Document:

Exhibit 10.1

ASSET PURCHASE AGREEMENT

by and between

SALUDA RIVER
ELECTRIC COOPERATIVE, INC.

as Seller

and

DUKE ENERGY
CAROLINAS, LLC

as Purchaser

December 20,
2006

 

 

ASSET
PURCHASE AGREEMENT

THIS
ASSET PURCHASE AGREEMENT is made and entered into effective
as of December 20, 2006 (the “Effective Date”), by and between SALUDA RIVER ELECTRIC COOPERATIVE, INC., a South Carolina
electric cooperative (“Seller”), and DUKE ENERGY
CAROLINAS, LLC, a North Carolina limited liability company (“Purchaser”).  Seller and Purchaser are also each referred
to herein as a “Party” and collectively as the “Parties.”

RECITALS

WHEREAS, Purchaser and Seller each have an ownership
interest in the nuclear-fueled generation facility known as Catawba Nuclear
Station located on Lake Wylie in York County, South Carolina (the “Station”);

WHEREAS, Purchaser and Seller are parties to the
Purchase, Construction and Ownership Agreement dated October 14, 1980, as
amended (the “PCOA”) under which Seller acquired an 18.75 percent
undivided ownership interest in Unit 1 (as defined below) of the Station and a
9.375 percent undivided ownership interest in the Support Facilities (as
defined below) (collectively “Seller’s Interest”);

WHEREAS, Seller has agreed to sell 71.96 percent of
Seller’s Interest to Purchaser under this Agreement and 28.04 percent of Seller’s
Interest to North Carolina Electric Membership Corporation (“NCEMC”) under a
separate agreement;

WHEREAS, the Rural Utilities Service (the “RUS”) is a
lender of Seller acting pursuant to the Debt Restructuring Agreement dated
April 30, 1999 between the United States of America, acting by and through the
Administrator of the RUS, and Seller, as amended (the “Debt Restructuring
Agreement”) and supports the sale of Seller’s Interest to Purchaser and NCEMC;
and

WHEREAS, the Parties have determined to set forth in
this Agreement the terms and conditions of their agreements regarding the
foregoing.

AGREEMENTS

NOW, THEREFORE, in
consideration of the Recitals set forth above, the respective covenants and
agreements of the Parties herein set forth, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged by
the Parties, the Parties, intending to be legally bound, do hereby agree as
follows:

ARTICLE I

DEFINITIONS; USAGE

Section 1.1             Definitions.  Unless the context shall otherwise require,
capitalized terms used in this Agreement shall have the meanings assigned to
them in this Section 1.1.

 

“Accounts” has the meaning given to it in Section 2.1.1(b).

“Affiliate” of any Person means any other
Person directly or indirectly Controlling, directly or indirectly Controlled by
or under direct or indirect common Control with such Person.  Seller has no Affiliates.

“Agreement” means this Asset Purchase Agreement
by and between Seller and Purchaser, as amended from time to time.

“Assumed Liabilities” has the meaning given to
it in Section 2.1.3.

“Bill of Sale” has the meaning given to it in Section 2.4.1(b)(ii).

“Business Day” means any day except Saturday,
Sunday or a weekday that banks in Charlotte, North Carolina or New York, New
York are closed.

“Catawba Agreements” means the IA, OFA and
PCOA.

“Closing” has the meaning given to it in Section 2.4.

“Closing Date” means the date on which the
Closing occurs.

“Code” means the Internal Revenue Code of 1986,
as amended.

“Control” of any Person means the possession,
directly or indirectly, of the power either to (a) vote more than fifty percent
(50%) of the securities or interests having ordinary voting power for the
election of directors (or other comparable controlling body) of such Person or
(b) direct or cause the direction of management or policies of such Person,
whether through the ownership of voting securities or interests, by contract or
otherwise.

“Debt Restructuring Agreement” has the meaning
given to it in the Recitals to this Agreement.

“Deeds” has the meaning given to it in Section 2.4.1(b)(iii).

“Default Rate” has the meaning given to it in Section 11.2.

 “DOE”
means the Department of Energy.

“Effective Date” has the meaning given to it in
the preamble to this Agreement.

“Environmental Law” means the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601
et seq.; the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et
seq.; the Federal Water Pollution Control Act, 33 U.S.C. Section 1251 et seq.;
the Clean Air Act, 42 U.S.C. Section 7401 et seq.; the Hazardous Materials
Transportation Act, 49 U.S.C. Section 1471 et seq.; the Toxic Substances
Control Act, 15 U.S.C. Sections 2601 through 2629; the Oil Pollution Act, 33
U.S.C. Section 2701 et seq.; the Emergency Planning and Community Right-to-Know
Act, 42 U.S.C. Section 11001 et seq.; the Safe Drinking Water Act, 42 U.S.C.
Section 300f through 300j; N.C. Gen. Stat. § 130A-310.1 et 

 

seq.; N.C. Gen. Stat. 
§ 143-214.1 et seq.; N.C. Gen. Stat. § 143-215.1 et seq.; N.C. Gen.
Stat. § 143-215.81 et seq.; N.C. Gen. Stat. § 143-215.94A et seq.; N.C. Gen.
Stat. § 130A-309.15 et seq.; N.C. Gen. Stat. § 130A-310.9 et seq.; and all
other Laws that relate to or otherwise address Hazardous Materials, protection
of human health, safety or the environment and all amendments to and all
regulations implementing any of the foregoing, all as may be amended from time
to time.

“Excluded Assets” has the meaning given to it
in Section 2.1.2.

“Excluded Liabilities” has the meaning given to
it in Section 2.1.4.

“Federal Power Act” means the Federal Power Act
of 1935, as amended, and the regulations thereunder.

“FERC” means the Federal Energy Regulatory
Commission.

“FERC Approval” means the order issued by FERC
under Section 203 of the Federal Power Act that approves the sale and purchase
of the Purchased Assets as contemplated by this Agreement.

“Fuel Inventory” has the meaning given to it in
Section 2.1.1(c).

“Governmental Authority” means any federal,
state or local governmental entity, authority or agency, court, tribunal,
regulatory commission or other body, whether legislative, judicial or executive
(or a combination or permutation thereof).

“Hazardous Materials” means (i) any substance,
emission or material, now or hereafter defined as, listed as or specified in a
Law as a “pollutant,” “contaminant,” “regulated substance,” “hazardous
substance,” “toxic substance,” “pesticide,” “hazardous waste,” “hazardous
material” or any similar or like classification or categorization under any Law
including by reason of ignitability, corrosivity, reactivity, carcinogenicity
or reproductive or other toxicity of any kind, (ii) any product or substance
that includes or contains petroleum, asbestos, or polychlorinated biphenyls and
(iii) any substance, emission or material determined to be hazardous or
harmful.

“HSR Act” means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the regulations thereunder.

“IA” means the Interconnection Agreement dated
October 14, 1980, by and between Seller and Purchaser, as amended.

 “Independent
Accounting Firm” means a nationally recognized certified public accounting
firm chosen jointly by Seller and Purchaser.

“Knowledge” or any similar phrase in this
Agreement means (i) in the case of Seller, the actual knowledge of Seller’s
officers and employees listed in Section 3.1 of
Seller’s Disclosure Schedule, and (ii) in the case of Purchaser, the actual
knowledge of Purchaser’s officers and employees listed in Section 3.2
of Purchase’s Disclosure Schedule; provided, however, a Party shall be deemed
to have Knowledge of a matter of which such Party has received written notice.

 

“Law” means any statute, law, treaty, rule,
code, common law, ordinance, regulation, permit, certificate or order of any
Governmental Authority, or any judgment, decision, decree, injunction, writ,
order or like action of any court, arbitrator or other Governmental Authority.

“Liability” means any indebtedness, obligation
and other liability of a Person (whether absolute, accrued, contingent, fixed
or otherwise, and whether due or to become due).

“Lien” means any pledge, deed of trust,
mortgage, hypothecation, assignment, deposit arrangement, encumbrance, lien
(statutory or other), charge, or preference, priority or other security grant
or agreement of any kind or nature whatsoever, including without limitation any
conditional sale or other title retention agreement, any financing lease having
substantially the same effect as any of the foregoing, or the filing of any
financing statement or similar instrument under the Uniform Commercial Code as
in effect in any relevant jurisdiction or comparable law of any jurisdiction,
domestic or foreign, and any other lease, and any easement, restriction,
condition, covenant, right-of-way or other encumbrance or title exception.

“Lien Releases” means such UCC termination
statements and release of lien instruments in recordable form as may be
necessary to evidence, effective on or before Closing, the termination and
release of any and all financing statements, security agreements, deeds of
trust or mortgages which encumber the Purchased Assets and which secure
indebtedness of Seller or its Affiliates as of Closing.

“Material Adverse Effect” means a material
adverse effect on (a) the Station or the Purchased Assets, (b) the ability of
Seller to perform its obligations under this Agreement or any of the other
Transaction Agreements, or (c) the validity or enforceability of this Agreement
or any of the other Transaction Agreements, or the rights or remedies of
Purchaser hereunder or thereunder; provided, however, that the term “Material
Adverse Effect” shall not include any change to the extent such change results
from changes in general international, national or regional economic, financial
or market conditions or the market price of electricity.

“NCEMC” has the meaning given to it in the
Recitals to this Agreement.

“NCEMC Asset Purchase Agreement” means the
Asset Purchase Agreement of even date herewith by and between Seller and NCEMC.

“NCEMC Catawba Agreements” means the Purchase,
Construction, and Ownership Agreement dated October 14, 1980, between Purchaser
and NCEMC, as amended, the Interconnection Agreement dated October 14, 1980,
between Purchaser and NCEMC, as amended, and the Operating and Fuel Agreement
dated October 14, 1980, between Purchaser and NCEMC, as amended.

“NCEMC Power Purchase Agreement” means the
Power Purchase Agreement of even date herewith by and between Purchaser and
NCEMC.

“NRC” means the Nuclear Regulatory Commission.

 

“NRC Approval” means the order issued by the
NRC that approves the transfer of Seller’s ownership license, Renewed License
NPF-35 for Catawba Nuclear Station, Unit 1, to Purchaser.

“OFA” means the Operating and Fuel Agreement
dated October 14, 1980, by and between Seller and Purchaser, as amended.

“Party” or “Parties” has the meaning given
to it in the preamble to this Agreement.

“PCOA” has the meaning given to it in the
Recitals to this Agreement.

“Permits” means permits, licenses, approvals,
certificates and other authorizations of any Governmental Authority.

“Permitted Liens” means (i) those exceptions to
title listed in Schedule 1.1 as of the date hereof, (ii) liens for Taxes
or other governmental charges or assessments not yet due and delinquent or the
validity of which is being contested in good faith by appropriate proceedings,
(iii) mechanics’, carriers’, workers’, repairers’ and other similar liens and
rights arising or incurred in the ordinary course of business for amounts not
yet due and payable or the validity of which is being contested in good faith
by appropriate proceedings, (iv) zoning, entitlement, conservation restrictions
and other land use and environmental regulations by any Governmental Authority,
and (v) any consensual Lien that secures indebtedness of Seller but only to the
extent such Lien shall be discharged and released in full at Closing.

“Person” means any individual, corporation,
partnership, joint venture, association, joint stock company, trust, limited
liability company, unincorporated organization, Governmental Authority or any
other form of legal entity.

“Prime Rate” has the meaning given to it in Section 11.2.

“Property Taxes” has the meaning given to it in
Section 2.2.2.

“PSCSC” means the Public Service Commission of
South Carolina.

“PSCSC Approval” means the order issued by the
PSCSC that approves an amendment of the Certificate of Public Convenience and
Necessity for the Station to reflect Seller’s transfer of the Purchased Assets
to Purchaser.

“Purchase Price” has the meaning given to it in
Section 2.2.1.

“Purchased Assets” has the meaning given to it
in Section 2.1.1.

“Purchaser” has the meaning given to it in the
preamble to this Agreement.

“Purchaser’s Disclosure Schedule” means the
schedule delivered to Seller by Purchaser herewith and dated as of the
Effective Date, containing all lists, descriptions, exceptions and other
information and materials as are required to be included therein by Purchaser
pursuant to this Agreement, attached hereto as Schedule 3.2.

 

“Real Property” means the real property upon
which the Station is located, together with all buildings, structures and other
improvements constructed thereon; rights, title and interests of Seller in and
to all other easements, benefits, privileges and other rights appurtenant to
such real property or in any way appertaining thereto, and all strips and gores
and any land lying in the bed of any street or road open or closed adjoining
such real property.

“Related Agreements” means the NCEMC Asset
Purchase Agreement, NCEMC Power Purchase Agreement and amendments to the NCEMC
Catawba Agreements.

“Related Person” means with respect to any
Person, such Person’s Affiliates, and the employees, officers, directors,
agents, representatives, licensees and invitees of such Person and its
Affiliates.

 “Required
Consents” means all consents required to be obtained from Governmental
Authorities and third parties in connection with the transactions contemplated
by this Agreement and the other Transaction Agreements, including all such
consents as set forth on Section 3.1.5
of Seller’s Disclosure Schedule.

“RUS” has the meaning given to it in the
Recitals to this Agreement.

“Seller” has the meaning given to it in the
preamble to this Agreement.

