viesgo companies.


 


(ii)                                  When said returns are
filed they are true, complete, and in accordance with the applicable
legislation in force at the time.


 


(iii)                               The Company and the
Subsidiaries have regularly and punctually paid their tax obligations or have
obtained deferrals of payment from the authorities, and Endesa Generación has
regularly and punctually paid when due, or has obtained deferrals of payment
from the authorities, and has settled its tax obligations relating to the
business contributed to Viesgo Generación within the appropriate time limit.


 


(iv)                              The Company and the
Subsidiaries have correctly made the appropriate withholdings from payments
made, including payments to employees, and have paid in the amounts so withheld
to the Tax Administration.


 


(v)                                 No liability for
application of the provisions of Article 16 of Law 43/1995, Corporate Tax,
stems from the transactions performed by the Company and its Subsidiaries with
parties related to them.


 


(vi)                              There is no tax
obligation of any kind over the assets of the Company and its Subsidiaries
other than those reflected in the annual reports and the tax returns filed by
them to date.


 


(vii)                           The
transactions described in expository parts III, IV, and V were carried out
under the tax neutrality regime prescribed in Title VIII, Chapter VIII of Law
43/1995, Corporate Tax. Nevertheless, Sellers shall waive said regime and
include the income stemming from transfer of all the equity items contributed
by virtue of said transactions in the taxable base for their Corporate Tax return
for the fiscal year ended December 31, 2001. No tax consequences adverse to the
Companies or their Subsidiaries stem from said transactions.


 


24

















 


(viii)                        The mere act of the formalizing of this
Agreement will not in any way change the tax situation, tax benefits, or, in
general, the tax credits, rights or obligations of the Company and its
Subsidiaries, with the exception of those related to its exclusion from the
fiscal consolidation group, the dominant entity of which is Endesa S.A.


 


(ix)                                Neither the company nor its subsidiaries
have been notified of the initiation of any inspection or audit proceedings on
the part of tax authorities not reflected in the Financial Statements.


 


(x)                                   In accordance with accounting rules and
principles generally accepted in Spain, the Company and its Subsidiaries have
recorded provisions sufficient for the payment of taxes related to their
operations, including those that are not yet payable as well as in connection
with the postponement of tax payments.


 


(P)                       Employment


 


(i)                                     The staff of the Company and its
Subsidiaries as of July 31, 2001 is as set forth in Appendix 8.1.(P).(i), which indicates the following
information: employee code, date of birth, registration date, seniority date,
contribution account code, category, contract type, and rate group.


 


In general, the individual
employment conditions of the personnel included in the agreement, which is part
of the staff of Grupo Viesgo, are not substantially different from those set
forth, by category, in the respective agreement.


 


(ii)                                  The Company and its Subsidiaries are
current in payment of their social security obligations and of the remuneration
due to personnel and it is complying with the provisions of all applicable collective
agreements in force for its personnel.


 


To be specific, the Company and its
Subsidiaries are current in compliance with the obligations derived from
contracts with its management and employees, and the Sellers have no knowledge
that the respective counterparts have failed to comply or intend to cancel said
contracts.


 


(iii)                               In accordance with the hypotheses
described in note 2 of the Financial Statements and with what is described in Appendix 8.1.(P) (iii), the Company and the
Subsidiaries, on the date of this Agreement, have internal funds and/or
exteriorization instruments (insurance contracts), necessary and sufficient for
compliance with the commitments assumed in the Employmnet Regulation Files
affecting its staff and assumed by them.


 


Appendix
8.1(P)(iii) contains the supporting documentation of the coverage as of July 31, 2001
of said commitments, explaining the


 


25

















 


criteria for calculation of the
personnel on those that are supported by internal funds according to the
Financial Statements.


 


(iv)                              Except for the provisions of Appendix 8.1(P)(iv) a and pursuant to the
phenomena described in note 2 to the Financial Statements and what is described
in Appendix 8.1.(P)(iv) b, the
Company and its Subsidiaries, as of the date of this Agreement, have the
internal funds and/or exteriorization instruments (pension plans and insurance
contracts) necessary and sufficient for compliance with the pension commitments
affecting their personnel and assumed by them.


 


Appendix 8.1.(P)
(iv) b contains
the supporting documentation of the coverage as of July 31, 2001 of said
pension commitments, explaining the criteria for calculating the personnel on
those that are supported by internal funds according to the Financial
Statements.


 


(v)                                 The Company and its Subsidiaries are in
compliance with current regulations regarding occupational health and safety.


 


(vi)                              The Sellers have no knowledge that the
Company or its Subsidiaries have any pending labor dispute or conflict, except
what is indicated in Appendix 8.1.(P).(iv).


 


(Q)                     Insurance


 


(i)                          The Company and its Subsidiaires have
signed the insurance policies listed in Appendix
8.1.(Q).(i), which provide adequate coverage of its assets pursuant
to the customary practice in Grupo Viesgo’s activity sector.


 


(ii)                       Neither the Company nor its Subsidiaries
has any pending claim for insurance indemnity nor is there any circumstance
from which a claim could be reasonably expected with respect to the twelve
months prior to the date of this Agreement, except for the provisions of Appendix 8.1.(Q) .(ii) and any that could
derive from the provisions of Appendix
8.1.(M). The Sellers have no knowledge that said claims may not be
covered by the insurance policies now in force.


 


(iii)                    The Company and the Subsidiaires have paid
all contracted insurance policies, and there is no pending payment for this
item.


 


26

















 


(R)                      Real Property


 


(i)                          The real property owned by Viesgo
Generación is as set forth in the Articles of Incorporation of said Corporation
executed June 30, 2001 before Madrid Notary Santiago Rubio Liniers, under
number 1323 in the notary book. Appendix
8.1.(R).(i) lists the real property of Viesgo Generación that have
been acquired, transferred, segregated, or on which real rights or any other
encumbrances have been established subsequent to said date.


