Document:

Exhibit 4.1

 

“PURCHASE
AND SALE CONTRACT

 

FOR
100% OF THE SHARES OF ELETTROGEN S.p.A.,

 

HELD
BY ENEL S.p.A.

 

BY
AND BETWEEN

 

ENEL
S.p.A.

 

in
the capacity as Seller

 

and

 

Endesa
S.A.,

ASM
Brescia S.p.A. and

Banco
Santander Central Hispano S.A.

 

in
the capacity as Buyer

 

	
  Enel SpA

  	
   

  
	
  Registered
  office 00198 Rome, viale Regina Margherita 137

  	
   

  
	
  Taxpayer
  I.D. and Company Reg. 00811702580

  	
   

  
	
  R.E.A.
  756032 P.I. 00934061003

  	
   

  
	
  Share
  Capital fully paid-in € 6,063,075,189

  	
  [initials]

  

 

 

	
  I

  	
  DEFINITIONS

  
	
   

  	
   

  	
   

  
	
  II

  	
  PURPOSE

  
	
   

  	
   

  	
   

  
	
   

  	
  2.1

  	
  Purchase and Sale

  
	
   

  	
   

  	
   

  
	
   

  	
  2.2

  	
  Purchase Price

  
	
   

  	
   

  	
   

  
	
   

  	
  2.3

  	
  Closing

  
	
   

  	
   

  	
   

  
	
   

  	
  2.4

  	
  Transactions at Closing

  
	
   

  	
   

  	
   

  
	
   

  	
  2.5

  	
  Final amount of the Adjusted Price and
  Correction of the Purchase Price at Closing

  
	
   

  	
   

  	
   

  
	
  III

  	
  THE SELLER’S REPRESENTATIONS AND GUARANTEES

  
	
   

  	
   

  	
   

  
	
   

  	
  3.1

  	
  The Seller’s existence, business standing,
  authorizations, bankruptcy proceedings and absence of insolvency status

  
	
   

  	
   

  	
   

  
	
   

  	
  3.2

  	
  The
  Company’s existence, business standing, authorizations, bankruptcy
  proceedings and absence of insolvency status

  
	
   

  	
   

  	
   

  
	
   

  	
  3.3

  	
  Absence
  of bonds, third-party consent and authorizations

  
	
   

  	
   

  	
   

  
	
   

  	
  3.4

  	
  Interest in the Company

  
	
   

  	
   

  	
   

  
	
   

  	
  3.5

  	
  Certified Balance Sheet

  
	
   

  	
   

  	
   

  
	
   

  	
  3.6

  	
  Absence of Damages; Maintenance

  
	
   

  	
   

  	
   

  
	
   

  	
  3.7

  	
  Management of the Business; Dividends

  
	
   

  	
   

  	
   

  
	
   

  	
  3.8

  	
  Litigation

  
	
   

  	
   

  	
   

  
	
   

  	
  3.9

  	
  Legal Compliance

  
	
   

  	
   

  	
   

  
	
   

  	
  3.10

  	
  Environmental Issues

  
	
   

  	
   

  	
   

  
	
   

  	
  3.11

  	
  Facilities

  
	
   

  	
   

  	
   

  
	
   

  	
  3.12

  	
  Contracts

  
	
   

  	
   

  	
   

  
	
   

  	
  3.13

  	
  Insurance

  
	
   

  	
   

  	
   

  
	
   

  	
  3.14

  	
  Tax Obligations

  
	
   

  	
   

  	
   

  
	
   

  	
  3.15

  	
  Collective bargaining agreements and
  subordinate employment relationships

  
	
   

  	
   

  	
   

  
	
   

  	
  3.16

  	
  Absence of Intermediaries

  
	
   

  	
   

  	
   

  
	
   

  	
  3.17

  	
  Intellectual Property Rights

  
	
   

  	
   

  	
   

  
	
   

  	
  3.18

  	
  No further representations or warranties by
  the Seller

  
	
   

  	
   

  	
   

  
	
  IV

  	
  THE BUYERS’ REPRESENTATIONS AND WARRANTIES

  
	
   

  	
   

  	
   

  
	
   

  	
  4.1

  	
  The Buyers’ existence, business standing,
  authorizations, bankruptcy proceedings and lack of insolvency status

  
	
   

  	
   

  	
   

  
	
   

  	
  4.2

  	
  Absence of related parties, third-party
  consent and authorizations

  

 

i

 

	
   

  	
  4.3

  	
  The
  Buyers’ Shareholders

  
	
   

  	
   

  	
   

  
	
   

  	
  4.4

  	
  Financial Standing

  
	
   

  	
   

  	
   

  
	
   

  	
  4.5

  	
  Irrevocable commitment in favor of the
  Treasury and Industry Ministries

  
	
   

  	
   

  	
   

  
	
   

  	
  4.6

  	
  Absence of Intermediaries

  
	
   

  	
   

  	
   

  
	
   

  	
  4.7

  	
  Accuracy of the information provided to the
  Seller in the course of the Transaction

  
	
   

  	
   

  	
   

  
	
   

  	
  4.8

  	
  PUHCA

  
	
   

  	
   

  	
   

  
	
   

  	
  4.9

  	
  Due Diligence

  
	
   

  	
   

  	
   

  
	
  V

  	
  SELLER’S AND BUYERS’ OBLIGATIONS

  
	
   

  	
   

  	
   

  
	
   

  	
  5.1

  	
  Conducting the Company’s business

  
	
   

  	
   

  	
   

  
	
   

  	
  5.2

  	
  Withdrawing from Intra-group Contracts

  
	
   

  	
   

  	
   

  
	
   

  	
  5.3

  	
  Expenses, Taxes

  
	
   

  	
   

  	
   

  
	
   

  	
  5.4

  	
  Execution of the Transaction

  
	
   

  	
   

  	
   

  
	
   

  	
  5.5

  	
  Notices of Events

  
	
   

  	
   

  	
   

  
	
   

  	
  5.6

  	
  Commitments pursuant to the Memorandum of
  Understanding

  
	
   

  	
   

  	
   

  
	
   