 “Seller’s
Disclosure Schedule” means the schedule delivered to Purchaser by Seller
herewith and dated as of the Effective Date, containing all lists,
descriptions, exceptions and other information and materials as are required to
be included therein by Seller pursuant to this Agreement and attached hereto as
Schedule 3.1.

“Seller’s Interest” has the meaning given to it
in the Recitals to this Agreement.

“Settlement Agreement” means the Settlement
Agreement of even date herewith between Purchaser, Seller, NCEMC and the RUS.

“Spare Parts Inventory” has the meaning given
to it in Section 2.1.1(e).

“Station” has the meaning given to it in the
Recitals to this Agreement.

“Station Permits” has the meaning given to it
in Section 3.1.11.

“Station Settlement Agreements” means (i) the
Release and Settlement Agreement dated March 13, 1994 by and between Duke Power
Company, Seller, NCEMC, North Carolina Municipal Power Agency Number 1,
Piedmont Municipal Power Agency and Westinghouse Electric Corporation, as
amended by the Release and Settlement Agreement Amendment dated June 30, 2000
by and between Duke Energy Corporation, Viacom Inc., Westinghouse Electric
Company LLC and British Nuclear Fuels plc, (ii) any settlement agreement
entered into with the Department of Justice with respect to the spent fuel
litigation described in Duke Power, A Division of Duke Energy Corp., v. The
United States, filed May 1, 2006, US Court of Federal Claims, Docket No.
98-485C, Case 1:98-cv-00485-JPW, John P. Wiese, Judge and (iii) any other
settlement agreement related to the Station.

 

“Support Facilities” means all facilities at
the Station, as described in Exhibit B
attached hereto, which are not part of or identified with Unit 1 or Unit 2, any
part of which being referred to as a Support Facility.

“Tax” or “Taxes” means any and all
taxes, including any interest, penalties, or other additions to tax that may
become payable in respect thereof, imposed by any federal, state, local, or
foreign government or any agency or political subdivision of any such
government, which taxes shall include all income taxes, profits taxes, taxes on
gains, alternative minimum taxes, estimated taxes, payroll and employee
withholding taxes, unemployment insurance taxes, social security taxes, welfare
taxes, disability taxes, severance taxes, license charges, taxes on stock,
sales and use taxes, ad valorem taxes, value-added taxes, excise taxes,
franchise taxes, gross receipts taxes, business license taxes, occupation
taxes, real or personal property taxes, stamp taxes, environmental taxes,
transfer taxes, workers’ compensation taxes, and other taxes, fees, duties,
levies, customs, tariffs, imposts, assessments, obligations and charges of the
same or of a similar nature to any of the foregoing.

“Tax Returns” means any return, report,
information return, claim for refund or other document (including any related
or supporting information) supplied to or required to be supplied to any Taxing
Authority with respect to Taxes, including any attachments, amendments and
supplements thereto.

“Taxing Authority” means, with respect to any
Tax, the governmental entity or political subdivision thereof that imposes such
Tax, and the agency (if any) charged with the collection of such Tax for such
entity or subdivision.

“Termination Agreement” has the meaning given
to it in Section 2.4.1(a)(i).

“Transaction
Agreements” means the following agreements:

1.1.1                        this Agreement;

1.1.2                        the Bill of Sale;

1.1.3                        the Deeds;

1.1.4                        the Termination Agreement;

1.1.5                        the Required Consents; and

1.1.6                        the Settlement Agreement.

“Transfer Taxes” has the meaning given to it in
Section 4.4(a).

“Unit 1” means Unit 1 of the Station as
described in Exhibit A attached hereto.

“Unit 2” means Unit 2 of the Station as
described in Exhibit A attached hereto.

 

Section 1.2             Rules as to Usage.  Except as otherwise expressly provided
herein, the following rules shall apply to the usage of terms in this
Agreement:

(a)           The terms defined
above have the meanings set forth above for all purposes, and such meanings are
equally applicable to both the singular and plural forms of the terms defined.

(b)           “Include,” “includes” and “including”
shall be deemed to be followed by “without limitation” whether or not they are
in fact followed by such words or words of like import.

(c)           “Writing,” “written” and comparable
terms refer to printing, typing, and other means of reproducing in a visible
form.

1.2.2        Any Law defined or
referred to above means such Law as from time to time amended, modified or
supplemented, including by succession of comparable successor Law.

(a)           References to a Person are also to
its successors and assigns.

(b)           Any term defined above by reference
to any agreement, instrument or Law has such meaning whether or not such
agreement, instrument or Law is in effect.

(c)            “Hereof,” “herein,” “hereunder” and
comparable terms refer, unless otherwise expressly indicated, to the entire
agreement or instrument in which such terms are used and not to any particular
article, section or other subdivision thereof or attachment thereto.  References in an instrument to “Article,” “Section,”
or another subdivision or to an attachment are, unless the context otherwise
requires, to the relevant article, section, subsection or subdivision of or an
attachment to such agreement or instrument. 
If such reference in this Agreement to “Article,” “Section,” or other
subdivision does not specify an agreement or document, such reference refers to
an article, section or other subdivision of this Agreement.  All references to exhibits or schedules in
any agreement or instrument that is governed by this Agreement are to exhibits
or schedules attached to such instrument or agreement.

(d)           Pronouns, whenever used in any
agreement or instrument that is governed by this Agreement and of whatever
gender, shall include natural Persons, corporations, limited liability
companies, partnerships and associations of every kind and character.

(e)           References to any gender include,
unless the context otherwise requires, references to all genders.

(f)            The word “or” will have the
inclusive meaning represented by the phrase “and/or.”

(g)            “Shall” and “will” have equal force
and effect.

 

Section 1.3             Schedules and Exhibits.  This Agreement consists of the Articles
contained herein and the Schedules and Exhibits attached hereto, all of which
constitute one and the same agreement with equal force and effect.

ARTICLE II

SALE AND PURCHASE; PRICE; CLOSING

Section 2.1             Sale and Purchase; Definition of Purchased Assets;
Assumed Liability.

2.1.1        Closing, Seller shall
sell, transfer, convey, assign and deliver to Purchaser, free and clear of all
Liens (other than Permitted Liens), and Purchaser shall purchase and pay for,
71.96 percent of Seller’s right, title and interest in and to all assets and
properties of Seller relating to its ownership interest in the Station,
including without limitation, Seller’s right, title and interest in and to the
following assets (collectively, the “Purchased Assets”):

(a)           Seller’s Interest;

(b)           All accounts
established to hold funds for purposes of Seller’s share of the decommissioning
costs of the Station, together with all cash, equity and debt securities, and
other investments, and any proceeds thereof, held in such accounts (the “Accounts”);

(c)           Nuclear fuel
inventory purchased and residing in Purchaser’s nuclear fuel fleet inventory
accounts and all accounts related to such nuclear fuel inventory (the “Fuel
Inventory”);

(d)           All rights of Seller
in any fuel supply agreements for the Station;

(e)           Spare parts
inventory of the Station, including equipment, tools, goods and supplies (the “Spare
Parts Inventory”);

(f)            The Station
Permits;

(g)           All rights of Seller
in and under the Station Settlement Agreements;

(h)           All plans, designs,
and specifications related to the construction, operation and maintenance of
the Station; and

(i)            All rights of
Seller in and under any agreements related to the ownership, operation or
maintenance of the Station.

2.1.2        Excluded Assets.  The Purchased Assets shall not include Seller’s
interest in the following agreements, assets and properties (the “Excluded
Assets”), and Purchaser shall have no Liability with respect thereto:

 

 

(a)           Except as set forth
in Section 2.1.1(b), cash, cash
equivalents, bank deposits, and accounts and notes receivable, trade or
otherwise;

(b)           Rights of Seller
arising under this Agreement, the Transaction Agreements or any other
instrument or document executed and delivered pursuant to this Agreement; and

(c)           All assets and
properties of Seller other than the Purchased Assets.

2.1.3        Assumed
Liabilities.  On the terms and
subject to the conditions set forth in this Agreement, effective as of the
Closing, Purchaser shall assume and satisfy or perform all Liabilities of
Seller that relate to the Purchased Assets, including those Liabilities
described below, and other than the Excluded Liabilities (collectively, the “Assumed
Liabilities”):

(a)           All Liabilities directly
or indirectly related to the decommissioning of the Station; and

(b)           All accrued
assessments by the DOE for the decommissioning of the DOE’s uranium enrichment
facilities, but solely to the extent such accrued assessments relate to the
Purchased Assets’ and

(c)           All Liabilities
arising under Environmental Law.

2.1.4        Excluded
Liabilities.  Except for the Assumed
Liabilities, Purchaser shall have no liability or obligation whatsoever for,
and Seller shall retain and continue to be responsible for, all of Seller’s
duties, obligations and Liabilities, whether incurred or arising before or
after Closing, (all of such retained duties, obligations and Liabilities being
referred to herein as the “Excluded Liabilities”).

Section 2.2             Purchase Price.

2.2.1        Amount.  In consideration of the sale, assignment,
conveyance, transfer and delivery to Purchaser as of the Closing of Seller’s
right, title and interest in and to the Purchased Assets, Purchaser shall pay
to Seller an amount equal to One Hundred Fifty-Eight Million Dollars
($158,000,000) (the “Purchase Price”).

2.2.2        Prorations.  Real and personal property ad valorem taxes
with respect to the Purchased Assets (“Property Taxes”) will be prorated
on a calendar year basis through the Closing Date.  Any special assessments or roll-back taxes on
or against the Purchased Assets shall be paid by Seller on or prior to the
Closing Date.  If the actual amount of
Property Taxes is not known on the Closing Date, such taxes shall be prorated
on the basis of the amount of such taxes payable for the prior year, and shall
be adjusted between the Parties when the actual amount of such taxes payable in
the year of Closing is known to Purchaser and Seller.  Within 30 days after the Property Tax
liability is known for the calendar year in which the Closing occurs, Purchaser
and Seller shall make such payments or credits between themselves as are
necessary so that each Party bears only its pro rata portion of the actual
Property Tax liability for the calendar year in which the Closing occurs.  All prorations shall be made as adjustments
to the Purchase Price, provided that to the extent any charge or receipt to be
prorated at Closing is not 

 

known as of the Closing Date, the Parties shall make
the applicable proration and adjusting payments as soon as possible after
Closing.

2.2.3        Method of Payment
of Purchase Price.  At Closing,
Purchaser shall deliver to Seller the Purchase Price, as adjusted for the
prorations and other adjustments hereunder, in United States dollars, by wire
transfer of immediately available federal funds to an account designated by
Seller.

Section 2.3             Allocation of Purchase Price for Tax Purposes.  The Purchase Price shall be allocated among
the Purchased Assets as of the Closing in accordance with a schedule to be
prepared by Purchaser, using the allocation method provided by Section 1060 of
the Code and the regulations thereunder. 
The consent of Seller under this Section shall not be a condition to the
Closing.  The Parties shall cooperate to
comply with all substantive and procedural requirements of Section 1060 of the
Code and the regulations thereunder, and except for any adjustment to the
Purchase Price, the allocation shall be adjusted only if and to the extent
necessary to comply with such requirements. 
Purchaser and Seller agree that they will not take nor will they permit
any Affiliate to take, for income Tax purposes, any position inconsistent with
such allocation; provided, however, that (i) Purchaser’s cost may
differ from the total amount allocated hereunder to reflect the inclusion in
the total cost of items (for example, capitalized acquisition expenses) not
included in the total amount so allocated, and (ii) the amount realized by
Seller may differ from the amount allocated to reflect transaction costs that
reduce the amount realized for federal income Tax purposes. Transfer Tax on the
Deeds shall be calculated based on such allocation.

Section 2.4             The Closing.  The closing of the transactions contemplated
herein (the “Closing”) will take place at Purchaser’s offices in Charlotte,
North Carolina (or such other location agreed to by the Parties), at 10:00 a.m.
local time on the date as soon as practicable (but in no event longer than 10
Business Days) after all conditions to the Closing set forth in Section 5.1 and Section 5.2
have been satisfied or waived.  The
Closing shall be deemed effective as of 12:01 A.M. Charlotte, North Carolina
time on the Closing Date.

2.4.1        Closing.

(a)           At the Closing,
Purchaser shall (i) pay to Seller the Purchase Price in accordance with Section 2.2 and (ii) execute (as applicable) and deliver the
following items to Seller:

(i)           a
Termination Agreement in substantially the form of Exhibit C
attached hereto (the “Termination Agreement”), pursuant to which the
Parties shall terminate the Catawba Agreements effective as of the Closing;

(ii)          the Required
Consents obtained as of Closing to the extent Purchaser is the beneficiary,
recipient or grantee thereof;

(iii)         a certificate of
good standing with respect to Purchaser, as of a recent date, issued by the
Secretary of State of the State of North Carolina;

 

(iv)        copies, certified by
the Secretary or Assistant Secretary of Purchaser, of resolutions of Purchaser’s
Board of Directors authorizing the execution and delivery of this Agreement and
all of the other agreements and instruments, in each case, to be executed and
delivered by Purchaser in connection herewith;

(v)         a certificate of the
Secretary or Assistant Secretary of Purchaser identifying the name and title
and bearing the signatures of the officers of Purchaser authorized to execute
and deliver this Agreement and the other agreements and instruments
contemplated hereby;  and

(vi)        a certificate
addressed to Seller dated the Closing Date executed by the duly authorized
officer of Purchaser to the effect that the conditions set forth in Section 5.2.1 and Section 5.2.2
have been satisfied by Purchaser.