 


The real property to which Viesgo
Generación now
has title, according to said document and Appendix
8.1.(R).(i), is what is necessary to carry out the activity of
Viesgo Generación and its state of repair allows said activity to be carried
out as it now is. The existing encumbrances on said assets do not affect the
normal course of business of Viesgo Generación.


 


(ii)                       Viesgo Generación has quiet enjoyment of the land on which are
found the hydroelectric plants listed in Appendix
8.1(R) (ii) as well as of said plants since their construction, and
their state of repair allows electrical generation activity to be carried out
in its current state.


 


(iii)                    The real property owned by Barra Generación is as listed in Appendix 8.1.(R).(iii).


 


(iv)                   Appendix 8.1.(R).(iv) a includes the real property other than the
distribution facilities, owned by Viesgo Distribución and by Begasa, setting
forth its description, its ownership information, and its encumbrance status,
which are the real property other than the distribution facilities that have
allowed them to carry out their activity to date in the current state. The
existing encumbrances on said assets do not affect the ordinary course of
business of Viesgo Distribución.


 


Viesgo Distribución and Begasa have
quiet enjoyment, which they have had continuously since construction, of the
distribution facilities of over 1 KV necessary for its normal activities. Their
state of repair allows said activity in its current state. The existing
encumbrances on said assets do not affect the normal course of business of
Viesgo Distribución. Appendix 8.1.(R).(iv) b lists
said Distribución facilities.


 


(v)                      The lease status of the real property of
Viesgo Generación and Barras Generación and of the real property other than the
distribution facilities of Viesgo Distribución and of Begasa is what is
detailed in the Data Room.


 


27

















 


(S)                       Personal Property


 


The machinery, equipment, and other
physical personal property included in the Financial Statements are adequate
for the use for which they are intended and sufficient to carry out the
business of Grupo Viesgo in the current state. In all material aspects, they
are in good repair and are not affected by any defect or condition that could
render said physical personal property useless or impossible to use safely such
that it would cause material damage to the Company or its Subsidiaries.


 


(T)                      Intellectual Property


 


(i)                                     Appendix 8.1.(T).(i) lists the trademarks that have been
transferred to Viesgo Distribución, through the documents that are mentioned in
said appendix. At this time, registration with the Spanish Patents and
Trademarks Office of those listed therein is pending processing. The Company
and its Subsidiaries are current in payment of the five-year payments and
applicable fees.


 


Appendix
8.1.(T).(i) lists the Internet domains as well as the status of those for which a
change of ownership has been applied for.


 


(ii)                                 The Company and its Subsidiaries have not
permanently or temporarily transferred to third parties use of the industrial
property items to which they are entitled except for the provisions in the
Contract for Transfer of Rights to the Development of Computer Programs on the
part of Viesgo Distribución to Endesa Servicios, S.L. of June 30, 2001.


 


(iii)                              The Company and the Subsidiaries are in
compliance with current regulations concerning the protection of personal
information.


 


(U)                     Accounts Receivable and obligations with
third parties


 


(i)                                     Accounts receivable or other credit of
the Company and its Subsidiaries may be collected at their par value in the
normal course of business or have been the object of provisions in the Financial
Statements according to accounting principles generally accepted in Spain.


 


(ii)                                  The Sellers have no knowledge that the
Company or the Subsidiaries have failed to comply in any substantial regard
with its obligations and they have no knowledge that the counterparts of said
contracts are in noncompliance with any important aspect thereof.


 


28

















 


(V)                      Administrative Concessions and licenses


 


(i)                          Viesgo Generación is in compliance with
all the requisites necessary for offering the energy produced by all its plants
to the electrical energy production market.


 


The plants and facilities of Viesgo
Generación belonging to the generation activities have the concessions
described in the articles of incorporation of Viesgo Generación executed on
June 30, 2001 before Madrid Notary Santiago Rubio Liniers under number 1,323 of
the notary book. Appendix 8.1.(V).(i)
lists the amendments made to said concessions since the date of incorporation
as well as the authorization and licenses related to said activity.


 


(ii)                       All the generating plants of Viesgo
Generación are registered with the Administrative Registry of Electrical Energy
Production Facilities. All the generating plants of Barras Generación are
registered with the Administrative Registry of Electrical Energy Production
Facilities, except those included in Appendix
8.1.(V).(ii).


 


(iii)                    The facilities concerning distribution
activities for electrical energy of over 55KV have the concession,
authorization and licenses listed in Appendix
8.1.(V).(iii) with which they have been operating continuously until
the date of this Agreement. The Sellers are not aware of any fact that, as the
result of the sale of the Shares, could give rise to an adverse change to the
current situation.


 


(iv)                   Neither the Company nor the Subsidiaires
have been notified in the 12 months prior to the signing of this Agreement of
any event of infraction or defect in concessions, authorization, or licenses
necessary for the exploitation of the generating and distribution facilities,
except for those set forth in Appendix
8.1.(V).(iv).


 


(W)                 Environment


 


(i)                          The Company and the Subsidiaries are in
compliance with all the state and autonomous environment regulations applicable
to all the activities performed by Grupo Viesgo related to the performance of
activities that are unpleasant, unhealthy, harmful, or dangerous to the
atmospheric environment, the use of water coming from aquifers, lakes, seas, or
rivers and the pouring of its waste water into any of these bodies, to the
contamination of soil and to the management of toxic and dangerous waste, and
they are in compliance with the limits established by regulations on emissions
into the atmosphere; all the foregoing except for what is included in Appendix 8.1.(W).(i) and the


 


29

















 


administrative
situation of environmental authorization and licenses of Viesgo Generación and
Viesgo Distribución, which is as set forth in section V above. Moreover, in
connection with possible waste that could be found in any of the land owned by
the Company or its Subsidiaries, the Sellers have no knowledge that they have
received or will receive notification or a summons from any Public
Administration related to “contaminated soil” based on the provisions of Law
10/1998, of April 21, on Waste.