  	
  5.7

  	
  Antitrust Notice

  
	
   

  	
   

  	
   

  
	
   

  	
  5.8

  	
  Confidentiality of the Industrial Plan

  
	
   

  	
   

  	
   

  
	
   

  	
  5.9

  	
  Litigation involving the Seller

  
	
   

  	
   

  	
   

  
	
   

  	
  5.10

  	
  Conversion Costs

  
	
   

  	
   

  	
   

  
	
   

  	
  5.11

  	
  “Elettrogen” Brand

  
	
   

  	
   

  	
   

  
	
   

  	
  5.12

  	
  Real
  Estate

  
	
   

  	
   

  	
   

  
	
   

  	
  5.13

  	
  Tax Documentation

  
	
   

  	
   

  	
   

  
	
   

  	
  5.14

  	
  Accident in one alternator at the Fiume
  Santo generating plant

  
	
   

  	
   

  	
   

  
	
  VI

  	
  TERMS AND SERIOUS DEFAULT

  
	
   

  	
   

  	
   

  
	
   

  	
  6.1

  	
  Suspensive Conditions

  
	
   

  	
   

  	
   

  
	
   

  	
  6.2

  	
  Cancellation Conditions

  
	
   

  	
   

  	
   

  
	
   

  	
  6.3

  	
  Express Defeasance Clause

  
	
   

  	
   

  	
   

  
	
  VII

  	
  INDEMNITY OBLIGATIONS

  
	
   

  	
   

  	
   

  
	
   

  	
  7.1

  	
  Seller’s indemnity and reparation
  obligations

  
	
   

  	
   

  	
   

  
	
   

  	
  7.2

  	
  Buyers’
  indemnity and reparation obligations

  
	
   

  	
   

  	
   

  
	
   

  	
  7.3

  	
  Parties requests pursuant to Sections 7.1
  and 7.2

  
	
   

  	
   

  	
   

  
	
   

  	
  7.4

  	
  Limit to the indemnity obligations relative
  to representations and warranties.

  

 

ii

 

	
  VIII

  	
  GENERAL CLAUSES

  
	
   

  	
   

  	
   

  
	
   

  	
  8.1

  	
  Disclosure

  
	
   

  	
   

  	
   

  
	
   

  	
  8.2

  	
  Amendments

  
	
   

  	
   

  	
   

  
	
   

  	
  8.3

  	
  Waivers

  
	
   

  	
   

  	
   

  
	
   

  	
  8.4

  	
  Assignments

  
	
   

  	
   

  	
   

  
	
   

  	
  8.5

  	
  Ineffectiveness vis-à-vis third parties

  
	
   

  	
   

  	
   

  
	
   

  	
  8.6

  	
  Previous Agreements

  
	
   

  	
   

  	
   

  
	
   

  	
  8.7

  	
  Partial
  annulment, invalidity or ineffectiveness of the Contract

  
	
   

  	
   

  	
   

  
	
   

  	
  8.8

  	
  Article and Section Headings

  
	
   

  	
   

  	
   

  
	
   

  	
  8.9

  	
  Calculation of deadlines

  
	
   

  	
   

  	
   

  
	
   

  	
  8.10

  	
  Notices

  
	
   

  	
   

  	
   

  
	
   

  	
  8.11

  	
  Applicable law

  
	
   

  	
   

  	
   

  
	
   

  	
  8.12

  	
  Disputes

  

 

iii

 

	
  EXHIBITS

  
	
   

  
	
  EXHIBIT 1.1 (a)

  
	
  Net Outstanding Capital

  
	
   

  
	
  EXHIBIT 1.1 (b)

  
	
  Net Worth

  
	
   

  
	
  EXHIBIT 1.2

  
	
  Bylaws of Elettrogen

  
	
   

  
	
  EXHIBIT
  2.2 (i)

  
	
  Purchase
  Price

  
	
   

  
	
  EXHIBIT
  2.2 (ii)

  
	
  Price Adjustment

  
	
   

  
	
  EXHIBIT 2.4 (i)

  
	
  Compliance with the Prime Minister’s Decree dated November 8,
  2000

  
	
   

  
	
  EXHIBIT 2.4 (iv)

  
	
  Intra-group Debt

  
	
   

  
	
  EXHIBIT 3.3 (a)

  
	
  Proceedings underway in relation to the Transaction

  
	
   

  
	
  EXHIBIT 3.3 (c)

  
	
  Third-party consent and authorizations for the Seller

  
	
   

  
	
  EXHIBIT 3.5

  
	
  Certified Balance Sheet of Elettrogen as of December 31, 2000

  
	
   

  
	
  EXHIBIT 3.6

  
	
  Damages as of January 1, 2001

  
	
   

  
	
  EXHIBIT 3.7

  
	
  Management of the Company Business

  
	
   

  
	
  EXHIBIT 3.8 (a)

  
	
  Pending or threatened litigation

  
	
   

  
	
  EXHIBIT 3.8 (b)

  
	
  Minor litigation

  
	
   

  
	
  EXHIBIT 3.9

  
	
  Legal Compliance

  

 

iv

 

	
  EXHIBIT 3.10 (a)

  
	
  Environmental matters

  
	
   

  
	
  EXHIBIT 3.10 (b)

  
	
  Proceedings on environmental matters

  
	
   

  
	
  EXHIBIT 3.11

  
	
  Real estate available to the Company

  
	
   

  
	
  EXHIBIT 3.12

  
	
  List of contracts

  
	
   

  
	
  EXHIBIT 3.14 (a)

  
	
  Tax, social and retirement obligations

  
	
   

  
	
  EXHIBIT 3.14 (b)

  
	
  Requests for payment of taxes or assessments

  
	
   

  
	
  EXHIBIT 3.15

  
	
  Collective bargaining and subordinate employment contracts

  
	
   

  
	
  EXHIBIT 4.5

  
	
  Irrevocable undertaking in favor of the Treasury and Industry
  Ministries

  
	
   

  
	
  EXHIBIT 5.1

  
	
  Conduct of the Company’s business

  
	
   

  
	
  EXHIBIT 5.2 (i)