(b)           At the Closing,
Seller shall execute (as applicable) and deliver the following items to
Purchaser:

(i)            the funds in the
Accounts;

(ii)           a bill of sale in
substantially the form of Exhibit D
attached hereto (the “Bill of Sale”);

(iii)          general
warranty deeds in substantially the form of Exhibit E
attached hereto (the “Deeds”) and any other documents necessary to
convey all of Seller’s right, title and interest in and to Seller’s Interest;

(iv)          the Termination
Agreement;

(v)           the Required
Consents obtained as of Closing to the extent Seller is the beneficiary,
recipient or grantee thereof;

(vi)          the Lien Releases;

(vii)         a certificate of good
standing with respect to Seller, as of a recent date, issued by the Secretary
of State of the State of South Carolina;

(viii)        copies, certified by
the Secretary or Assistant Secretary of Seller, of resolutions of Seller’s
Board of Directors authorizing the execution and delivery of this Agreement and
all of the other agreements and instruments, in each case, to be executed and
delivered by Seller in connection herewith;

(ix)           a certificate of
the Secretary or Assistant Secretary of Seller identifying the name and title
and bearing the signatures of the officers of Seller authorized to execute and
deliver this Agreement and the other agreements and instruments contemplated
hereby; and

 

(x)            a certificate
addressed to Purchaser dated the Closing Date executed by the duly authorized
officer of Seller to the effect that the conditions set forth in Section 5.1.1 and Section 5.1.2
have been satisfied by Seller.

Section 2.5          Further Assurances. Subject to the
terms and conditions of this Agreement, at any time or from time to time after
the Closing, at either Party’s request and without further consideration, the
other Party shall execute and deliver to such Party such other instruments of
sale, transfer, conveyance, assignment and confirmation, provide such materials
and information and take such other actions as such Party may reasonably deem
necessary or desirable in order more effectively (i) to transfer, convey and
assign to Purchaser, and to confirm Purchaser’s title to, the Purchased Assets,
(ii) to the full extent permitted by Law, to put Purchaser in actual possession
of the Purchased Assets, and (iii) otherwise to consummate the transactions
contemplated by this Agreement.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

Section 3.1          Representations and Warranties of Seller.  Except as specifically set forth in Seller’s
Disclosure Schedule attached hereto as Schedule 3.1, Seller hereby
represents and warrants to Purchaser that all of the statements contained in
this Section 3.1 are true and correct as of
the Effective Date.  Each exception and
other response to this Agreement set forth in Seller’s Disclosure Schedule is
identified by reference to, or has been grouped under a heading referring to, a
specific individual section of this Agreement, and, except as otherwise
specifically stated with respect to such exception, relates only to such
section.

3.1.1        Existence.  Seller is a corporation duly organized,
validly existing and in good standing under the Laws of the State of South
Carolina.  Seller has all requisite corporate
power and authority to own, lease and operate its properties and to carry out
its business as it is now being conducted, and is duly qualified and in good
standing to do business in each jurisdiction in which the nature of its
business or the ownership or leasing of its assets and properties makes such
qualification necessary.

3.1.2        Authority.  Seller has full corporate power and authority
to execute and deliver this Agreement and the Transaction Agreements to which
it is or will be a party, to perform its obligations hereunder and thereunder
and to consummate the transactions contemplated hereby and thereby.  The execution and delivery by Seller of this
Agreement and the Transaction Agreements to which it is or will be a party, and
the performance by Seller of its obligations hereunder and thereunder, have
been duly and validly authorized by all required corporate action by Seller,
and no other action on the part of Seller, its directors or shareholders is
necessary.

3.1.3        Binding Agreement.  This Agreement and the Transaction Agreements
to which Seller is or will be a party have been or will be when delivered duly
executed and delivered by Seller and, assuming due and valid authorization,
execution and delivery thereof by Purchaser, this Agreement and the Transaction
Agreements to which Seller is or will be a party are or will be when delivered
valid and binding obligations of Seller enforceable against Seller in 

 

accordance with their terms, except (i) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance and other similar laws of general application affecting enforcement
of creditors’ rights generally and (ii) to the extent that the availability of
the remedy of specific performance or injunctive or other forms of equitable
relief may be subject to equitable defenses or would be subject to the
discretion of the court before which any proceeding therefor may be brought.

3.1.4        No Conflicts.  The execution and delivery by Seller of this
Agreement do not, and the execution and delivery by Seller of the Transaction
Agreements to which it is or will be a party, the performance by Seller of its
obligations under this Agreement and such Transaction Agreements, and the
consummation of the transactions contemplated hereby and thereby shall not:

(a)           conflict with or
result in a violation or breach of any of the terms, conditions or provisions
of Seller’s certificate of incorporation or bylaws;

(b)           assuming all of the
Required Consents have been obtained, result in a default, penalty, or any
adjustment in required payments (or give rise to any right of termination,
cancellation or acceleration) under any of the terms, conditions or provisions
of any note, bond, deed of trust, indenture, license, agreement, lease or other
instrument or obligation to which Seller is party or by which Seller or any of
the Purchased Assets may be bound, except for such defaults, penalties or
adjustments (or rights of termination, cancellation or acceleration) as to
which requisite waivers or consents have been obtained in writing (true and
correct copies of which waivers or consents have been furnished to Purchaser);
or

(c)           assuming all of the
Required Consents have been obtained, conflict with or result in a violation or
breach of any term or provision of any Law applicable to Seller or the
Purchased Assets.

3.1.5        Approvals and
Filings.  Except as set forth in Section 3.1.5 of Seller’s Disclosure Schedule, no consent,
approval or action of, filing with or notice to any Governmental Authority or
other Person by Seller is required in connection with the execution, delivery
and performance by Seller of this Agreement or any of the Transaction
Agreements to which it is or will be a party or the consummation of the
transactions contemplated hereby or thereby.

3.1.6        Legal Proceedings.  There are no claims, actions, proceedings or
investigations pending with respect to which Seller itself has received notice,
has been served or entered an appearance or, to Seller’s Knowledge, threatened
against Seller before any Governmental Authority that would reasonably be
expected (i) to result in the issuance of an order restraining, enjoining or
otherwise prohibiting or making illegal the consummation of the transactions
contemplated by this Agreement or any of the Transaction Agreements, (ii) to
adversely affect the ownership, operation or maintenance of the Station, or
(iii) individually or in the aggregate, to have a Material Adverse Effect.  There are no outstanding judgments, rules,
orders, writs, injunctions or decrees of any Governmental Authority relating
specifically to Seller that would, individually or in the aggregate, be
reasonably likely to have a Material Adverse Effect.

 

3.1.7        Compliance with
Laws.  Seller is not in violation of
or in default in any material respect under any Law applicable to Seller or, to
Seller’s Knowledge, applicable to the Purchased Assets.  Except as set forth in Section
3.1.7 of Seller’s Disclosure Schedule, Seller has not itself
received notification alleging that it is in violation of any Law applicable to
Seller or, to Seller’s Knowledge, the Purchased Assets.

3.1.8        Title.  Seller has good and valid title to all of its
properties and assets constituting the Purchased Assets other than Seller’s
Interest (it being understood that Seller’s Interest is covered by Section 3.1.9), free and clear of all Liens except Permitted
Liens.

3.1.9        Real Property.  Seller has good, valid and marketable fee
simple title to Seller’s Interest, free and clear of all Liens other than
Permitted Liens.  Seller itself has
received no notice of, and has no Knowledge of, any pending or threatened
action, litigation, condemnation or other proceeding of any kind with respect
to or concerning the Real Property. 
Seller itself has not received any notice, and has no Knowledge, that
the Real Property (or any portion of it) is in violation of any applicable
zoning, flood, building or other code, or any other legal requirement or
private restriction.  Other than
Permitted Liens, there are no commitments to or agreements with any
Governmental Authority affecting the use or ownership of the Real Property.

3.1.10      Contracts and
Agreements.  Except for the Catawba
Agreements, the agreements listed in Schedule 1.1, and any agreements
listed in Section 3.1.10 of Seller’s Disclosure
Schedule, there are no agreements, indentures, security agreements, deeds of
trust and other contracts relating to the development, design, construction,
ownership, operation or maintenance of the Station, to which Seller is a party.  The Catawba Agreements are in full force and
effect and constitute a legal, valid and binding agreement of Seller and of
each other party thereto, enforceable in accordance with their terms, and no
material term or condition thereof has been amended from the form thereof
delivered to Purchaser or waived.  Except
for violations, breaches or defaults known by Purchaser, neither Seller nor, to
Seller’s Knowledge, any other party to any Catawba Agreement is in violation or
breach of or default under any such Catawba Agreement (or with notice or lapse
of time or both, would be in violation or breach of or default under any such
Catawba Agreement).

3.1.11      Permits.  Section 3.1.11 of Seller’s Disclosure
Schedule sets forth all Permits acquired or held by or in the name of Seller in
connection with the ownership, operation, maintenance or use of the Station
(the “Station Permits”).  To Seller’s
Knowledge, Seller is in compliance with each Station Permit and has received no
notice of violation or noncompliance from any Governmental Authority.  To Seller’s Knowledge, Seller has received no
notice alleging that any such Station Permit (i) is not in full force and
effect, or (ii) is subject to any legal proceeding or to any unsatisfied
condition that (A) is not reasonably expected to be satisfied or (B) if not
satisfied could reasonably be expected to allow material modification or
revocation thereof.

3.1.12      Environmental
Matters. There are no claims, actions, proceedings or investigations
pending or threatened against Seller or, to Seller’s Knowledge, the Purchased
Assets under any Environmental Law relating to the Station or the Real
Property.  Seller itself has not received
from any third party any notice of violation or other claim of noncompliance 

 

with Environmental Laws regarding the Station or the
Real Property.  Seller is not a party to
any consent decrees, order or similar document relating to Liability arising
under Environmental Laws involving the Station, the Real Property or the Purchased
Assets.

3.1.13      Taxes.

(a)           Seller has filed or
will file when due all Tax Returns that are required to be filed on or before
the Closing Date with respect to the Purchased Assets and has paid or will pay
in full all Taxes required to be paid with respect to the Purchased Assets; and
(ii) such Tax Returns were prepared or will be prepared in the manner required
by applicable Laws.  Seller has not
received any notice that any Taxes relating to any period prior to the Closing
Date are owing that have not been paid on or before the Closing Date.

(b)           Seller has not
extended or waived the application of any statute of limitations of any
jurisdiction regarding the assessment or collection of any Tax of Seller with
respect to the Purchased Assets.

(c)           None of the
Purchased Assets are subject to any Liens for Taxes, other than Permitted
Liens.

(d)           There are no audits,
claims, assessments, levies, administrative or judicial proceedings pending, or
to Seller’s Knowledge, threatened, proposed or contemplated with respect to the
Purchased Assets by any Tax Authority.

3.1.14      Brokers.  All negotiations relative to this Agreement
and the transactions contemplated hereby have been carried out by Seller
directly with Purchaser without the intervention of any Person on behalf of
Seller in such manner as to give rise to any valid claim by any Person against
Purchaser for a finder’s fee, brokerage commission or similar payment.

3.1.15      SELLER IS MAKING NO
REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, OF ANY NATURE WHATSOEVER,
INCLUDING, WITHOUT LIMITATION, ANY WARRANTY AS TO THE CONDITION,
MERCHANTABILITY, FITNESS OR SUITABILITY FOR USE OR WORKING ORDER,  RELATING TO THIS AGREEMENT, THE PURCHASED
ASSETS OR THE TRANSACTIONS THIS AGREEMENT CONTEMPLATES, EXCEPT AS SPECIFICALLY
SET FORTH IN THIS SECTION 3.1.  EXCEPT FOR THOSE REPRESENTATIONS AND
WARRANTIES EXPRESSLY SET FORTH IN THIS SECTION 3.1 OR
ELSEWHERE IN THIS AGREEMENT OR THE TRANSACTION AGREEMENTS, THE PURCHASED ASSETS
ARE SOLD “AS IS, WHERE IS” ON THE CLOSING DATE, AND IN THEIR CONDITION ON THE
CLOSING DATE “WITH ALL FAULTS.”

Section 3.2             Representations
and Warranties of Purchaser. 
Except as specifically set forth in Purchaser’s Disclosure Schedule
attached hereto as Schedule 3.2, Purchaser hereby represents and
warrants to Seller that all of the statements contained in this Section 3.2 are true and correct as of the Effective
Date.  Each exception and other response
to this Agreement set forth in Purchaser’s Disclosure Schedule is identified by
reference to, or has been grouped under a heading referring to, a specific
individual section of this Agreement, and, except as otherwise specifically
stated with respect to such exception, relates only to such section.

 

3.2.1        Existence.  Purchaser is a limited liability company,
duly formed, validly existing and in good standing under the Laws of the State
of North Carolina.  Purchaser has all
requisite power and authority to own, lease and operate its properties and to
carry out its business as it is now being conducted.