 


(ii)                       The Company and its Subsidiaries have not
been notified during the 12 months prior to the signing of this Agreement of
any case sanctioning a violation of environmental regulations, nor do they have
pending resolution any notice prior to said date except for the content of Appendix 8.1.(W).(ii).


 


(X)                     Costs of Transition to the Competence
(“CTSs”)


 


ENDESA GENERACIÓN, by virtue of the
articles of incorporation, has transferred as a non-monetary contribution of a
branch of the activity of Viesgo Generación, to Viesgo Generación:


 


(i)                          The rights to collect for the
Technological Costs of Transition of Competence, the sum of which, as of
December 31, 2000, amounts to 45,493 million pesetas, which is 3.82% of the
total of all the firms of the sector as of said date.


 


(ii)                       The right to collect the premium for
consumption of domestic carbon of the thermal plants of Escatrón, Escucha,
Puertollano, Puente Nuevo and Cercs.


 


The Ministerial Order by which Viesgo
Generación, S.L. is given the right to collect costs of transition to the
authorities beginning July 1, 2001 is incorporated as Appendix 8.1.(X).


 


(Y)                      Data Room


 


The Sellers declare that the
information and documentation of the Data Room constitutes all the information
sufficient for the Buyer to have knowledge of the situation of Grupo Viesgo in
all material aspects, which does not omit any fact known to the Sellers nor is
it deceptive or incomplete to the point of being able to influence a decision
to buy which would have been made by a reasonable buyer.


 


30

















 


8.2.                 Buyer’s
warranties and representations


 


The Buyer warrants and represents to the Sellers that:


 


(A)                    Organization and capacity


 


(i)                          It is duly organized and in
legal existence in accordance with the laws of its place of organization.


 


(ii)                       It has full authority to sign
and fulfill this Agreement, which does not violate its corporate bylaws nor any
legal or administrative provision, accord, agreement or commitment binding it.


 


(iii)                    The Buyer or its major shareholders
are companies of acknowledged reputation and significant experience in the
electricity sector, and knowledgeable of the businesses of electrical energy
generation and distribution, including all aspects of the Spanish and Community
regulatory framework.


 


(iv)                   For purposes of signing and
fulfilling this Agreement, it has received the approvals of its administrative
bodies as well as all required administrative authorizations except those
mentioned in clause 3 above.


 


(v)                      It has sufficient funding to pay
the Purchase Price and any applicable Interest.


 


(B)                      Sale process


 


The Buyer states that it has participated in the sale process, and has
received and examined the information provided to it during such process.


 


The Parties solemnly warrant that they wish to completely fulfill and
execute the Agreement as quickly as possible, and for all conditions and
requirements set forth therein to be stipulated to ensure such execution and to
in no way impede it, delay it or in any way disrupt the normal operations of
the Company and Subsidiaries.


 


9.                            OTHER COMMITMENTS BY THE PARTIES


 


Notwithstanding any other commitments set forth in this Agreement, the
Parties assume the following:


 


31

















 


9.1                               Sellers


 


(i)                           The Sellers undertake to
accept such conditions as may be established by the competent defense
authorities, whether Spanish or Community, in the respective resolutions or
rulings that they may issue as set forth in Clause 3 above, as well as to
fulfill such conditions and obligations as the European Commission may impose
pursuant to articles 6.1bis and 8.2 of EEC Regulation 4064/89, to guarantee
fulfillment of the acquired commitments with a view to harmonizing the
concentration with that of the Common Market; all notwithstanding the
provisions set forth in clause 3.4.


 


(ii)                        The Sellers undertake not to
hire workers from the Grupo Viesgo for a period of two years after the Closing
Date, except through exercise of the rights of return that managers of the
Grupo Viesgo may enjoy as of the Closing Date.


 


(iii)                     Endesa, S.A. and the Sellers
undertake not to actively and specifically induce current clients of the Grupo
Viesgo to break or abandon their contractual relations with the latter for a
period of twenty-four months after the Closing Date. This restriction will
apply only to activities involving the sale of electrical energy. For purposes
of this clause, those clients which, as of the date of this Agreement, are also
clients of other entities of the Endesa Group, and corporate clients,
understood as being clients forming part of groups operating in more than one
autonomous community, shall not be assumed as forming part of the current
clients of the Grupo Viesgo.


 


This restriction shall not apply
and shall remain invalid when the joint share on the peninsular market for
energy sold in the regulated and unregulated market corresponding to the Buyer
and its Affiliates (understood as those in which the Buyer holds a percentage
of capital greater than 10%) and the Company and its Subsidiaries is greater
than 7%. For this purpose, it shall be understood that such share has been
exceeded when, during the aforementioned 24-month period, the aforementioned share
has been exceeded for two consecutive months or three alternating months.


 


(iv)                    The Sellers undertake to promote
pension plans or to sign other outsourcing instruments in the manner specified
in Appendices 8.1P (iii) and 8.1P (iv) b
of the pension and ERE commitments assumed by the Company or Subsidiaries prior
to the date of this Agreement, in accordance with the assumptions set forth in
clauses 8.1.(P).(iii) and 8.1.(P).(iv).


 


In the event that the cost of the
instruments submitted prior to the Closing Date exceeds the internal funds
allocated for such purposes on the outsourcing date, the Sellers jointly and
severally undertake to pay the Buyer, for the lower Purchase Price, an amount
equal to the resulting deficit. Such amount must be paid by bank transfer in
immediately available


 


32

















 


funds and with value date no later
than the fifth Business Day after the date the Buyer confirms to the Sellers
the subscription or signing of the instruments, to the checking account to be
indicated by the Buyer to the Sellers for that purpose, on the same date as the
signing of the instruments is recorded, for its amount in Euros net of expenses
and fees, as well as any tax withholding.