  
	
  Intra-group Contracts

  
	
   

  
	
  EXHIBIT 5.2 (ii)

  
	
  Cancellation notices

  
	
   

  
	
  EXHIBIT 5.6 (i)

  
	
  Memorandum of Understanding

  
	
   

  
	
  EXHIBIT 5.6 (ii)

  
	
  Undertakings with local authorities

  
	
   

  
	
  EXHIBIT 5.12

  
	
  Real estate to be transferred to the Company prior to the Closing
  Date

  
	
   

  
	
  EXHIBIT 6.1

  
	
  Antitrust Authority

  

 

v

 

SALE AND PURCHASE CONTRACT

 

for the
Interest (as defined below) in the share capital of Elettrogen S.p.A., a
joint-stock company incorporated under Italian law, with share capital of
€ 139,450,000, divided into 139,450,000 common shares with a par value of
€ 1 (one) each, with its registered office in Rome, Via G.B. Martini, 3,
registered in the Registro delle Imprese [Registry
of Companies] at the Rome Chamber of Commerce, Industry, Crafts and Agriculture
under number 204365/99 and at the R.E.A. [Administrative Economic Roster] under
number 929544, Taxpayer Identification and VAT No. 058548351002 (hereinafter
“Elettrogen” or the “Company”), held by Enel S.p.A., a joint-stock company
incorporated under Italian law, with share capital of 12,126,150,379,000 lire,
divided in 12,126,150,379 common shares with a par value of 1,000 (one
thousand) Lire each, with its registered office in Rome at Viale Regina
Margherita 137, registered in the Registro
delle Imprese at the Rome Chamber of Commerce, Industry, Crafts and
Agriculture under number 7050/92, Taxpayer Identification 00811720580 and VAT
No. 00934061003 (hereinafter the “Seller” or “Enel”) (the “Contract”)

 

ARTICLE I

 

DEFINITIONS

 

In the present
Contract and in the Exhibits thereto (as described below, which form an
integral and substantial part of the present Contract), words and expressions
distinguished by a capital letter at the beginning shall have the meaning
indicated below, respectively, unless they are defined elsewhere in the present
Contract:

 

“Buyers” shall mean any of the following companies, which shall be
jointly and severally liable among themselves for performance of each and every
obligation deriving for them pursuant to the present Contract: ENDESA S.A., a
company under Spanish law headquartered at Calle Principe de Vergara 187, 28002
Madrid, Spain, share capital of € 1,270,502,540.40, fully subscribed and
paid in, registered at Registro Mercantil de
Madrid [Madrid Trade Registry], Book 736, folio 196, page 434,
Taxpayer Identification No. A-28023430; ASM BRESCIA S.p.A., a company under
Italian law headquartered at Via Larmarmora 230, Brescia, Italy, share capital
of 1,360,536,000,000 Lire, fully subscribed and paid in, registered at the Registro delle Imprese di Brescia under
number 03125280176, REA of Brescia No. 402664 and BANCO SANTANDER CENTRAL
HISPANO S.A., a company under Spanish law headquartered at Paseo de Pereda
9-12, Santander, Spain, share capital of € 2,280,768,206.50, fully
subscribed and paid in, registered at Registro
Mercantil de Cantabria [Cantabria Trade Registry], folio 286, page
64, Taxpayer Identification No. A-39000013.

 

“Price Adjustment” shall be the amount equal to the algebraic sum between
the Difference in the Intra-group Debt (as defined hereinafter) and the
Difference in the Net Outstanding Capital (as defined hereinafter).

 

“Exhibits” shall mean the exhibits to the present Contract.

 

“Maximum Amount” shall have the meaning indicated in Section 7.4 below.

 

“Deed of Conveyance “ shall mean the deed of conveyance between the
Seller and the Company dated October 1, 1999 (as subsequently amended on
February 15, 2001, March 6, 2001 and July 23, 2001).

 

“Shares” shall have the meaning indicated in Section 3.4 below.

 

“Certified Balance Sheet” shall have the meaning indicated in Section
3.5 below.

 

1

 

“Net Outstanding Capital” shall have the meaning indicated in Exhibit
1.1 (a).

 

“Net Outstanding Capital at the Closing Date” shall mean the respective
amount of the Company’s Net Outstanding Capital on the Closing Date, determined
in accordance with Exhibit 1.1 (a).

 

“Closing” shall have the meaning indicated in Section 2.3 below.

 

“Civil Code” shall mean the [Italian] Civil Code currently in effect,
approved by Royal Decree No. 262 of March 16, 1942 (and as subsequently
amended).

 

“Conclusions” shall have the meaning indicated in paragraph (c) of
Section 2.5 below.

 

“Confidentiality Agreement” shall mean any confidentiality agreement
executed by the Seller as party of the first part and the Buyers as party of
the second part, regarding the procedure for the sale of the Interest (as
defined hereinafter).

 

“Financial Advisors” shall mean the Seller’s financial advisors with
regard to the Transaction (as defined hereinafter) or Credit Suisse First
Boston (Europe) Limited, Lehman Brothers International SIM S.p.A. and Merrill
Lynch Capital Markets Bank Limited.

 

“Intra-group Contracts” shall have the meaning indicated in Section 5.2
below.

 

“Contract” shall have the meaning set forth in the Recitals (as defined
hereinafter).

 

“Separate Guaranty Agreement” shall mean the separate guaranty
agreement provided in favor of the Seller pursuant to the Tender.

 

“Oil Pipeline Contract” shall mean the procurement contract between
Elettrogen and Enelpower S.p.A. for the provision of services for performance
of the fuel unloading system and for start-up of an oil pipeline suitable for
the transportation of fuel oil and Orimulsion®, dated April 17,
2001.

 

“Control,” with regard to any party, shall have the meaning indicated
in Article 7 of Law No. 287 of October 10, 1990.

 

“Conversion Costs” shall have the meaning indicated in Section 5.10
below.

 

“Closing Date” shall mean the date on which the Closing shall take
place, as indicated in Section 2.3 below.

 

“Date of the Tender” shall mean June 15, 2001, the date on which
the Tender was duly signed and sent by the Buyers to the Seller.