3.2.2        Authority.  Purchaser has full power and authority to
execute and deliver this Agreement and the Transaction Agreements to which it
is or will be a party, to perform its obligations hereunder and thereunder, and
to consummate the transactions contemplated hereby and thereby.  The execution and delivery by Purchaser of
this Agreement and the Transaction Agreements to which it is or will be a
party, and the performance by Purchaser of its obligations hereunder and
thereunder, have been duly and validly authorized by all required action by
Purchaser, and no other action on the part of Purchaser or its member is
necessary.

3.2.3        Binding Agreement.  This Agreement and the Transaction Agreements
to which Purchaser is or will be a party have been or will be when delivered
duly executed and delivered by Purchaser and, assuming due and valid
authorization, execution and delivery thereof by Seller, this Agreement and the
Transaction Agreements to which Purchaser is or will be a party are or will be
when delivered valid and binding obligations of Purchaser, enforceable against
Purchaser in accordance with their terms, except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and
other similar laws of general application affecting enforcement of creditors’ rights
generally and (ii) the availability of the remedy of specific performance or
injunctive or other forms of equitable relief may be subject to equitable
defenses and would be subject to the discretion of the court before which any
proceeding therefor may be brought.

3.2.4        No Conflicts.  The execution and delivery by Purchaser of
this Agreement do not, and the execution and delivery by Purchaser of the
Transaction Agreements to which it is or will be a party, the performance by
Purchaser of its obligations under this Agreement and such Transaction
Agreements and the consummation of the transactions contemplated hereby and
thereby shall not:

(a)           conflict with or
result in a violation or breach of any of the terms, conditions or provisions
of Purchaser’s articles of organization or operating agreement;

(b)           result in a default,
penalty, or any adjustment in required payments (or give rise to any right of
termination, cancellation or acceleration) under any of the terms, conditions
or provisions of any note, bond, deed of trust, indenture, license, agreement,
lease or other instrument or obligation to which Purchaser is a party or by
which Purchaser or any of its assets and properties may be bound, except for
such defaults, penalties or adjustments (or rights of termination, cancellation
or acceleration) as to which requisite waivers or consents have been obtained;
or

(c)           assuming the
Required Consents have been obtained, conflict with or result in a violation or
breach of any term or provision of any Law applicable to Purchaser or  any of its assets and properties.

 

3.2.5        Approvals and
Filings.  Except as set forth in Section 3.2.5 of Purchaser’s Disclosure Schedule, no
consent, approval or action of, filing with or notice to any Governmental
Authority or other Person by Purchaser is required in connection with the
execution, delivery and performance by Purchaser of this Agreement or any of
the Transaction Agreements to which it is or will be a party or the
consummation by Purchaser of the transactions contemplated hereby or thereby.

3.2.6        Legal Proceedings.  There are no claims, actions, proceedings or
investigations pending or, to Purchaser’s Knowledge, threatened against
Purchaser before any Governmental Authority that would reasonably be expected
to result in the issuance of an order restraining, enjoining or otherwise
prohibiting or making illegal the consummation of the transactions contemplated
by this Agreement or any of the Transaction Agreements.

3.2.7        Brokers.  All negotiations relative to this Agreement
and the transactions contemplated hereby have been carried out by Purchaser
directly with Seller without the intervention of any Person on behalf of
Purchaser in such manner as to give rise to any valid claim by any Person
against Seller for a finder’s fee, brokerage commission or similar payment.

ARTICLE IV

COVENANTS

Section 4.1             Efforts
to Close.  After the
Effective Date and prior to Closing:

4.1.1        Required Consents; Other Covenants.

(a)           Each Party shall provide reasonable
cooperation to the other Party in obtaining consents, approvals or actions of,
making all filings with and giving all notices to Governmental Authorities or
other Persons required of the other Party in connection with obtaining any
Required Consents with respect to the transactions contemplated hereby and by
the Transaction Agreements, including the following:

(i)           Within
a reasonable period of time after the Effective Date, Seller and Purchaser
shall each file, with the appropriate Governmental Authority, such filings as
are required by the HSR Act and shall take all actions reasonably necessary to
cause early termination of the applicable waiting period under the HSR Act.

(ii)          Within
a reasonable period of time after the Effective Date, Purchaser and Seller
shall jointly file with the PSCSC all documents reasonably required to obtain
the PSCSC Approval.  The Parties shall
consult on and coordinate all principal filings submitted by Purchaser and
Seller to the PSCSC in connection with the PSCSC Approval.

(iii)         Within
a reasonable period of time after the Effective Date, Purchaser and Seller
shall jointly file with the FERC all documents reasonably required to obtain
the FERC Approval.  The Parties shall
consult on and coordinate all principal filings submitted by Purchaser and
Seller to the FERC in connection with the FERC Approval.

 

 

(iv)        Within
a reasonable period of time after the Effective Date, Purchaser shall file with
the NRC all documents reasonably required to obtain the NRC Approval.

(b)           The Parties shall
furnish to each other’s counsel such necessary information and assistance as
the other Party may request in connection with its preparation of any such
filing or submission that is necessary to obtain the foregoing consents,
approvals or actions.  The Parties shall
consult with each other as to the appropriate time of making such filings and
submissions and shall make such filings and submissions at the agreed upon
time.  The Parties shall keep each other
apprised of the status of any communications with and any inquiries or requests
for additional or supplemental information from applicable Governmental
Authorities and shall provide any such additional or supplemental information
that may be reasonably requested in connection with any such filings or
submissions.

4.1.2        Fulfillment of Conditions.

(a)           Each Party shall use commercially
reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, all things necessary, proper or advisable under Law to
consummate and make effective the purchase, sale, assignment, conveyance,
transfer and delivery of the Purchased Assets and the assumption of the Assumed
Liabilities pursuant to this Agreement. 
Such actions shall include each Party using its commercially reasonable
efforts to ensure satisfaction of the conditions precedent to its obligations
hereunder.

(b)           Each Party shall
give notice to the other promptly after becoming aware of (i) the occurrence or
non-occurrence of any event whose occurrence or non-occurrence would be likely
to cause any representation or warranty contained in this Agreement to be untrue
or inaccurate in any material respect at any time from the Effective Date
hereof to the Closing Date and (ii) any failure of a Party to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied
by it hereunder.

Section 4.2             Preservation
of Purchased Assets.

(a)           After the Effective
Date and prior to Closing, Seller shall (i) preserve and maintain the Purchased
Assets; and (ii) fulfill its obligations under the Catawba Agreements in the
usual and ordinary course of business.

(b)           After the Effective
Date and prior to Closing, Seller shall not, without the written consent of
Purchaser: (i) distribute, dispose of, sell, lease, transfer, pledge, assign or
encumber, or incur or permit to exist any Lien (other than a Permitted Lien)
on, any of the Purchased Assets; (ii) amend its certificate of incorporation or
bylaws; (iii) take any action that alters the regulatory status of Seller;
(iv) take any other action or fail to take any action that adversely
affects the Purchased Assets or impairs the ability of the Parties to
consummate the transactions contemplated by this Agreement; or (v) enter into
any agreement to do or engage in any of the foregoing.

 

Section 4.3             Notification.

4.3.1        Seller.  Prior to the Closing, Seller shall promptly
notify Purchaser in writing if it becomes aware of any fact or condition that
(i) causes or constitutes a breach of any representation or warranty set forth
in Section 3.1 or (ii) would have caused
or constituted a breach of any such representation or warranty had such
representation or warranty been made as of the time of occurrence or discovery
of such fact or condition.  Should any
such fact or condition require any change in Seller’s Disclosure Schedule,
Seller shall promptly deliver to Purchaser a supplement to Seller’s Disclosure
Schedule specifying such change.  During
the same period, Seller shall promptly notify Purchaser of the occurrence of
any breach of any covenant of Seller or of the occurrence of any event that
would reasonably be expected to make the satisfaction of the conditions set
forth in ARTICLE V impossible or unlikely.

4.3.2        Purchaser.  Prior to the Closing, Purchaser shall
promptly notify Seller in writing if Purchaser becomes aware of any fact or
condition that (i) causes or constitutes a breach of any representation or
warranty set forth in Section 3.2 or
(ii) would have caused or constituted a breach of any such representation or
warranty had such representation or warranty been made as of the time of
occurrence or discovery of such fact or condition.  Should any such fact or condition require any
change in Purchaser’s Disclosure Schedule, Purchaser shall promptly deliver to
Seller a supplement to Purchaser’s Disclosure Schedule specifying such
change.  During the same period,
Purchaser shall promptly notify Seller of the occurrence of any breach of any
covenant of Purchaser or of the occurrence of any event that would reasonably
be expected to make the satisfaction of the conditions in ARTICLE V
impossible or unlikely.

4.3.3        Effect of
Supplemental Disclosure.  Any notice
delivered by a Party pursuant to this Section 4.3
shall be disregarded for purposes of determining an inaccuracy or breach of a
representation or warranty made by such Party in this Agreement or in Seller’s
Disclosure Schedule or Purchaser’s Disclosure Schedule, as the case may be;
provided, however, that if such supplemental disclosure causes a condition to
the obligation of the other Party under ARTICLE V not
to be satisfied, and the Party making such supplemental disclosure (at the time
of making such disclosure) expressly identifies such condition that will not be
satisfied in the notice delivered pursuant to this Section 4.3,
then in the event the Party receiving such supplemental disclosure nevertheless
proceeds to close notwithstanding the failure of such condition to be
satisfied, then such supplemental disclosure shall be given effect as if
disclosed on the Effective Date. 
Notwithstanding the foregoing, any supplemental disclosure of
information of which Seller had Knowledge on the Effective Date and
intentionally failed to disclose shall be disregarded for all purposes.

Section 4.4             Tax
Matters.

(a)           Notwithstanding any
other provision of this Agreement, all applicable sales, transfer, use, stamp,
conveyance, value added, recording, excise, and other similar Taxes, if any,
together with all recording or filing fees, notarial fees and other similar
costs of Closing, that may be imposed upon, or payable, collectible or incurred
in connection with the transfer of the Purchased Assets to Purchaser or
otherwise as a result of the transfer of the Purchased Assets (“Transfer
Taxes”) shall be borne solely by Seller. 
Seller, at its own expense, will file, to the extent required by
applicable Law, all necessary Tax Returns and other 

 

documentation with respect to all such Transfer Taxes,
and if required by applicable Law, Purchaser will join in the execution of any
such Tax Returns or other documentation.

(b)           With respect to
Taxes to be prorated in accordance with Section 2.2.2,
Purchaser shall prepare and timely file all Tax Returns required to be filed
after the Closing with respect to the Purchased Assets, if any, and shall duly
and timely pay all such Taxes shown to be due on such Tax Returns.  Purchaser’s preparation of any such Tax
Returns that are material shall be subject to Seller’s approval, which shall
not be unreasonably withheld, conditioned or delayed.  Purchaser shall make such Tax Returns
available for Seller’s review and approval not later than 15 Business Days
prior to the due date for filing such Tax Return and shall make such changes as
are reasonably requested by Seller. 
Within 10 Business Days after Purchaser’s payment of such Taxes, Seller
shall pay to Purchaser, or Purchaser shall pay to Seller, as appropriate, the
difference between (i) Seller’s proportionate share of the amount shown as due
on such Tax Return determined in accordance with Section
2.2.2 and (ii) the amount paid by Seller at the Closing Date
pursuant to Section 2.2.2.

(c)           Seller and Purchaser
shall provide the other with such assistance as may reasonably be requested in
connection with the preparation of any Tax Return, any audit or other
examination by any Taxing Authority, or any judicial or administrative
proceedings relating to Liability for Taxes, and each will retain and provide
the requesting Party with any records or information that may be relevant to
such return, audit, or examination, proceedings or determination.  Any information obtained pursuant to this Section 4.4 or pursuant to any other Section hereof
providing for the sharing of information or review of any Tax Return or other
schedule relating to Taxes shall be kept confidential by the Parties.

(d)           Purchaser shall
remit to Seller any refund or credit of Taxes, if and when actually received by
Purchaser, to the extent such Taxes are attributable to any taxable period, or
portion thereof, ending on or before the Closing Date.

(e)           Any payment by
Purchaser or Seller to the other pursuant to this Section 4.4
shall be treated for all purposes by both Parties as an adjustment to the
Purchase Price, to the maximum extent permitted by Law.

(f)            In the event that a
dispute arises between Seller and Purchaser regarding Taxes or any amount due
under this Section 4.4, the Parties shall
attempt in good faith to resolve such dispute and any agreed upon amount shall
be paid to the appropriate Party.  If
such dispute is not resolved within 30 days, the Parties shall submit the
dispute to an Independent Accounting Firm for resolution within 30 days
thereafter, which resolution shall be final, conclusive and binding on the
Parties.  Notwithstanding anything in
this Agreement to the contrary, the fees and expenses of the Independent
Accounting Firm in resolving the dispute shall be borne 50% by Seller and 50%
by Purchaser.  Any payment required to be
made as a result of the resolution of the dispute by the Independent Accounting
Firm shall be made within 10 days after such resolution, together with any
interest, as required for the applicable Tax.