 


9.2                               Buyer


 


(i)                           The Buyer undertakes to accept such conditions
as may be established by the competent defense authorities, whether Spanish or
European Community, in the respective resolutions or rulings that they may
issue as set forth in Clause 3 above, as well as to fulfill such conditions and
obligations as the European Commission may impose pursuant to articles 6.1bis
or 8.2 of EEC Regulation 4064/89, to guarantee fulfillment of the acquired
commitments with a view to harmonizing the concentration with that of the
Common Market; all notwithstanding the provisions set forth in clause 3.4.


 


(ii)                        On or before the Closing Date,
the Buyer undertakes to sign an insurance policy or policies replacing those
currently in force, as set forth in Appendix
8.1.(Q).(i) of this Agreement, covering at least the same risks and
for the same amounts as the Endesa, S.A. general policy, which is described in
the aforementioned Appendix, currently covers for the Grupo Viesgo; such new
policy or policies must enter into force on the Closing Date and be signed with
an insurance company or companies of acknowledged reputation and solvency.


 


(iii)                     The Buyer is required to allow the
Sellers reasonable access to the books and records of the Company and
Subsidiaries and undertakes to provide or cause to provide to the Sellers any
information they may reasonably request, for purposes of the Sellers’
compliance with their legal obligations (and specifically their tax
obligations) or their exercise of the right of defense to which they are
entitled pursuant to clause 11 below, or any other right acknowledged thereto
in this Agreement.


 


(iv)                    The Buyer assumes and is required
to fulfill and ensure that the Company and Subsidiaries fulfill the
social-labor regulations governing business successions, as contained in
Community law, article 44 of the Worker Statute and any other regulation,
accord or agreement that may apply thereto, both specifically and in general,
as provided for in the following paragraph.


 


33

















 


For its part, the Company and Subsidiaries are completely subrogated
and bound to fulfill the conventional and contractual regulations and all labor
conditions applying to personnel affiliated with the companies, worksites and
facilities covered by this Agreement. Appendix
9.2.(iv).a includes the current collective agreements for such
personnel, including the first framework agreement of the Grupo Viesgo of July
31, 2001 and its supplementary addendum for Begasa, the corporate restructuring
and business reorganization agreements of the Endesa Group in 1999, and the
Grupo Viesgo agreement on specific matters of July 31, 2001.


 


Specifically and notwithstanding the provisions of the preceding
paragraphs, the Buyer expressly assumes and is required to fulfill and ensure
that the Company and/or Subsidiaries fulfill and/or are subrogated, as the case
may be:


 


•                               In
the employment stability guarantees set forth in the agreement of the
commission for the Grupo Viesgo agreement on specific matters of July 31, 2001,
expressly undertaking to effectively adopt any measures as may be necessary to
provide for the relocation of affected workers in accordance with the terms set
forth in such agreement, before adopting extinctive labor relations measures
other than early retirement.


 


•                               In
the current administrative resolutions and social monitoring plans
corresponding to the Employment Regulation Processes affecting the personnel of
the Company and Subsidiaries, by virtue of the provisions set forth in the
official letter issued by the General Labor Secretariat on July 3, 2001 and the
Grupo Viesgo agreement on specific matters of July 31, 2001.


 


Attached as Appendix 9.2.(iv).b
are the aforementioned administrative resolutions, social monitoring plans and
official letters.


 


•                               In
the supplementary social security systems and pension commitments affecting the
personnel of the Company and Subsidiaries deriving from collective agreements
and/or individual contracts applying to its staff.


 


•                               In
the maintenance, as an ad personam
guarantee, of specific labor conditions more favorable than the original
agreements, pursuant to the Grupo Viesgo agreement on specific matters of July
31, 2001.


 


•                               In
labor relations and in specific and general conditions relating to management
personnel. Appendix 9.2. (iv) c includes
the model labor agreement for members of the Grupo Viesgo Management Committee.


 


34

















 


(v)                       The Buyer undertakes to ensure
that the Company and Viesgo Generation pay Endesa S.A. or any other companies in
the Endesa Group, on an annual basis, the funds contributed by such companies
to the various social security instruments intended to cover the current
pension commitments therein with respect to workers transferred to the Company
or Viesgo Generation and whose pension commitments are maintained at Endesa or
other companies of its Group during such time as its labor relations are
maintained with the Company or Viesgo Generation, all pursuant to Appendix 9.2.(v).


 


(vi)                    The Buyer undertakes not to hire
workers of the Endesa Group, of which the Sellers form part, for itself or for
any company in the Grupo Viesgo, for two years after the Closing Date, unless
such hiring occurs or results from a general offer of employment published in
the press or other mass communications medium.


 


(vii)                 The Buyer undertakes to:


 


(a)                       Accept for purposes of the
provisions of this clause and clause 9.1.(iv), and to continue applying after
the Closing Date:


 


•                       the
assumptions and calculation criteria used for allocating internal funds to
cover the commitments assumed in the employment regulation processes affecting
the staff of the Company and Subsidiaries, and assumed thereby, to which the
warranty contained in clause 8.1.(P).(iii) refers.


 


•                       the
assumptions and calculation criteria used for allocating internal funds to
cover the pension commitments affecting the staff of the Company and
Subsidiaries and assumed thereby, to which the warranty contained in clause
8.1.(P).(iv) refers.


 


(b)                      To continue performing, after the
Closing Date, the allocations corresponding to covering the commitments
indicated in section (a) above which are not outsourced as of that date, and
applying the assumptions and criteria indicated in such section (a) above.