 

“Date of the present Contract” shall mean the date on which the Seller
accepted the Buyers’ proposal for purchase of the Interest and the respective
Tender, pursuant to the terms and conditions of the present Contract.

 

2

 

“Data Room” shall mean the data room located at the Seller’s designated
premises in Rome, where certain specific documents and information regarding
the Company have been made available to potential buyers of the Interest
(including the Buyers) from March 19, 2001 to April 9, 2001, and to
which potential buyers had access for 5 (five) days.

 

“Intra-group Debt” shall mean the Company’s financial debt deriving
from the financing between the Seller and the Company executed on
January 4, 2000, increasing the balance, if a liability for the Company,
or decreasing the balance, if an asset for the Company, from the current
account referred to in the treasury services contract between the Seller and
the Company executed on March 16, 2001 (the primary terms of both
contracts are summarized in Exhibit 2.4 (iv) to the present Contract).

 

“Intra-group Debt on the Closing Date” shall mean the sum pertaining to
the Company’s Intra-group Debt on the Closing Date, which shall not in any case
be greater than € 1,060,659,341.04 (equal to 2,053,722,862,278 Lire).

 

“Determinations” shall have the meaning indicated in paragraph (a) of
Section 2.5 below.

 

“Difference in the Net Outstanding Capital” shall mean the amount equal
to the algebraic difference between the Net Outstanding Capital on the Closing
Date and € 109,793,813 (equal to 212,485,908,250 Lire) (equal to the Net
Outstanding Capital on December 31, 2000).

 

“Difference in the Intra-group Debt” shall mean the amount equal to the
difference between € 1,060,659,341.04 (equal to 2,053,722,862,278 Lire)
(equal to the Intra-group Debt drawn from the Certified Balance Sheet) and the
Intra-group Debt on the Closing Date.

 

“Negative Difference” shall have the meaning indicated in paragraph (d)
of Section 2.5 below.

 

“Positive Difference” shall have the meaning indicated in paragraph (e)
of Section 2.5 below.

 

“Transaction Documents” shall mean the Tender, the Separate Guaranty
Contract, the Confidentiality Agreements, the irrevocable undertaking in favor
of the Ministry of Industry, Commerce and Crafts and the Treasury Ministry, the
Balance Sheet and the Financial Timetable referred to in Section 4.5 below and
any other agreement executed between the Parties (as defined hereinafter) with
reference to the Transaction.

 

“Elettrogen” shall have the meaning referred to in the Recitals.

 

“Enel” shall have the meaning referred to in the Recitals.

 

“EPC” shall mean the Engineering, Procurement and Construction contract
for the CCGT Facility (as defined hereinafter) in Ostiglia, executed between
the Company and Enelpower S.p.A., dated March 19, 2001.

 

“Euro (€)” shall mean the single currency of the European Economic and
Monetary Union, adopted also by Italy as a member state as of January 1,
1999.

 

3

 

“Deductible” shall have the meaning indicated in Section 7.4 below.

 

“Minimum Deductible” shall have the meaning indicated in Section 7.4
below.

 

“Commitment to the Memorandum of Understanding” shall have the meaning
indicated in Section 5.6 below.

 

“Facilities” shall mean the electricity generating facilities,
including the thermoelectric facilities, along with the respective
appurtenances, owned by the Company, located in Monfalcone, Ostiglia, Fiume
Santo, Tavazzano, and Trapani, as well as the hydroelectric facilities, along
with the respective appurtenances, owned by the Company, forming part of the
Terni Unit, the Catanzaro Unit and the Cotronei Unit, all as described in the
Deed of Conveyance.

 

“CCGT Facilities” shall mean the thermoelectric generating facilities
owned by the Company suitable for combined-cycle conversion, located in
Ostiglia, Monfalcone and Tavazzano.

 

“Information Memorandum” shall mean the summary description of the
Company (along with all the attachments thereto, including the Environmental
Consultant’s Report (as defined hereinafter) and the Technical Consultant’s
Report (as defined hereinafter) prepared by the Financial Advisors and sent by
them to the potential buyers of the Interest (including the Buyers) on
December 18, 2000 (and, insofar as the Environmental Consultant’s Report
is concerned, updated with reference to December 31, 2000 and sent to the
Buyers).

 

“Italy” shall mean the Italian Republic.

 

“Lire” or “Lit.” shall mean the non-decimal subdivision of the Euro
having legal currency in Italy.

 

“Environmental Standards” shall mean any law or regulations applicable
and in effect on the Date of the Tender, whether Italian or of the European
Union (including any directly applicable directive), concerning the environment
and pollution and, in general, regarding emissions or concerning production,
transformation, treatment, storage, stocking, unloading, use, transportation or
movement of wastes and residues of chemical or biological polluting or contaminating
substances or hazardous or non-hazardous industrial wastes.

 

“Procedural Rules” shall mean the laws and regulations pursuant to
which the sale of the Interest is being carried out, in particular Law No. 474
of July 30, 1974, Article 8 of Law No. 79 of March 16, 1999, Decree
by the Prime Minister dated August 4, 1999, Decree by the Treasury
Minister, together with the Minister of Industry, dated January 25, 2000,
and the Decree by the Prime Minister dated November 8, 2000 and the respective
accessories thereto.

 

“Tax Rules” shall mean any rule or regulation applicable and in force
on the Date of the Tender pursuant to which the Italian state or the competent
Italian authorities impose any tax, assessment or other retirement or insurance
charge on taxpayers.

 

4

 

“Tender” shall mean the firm and irrevocable tender for 90 days,
regarding purchase of the Interest, duly signed by the Buyers and sent to the
Seller, dated June 15, 2001.

 

“Transaction” shall mean the purchase and sale of the Interest between
the Seller and the Buyers, carried out pursuant to the terms and conditions of
the present Contract in accordance with the Procedural Rules.

 

“Interest” shall mean 139,450,000 common shares with a par value of € 1
(one) each, representing the Company’s entire subscribed and paid-in share
capital, equal to € 139,450,000.