 

ARTICLE V

CONDITIONS TO CLOSING

Section 5.1             Purchaser’s
Conditions Precedent.  The
obligations of Purchaser hereunder to execute or deliver the items it is
required to deliver pursuant to Section 2.4.1(a)
are subject to the fulfillment, at or before the Closing, of each of the
following conditions (all or any of which may be waived in whole or in part by
Purchaser in its sole discretion):

5.1.1        Representations
and Warranties.  Each of the
representations and warranties made by Seller in this Agreement that are
qualified as to materiality or Material Adverse Effect shall be true and
correct on and as of the Closing Date as though made on and as of the Closing
Date.  Each of the representations and
warranties made by Seller in this Agreement that are not qualified as to
materiality or Material Adverse Effect shall be true and correct in all
material respects on and as of the Closing Date as though made on and as of the
Closing Date.

5.1.2        Performance.  Seller shall have performed and complied with
the agreements, covenants and obligations required by this Agreement to be so
performed or complied with by Seller at or before the Closing Date.

5.1.3        Law.  There shall not be in effect at the Closing
Date any preliminary or permanent injunction or other order or decree by any
federal or state court which prevents the consummation of the transactions
contemplated by this Agreement or any Law restraining, enjoining or otherwise
prohibiting or making illegal the consummation of the transactions contemplated
by this Agreement.

5.1.4        PSCSC Approval.  The PSCSC Approval shall have been duly
obtained and be in full force and effect, shall not have been reversed, stayed,
enjoined, set aside, annulled or suspended, and shall not have imposed or
required any condition or modification unacceptable to Purchaser.

5.1.5        FERC Approval.  The FERC Approval shall have been duly
obtained and be in full force and effect, shall not have been reversed, stayed,
enjoined, set aside, annulled or suspended, and shall not have imposed or
required any condition or modification unacceptable to Purchaser.

5.1.6        NRC Approval.  The NRC Approval shall have been duly
obtained and be in full force and effect, shall not have been reversed, stayed,
enjoined, set aside, annulled or suspended, and shall not have imposed or
required any condition or modification unacceptable to Purchaser.

5.1.7        Required Consents.  Purchaser shall have received evidence
reasonably satisfactory to Purchaser that all Required Consents have been
obtained.

5.1.8        HSR Act.  The waiting period under the HSR Act
applicable to the consummation of the sale and purchase of the Purchased Assets
contemplated hereby shall have expired or been terminated.

 

5.1.9        Deliveries.  Seller shall have executed and delivered to
Purchaser the items set forth in Section 2.4.1(b).

5.1.10      Material Adverse
Change.  There shall not have been or
occurred, since the Effective Date, any event, occurrence or circumstance that
would reasonably be expected to result in or give rise to a Material Adverse
Effect.

5.1.11      Related Agreements.  The Related Agreements shall have been
delivered, executed and, to the extent required, approved by the appropriate
Governmental Authority without condition or modification not acceptable to
Purchaser.

Section 5.2             Seller’s Conditions
Precedent.  The
obligations of Seller hereunder to execute or deliver the items it is required
to deliver pursuant to Section 2.4.1(b)
are subject to the fulfillment, at or before the Closing, of each of the
following conditions (all or any of which may be waived in whole or in part by
Seller in its sole discretion):

5.2.1        Representations
and Warranties.  Each of the
representations and warranties made by Purchaser in this Agreement that are
qualified by materiality or Material Adverse Effect shall be true and correct
on and as of the Closing Date as though made on and as of the Closing
Date.  Each of the representations and
warranties made by Purchaser in this Agreement that are not qualified by
materiality or Material Adverse Effect shall be true and correct in all
material respects on and as of the Closing Date as though made on and as of the
Closing Date.

5.2.2        Performance.  Purchaser shall have performed and complied
with the agreements, covenants and obligations required by this Agreement to be
so performed or complied with by Purchaser at or before the Closing Date.

5.2.3        Law.  There shall not be in effect at the Closing
Date any preliminary or permanent injunction or other order or decree by any
federal or state court which prevents the consummation of the transactions
contemplated by this Agreement or any Law restraining, enjoining or otherwise
prohibiting or making illegal the consummation of the transactions contemplated
by this Agreement.

5.2.4        PSCSC Approval.  The PSCSC Approval shall have been duly
obtained and be in full force and effect and shall not have been reversed,
stayed, enjoined, set aside, annulled or suspended.

5.2.5        FERC Approval.  The FERC Approval shall have been duly
obtained and be in full force and effect and shall not have been reversed,
stayed, enjoined, set aside, annulled or suspended.

5.2.6        NRC Approval.  The NRC Approval shall have been duly
obtained and be in full force and effect and shall not have been reversed,
stayed, enjoined, set aside, annulled or suspended.

5.2.7        Required Consents.  Seller shall have received evidence
reasonably satisfactory to Seller that all Required Consents have been
obtained.

 

5.2.8        HSR Act.  The waiting period under the HSR Act
applicable to the consummation of the sale and purchase of the Purchased Assets
contemplated hereby shall have expired or been terminated.

5.2.9        Deliveries.  Purchaser shall have executed and delivered
to Seller the items set forth in Section 2.4.1(a).

5.2.10      Power Contract.  In order for the Closing to occur prior to
September 30, 2008, Purchaser, or another third party, shall have entered into
a power supply arrangement with Seller that replaces Seller’s power supply from
the Station which Seller determines is satisfactory to Seller and to
Central-Electric Power Cooperative, Inc. and South Carolina Public Service
Authority through September 30, 2008.

ARTICLE VI

TERMINATION

Section 6.1             Termination
Prior to Closing.  This
Agreement may be terminated, and the transactions contemplated hereby may be
abandoned:

(a)           at any time before
the Closing, by Seller or Purchaser upon notice to the other Party, in the
event that any Law becomes effective restraining, enjoining, or otherwise
prohibiting or making illegal the consummation of the transactions contemplated
by this Agreement;

(b)           at any time before
the Closing, by Seller or Purchaser upon notice to the other Party, in the
event (i) of a breach hereof by the non-terminating Party that would reasonably
be expected to give rise to a Material Adverse Effect, if the non-terminating
Party fails to cure such breach within 30 days following notification thereof
by the terminating Party; or (ii) any condition to such Party’s obligations
under this Agreement (other than the payment of money to the other Party)
becomes impossible or impracticable to satisfy with the use of commercially
reasonable efforts, so long as such impossibility or impracticability is not
caused by a breach hereof by such Party; provided further, however, that
if it is reasonably possible that the circumstances giving rise to the
impossibility or impracticability may be removed prior to the expiration of the
time period provided in this Section 6.1(b),
then such notification may not be given until such time as the removal of such
circumstances is no longer reasonably possible or practicable within such time
period; or

(c)           at any time
following October 1, 2008, by Seller or Purchaser upon notice to the other
Party if the Closing shall not have occurred on or before such date and such
failure to consummate is not caused by a breach of this Agreement by the
terminating Party.

Section 6.2             Effect of
Termination or Breach Prior to Closing.  If this Agreement is validly terminated
pursuant to Section 6.1, written notice thereof shall forthwith be given by the
terminating Party to the other Party and this Agreement shall terminate and the
transactions contemplated hereby shall be abandoned without further action by
the Parties hereto.   If the Agreement is
validly terminated as provided herein, (i) there shall be no liability or
obligation on the part of Seller or Purchaser (or any of their respective
Related Persons), except that the 

 

provisions of ARTICLE IX, ARTICLE X and
Sections 11.1, 11.2, 11.3, 11.4, 11.5, 11.6, 11.7,
11.9, 11.10, 11.11, 11.12, 11.13, 11.14 and 11.15 and this Section 6.2 shall continue to apply following any such
termination, and (ii) all filings, applications and other submissions made
pursuant to this Agreement, to the extent practicable, shall be withdrawn from
the Governmental Authority or other Person to which they were made.  Notwithstanding any other provision in this
Agreement to the contrary, if this Agreement is validly terminated by Purchaser
or Seller pursuant to Section 6.1(b)
as a result of the willful breach by the other Party, the terminating Party may
exercise such remedies as may be available at law or in equity.

ARTICLE VII

[Reserved]

ARTICLE VIII

SURVIVAL; NO OTHER REPRESENTATIONS

Section 8.1          Survival of Representations and Warranties.  The representations and warranties of Seller
and Purchaser contained in this Agreement shall survive the Closing and shall
expire on the date that is three (3) years after the Closing Date.  Notwithstanding the preceding sentence, (i)
the representations and warranties contained in Sections
3.1.1, 3.1.2, 3.1.3, 3.1.8, 3.1.9, 3.1.12, 3.1.13, 3.2.1, 3.2.2, and
3.2.3 and the representations and
warranties set forth in the Deeds shall survive indefinitely after the Closing
(or 90 days after the statute of limitations runs).  The covenants and agreements of the Parties
contained in ARTICLES II, IV and XI of this Agreement shall survive the Closing for (i) the
time period(s) set forth in the respective Sections contained in such Articles,
or (ii) if no time period is so specified, until 90 days after the expiration
of the applicable statute of limitations.

Section 8.2             No Other
Representations. 
NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS AGREEMENT, IT
IS THE EXPLICIT INTENT OF EACH PARTY HERETO THAT, EXCEPT FOR THOSE
REPRESENTATIONS AND WARRANTIES CONTAINED IN ARTICLE III
OR IN ANY CERTIFICATE, INSTRUMENT OR DOCUMENT DELIVERED BY SELLER AT CLOSING,
NEITHER PARTY IS MAKING ANY REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR
IMPLIED, INCLUDING BUT NOT LIMITED TO ANY IMPLIED REPRESENTATION OR WARRANTY AS
TO CONDITION, MERCHANTABILITY, USAGE, SUITABILITY OR FITNESS FOR ANY PARTICULAR
PURPOSE WITH RESPECT TO THE STATION, OR ANY PART THEREOF.

ARTICLE IX

DISPUTE RESOLUTION

Section 9.1             Dispute
Resolution.  Any dispute
or claim arising under this Agreement that is not resolved in the ordinary
course of business shall be referred to a panel consisting of a senior
executive (President or a Vice President) of Purchaser and Seller, with
authority to decide or resolve the matter in dispute, for review and resolution.  Such senior executives shall meet and 

 

in good faith attempt to resolve the dispute within 30
days.  If the Parties are unable to
resolve a dispute pursuant to this Section 9.1,
either Party may enforce its rights at law or in equity subject to the
provisions of this Agreement, including Section 9.2 below.

Section 9.2             Submission
to Jurisdiction; Waiver of Jury Trial.  Each Party hereto irrevocably submits to the
exclusive jurisdiction of the federal court in the State of South Carolina for
the purposes of any action arising out of or based upon this Agreement or
relating to the subject matter hereof. 
If, for any reason, the Parties fail to qualify for the jurisdiction of
the federal court in the State of South Carolina, then each Party hereto irrevocably
submits to the exclusive jurisdiction of the state courts of the State of South
Carolina for the purposes of any action arising out of or based on this
Agreement or relating to the subject matter hereof.  Each Party hereto further agrees that service
of any process, summons, notice or document by U.S. registered mail to such
Party’s respective address set forth in Section 11.1
shall be effective service of process for any action, suit or proceeding in
South Carolina with respect to any matters to which it has submitted to
jurisdiction in this Section 9.2.  Each Party hereto irrevocably and
unconditionally waives any objection to the laying of venue of any action, suit
or proceeding in the federal court in South Carolina, and hereby further
irrevocably and unconditionally waives and agrees not to plead or claim in any
such court that any such action, suit or proceeding brought in any such court
has been brought in an inconvenient forum. 
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE PARTIES
HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT OF TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT,
THE TRANSACTION AGREEMENTS OR ANY MATTER ARISING HEREUNDER OR THEREUNDER.

ARTICLE X

LIMITED REMEDIES AND DAMAGES

Section 10.1           Limitation of Liability.  NOTWITHSTANDING ANY OTHER PROVISION HEREOF,
EXCEPT TO THE EXTENT RESULTING FROM ANY THIRD PARTY CLAIM OR FROM FRAUD OR
WILLFUL MISCONDUCT, NO PARTY SHALL, UNDER ANY CIRCUMSTANCES, BE LIABLE UNDER THIS
AGREEMENT OR THE TRANSACTION AGREEMENTS FOR CONSEQUENTIAL, INCIDENTAL, PUNITIVE
OR EXEMPLARY DAMAGES, WHETHER BY STATUTE, IN TORT OR CONTRACT OR
OTHERWISE.  THE LIMITATIONS HEREIN
IMPOSED ON REMEDIES AND THE MEASURE OF DAMAGES SHALL BE WITHOUT REGARD TO THE
CAUSE OR CAUSES RELATED THERETO, INCLUDING THE NEGLIGENCE OF ANY PARTY.

Section 10.2           Specific Performance.  EACH PARTY AGREES THAT DAMAGE REMEDIES SET
FORTH IN THIS AGREEMENT MAY BE DIFFICULT OR IMPOSSIBLE TO CALCULATE OR
OTHERWISE INADEQUATE TO PROTECT ITS INTERESTS AND THAT IRREPARABLE DAMAGE MAY
OCCUR IN THE EVENT THAT PROVISIONS OF THIS AGREEMENT ARE NOT PERFORMED BY THE
PARTIES IN ACCORDANCE WITH THE SPECIFIC TERMS OF THIS AGREEMENT.  ANY PARTY MAY SEEK TO REQUIRE THE PERFORMANCE
OF ANY OTHER PARTY’S OBLIGATIONS UNDER THIS AGREEMENT THROUGH AN ORDER OF
SPECIFIC PERFORMANCE RENDERED BY 

 

THE FEDERAL COURT IN THE STATE OF SOUTH CAROLINA OR
THE STATE COURTS IN THE STATE OF SOUTH CAROLINA AS PROVIDED IN SECTION 9.2.