 


(c)                       To ensure that the Company
and/or Subsidiaries sign such instruments as are submitted thereto by the
Sellers pursuant to clause 9.1.(iv) above.


 


In the event that the cost of the instruments submitted after the
Closing Date is less than the internal funds allocated for such items on the
outsourcing date, the Buyer undertakes to pay the Sellers (in


 


35

















 


proportion to their share in the Company on the date of this
Agreement), for the higher Purchase Price, an amount equal to the resulting
excess. Such amount must be paid through a bank transfer, in immediately
available funds and with value date no later than the fifth Business Day after
the date the Sellers have presented the instruments to the Buyer, to such
checking account as the Sellers must indicate to the Buyer for that purpose, on
the same date as the instruments are presented, for their amount in Euros net
of expenses and fees as well as of all tax withholdings.


 


(viii)              Regarding the coverage of retirement
contingencies or similar situations, invalidity and/or death, deriving both
from the corresponding collective agreements and the employment regulation
processes (ERES), the Buyer undertakes to ensure that Viesgo Distribución and
Viesgo Generación completely fulfill the agreement signed in this regard with
Endesa, S.A. and Endesa Generación, which is attached as Appendix 9.2.(viii), by virtue of which, in
order that the latter two companies may perform the corresponding reductions in
the Corporate Tax bases, the former two companies have committed to report,
regarding the aforementioned coverages, that during the immediately preceding
year they have met the conditions required by the general Corporate Tax
regulation to be considered as deductible.


 


This communication will be issued in accordance with the terms set
forth in the aforementioned agreement attached as Appendix 9.2.(viii), which the Buyer warrants in full
knowledge. To this end, the Buyer, along with Viesgo Generación and Viesgo
Distribución, jointly and severally guarantees fulfillment of this obligation
to communicate, and is jointly and severally bound with these companies to
repair the damage and losses provided for in the aforementioned agreement.


 


Notwithstanding the provisions set forth in the two preceding
paragraphs, the aforementioned agreement, which is attached as Appendix 9.2.(viii), provides that in the
event that an express ruling is obtained from the General Tax Office fully
ratifying the criteria set forth in statement 12 of the agreement attached as Appendix 9.2.(viii), such agreement shall
be rendered invalid, in which case it is expressly agreed that the commitment
assumed by the Buyer by virtue of this clause 9.2.(viii) shall be replaced by
the commitment provided for in clause 9.2.(ix) thereafter.


 


(ix)                      If an express ruling is obtained
from the General Tax Office fully ratifying the criteria set forth in statement
12 of the agreement attached as Appendix
9.2.(viii), i.e., that the future deductibility of the expenses
corresponds entirely to Viesgo Generación and Viesgo Distribución:


 


36

















 


•                               the Agreement attached as Appendix 9.2. (viii)
shall be invalidated except as provided for in the following paragraphs with
regard to obligations to report information; and


 


•                               The
Buyer undertakes to pay to the Sellers each fiscal year (in proportion to their
share in the Company on the date of this Agreement), for the higher Purchase
Price, an amount equal to 35 percent of the downward adjustments (hereinafter,
the “Downward Adjustments”) to the Corporate Tax basis of Viesgo Distribución
and Viesgo Generación for the immediately preceding fiscal year, for the items
set forth in clause II of the agreement attached as Appendix 9.2.(viii), with such payment commitment to be
maintained until the total value of the Downward Adjustments exceeds the total
adjustments set forth in the aforementioned clause II. Notwithstanding the
above, if during any fiscal year the Corporate Tax basis of Viesgo Generación
or Viesgo Distribución is negative (i) before making the Downward Adjustment,
or (ii) as a result of making the Downward Adjustment, the obligation to pay
the amount corresponding to such Downward Adjustment, in case (i), or the
amount of such Downward Adjustment that exceeds the tax basis before it is
made, in case (ii), shall be deferred until the fiscal year when it is
effectively used by the corresponding corporation.


 


Such amounts must be paid to the Sellers, prorated for their ownership
interest in the Company, within five days after the 25 days following the six
months after the close of each fiscal year, in the corresponding amount, by
bank transfer in immediately available funds and with value date no later than
the fifth Business Day after the date ending the period legally established for
submitting the Corporate Tax return for Viesgo Distribución and Viesgo
Generación for such prior fiscal year, for the amount in Euros net of expenses
and fees as well as any tax withholdings. To this end, before the end of the
aforementioned legal period for submitting the Corporate Tax return, the
Sellers must provide notification of the checking accounts to which the
payments are to be made.


 


In order that the Sellers may verify proper settlement of the amounts
they are entitled to collect pursuant to this clause 9.2.(ix), the Buyer is
required to communicate to the Sellers the information set forth in clause II
of the agreement attached as Appendix
9.2.(viii), with the content and within the deadlines set forth
therein, expressly granting the Sellers the right to verify the information
contained in clause III of the aforementioned agreement.


 


37

















 


10.                     INDEMNITY


 


10.1              Sellers shall be jointly liable to Buyer for solely those damages that
presume a decrease in net worth of the Company and Subsidiaries, that are a
direct consequence of the lack of truthfulness in the statements and guarantees
made in Clause 8, noncompliance with the obligations established in
Clause 5.1 or claims by third parties against Viesgo Distribución under
the scope of Article 259 of the Corporations Law in relation to the division of
Electra de Viesgo I, S.A. in favor of Electra de Viesgo II, S.A. according to
the division document issued before the Notary of Burgos, Mr. José María de
Prada Díez on December 17, 1999, under No. 3,767 of his records, which led to
entry 12 on the corporate records of Electra de Viesgo I, S.A.; Buyer does not,
in any event, have to the right to indemnification for damages caused in
relation to events or circumstances revealed to Buyer or known thereto by
reason of documents or reports specifically cited in this Agreement.