 

“Obligated Party” shall have the meaning indicated in Section 7.3
below.

 

“Compensated Party” shall have the meaning indicated in Section 7.3 below.

 

“Parties” shall mean both the Buyers and the Seller, and a “Party”
shall mean the Seller and the Buyers, respectively.

 

“Net Worth” shall mean the Company’s net worth as set forth under the
heading “Liabilities: A) Net Worth,” according to the format referred to under
Article 2424 of the Civil Code, determined on the basis of the Accounting
Principles (as defined hereinafter) applied in the drafting of the Certified
Balance Sheet or as amended as shown in Exhibit 1.1 (b).

 

“Environmental Permits” shall mean any concession, authorization,
license, permit and all the administrative orders issued by the competent
authorities or any notice sent by the Company to said authority to be able to
validly conduct the Company’s business, in accordance with any applicable
Environmental Rules.

 

“Purchase Price” shall mean the price offered by the Buyers for the
purchase of the Interest, as indicated in Exhibit 2.2 (i) of the present
Contract, which shall not include the Intra-group Debt.

 

“Purchase Price at Closing” shall have the meaning indicated in
paragraph (a) of Section 2.2 below.

 

“Amended Purchase Price” shall have the meaning indicated in paragraph
(d) of Section 2.5 below.

 

“First Installment” shall have the meaning indicated in paragraph (b)
of Section 2 below.

 

“Accounting Principles” shall mean the criteria set forth in Article
2426 of the Civil Code, incorporated and interpreted by the accounting
principles issued by the National Council of Business Experts and Accountants.

 

“Memorandum of Understanding” shall have the meaning indicated in
Section 5.6 below.

 

“PUHCA” shall mean the United States Public Utility Holding Company Act
of 1935 (as amended).

 

5

 

“Environmental Consultant’s Report” shall mean the summary report of
the report prepared by URS-Dames & Moore, attached to the Information
Memorandum and subsequently updated with reference to December 31, 200 and
sent to the Buyers.

 

“Technical Consultant’s Report” shall mean the report prepared by
S&W Consultants, Inc., attached to the Information Memorandum.

 

“Final Installment” shall have the meaning indicated in paragraph (b)
of Section 2.2 below.

 

“Auditor” shall have the meaning indicated in paragraph (a) of Section
2.5 below.

 

“Independent Auditor” shall have the meaning indicated in paragraph (c)
of Section 2.5 below.

 

“Net Worth at Closing” shall have the meaning indicated in paragraph
(a) of Section 2.5 below.

 

“Company” shall have the meaning set forth in the Recitals.

 

“Controlled Company,” with reference to each party, shall mean a
company directly or indirectly controlled by or under the joint direct or
indirect control of said party, as defined in Article 7 of Law No. 287 of
October 10, 1990.

 

“Contingent Liabilities” shall mean any direct (and with the exception
of any indirect) and foreseeable loss, shortage, capital loss, charge, damage,
liability, penalty, third-party claim, order for payment, expenses or costs.

 

“Bylaws” shall mean the Company’s updated company bylaws, as set forth
in Exhibit 1.2 to the present Contract.

 

“Final Deadline” shall have the meaning indicated in paragraph (d) of
Section 2.2 below.

 

“Seller” shall have the meaning indicated in the Recitals.

 

“Encumbrance” with respect to any asset shall mean any other right of
enjoyment or of guaranty, seizure, pledging, mortgaging, other prejudicial
transcription or registration, preference, including tax-wise, and charges of
any manner and any other encumbrance in favor of third parties which could
limit traffic or enjoyment and constitute the subject matter of pending legal
proceedings.

 

ARTICLE II

 

PURPOSE

 

Section 2.1 Purchase and Sale. The
Seller sells to the Buyers, and the Buyers buy from the Seller, in the
proportions per item (viii) of paragraph (a) of Section 2.4 below, the
Interest, at the Purchase Price as indicated in the following

 

6

 

Section 2.2, effective January 1, 2001, and under all the terms
and conditions of the present Contract.

 

Section 2.2 Purchase Price. (a) The
purchase price for the Interest is equal to that set forth in Exhibit 2.2 (i)
of the present Contract (the “Purchase Price”), plus a sum equal to the Price
Adjustment, if positive, or decreased by a sum equal to the Price Adjustment,
if negative, as illustrated in Exhibit 2.2 (ii) (the Purchase Price, as
increased or decreased according to the preceding remarks, is hereinafter
termed the “Purchase Price at Closing”).

 

(b) The Purchase Price at Closing shall be paid to the Seller in the
following manner. A sum equal to 5% (five percent) of the Purchase Price (the
First Installment) shall be paid by the Buyers to the Seller at the Date of the
present Contract, by credit transfer to the current bank account that will be
indicated in writing by the Seller at least 5 days prior to its own acceptance
of the Offer. If Closing occurs, the First Installment shall be charged to the
Purchase Price and, consequently, the remaining sum equaling 95% (ninety five
percent) of the Purchase Price, increased or decreased by the Price Adjustment,
as calculated by the Seller and indicated in writing to the Buyers at least 5
(five) days prior to the Closing Date (in all, the “Final Installment”), shall
be paid by the Buyers to the Seller at the Closing Date by the methods set forth
in Section 2.4 below.

 

(c) Furthermore, the Positive Difference or Negative Difference per
paragraphs (d) and (e) of the following Section 2.5 shall be paid, as the case
may be, subsequent to the Closing Date, according to the methods set forth
therein.

 

(d) The Parties expressly state here and now that, if the Closing does
not occur (per the following Section 2.3), due to lack of fulfillment of the
conditions per paragraph (a) of the following Section 6.1 within 180 (one
hundred eighty) days of the Date of the present Contract (the “Final Deadline”)
or due to lack of acceptance on the part of the Buyers of the obligations or
conditions determined by the antitrust authorities per paragraph (b) of the
following Section 6.1 at the deadline set forth therein, the Seller shall be
fully entitled to keep the entire First Installment, without the Buyers being
entitled to any further consideration.