ARTICLE XI

MISCELLANEOUS

Section 11.1           Notices.

11.1.1      Unless this Agreement specifically
requires otherwise, any notice, demand or request provided for in this
Agreement, or served, given or made in connection with it, shall be in writing
and shall be deemed properly served, given or made if delivered in person or
sent by fax or sent by registered or certified mail, postage prepaid, or by a
nationally recognized overnight courier service that provides a receipt of
delivery, in each case, to a Party at its address specified below:

If to Purchaser, to:

Duke Energy Carolinas, LLC

526 South Church Street, Mail Code EC2XA

Charlotte, NC 
28202

Facsimile No.: 
(980) 373-5393

Attn:  Ellen T.
Ruff, President

with a copy to:

Duke Energy Carolinas, LLC

526 South Church Street, Mail Code EC03T

Charlotte, NC 
28202

Facsimile No.: 
(980) 382-5090

Attn:  Paul R.
Newton, GVP & General Counsel —

U.S. Franchised Electric
& Gas

If to Seller, to:

Saluda River Electric
Cooperative

P.O. Box 929

Laurens, SC 29360

Facsimile No.:  (864) 682-3162 + (864) 761-7024

Attn: Charles L.
Compton

with a copy to:

Richardson\, Plowden\,
Carpenter & Robinson\, P.A.

1900 Barnwell  Street, PO Box 7788

Columbia, SC 29202

Facsimile No.: (803)
779-0016

Attn: Steven Hamm

 

 

11.1.2      Effective Time.  Notice given by personal delivery, mail or
overnight courier pursuant to this Section 11.1
shall be effective upon physical receipt. 
Notice given by fax pursuant to this Section 11.1
shall be effective as of (i) the date of confirmed delivery if delivered before
5:00 p.m. local time on any Business Day, or (ii) the next succeeding Business
Day if confirmed delivery is after 5:00 p.m. local time on any Business Day or
during any non-Business Day.

Section 11.2           Payments.  Except for payments due at Closing, if either
Party is required to make any payment under this Agreement on a day other than
a Business Day, the date of payment shall be extended to the next Business
Day.  In the event a Party does not make
any payment required or approved by the Parties under this Agreement on or
before the due date, interest on the unpaid amount shall be due and paid at a
rate that is the lesser of (a) the prime rate under “Money Rates” as reported
in the Wall Street Journal on the first Business Day of the month (the “Prime
Rate”) plus two percent (2%) or (b) the maximum rate of interest permitted
to be charged by applicable Law (such lesser rate, the “Default Rate”)
from the date such payment is due until the date such payment is made in
full.  Any payment of such interest at
the Default Rate pursuant to this Agreement shall not excuse or cure any
default hereunder.  All payments shall
first be applied to the payment of accrued but unpaid interest.

Section 11.3           Entire Agreement.  This Agreement and the Transaction Agreements
supersede all prior discussions and agreements between the Parties with respect
to the subject matter hereof and thereof, including, in each case, all
schedules and exhibits thereto, and contain the sole and entire agreement between
the Parties hereto with respect to the subject matter hereof and thereof.

Section 11.4           Expenses.  Except as otherwise expressly provided in
this Agreement, whether or not the transactions contemplated hereby are
consummated, each Party will pay its own costs and expenses incurred in
connection with the negotiation, execution and performance under this Agreement
and the Transaction Agreements and the transactions contemplated hereby and
thereby; provided, however, that the fee payable in connection with the filing
required by the HSR Act shall be shared one-half by Seller and one-half by
Purchaser.

Section 11.5           Public Announcements.  Seller and Purchaser will not issue or make
any press releases or similar public announcements concerning this Agreement or
the transactions contemplated hereby without the consent of the other, which
consent shall not be unreasonably withheld. 
If either Party is unable to obtain the approval of its press release or
similar public statement from the other Party and such press release or similar
public statement is, in the opinion of legal counsel to such Party, required by
Law in order to discharge such Party’s disclosure obligations, then such Party
may make or issue the legally required press release or similar public statement
and promptly furnish the other Party with a copy thereof.  Seller and Purchaser will also obtain the
other Party’s prior approval, which approval shall not be unreasonably
withheld, of any press release to be issued immediately following the execution
of this Agreement or the Closing announcing either the execution of this
Agreement or the consummation of the transactions contemplated by this
Agreement.

 

Section 11.6           Confidentiality.  Each Party hereto will hold, and will use
commercially reasonable efforts to cause its Related Persons to hold, in strict
confidence from any Person (other than any such Related Persons), unless (i)
compelled to disclose by judicial or administrative process (including in
connection with obtaining the necessary approvals of this Agreement and the
transactions contemplated hereby of Governmental Authorities) or by other
requirements of Law or necessary or desirable to disclose in order to obtain
the PSCSC Approval, NRC Approval and FERC Approval or (ii) disclosed in an
action or proceeding brought by a Party hereto in pursuit of its rights or in
the exercise of its remedies hereunder, all documents and information
concerning the other Party or any of its Related Persons furnished to it by the
other Party or such other Party’s Related Persons in connection with this
Agreement or the transactions contemplated hereby, except to the extent that
such documents or information can be shown to have been (a) previously known by
the Party receiving such documents or information, (b) in the public domain
(either prior to or after the furnishing of such documents or information
hereunder) through no fault of such receiving Party or (c) later acquired by
the receiving Party from another source if the receiving Party is not aware
that such source is under an obligation to another Party hereto to keep such
documents and information confidential. 
In the event the transactions contemplated hereby are not consummated,
upon the request of the other Party, each Party hereto will, and will use
commercially reasonable efforts to cause its Related Persons to, promptly (and
in no event later than five Business Days after such request) destroy or cause
to be destroyed all copies of confidential documents and information furnished
by the other Party in connection with this Agreement or the transactions
contemplated hereby and destroy or cause to be destroyed all notes, memoranda,
summaries, analyses, compilations and other writings related thereto or based
thereon prepared by the Party furnished such documents and information or its
Related Persons.  The obligations
contained in this Section 11.6
shall not survive Closing or, if this Agreement is terminated pursuant to ARTICLE VI, such obligations shall survive for one year
following the termination of this Agreement.

Section 11.7           Waivers.

11.7.1      Grant of Waivers.  Any term or condition of this Agreement may
be waived at any time by the Party that is entitled to the benefit thereof, but
no such waiver shall be effective unless set forth in a written instrument duly
executed by or on behalf of the Party waiving such term or condition.  No waiver by any Party of any term or
condition of this Agreement, in any one or more instances, shall be deemed to
be or construed as a waiver of the same or any other term or condition of this
Agreement on any future occasion.  All
remedies, either under this Agreement or by Law or otherwise afforded, will be
cumulative and not alternative.

11.7.2      Exercise of
Remedies.  No failure or delay of any
Party, in any one or more instances, (i) in exercising any power, right or
remedy (other than failure or unreasonable delay in giving notice of default)
under this Agreement or (ii) in insisting upon the strict performance by the
other Party of such other Party’s covenants, obligations or agreements under
this Agreement, shall operate as a waiver, discharge or invalidation thereof,
nor shall any single or partial exercise of any such right, power or remedy or
insistence on strict performance, or any abandonment or discontinuance of steps
to enforce such a right, power or remedy or to enforce strict performance,
preclude any other or future exercise thereof or insistence thereupon or the 

 

exercise of any other right, power or remedy.  The covenants, obligations, and agreements of
a defaulting Party and the rights and remedies of the other Party upon a
default shall continue and remain in full force and effect with respect to any
subsequent breach, act or omission.

Section 11.8           Amendment.  This Agreement and any of the Transaction
Agreements may be amended, supplemented or modified only by a written
instrument duly executed by or on behalf of each Party hereto.

Section 11.9           No Construction Against
Drafting Party.  The
language used in this Agreement is the product of both Parties’ efforts, and
each Party hereby irrevocably waives the benefits of any rule of contract
construction that disfavors the drafter of a contract or the drafter of
specific words in a contract.

Section 11.10         No Third-Party Beneficiary.  The terms and provisions of this Agreement
are intended solely for the benefit of each Party hereto and their respective
successors or permitted assigns, and it is not the intention of the Parties to
confer third-party beneficiary rights upon any other Person.

Section 11.11         Headings.  The headings used in this Agreement have been
inserted for convenience of reference only and do not define or limit the
provisions hereof.

Section 11.12         Invalid Provisions.  If any provision of this Agreement is held to
be illegal, invalid or unenforceable under any present or future Law, and if
the rights or obligations of any Party hereto under this Agreement will not be
materially and adversely affected thereby, (a) such provision will be fully
severable, (b) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
(c) the remaining provisions of this Agreement will remain in full force and
effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance herefrom and (d) Purchaser and Seller shall
negotiate an equitable adjustment in the provisions of the Agreement with a
view toward effecting the purposes of the Agreement, and the validity and
enforceability of the remaining provisions, or portions or applications
thereof, shall not be affected thereby.

Section 11.13         Governing Law.  THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH CAROLINA APPLICABLE
TO A CONTRACT EXECUTED AND PERFORMED IN SUCH STATE, WITHOUT GIVING EFFECT TO
THE CONFLICTS OF LAWS PRINCIPLES THEREOF.

Section 11.14         Court Costs; Interest.  With respect to any court proceeding between
the Parties, the non-prevailing Party shall pay the prevailing Party (i) all
court costs, and (ii) pre- and post-judgment interest on the amount awarded
from the date of the applicable breach until paid.

Section 11.15         No Assignment; Binding
Effect.  Neither this
Agreement nor any right, interest or obligation hereunder may be assigned by
any Party hereto without the prior written consent of the other Party hereto
and any attempt to do so will be void, except for assignments and transfers by
operation of Law.  This Agreement is
binding upon, inures to the benefit of and is enforceable by the Parties and
their respective successors and assigns.

 

Section 11.16         Counterparts.  This Agreement may be executed in any number
of counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.  Each Party expressly acknowledges the
effectiveness of facsimile signatures as originals.

[Signature Page
Follows.]

 

IN
WITNESS WHEREOF, Seller and Purchaser have caused this
Agreement to be signed by their respective duly authorized officers as of the
Effective Date.

	
  

  	
  SALUDA RIVER ELECTRIC

  
	
   

  	
  COOPERATIVE, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Charles L. Compton

  
	
   

  	
  Name:

  	
  Charles L. Compton

  
	
   

  	
  Title

  	
  President and CEO

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  DUKE ENERGY CAROLINAS, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Ellen T. Ruff

  
	
   

  	
  Name:

  	
  Ellen T. Ruff

  
	
   

  	
  Title

  	
  PresidentExhibit
10.1

LOAN
AGREEMENT

THIS AGREEMENT dated as of the 21st day of December, 2006

AMONG:

VISTA
GOLD CORP., a Yukon company having its head office at
Suite 5 – 7961 Shaffer Parkway, Littleton, Colorado, U.S.A., 80127

(the “Lender”)

AND:

LUZON
MINERALS LTD., a British Columbia company having its head
office at Suite 202 - 837 West Hastings Street, Vancouver, British Columbia,
V6C 3N6

(the “Borrower”)

WHEREAS
the Borrower has requested that the Lender lend to the Borrower the sum of
U.S.$200,000 by way of a 90 day term loan (the “Loan Facility”), and the Lender has agreed to make the Loan
Facility available to the Borrower on the terms and conditions set out in this
Agreement.

AND
WHEREAS the Borrower and the Lender entered into an agreement dated December 11,
2003, as amended, (such agreement as amended, supplemented or replaced from
time to time, the “Amayapampa Project
Agreement”) which sets out the terms on which the Lender has agreed
to sell the Borrower, and the Borrower has agreed to purchase, the Lender’s
interest in the Amayapampa Gold Project (the “Project”).

AND
WHEREAS the Borrower and Republic Gold Limited (“RAU”) intend to enter into a business combination agreement in
substantially the same form as contemplated by the press release of the Borrower
dated November 21, 2006, pursuant to which the Borrower would acquire RAU’s
interest in certain mineral properties for shares of the Borrower (the “Combination”).

NOW THEREFORE THIS AGREEMENT
WITNESSES that in consideration of the mutual covenants and agreements set
forth in this Agreement and other good and valuable consideration (the receipt
and sufficiency of which is hereby acknowledged), the parties agree as follows:

1.                             THE LOAN

1.1                          Amount
-  The Lender shall make available to the
Borrower the principal amount of U.S.$200,000 (the “Principal”).

 

1.2                          Interest
Rate - Interest (the “Interest”)
shall accrue and be paid at the rate of 12% per annum, payable as provided in
Section 2.1 below, on the Principal or such amount thereof as may be
outstanding from time to time, on interest not paid when due and on all other
amounts payable by the Borrower to the Lender under this Agreement or the
Security (as defined herein).  All such
Principal, Interest and other amounts payable hereunder are referred to collectively
as the “Loan”.