 


10.2              The indemnity obligation contemplated herein shall remain in effect:


 


(i)                           For a period of two years, as of the Closing
Date for damages that are a consequence of the lack of truthfulness of the
statements and guarantees made in Clause 8.1.(W);


 


(ii)                        During the period of the statute of limitations
plus sixty days for damages originating in the inaccuracy of statements
regarding tax and/or Social Security aspects;


 


(iii)                     For the legal period in relation to valid
ownership, encumbrances or other rights related to the Interests; and


 


(iv)                    For a period of one year as of the Closing Date
for the remainder.


 


10.3              Buyer may not submit claims to Sellers under this Agreement whose amount
is less than € 100,000 and those so excluded shall not be calculated for purposes of
the deductible provided in Clause 10.4 below. For these purposes, all claims
deriving from one and the same cause are considered one single claim.


 


10.4              The obligation to indemnify Buyer shall apply solely in the case of
claims against Sellers, the total amount whereof exceeds 0.5% of the Purchase
Price. Sellers shall therefore be liable only for amounts in excess thereof.


 


10.5              The maximum indemnity to be paid by Sellers shall be limited to 15% of
the Purchase Price.


 


38

















 


Nonetheless,
damages originating in the inaccuracy of statements related to the ownership of
the Interests and the absence of encumbrances thereon shall not be calculated
for purposes of the maximum indemnity limit and shall be indemnified in full by
Sellers, with the sole limit of the Purchase Price.


 


10.6              Sellers’ Rights.


 


10.6.1                 The provisions of any other clause herein notwithstanding, there shall
be no obligation whatsoever to indemnify Sellers:


 


(a)                        With respect to those claims
that Buyer may have submitted after the periods cited in Paragraph 10.2 for
each of the cases mentioned therein have elapsed.


 


(b)                       With respect to third-party
claims that were not satisfied or that did not result in actual damage to net
worth for the Company or the Subsidiaries that was indemnifiable in accordance
with the provisions of this clause.


 


(c)                        With respect to claims for
which a specific reserve has been recorded, in terms of accounting, on the
Financial Statements for the item causing the claim, and up to the amount of
such reserve;


 


(d)                       With respect to damages that
would not have occurred if not for:


 


•                      Actions or
omissions by Buyer, the Company or the Subsidiaries with the participation in
or knowledge of the adoption on the part of the Buyer, or Directors, managers
or employees designated by the latter,


 


•                      The entry
into effect or adoption, after this day, of any legal provision, decree, order,
regulation or decision or administrative practice or amendment to the existing
ones,


 


•                      The
amendment by Buyer of the accounting policies or practices of the Company or
Subsidiaries;


 


(e)                        With respect to damages that
may result from a price adjustment by reason of the provisions of any of the clauses
of the present Agreement.


 


10.6.2                 If, pending payment of an indemnity to Sellers in conformity herewith,
Buyer, the Company or Subsidiaries collects (whether by payment, discount,
credit, offset or otherwise) or may have a right to collect from a third party
a sum in relation to the damage that resulted in said claim, Buyer shall take
or permit the Company or Subsidiaries, as applicable, to


 


39

















 


take
the precise measures to demand such collection, before demanding payment from
Sellers, and shall keep Sellers duly informed with regard to the rights and
collections made by it, and they shall be taken into consideration in order to
reduce the amount of the claim against Sellers.


 


10.7              The Parties agree that any payment or indemnity paid by Sellers to Buyer
under the provisions hereof shall be considered a reduction in the Purchase
Price.


 


11.                     CLAIMS
AND PROCEDURES


 


11.1              Third-Party
Claims against the Company or Subsidiaries


 


In
the case of third-party claims against the Company or Subsidiaries that may
result in an indemnification by Sellers under the scope of Clause 10 above,
Buyer shall notify Sellers of the filing of such claim as soon as it becomes
aware thereof, and in any event, within the first half of the period legally
established for response to said claim. Sellers shall have the right, but not
the obligation, to manage the proceedings that may result from such claims,
without prejudice to permitting Buyer and its consultants an active role in such
matters.


 


During the second half of the legal period for
response to the claim, Sellers shall notify Buyer of their decision regarding
management of the defense.


 


If the Sellers decide to direct the defense, the Buyer agrees (i) to
take the necessary measures so that the Company and/or the Subsidiaries will
grant sufficient powers to the Sellers or the persons designated by the
Sellers, (ii) to provide them with all information and documents necessary for
the defense, (iii) to cooperate in good faith with the Sellers in all matters
connected with the defense, (iv) that it will not take any action with respect
to the claim that might be in conflict with the defense assumed by the Sellers
or that might harm that defense and (v) to take the measures requested by the
Sellers in connection with the defense. All costs and expenses incurred by the
Buyer or the Grupo Viesgo, at the request of the Sellers, in the defense of
said claims shall be payable by the Sellers.


 


If the Sellers decide not to direct the defense of the claim, the
defense shall be the responsibility of the Buyer. The Buyer shall not accept
any responsibility for such claim, nor will it reach any settlement agreement
without the advance consent of the Sellers.


 


In the event of claims from third parties, the Sellers shall indemnify
the Buyer only if the Company or the subsidiaries have suffered damages as a
result of the final


 


40

















 


and unappealable settlement, judgment or decision in connection with
such claims, and in the amount determined in such decisions.


 


The Buyer agrees to cooperate diligently and in good faith with the
Sellers to minimize any damage that might be caused by the claim from the third
party.


 


If the Buyer fails to perform its obligations of timely notice and
advance information in this clause 11.1, and in 11.2 below, the Sellers shall
be released from their obligation to indemnify under clause 10, only insofar as
such delay harms the right of defense of the Sellers and only in the amount of
the loss caused to the Sellers.