 

(e) The Parties likewise expressly declare here and now that, if the
Closing (per the following Section 2.3) does not take place by the Closing Date
(per the following Section 2.3), for any reason not attributable to the Seller
(with the exception of (i) a decision by any Italian judicial or administrative
authority or by the European Union (other than the decision per the following
Section 6.1 (a)) handed down against the Seller, or (ii) a legislative or
regulatory enactment issued by any Italian authority or by the European Union,
which prohibit or make unlawful the entering into or executing of the present
Contract, or the entering into of agreements or the executing of operations as
stipulated in the body of the present Contract), the Seller shall be fully
entitled to keep the entire First Installment, without the Buyers being
entitled to any further consideration.

 

Section 2.3 Closing. The transfer of the
Interest from the Seller to the Buyers and the payment of the Final Installment
by the Buyers to the Seller (the “Closing”) shall take place, subordinated to
the fulfillment of the suspensive condition per the following Section 6.1 by
the Final Deadline, and to the lack of fulfillment of the

 

7

 

resolutory condition per the following Section 6.2, at the main office
of the Seller in Rome, at Viale Regina Margherita 137, on a date occurring
between the seventh and the fifteenth day following the fulfillment of the
suspensive condition per the following Section 6.1 (the “Closing Date”), which
shall be communicated in writing by the Seller to the Buyers, and at least 5
(five) days prior to the Closing Date.

 

Section 2.4 Transactions at Closing.
(a) At the Closing Date, the Parties shall proceed to carry out the following
transactions:

 

(i)                         the Buyers shall hand over to
the Seller a written declaration, essentially in the form of Exhibit 2.4 (i) of
the present Contract, in regard to their own compliance with the requirements
per the Decree of the Prime Minister of November 8, 2000;

 

(ii)                      the Seller shall hand over to the
Buyers a copy conforming to the original of the written communications
regarding the right of withdrawal in regard to the Intra-group Contracts,
signed by the particular Controlled Companies themselves, in keeping with the
provisions of the following Section 5.2;

 

(iii)                   the Seller shall hand over to the
Buyers a copy conforming to the original of the respective powers of attorney
of its own legal representatives who have signed or will sign the present
Contract;

 

(iv)                  the Buyers shall pay to the Seller
the amount corresponding to the Intra-group Debt as of the Closing Date, which
shall be indicated in writing by the Seller at least 5 (five) days prior to the
Closing Date, it being understood that, by virtue of said payment, the Buyers
shall be automatically subrogated in the credit rights of the Seller with respect
to the Company, as regards the Intra-group Debt;

 

(v)                     the Buyers shall pay the Final
Installment to the Seller;

 

(vi)                  the Seller shall hand over to the
Buyers full quittance of the payment as provided in the preceding paragraph
(iv);

 

(vii)               the Seller shall hand over to the Buyers
a copy of the letters of resignation of the board members and auditors of the
Company, with express declaration that they no longer have any claim against
the Company for any cause or reason;

 

(viii)            the Seller, in the presence of a person
qualified to make the necessary authentications, shall hand over to the Buyers
the share certificates representing the Interest, properly endorsed to enable
full ownership by the Buyers, in accordance with the lawful procedures, in the
following proportions:

 

share certificate No. 3, representing 63,213,662 Shares, in the name of
Endesa S.A., equal to around 45.33% (forty five and thirty three hundredths
percent) of the capital stock of the Company;

 

8

 

share certificate No. 4, representing 20,456,338 Shares, in the name of
ASM Brescia S.p.A., equal to around 14.67% (fourteen and sixty seven hundredths
percent) of the capital stock of the Company; and

 

share certificate No. 5, representing 55,780,000 Shares, in the name of
Banco Santander Central Hispano S.A., equal to around 40% (forty percent) of
the capital stock of the Company;

 

and shall ensure that the transfer of the Interest is adequately noted
in the shareholder ledger of the Company; and

 

(ix)                    the Seller is obligated to ensure
that the ordinary shareholders’ meeting of the Company is held on the Closing
Date, to resolve on (a) the appointment of a board of directors composed of
persons previously designated by the Buyers, and (b) the appointment of the
auditing board, composed of persons previously designated by the Buyers.

 

(b) The payments to be made at the Closing Date by the Buyers, in
accordance with items (iv) and (v) of the preceding paragraph (a), shall be
made in Euros, with value date at the Closing Date, to the current bank
accounts which the Seller shall indicate to the Buyers at least 5 (five) days
prior to the Closing Date.

 

Section 2.5 Final Amount
of the Adjusted Price and Correction of the Purchase Price at
Closing. (a) The Seller has issued instructions, at its own expense, to the
auditing firm of Arthur Andersen S.p.A. (the “Auditor”), to subject to a
complete accounting audit the financial position of the Company at the Closing
Date, as drawn up by the Company on the basis of the same Accounting Principles
as used for the preparation of the Certified Balance Sheet (said financial
position, as certified by the Auditor, being the “Financial Position at
Closing”). Within and not more than 75 (seventy five) days from the Closing
Date, the Seller shall hand over to the Buyers its own determinations (the
“Determinations”) with regard to the definitive amounts of the Price Adjustment
and the resulting Purchase Price at Closing. The Determinations shall be
formulated by the Seller on the basis of the data contained in the Financial
Position at Closing, which shall be made available to the Buyers, upon request
of same.

 

(b) The Buyers shall examine the Determinations and hand over to the
Seller their own deductions, if any, within 30 (thirty) days from the handover
by the Seller of the Determinations. The Parties shall examine the respective
conclusions and endeavor to resolve in amicable fashion any difference during
the following 15 (fifteen) days, in order to reach a written agreement with
regard to the definitive amounts of the Price Adjustment and of the resulting
Purchase Price at Closing. It is expressly understood and agreed between the
Parties that, if the Buyers do not communicate in writing to the Seller their
own deductions with regard to the Determinations within 30 (thirty) days per
the above, the definitive amounts of the Price Adjustment and of the resulting
Purchase Price at Closing as handed over by the Seller shall be understood to
be definitive and binding on the Parties.