1.3                          Legal
Fees - The Borrower shall be responsible for the Lender’s legal fees
and disbursements in connection with the Loan Facility and the documentation
required therefore. Notwithstanding the foregoing, the maximum amount of legal
fees and disbursements that the Borrower will be responsible for is
U.S.$10,000.  In the event the Borrower
does not pay the Lender’s legal fees and disbursements, the Lender may pay such
fees and disbursements on behalf of the Borrower.  Any amounts advanced on behalf of the
Borrower by the Lender under this Section 1.2 will be added to the Principal
Amount.

1.4                          Purpose
- The Principal shall be used by the Borrower to pay down debts already
incurred and ongoing expenses in connection with the Project and the Lipichi
project, as set out in Schedule “A” to this Agreement, which is incorporated
into and forms a part of this Agreement. 
Maria Esther Jitton, a representative of the Lender, shall supervise the
payment of the Principal on the debts of the Borrower.

2.                             REPAYMENT

2.1                          Interest
- Interest shall be calculated in accordance with Section 1.2 above.  The Borrower shall pay all accrued Interest
on the last day of each and every month during the term of the Loan commencing
January 31, 2007.

2.2                          Principal - The Principal shall be
repaid to the Lender by the Borrower on the 90th day after the date on which the Principal, or
any portion thereof, is first advanced to the Borrower or such earlier date in
the event that the Lender makes demand for full payment in accordance with
Section 6.3.

2.3                          Prepayment - The Borrower may prepay
the whole or any part of the Principal or any Interest accrued thereon upon
14 days prior written notice to the Lender, and such prepayment will be
applied against the outstanding balance of the Principal.

3.                             SECURITY

3.1                          General
Security Agreement - The Loan shall be secured by a General Security
Agreement (“GSA”) in favour of the
Lender, creating a security interest in all personal property of the Borrower
and a floating charge on all other property of the Borrower, which security
interest and floating charge shall rank prior in priority to any other security
interests or charge given by the Borrower in or on its personal property or
other property, except as provided in Schedule “B” hereof, which is
incorporated into and forms a part of this Agreement.

 2
 

 

3.2                          Supporting Documents - The Borrower shall provide all
customary supporting documents, including certificates, resolutions and
opinions, with respect to the documents contemplated by Section 3.1 as the
Lender shall reasonably require.

3.3                          Discharge
- The Lender will execute and deliver, or cause to be executed and delivered,
all instruments necessary to discharge the Security (as defined below) upon
full repayment of the Loan.

4.                             CONDITIONS
PRECEDENT

4.1                          Conditions
Precedent to Advance  - The obligation of the Lender to advance the
Principal to the Borrower is subject to the following, it being understood that
these conditions precedent are for the exclusive benefit of the Lender:

(a)           the Borrower shall have
executed and delivered this Agreement to the Lender;

(b)           the Borrower shall have
executed and delivered a direction to pay the Principal to Maria Esther Jitton;

(c)           the Borrower shall have
executed and delivered, or have caused to be executed and delivered, to the
Lender the security documents described in Sections 3.1 (collectively, the
“Security”) and all Security shall
have been registered in all necessary and appropriate places;

(d)           RAU shall have agreed
to provide to the Borrower, by loan or otherwise, sufficient funds to pay
urgent current debts of the Borrower, such funds to be at least CDN$168,000,
and the Borrower shall provide to the Lender evidence that at least CDN$100,000
has been provided to the Borrower;

(e)           the Borrower shall have
caused to be delivered to the Lender a certified copy of a resolution of its
directors approving the form and authorizing execution of this Agreement and
the Security;

(f)            the Borrower shall have
caused to be delivered to the Lender an opinion of the Borrower’s counsel
addressed to the Lender and its counsel, in form and content acceptable to the
Lender acting reasonably;

(g)           the Borrower shall have
provided to the Lender a certified copy of the Borrower’s Notice of Articles
and Articles; and

(h)           the Borrower shall have
delivered to the Lender such other information and documents as the Lender may
reasonably request.

5.                             COVENANTS
OF BORROWER

5.1                          Performance - The Borrower covenants with the Lender that it will duly perform and
observe each and all of its covenants and agreements set forth in this
Agreement, the Amayapampa Project Agreement and the Security.

 3
 

 

5.2                          Corporate Existence - The Borrower will maintain its corporate
existence, will carry on and conduct its business in a proper business-like manner
and in accordance with good business practice, will comply with all applicable
laws (including environmental laws), will pay all taxes when due, and will keep
or cause to be kept proper books of account in accordance with generally
accepted accounting principles consistently applied.

5.3                          Application to TSX Venture Exchange - The Borrower will use commercially reasonable
efforts to obtain approval of the TSX Venture Exchange of this Agreement and
the issuance and listing of the Shares issuable upon the conversion of the
Loan, or any portion thereof, as soon as practicable after the date hereof.

5.4                          Listing and Reporting Issuer Status – The Borrower will use commercially reasonable
efforts to maintain the listing of the Shares on the TSX Venture Exchange and
the Borrower will use
commercially reasonable efforts to maintain its status as a reporting issuer
under applicable securities legislation in the Provinces of British Columbia
and Alberta.

5.5                          Repayment - The Borrower shall pay Principal and
Interest when due.

5.6                          Negative Covenants – The Borrower will not, without the prior
written consent of the Lender:

(a)           declare or pay any dividends or repurchase any
shares in its capital;

(b)           repay to any shareholder of the Borrower any
amounts owing to such shareholders under any shareholder loans;

(c)           amalgamate or merge with any other party, other
than as part of the Combination;

(d)           sell or transfer any assets having an aggregate
value in excess of U.S.$10,000;

(e)           guarantee, endorse or otherwise become liable for
the obligations of any other party, other than as part of the Combination;

(f)            pay any bonus to any of its directors, officers
or employees;

(g)            create any security under Section 427 of the
Bank Act (Canada);

(h)           borrow any monies and/or grant any security which
would rank in priority to the Security, except as provided in Schedule “C”
hereof, which is incorporated into and forms a part of this Agreement; or

(i)            grant, assume, create or suffer to exist any
security interest, mortgage, charge or the encumbrance of the Amayapampa
Project Agreement or the Project.

5.7                          Reporting Covenants - The Borrower will submit to the Lender:

(a)           within 20 days of each month end,
management-prepared income statement, month-end balance sheet and sales and
other monthly reports; and

(b)           such other information as the Lender may
reasonably request from time to time.

 4
 

 

6.                             DEFAULT

6.1                          Events
of Default - Any one or more of the following shall constitute an event
of default (“Event of Default”)
for the purposes of this Agreement:

(a)           Failure to Pay Principal or Interest -
The failure by the Borrower to pay either Interest or Principal when due;

(b)           Breach of Covenant - The failure of the
Borrower to comply with any covenant in or obligation under this Agreement or
the Security;

(c)           Bankruptcy - The making by the Borrower
of a proposal or a general assignment for the benefit of its creditors or if
the Borrower petitions or applies to any court or tribunal for the appointment
of a trustee or receiver for itself or any substantial part of its assets, or
commits an act of bankruptcy or insolvency, or commences any proceedings under
any bankruptcy, arrangement, insolvency, readjustment of debt, or similar
statute of any jurisdiction, whether now or hereafter in effect, or any such proceedings
are commenced by any other person and the Borrower, as the case may be, by any
action or non-action indicate their approval thereof, consent thereto or
acquiescence therein, or an order is entered appointing any such trustee or
approving the petitions in any such proceedings, or if the Borrower
acknowledges its insolvency in any manner whatsoever;

(d)           Additional Funding – The failure of the
Borrower to obtain U.S.$200,000 (from RAU or any other source) by January 15,
2007 for the purpose of paying ongoing expenditures of the Borrower;

(e)           Obligations under Letter Agreement with the Lender
– The failure of the Borrower, without the prior written consent of the Lender,
to either (i) complete all of the conditions set out in the letter agreement
between the Lender and the Borrower dated December 5, 2006, which forms part of
the Amayapampa Project Agreement, or (ii) pay the Lender U.S.$2.6 million on or
before January 30, 2007;

(f)            Impairment of Loan / Danger to Charged Property or
Assets - If the Lender believes in good faith, or has
commercially reasonable grounds to believe that the prospect of repayment of
the Loan is or is about to be impaired or the charged property and assets are
or are about to be placed in jeopardy;

(g)           Material Adverse Change - The
occurrence of any material adverse change in the Borrower, its business or its
financial prospects, as determined by the Lender, acting reasonably;

(h)           Appointment of Receiver - The
appointment of a receiver, receiver-manager or receiver and manager of the
Borrower or of any material part of the properties or assets of the Borrower;
and

(i)            Alteration of Corporate Structure - The
disposition by the Borrower of all or
substantially all of its property or undertaking or the amalgamation or merger
of the Borrower with any other corporation or corporate reorganization of the
Borrower, 

 5
 

 

other than as part of the Combination, without the prior written
consent of the Lender.

6.2                          Effect
of Event of Default on the Amayapampa Project Agreement - An Event of Default will be a breach of the
Amayapampa Project Agreement that will give the Lender the right to terminate
the Amayapampa Project Agreement upon at least 15 business days prior written
notice to the Borrower.

6.3                          Consequences
of Default - After any of the Events of Default has occurred and at any
time thereafter, provided that the Borrower has not theretofore remedied or
caused to be remedied all outstanding Events of Default, the Lender may, in its
discretion, by notice to the Borrower, declare this Agreement to be in
default.  At any time thereafter, while
the Borrower shall not have remedied all outstanding Events of Default, the
Lender may, in its discretion, exercise one or any of the following remedies:

(a)           declare the outstanding
balance of the Loan and all liabilities of the Borrower hereunder to be
immediately due and payable and such moneys and liabilities shall forthwith
become due and payable without presentment, demand, protest or other notice of
any kind to the Borrower, all of which are hereby expressly waived;

(b)           subject to and upon
compliance with the conversion procedure set forth in Schedule “D”, which is
incorporated into and forms a part of this Agreement, exercise its right to
convert the Loan, or any portion thereof, into common shares in the capital of
the Borrower (the “Shares”) at the
Current Market Price (as defined in Schedule “D”) of the Shares; and

(c)           exercise any or all of
its remedies under the Security.

7.                             MISCELLANEOUS

7.1                          Notices
- All notices, demands and payments required or permitted to be given under
this Agreement shall be in writing and may be delivered personally, by courier
or may be forwarded by first class prepaid registered mail to the addresses set
forth on page one or at such other addresses as may from time to time be
notified in writing by the parties to this Agreement.  Any notice delivered personally or by courier
shall be deemed to have been given and received at the time of delivery.  Any notice forwarded by first class prepaid
registered mail shall be deemed to have been given and received on the
expiration of 72 hours after it is posted provided that if there shall be
between the time of mailing and the actual receipt of the notice a mail strike,
slowdown or other labour dispute which might affect the delivery of such notice
by the mails, then such notice shall only be effective if actually received.

 6
 

 

7.2                          No
Set-Off - The obligation of the Borrower to make all payments hereunder
shall be absolute and unconditional and shall not be effected by any
circumstance, including without limitation any set-off, compensation,
counterclaim, defence or other right which the Borrower may have against the
Lender relating to the transactions contemplated under this Agreement or
otherwise.

7.3                          Amendments
- Neither this Agreement nor any provision hereof may be amended or modified
except by agreement in writing.  No
provision of this Agreement may be waived or released except by instrument in
writing signed by the party against whom enforcement of such waiver or release
is sought.

7.4                          Further
Assurances - Each of the parties shall execute such further and other
documents and instruments and do such further and other things as may be
necessary to implement and carry out the intent of this Agreement.

7.5                          Governing
Law - This Agreement shall be governed by and construed in accordance
with the laws of the Province of British Columbia which shall be deemed to be
the proper law of this Agreement.

7.6                          Severability
- If any provision of this Agreement is wholly or partially invalid, this Agreement
shall be interpreted as if the invalid provision had not been a part of this
Agreement.

7.7                          Headings
- The headings appearing in this Agreement have been inserted for convenience
of reference only and in no way define, limit or enlarge the scope or meaning
of this Agreement or any provision in this Agreement.

7.8                          Time
- Time is of the essence of this Agreement.

7.9                          Enurement
- This Agreement shall enure to the benefit of and be binding upon the parties
to this Agreement and their respective successors and assigns.

7.10                        Counterparts
– This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original, but all of which together shall constitute
one and the same document.

 7
 

 

7.11                        Facsimile
– This Agreement may be executed and delivered by facsimile transmission and
when so delivered this Agreement shall be deemed to be an original executed and
delivered agreement and binding upon the parties for all purposes as if
originally executed and delivered.

IN WITNESS WHEREOF the parties have executed this Agreement as of the
day and year first above written.