 


11.2 Claims
from buyer not entailing cause of claims from third parties


 


If the Buyer believes that the Company has suffered damage as a result
of an inaccurate representation of the Sellers, it shall communicate that
circumstance to the Sellers and the amount of such damage, within 30 days
following the date on which it learns of such circumstance. Such notice must
include a description of the nature, substance and amount of the claim and a
copy of the documentation connected with it, so that the Sellers will be able
to evaluate such claim properly. The Sellers shall have 30 days from the
receipt of such communication in which to reject or accept the claim that has
been made. During the next 30 days, the Sellers and the Buyer shall in good
faith negotiate a solution to the dispute that has arisen.


 


If the Sellers do not communicate their position on the claim within
the aforementioned time limit, it shall be understood that they are rejecting
it.


 


If there is no agreement between the parties about the existence or
nonexistence of the damage, or about its amount, the discrepancy shall be
resolved pursuant to the provisions of clause 15.


 


The Sellers shall bear a compensation obligation only for damage whose
existence or amount they have accepted, or damage that has been declared
through the procedure indicated in clause 15 and in the amount declared there,
in accordance with the provisions of this clause and in the previous clauses.


 


11.3 Common Provisions


 


11.3.1                              If
compensation is actually claimable by the Buyer from the Sellers pursuant to
this Agreement, the Sellers shall pay the amount of the damage


 


41

















 


directly to the Buyer in the value that is necessary to put the Company
back into the asset position that it would be in if the inaccurate
representation and warranty that gave rise to the damage had been correct.


 


11.3.2                              Any
compensation that is payable by the Sellers under this Agreement shall be
reduced by any tax effect that the claim or loss that gave rise to it would
have actually had for the Company or the Subsidiaries.


 


12. ASSIGNMENT


 


The Parties may assign this
Agreement to any entity of the same group as the group to which the assigning
party belongs with the advance, written consent of the other Party, which may
not be unreasonably denied, and provided that, simultaneously, the assigning
party jointly and severally guarantees the performance of the obligations
derived from this Agreement by the assignee.


 


13. CONFIDENTIALITY


 


Both Parties agree to maintain
confidentiality and not to disclose to third parties the transaction that is
the subject of this Agreement, or its existence or contents, except when that
is necessary to meet the requirements of applicable laws and specifically the
rules and regulations of any Securities Exchange on which the shares of either
Party, or any company of the groups to which either Party belongs, are listed.


 


The Buyer agrees to maintain
the confidentiality of the information provided by the Sellers without
disclosing it to third parties, up until the Closing Date, and to obtain the
same commitment from its employees and advisors who participate in the Sale
Process.


 


However, if, for any reason,
the transfer of the Interests does not occur, the confidentiality obligation
shall be indefinite, and the Buyer must return to the Sellers all the documents
and information to which it has had access, including copies and, if
applicable, destruction, of the information to which it has had access on any
medium, in connection with this transaction.


 


In any event, the effectiveness
of the Confidentiality Agreement signed between the Buyer and Endesa, S.A. on
May 15, 2001 is confirmed on its own terms.


 


42

















 


14.                   MISCELLANEOUS CLAUSES


 


14.1            Expenses and Taxes


 


Whether or not the transactions set forth in this Agreement are
consummated, the expenses connected with them shall be paid by the Party that
incurred them, including the fees and disbursements of its respective legal and
financial advisors. Any taxes assessed on this Agreement and the purchase/sale
of the Interests set forth herein shall be paid by the parties, pursuant to
law.


 


The costs of the notary public before whom the purchase/sale is executed
shall be paid by the Parties in halves.


 


14.2            Cooperation


 


The Parties shall cooperate mutually in conducting the transactions set
forth in this Agreement and in delivering all the documents and instruments
that are considered reasonably necessary or useful by any of the Parties.


 


14.3            Notices


 


Any notice, application, request or other communication to be given by
either Party to this Agreement shall be addressed to the other Party at the
addresses and to the attention of the representative person who is indicated
below, or to any other addresses and/or persons that one Party may indicate at
any time to the other.


 


All notices, applications, requests or communications shall be
submitted by any written means that provide certainty of their receipt.


 


The parties agree on the following addresses and numbers for making the
communications (or any others that each party indicates to the other for these
purposes during the effective term of this Agreement):


 


To the
Buyer: 

Attn.: Mr. Mario Barozzi

Manager of Strategy, Planning and Development 

ENEL

Viale Regina Margherita 137

00198 Rome (Italy)

Fax: 39 06 8509 2352


 


C/c: Mr.
Salvatore Cardillo

Manager of Legal Counsel

ENEL

Viale Regina Margherita 137


 


43

















 


00198 Rome
(Italy)

Fax:  39 06 85092042


 


 


To the Sellers:

Attn. Mr. Luis Rivera Novo


 


General Manager of Planning and Media


 


Endesa


 


Príncipe
de Vergara, 187


 


28002
Madrid


 


Fax:
+34.91.213.99.67


 


c/c:                              Mr.
Francisco de Borja Acha Besga.


 


Corporate
Manager of Legal Counsel


 


Endesa


 


Príncipe
de Vergara, 187


 


28002
Madrid


 


Fax:
+34.91.213.96.60


 


 


14.4            Full Agreement; Amendments


 


This Agreement contains the full agreement between the Parties with
respect to the subject of the agreement and replaces all other contracts or
agreements made between the Parties in relation to the transaction stipulated
here, which shall therefore cease to be valid or effective as of the date of
this Agreement except for the aforementioned Confidentiality Agreement, which
shall continue to exist in accordance with its own terms. In the event of
conflict between the two documents, this Agreement shall prevail.


 


14.5            Counterparts


 


This Agreement shall be formalized in two counterparts, one for the
Sellers and the other for the Buyer. Each counterpart shall be considered an
original.