 

(c) If, after the amicable consultation per paragraph (b) above, the
Parties do not arrive at an agreement as to the Determinations within the 15
(fifteen) days per above, due to differences between the Parties as to the
Financial Position at Closing, the Buyers shall have the right, by giving
written notice to

 

9

 

the Buyer within 5 (five) days of the aforesaid deadline, to submit the
matter, at their own expense, to the independent auditor whom the Buyers are
obligated to select in common accord with the Seller (and who, failing an
agreement within 15 (fifteen) days of the amicable consultation per the above
paragraph (b), shall be appointed, at the request of whichever Party so
desires, by the President of the Court of Rome, who shall select him from among
those listed in the Registry of Accounting Auditors) (the “Independent
Auditor”). It is understood between the Parties that, if the Buyers do not
request the intervention of the Independent Auditor within the aforesaid
deadline of 5 (five) days, the definitive amounts of the Price Adjustment and
of the resulting Purchase Price at Closing as handed over by the Seller shall
be understood to be definitive and binding on the Parties. The Independent Auditor
shall resolve the differences that have arisen between the Parties as to the
Financial Position at Closing, and shall communicate his own conclusions to the
Parties (the “Conclusions”) as soon as possible, but not later than 60 (sixty)
days from his appointment. The Conclusions shall be definitive and binding on
the Parties and the respective contractual intents shall be incorporated
therein. In particular, the Parties promise to calculate in common accord, on
the basis of the Conclusions, the definitive value of the Price Adjustment and
of the resulting Purchase Price at Closing, in keeping with what is set forth
in the preceding paragraph (a) of Section 2.2.

 

(d) If the definitive amount of the Purchase Price at Closing, as
determined in accordance with the preceding items (b) or (c) (the “Corrected
Purchase Price”), happens to be less than the Purchase Price at Closing, as
determined by the Seller in accordance with the preceding paragraph (b) of
Section 2.2 (said difference with regard to the Purchase Price at Closing being
hereinafter the “Negative Difference”), by an amount equal to at least
€ 500,000 (five hundred thousand), the Seller agrees here and now to pay
to the Buyers a sum corresponding to the Negative Difference on the tenth day
from the date on which the Corrected Purchase Price was determined in
accordance with the preceding items (b) or (c), by credit transfer to the
current bank account that will be indicated in good time by the Buyers.

 

(e) If the Corrected Purchase Price happens to be greater than the
Purchase Price at Closing, as determined by the Seller in accordance with the
preceding paragraph (b) of Section 2.2 (said difference with regard to the
Purchase Price at Closing being hereinafter the “Positive Difference”), by an
amount equal to at least € 500,000 (five hundred thousand), the Buyers
agree here and now to pay to the Seller a sum corresponding to the Positive
Difference on the tenth day from the date on which the Corrected Purchase Price
was determined in accordance with the preceding items (b) or (c), to the
current bank account that will be indicated in good time by the Seller.

 

(f) The certifications of the Auditor per paragraph (a) of the present
Section and the Conclusions of the Independent Auditor shall be neither
equitable nor discretionary, but rather shall be formulated in accordance with
the Accounting Principles adopted by the Company for the drawing up and
approval of the Certified Balance Sheet, as specified in Appendices 1.1 (a) and
1.1 (b).

 

(h) The Buyers promise, as of the Closing Date, to ensure that the
Seller and the Auditor have access to any document or information of the
Company needed to draw up the Financial Position at Closing.

 

10

 

ARTICLE III

 

THE SELLER’S
REPRESENTATIONS AND GUARANTEES

 

The Seller declares and guarantees to the Buyers the following, with
reference to both the Date of the present Contract and the Closing Date.

 

Section 3.1 The
Seller’s Existence, business standing, authorizations, bankruptcy
proceedings, and absence of insolvency status. (a) The Seller is an Italian
company, properly constituted and validly existing according to Italian law.
The Seller is not subject to bankruptcy proceedings, nor is it in a state of insolvency.

 

(b) The Seller has the capacity and is endowed with all necessary
powers for the signing and execution of the present Contract and every one of
the Operation Documents to which the Seller is a party, their execution, and
the performance of the obligations set forth therein (including the operations
listed in the preceding Section 2.4). The signing and the execution of the
present Contract, and of all the Operation Documents to which the Seller is a
party, has been properly authorized in accordance with the company by-laws of
the Seller. Assuming that the Operation Documents have been properly authorized
and signed, both by the Seller and by each party that has signed the Operation
Documents, the present Contract and each of the Operation Documents represent
valid obligations that are binding on the Seller, in keeping with what is
provided therein.

 

Section 3.2
The Company’s Existence, business status, authorizations, bankruptcy
proceedings, and absence of insolvency status. The Company is an Italian
company, properly constituted, validly existing according to Italian law, and
authorized to carry on its activities in the manner by which it is currently so
doing. The Company is not subject to bankruptcy proceedings, nor is it in a
state of insolvency, nor is it in any of the situations stipulated by Articles
2446 and 2447 of the Civil Code, nor have any legal actions been brought in
order to declare a state of insolvency of the Company.

 

Section 3.3 Absence
of bonds, third party consent and authorizations. (a) The signing of the
present Contract and of the Operation Documents, their execution, and the
performance of the obligations provided therein (including the operations
listed in the preceding Section 2.4) on the part of the Seller, do not entail
the violation of its own company charter, the performance of any contractual
obligation, the violation of any resolution of the Seller, court or arbitration
order or arrangement handed down with regard to the Seller, or the violation of
normative or administrative enactments (other than the Procedural Rules
applicable to the Buyers), nor is there any court or arbitration proceeding in
progress as of the Date of the present Contract, except for what is set forth
in Exhibit 3.3 (a), such as may impact the validity, effectiveness, and
execution of the present Contract.

 

(b) The signing of the present Contract and of the Operation Documents
to which the Seller is a party, their execution, and the performance of the
obligations provided therein on the part of the Seller, are governed by private
law and are not to be considered acts of public law or issued in the exercise
of public authority. The alienation of the Interest by the Seller (including
the signing of the present Contract and of the Operation Documents, their
execution, and the performance of the obligations provided therein on the part
of the Seller) is done in accordance with the present Contract, under the

 

11

 

supervision and coordination of the Minister of the Treasury and Budget
and the Minister of Industry, Commerce and Trades, and with the assistance of
the Committee for General Consultancy and Guarantees for Privatizations, in
keeping with the Procedural Rules, in order to ensure compliance with said Procedural
Rules.