	
  VISTA GOLD CORP.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Authorized
  Signatory

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  LUZON
  MINERALS LTD.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Authorized
  Signatory

  	
   

  	
   

  

 

 8
 

 

Schedule “A”

Required
Urgently:

	
  VENDOR

  	
   

  	
  AMOUNT 

  OWED

  	
   

  
	
  ALS BOLIVIA LTD
  (NET TO PAY)

  	
   

  	
  4,133.91

  	
   

  
	
  LAB SISSY,
  CHEMICAL ANALYSIS

  	
   

  	
  1,800.00

  	
   

  
	
  MEDIUM MINERS
  ASSOCIATION (6 MONTHS & EXTRA PAYMENT)

  	
   

  	
  1,890.00

  	
   

  
	
  STEPHAN VON
  BORRIES (TRANSLATOR)

  	
   

  	
  380.00

  	
   

  
	
  CARLOS MURIEL,
  ENVIRONMENTAL LICENSE CONSULTANT AMAYAPAMPA

  	
   

  	
  1,500.00

  	
   

  
	
  CARLOS PRIETO V.
  (NET FROM JULY TO NOV)

  	
   

  	
  3,500.00

  	
   

  
	
  GUILLERMO
  CORDERO (MAY NET)

  	
   

  	
  1,500.00

  	
   

  
	
  HERBERT CHAVEZ
  (NET FROM JULY TO NOV)

  	
   

  	
  10,000.00

  	
   

  
	
  JUAN CABRERA
  (NET FROM JULY TO NOV)

  	
   

  	
  15,500.00

  	
   

  
	
  DR. GUSTAVO
  MIRANDA (NET FROM AUGUST TO NOV)

  	
   

  	
  2,700.00

  	
   

  
	
  WILFREDO CAMACHO
  (NOVEMBER)

  	
   

  	
  500.00

  	
   

  
	
  MARIA ESTHER
  JITTON (NET FROM JULY TO NOV)

  	
   

  	
  14,000.00

  	
   

  
	
  LIPICHI PAYABLES
  TO NOVEMBER

  	
   

  	
  13,000.00

  	
   

  
	
  TAXES (NET TO
  PAY)

  	
   

  	
  3,000.00

  	
   

  
	
  TOTAL

  	
   

  	
  73,403.91

  	
   

  

 

Required in December 2006

	
  VENDOR

  	
   

  	
  AMOUNT 

  OWED

  	
   

  
	
  LIPICHI FIELD
  SUPPLIES AND TRAVEL DECEMBER

  	
   

  	
  20,000.00

  	
   

  
	
  LIPICHI SALARY
  DEC AND CHRISTMAS BONUS

  	
   

  	
  13,000.00

  	
   

  
	
  CHRISTMAS GIFTS
  TO LIPICHI WORKERS

  	
   

  	
  1,300.00

  	
   

  
	
  MARIA ESTHER
  DECEMBER AND CHRISTMAS BONUS

  	
   

  	
  6,800.00

  	
   

  
	
  JUAN CABRERA
  DECEMBER AND CHRISTMAS BONUS

  	
   

  	
  7,400.00

  	
   

  
	
  WILLY CHAMBY
  DECEMBER AND CHRISTMAS BONUS

  	
   

  	
  5,258.00

  	
   

  
	
  HERBERT CHAVEZ
  DECEMBER AND CHRISTMAS BONUS

  	
   

  	
  5,600.00

  	
   

  
	
  GUSTAVO MIRANDA
  DECEMBER AND CHRISTMAS BONUS

  	
   

  	
  2,000.00

  	
   

  
	
  CARLOS PRIETO
  DECEMBER AND CHRISTMAS BONUS

  	
   

  	
  2,000.00

  	
   

  
	
  TRAVEL AND
  OTHERS AMAYAPAMPA

  	
   

  	
  2,000.00

  	
   

  
	
  TAXES FROM FIELD
  SUPPLIES AND OTHERS

  	
   

  	
  2,000.00

  	
   

  
	
  TAXES FROM
  PENDING FEES TO NOVEMBER

  	
   

  	
  7,500.00

  	
   

  
	
  TAXES FROM
  DECEMBER FEES AND CHRISTMAS BONUS

  	
   

  	
  3,700.00

  	
   

  
	
  ALBERTO MONDACA,
  ELECTRICAL ENGINEERING CONSULTANT AMAYAPAMPA

  	
   

  	
  2,000.00

  	
   

  
	
  S. ALFARO,
  OFFICE ASSISTANT FEES JAN TO SEPT & CHR. BONUS

  	
   

  	
  2,000.00

  	
   

  
	
  MARIA ESTHER
  JITTON (NET FROM JANUARY TO MAY 2006)

  	
   

  	
  15,000.00

  	
   

  
	
  A. PINTO,
  ADMINISTRATOR OF THE CAMP, FEES FROM JAN TO DEC 2006

  	
   

  	
  12,000.00

  	
   

  
	
  TOTAL

  	
   

  	
  109,558.00

  	
   

  

 

 9
 

 

Required
January 2007 Onwards:

	
  VENDOR

  	
   

  	
  AMOUNT 

  OWED

  	
   

  
	
  MONTHLY EXPENSES
  FOR LUZON`S ADMINISTRATION SUPPLIES AND OFFICE RENTAL

  	
   

  	
  12,000.00

  	
   

  
	
  NEW CONCESSIONS
  TO BE FILED

  	
   

  	
  15,600.00

  	
   

  
	
  TOTAL

  	
   

  	
  27,600.00

  	
   

  

 

 10
 

 

Schedule “B”

Security
interest registered under the Personal
Property Security Act (British Columbia) in the name of Republic
Gold Limited, Control Number B6784429, Base Registration Number 471428C.

 11
 

 

Schedule “C”

1.             Additional funding of
at least CDN$68,000 from RAU as described in Subsection 4.1(d) of this
Agreement; and

2.             Additional funding of
U.S.$200,000 from RAU as contemplated in Subsection 6.1(d) of this Agreement.

 12
 

 

Schedule “D”

Conversion Right

1.             Current Market Price – the Current
Market Price means an amount equal to the volume weighted average trading price
per share (or, if no trades occur on any day, the mean between the closing bid
and asked quotations on such day) of the Shares on the TSX Venture Exchange for
the 20 trading days prior to the date notice of the exercise of the conversion
right is given, or if the Shares are not listed on the TSX Venture Exchange on
the date such notice is given, on such stock exchange on which the Shares are
listed as may be selected for such purpose by the directors of the Borrower or,
if the Shares are not listed on any stock exchange, a price determined by the
directors of the Borrower and approved by an independent, qualified investment
dealer who is a member of the Toronto Stock Exchange and who is selected by the
Lender for that purpose.

2.                             Conversion Procedure. 
In order to exercise the conversion privilege, the Lender
must provide written notice to the Borrower stating (i) that the Lender elects
to convert the Loan, or any portion thereof, to Shares, and (ii) the name or
names (with addresses) in which the certificates for the Shares issuable on
such conversion will be issued.

The
Lender may only require the Borrower to issue Shares to a person or persons
other than the Lender upon a conversion of the Loan, or any portion thereof, if
such issuance is permitted under applicable securities legislation.  If any of the Shares to be issued hereunder
are to be issued to a person or persons other than the Lender such request will
be accompanied by payment to the Borrower of any tax which may be payable by
reason of the transfer and if requested by the Borrower, a legal opinion
acceptable to the Borrower acting reasonably stating that such issuance is
permitted under applicable securities legislation.

The
written notice of conversion of the Loan, or any portion thereof, to the
Borrower will be deemed to constitute a contract between the Lender and the
Borrower whereby: (i) the Lender subscribes for the number of Shares which it
will be entitled to receive on such conversion; (ii) the Lender releases the
Borrower from all liability thereon or from all liability with respect to that
portion of the Loan thereof to be converted, as the case may be; and (iii) the
Borrower agrees that the conversion of the Loan, or any portion thereof so
converted, constitutes full payment of the subscription price for the Shares
issuable upon such conversion.

As promptly as is practicable
after the delivery of the written notice of conversion the Borrower will issue
or cause to be issued and deliver or cause to be delivered to the Lender, or on
its written order, a certificate or certificates in the name or names of the
person or persons specified in accordance with this Section 2 of this Schedule
for the number of Shares deliverable
upon the conversion of the Loan, or any portion thereof.  This
conversion will be deemed to have been effected immediately prior to the close
of business on the date of delivery of the written notice of conversion and at
such time the rights of the Lender to be paid the Loan, or any portion
thereof so converted, will cease and the
person or persons in whose name or names any certificates for the Shares
will be deliverable upon such conversion
will be deemed to have become on such date the holder or holders of record of
the Shares represented thereby;
provided, however, that no such surrender on any date when the share transfer
registers for the Shares are closed
will be effective to constitute the person or persons entitled to receive the Shares
upon such conversion as the holder or 

 13
 

 

holders of record of such Shares on such date, but such surrender will be
effective to constitute the person or persons entitled to receive such Shares
as the holder or holders of record thereof
for all purposes on the next succeeding day on which such share transfer
registers are open.

3.                             No Fractional Shares.  Notwithstanding
anything herein contained, the Borrower will not be required to issue
fractional Shares upon the
conversion of the Loan, in whole or
in part.  If the number of Shares upon
conversion of the Loan, or any portion thereof, is not a whole number, then the number of such Shares will be rounded
down to the nearest whole number.

4.                             Adjustment of the Conversion Price. 
The Conversion Price will
be subject to adjustment from time to time as follows:

(a)           If and whenever at any time after the date hereof
the outstanding Shares are subdivided, redivided or changed into a greater, or
reduced, combined or consolidated into a lesser, number of shares or
reclassified into different shares, the Lender prior to the effective date of
such subdivision, redivision, change, reduction, combination, consolidation or
reclassification will be entitled to receive and will accept, upon the exercise
of such right at any time on such effective date or thereafter, in lieu of the
number of Shares to which it was theretofor entitled upon conversion at the
Conversion Price, the aggregate number of shares of the Borrower that the
Lender would have been entitled to receive as a result of such subdivision,
redivision, change, reduction, combination, consolidation or reclassification
if, on the effective date thereof, the Lender had been the registered holder of
the number of Shares to which it was theretofor entitled upon conversion.

(b)           If and whenever at any time after the date hereof
the Borrower issues additional Shares (or securities convertible into Shares)
to the holders of all of its outstanding Shares by way of a stock dividend or
other distribution, other than a stock dividend to holders of Shares who
exercise an option to receive in the ordinary course equivalent dividends in
Shares in lieu of receiving cash dividends, the Conversion Price will be
adjusted immediately after the record date for such stock dividend or other
distribution by multiplying the Conversion Price in effect on such record date
by a fraction of which the numerator will be the total number of Shares
outstanding on the record date and of which the denominator will be the total
number of Shares outstanding on the record date plus the number of additional
Shares which will result from the stock dividend or other distribution
(assuming for this purpose that all Shares issuable upon the exercise of the
conversion rights of the securities convertible into Shares had been
issued).  Any dividend or distribution on
the Shares of the Borrower in Shares will be deemed to have been issued or made
immediately prior to the time of the record date for such dividend or
distribution for the purposes of calculating the number of outstanding Shares
under Subsection (c) below.

(c)           If and whenever at any time after the date hereof
the Borrower makes a distribution to all holders of its Shares of:

(i)            shares of any class not included in the
definition of Shares;

(ii)           evidences of its indebtedness; or

 14
 

 

(iii)          assets (excluding cash dividends or
distributions, and dividends or distributions referred to in
Subsection (b) above and stock dividends to holders of Shares who exercise
an option to receive in the ordinary course equivalent dividends in Shares in
lieu of receiving cash dividends);

then in each such case the
Conversion Price will be adjusted immediately after the record date for the
making of such distribution so that it will equal the price determined by
multiplying the Conversion Price in effect on such record date by a fraction,
of which the numerator will be the total number of Shares outstanding on such
record date multiplied by the Current Market Price on such record date, less
the fair market value (as determined by the board of directors of the Borrower,
whose determination will be conclusive) of said shares or evidences of
indebtedness or assets or options, rights or warrants so distributed, and of
which the denominator will be the total number of Shares outstanding on such
record date multiplied by such Current Market Price.  Shares owned by or held for the account of
the Borrower will be deemed not to be outstanding for the purpose of any such
computation.  Such adjustment will be
made successively as of any such record date. 
To the extent that such distribution is not so made, the Conversion
Price will be readjusted to the Conversion Price which would then be in effect
based upon the said shares, evidences of indebtedness or assets actually
distributed.

(d)           In any case in which this Schedule will require
that an adjustment will become effective immediately after a record date for an
event, the Borrower may defer until the occurrence of such event issuing to the
Lender, if the Loan is converted in
whole or in part after such record date and before the occurrence of such
event, the additional Shares issuable upon such conversion by reason of the
adjustment required by such event over and above the Shares issuable upon such
conversion before giving effect to such adjustment; provided, however, that the
Borrower will deliver to the Lender an appropriate instrument evidencing the
Lender’s rights to receive such additional Shares, upon the occurrence of the
event requiring such adjustment.

(e)           No adjustment in the Conversion Price will be
required unless such adjustment would require an increase or decrease of at
least one percent in such price; provided, however, that any adjustments which
by reason of this Subsection (e) are not required to be made will be
carried forward and taken into account in any subsequent adjustment.

5.                             Certificate as to
Adjustment.  The Borrower will from time to time immediately
after the occurrence of any event which requires an adjustment in the
Conversion Price as provided in this Schedule, deliver an officer’s certificate
to the Lender specifying the nature of the event requiring the adjustment and
the amount of the adjustment thereby necessitated and setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based, and specifying the Conversion Price after adjustment.

 15

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