 


44

















 


14.6            Language


 


This Agreement shall be formalized in Spanish, even though some of its
Appendices are written in English.


 


14.7          Nonexistence of Waiver


 


Failure by one of the Parties to exercise any right derived from this
Agreement shall not be interpreted as a waiver of such right by that Party.


 


45

















 


15.                   APPLICABLE LAW AND DISPUTE RESOLUTION


 


This Agreement and any dispute that might arise from it shall be
subject to the laws of Spain.


 


All disagreements deriving from this Agreement or connected with it
shall be resolved permanently in accordance with the Rules of Arbitration of
the International Chamber of Commerce by one or more arbitrators appointed
pursuant to those Rules. The location of the arbitration shall be Madrid and
the language of the arbitration shall be Spanish. Any document may be presented
to the arbitrators in its original language however the arbitrators may request
a translation of it into Spanish, and the cost of the translation shall be
payable by the Party that submitted the document in a language other than
English.


 


The Parties also expressly certify their agreement to comply with the
arbitral award that is issued.


 


 


[The rest of this page is left deliberately blank]


 


46

















 


AND
IN WITNESS WHEREOF, the Parties sign this Agreement and its Appendices in two
identical counterparts, one for the Buyer (issued as to the Agreement on 44
pages of plain paper written on one side only and numbered consecutively from 1
to 44, and as to the Appendices on 2,157 pages of class 8 stamped paper of the
State, written only on the reverse numbered from OF8366504 to OF8368649; from
OF7452292 to OF7452300; OF7452301 and OF7452303; all inclusive) and one for the
Sellers (issued as to the Agreement, on 44 pages of plain paper written on one
side only and numbered consecutively from 1 to 44,  and as to the Appendices, on 2,157 pages of class 8 stamped paper
of the State, written only on the reverse, numbered from OF7452285 to
OF7452281; OF7451950; OF7451949; from OF7452279 to OF7450501 (except:
OF7452276, OF7452270, OF7452265, OF7452255, OF7452252, OF7452242, OF7452202,
OF7452171, OF7452129, OF7452091, OF7452088, OF7452043, OF7452007, OF7452000,
OF7451966, OF7451951, OF7451950, OF7451949, OF7451948, OF7451903, OF7451880,
OF7451875, OF7451871, OF7451832, OF7451763, OF7451722, OF7451713, OF7451679,
OF7451668, OF7451651, OF7451617, OF7451563, OF7451514, OF7451478, OF7451448,
OF7451445, OF7451409, OF7451390, OF7451379, OF7451350, OF7451309, OF7451258,
OF7451195, OF7451193, OF7451141, OF7451118, OF7451084, OF7451041, OF7451005,
OF7451000, OF7450966, OF7450913, OF7450910, OF7450907, OF7450899, OF7450896,
OF7450884, OF7450852, OF7450807, OF7450756, OF7450714, OF7450664, OF7450637 and
OF7450572); from OF7453001 to OF7453067; OF7452302; and from OF7453068 to
OF7453434; all inclusive), for a single purpose, on the date indicated in the
heading.


 


SIGNED on behalf of and
representing ENDESA, S.A.


 


SIGNED on behalf of and
representing ENDESA GENERACIÓN, S.A.


 


SIGNED on behalf of and
representing ENDESA DISTRIBUCIÓN, S.A.


 


SIGNED on behalf of and
representing ENEL S.p.A.


 


47

















 


CLAUSES – TABLE OF
CONTENTS


 


 


	
  1.  DEFINITIONS

  
	
  2.  SHARE PURCHASE

  
	
  3.  CONDITIONS PRECEDENT

  
	
  4.  PURCHASE PRICE

  
	
  4.1

  	
  PURCHASE PRICE

  
	
  4.2

  	
  ADVANCE

  
	
  4.3

  	
  FORM
  OF PAYMENT

  
	
  4.4

  	
  CLOSING ADJUSTMENT

  
	
  5. 
  EVENTS BETWEEN AGREEMENT DATE AND CLOSING DATE

  
	
  5.1

  	
  BETWEEN THE DATES THIS AGREEMENT IS SIGNED AND THE CLOSING DATE, THE
  SELLERS AGREE THAT THE COMPANIES THAT MAKE UP THE GRUPO VIESGO WILL NOT
  PERFORM ANY TRANSACTION OUTSIDE THE ORDINARY COURSE OF THEIR BUSINESS.

  
	
  6.  CLOSING

  
	
  7.  TERMINATION

  
	
  8.  REPRESENTATIONS AND WARRANTIES

  
	
  9.  OTHER COMMITMENTS BY THE PARTIES

  
	
  9.1

  	
  THE SELLERS

  
	
  9.2

  	
  THE BUYER

  
	
  10.  INDEMNITY

  
	
  11.  CLAIMS AND PROCEDURES

  
	
  11.1

  	
  THIRD-PARTY CLAIMS AGAINST THE COMPANY OR
  SUBSIDIARIES

  
	
  11.2

  	
  CLAIMS FROM BUYER NOT ENTAILING CAUSE OF
  CLAIMS FROM THIRD PARTIES

  
	
  12.  ASSIGNMENT

  
	
  13.  CONFIDENTIALITY

  
	
  14.  MISCELLANEUS CLAUSES

  
	
  14.1

  	
  EXPENSES AND TAXES

  
	
  14.2

  	
  COOPERATION

  
	
  14.3

  	
  NOTICES

  
	
  14.4

  	
  FULL AGREEMENT; AMENDMENTS

  
	
  14.5

  	
  COUNTERPARTS

  
	
  14.6

  	
  LANGUAGE

  
	
  14.7

  	
  NONEXISTENCE OF WAIVER

  



 

















 


	
  15.  APPLICABLE LAW AND DISPUTE
  RESOLUTION

  



 


2