 

(c) With the exception of the authorization on the part of the
antitrust authority per the following Section 6.1, and of what is set forth in
Exhibit 3.3 (c), the signing of the present Contract and of the Operation
Documents, their corresponding execution and the performance of the obligations
provided therein on the part of the Seller (i) do not require the consent, the
authorization, the approval, the go-ahead or the issuance of concessions or
licenses on the part of public or private administrations, (ii) do not confer
on third parties rights of withdrawal or of rescission of contractual relations
in existence with the Company, (iii) do not entail the loss, the
ineffectiveness, the lapsing or the repeal of licenses, authorizations, concessions
or administrative permits issued to the Company and (iv) do not violate any
agreement to which the Company is tied, or any decision, court or arbitration
provision, order or provision imposed on the Company.

 

Section 3.4 Interest in the Company.
(a) The Interest of the Seller in the Company represents 100% (one hundred
percent) of the Company’s capital stock that has been subscribed and paid in,
equal to € 139,450,000, subdivided into 139,450,000 shares of common stock
with par value of € 1 (one) each (the “Shares”). All the Shares of the
Company are in the full and proper possession of the Seller, have been properly
issued, are fully subscribed and paid up, are free of another party’s rights of
possession or of guarantee, of attachments, distraints, pledges, other
prejudicial recordings or registrations, liens, including tax liens, and
encumbrances of any kind and of any other third party right (including
warrants, options, conversion rights) or an obligation which might limit their
circulation or possession, and they are not subject to pending or threatened
court proceedings, or subject to any third party claim.

 

(b) The Interest represents the entire capital stock, and there are not
in progress any subscriptions, options, rights of conversion, refunds,
liabilities, understandings, agreements, programs, shareholder resolutions or
other acts or compacts of any kind that call for or entail the purchase, the
issuance, the sale or the transfer of any certificate of any Share of the
Company or of any right to any Share of the Company.

 

(c) A copy conforming to the original of the current Charter of the
Company is enclosed with the present as Exhibit 1.2. The books of the Company
have been properly kept, and that which is presented therein faithfully represents
the company transactions to which they refer.

 

(d) The Company does not hold any interest in other companies, nor does
it have Controlled Companies, except for a Interest of 171,000 shares of common
stock of Lire 5,000 each, equal to 5% (five percent) of the capital stock, in
CESI-Centro Elettronico Sperimentale Italiano Giacinto Motta S.p.A., a company
active in the field of research, technical analysis and testing in the sectors
of electrical engineering, electronics and data processing, with main office in
Milan, Via Rubattino 54, capital stock equal to 17,100,000,000 Lire, divided
into 3,420,000 shares of common stock of 5,000 Lire each, and listed in the
Register of Companies at the CCIAA of Milan as No. 84067 and in the R.E.A. as
No. 429222, C.F. [taxpayer code] 00793580150. Said Interest is free of any
Obligation.

 

12

 

Section 3.5 Certified Balance Sheet.
(a) The operating balance sheet of the Company as of December 31, 2000,
consisting of the corresponding statement of assets and liabilities, the income
statement, and explanatory notes, has been approved by the shareholders’
meeting of the Company on March 21, 2001 and certified by the auditing
firm Arthur Andersen S.p.A. on March 6, 2001 (the “Certified Balance
Sheet”) and is enclosed with the present Contract, together with the
certification statement, the statement of the board of directors and the
statement of the auditing committee of the Company and all relevant exhibits
per Exhibit 3.5. As indicated in the certification statement, enclosed with the
Certified Balance Sheet, the Certified Balance Sheet has been drawn up with
clarity and represents in a truthful and correct manner the asset and financial
situation and the income results of the Company pertaining to the year ended on
December 31, 2000, in accordance with the Accounting Principles.

 

(b) The Certified Balance Sheet reflects the accounting books and
documents of the Company, which are shown to have been properly and correctly
kept.

 

(c) As of the Closing Date, the Net Worth of the Company will not be
less than € 524 million (equal to 1014.6 billion Lire).

 

(d) As of the Closing Date, the Company will not have any forms of
financial indebtedness other than the Intra-group Debt.

 

Section 3.6 Absence of
Damages; Maintenance. (a) Since the last day of the period covered by
the Certified Balance Sheet, the Company has not experienced any damage,
destruction or loss (not covered by insurance) such as has or may harm the
normal operating capacity of the facilities, with the exception of that stated
in Exhibit 3.6.

 

(b) As of the last day of the period covered by the Certified Balance
Sheet, the Facilities have been maintained according to the practice of the
sector in Italy.

 

Section 3.7 Management of
the Business; Dividends. (a) With the exception of what is otherwise
stated in the present Contract, in Exhibit 3.7 or in Exhibit 3.12, as of the
last date covered by the Certified Balance Sheet the Company (i) has not
arranged for any increase in the present or future salaries of its own
executives or employees or any increase in any bonus, insurance, payroll tax or
social security contribution, or other plan providing benefits, payment or
agreement implemented or reached by the Company in favor of, or with any
executive or employee of the Company, with the exception of what has been
arranged in the course of the routine administration, including the incentives
for retirement of employees, and in keeping with the managerial practices of
the Company, or in accordance with the law or the contracts per Exhibit 3.15,
(ii) it has not reached any agreement with the Seller or any Controlled Company
of the Seller (different from the Company), (iii) it has not made financial
investments of a speculative nature, and (iv) it has been run in accordance
with the criteria of ordinary diligence, in keeping with the managerial
practice of the Company.

 

(b) From the last day of the period covered by the Certified Balance
Sheet, the Company has not paid any earnings or reserves, or paid any special
distribution or fee to the Seller or to its own board members, with the
exception of the distribution to the Seller of the profits pertaining to the
year ended on December 31, 2000, as approved by the shareholders’ meeting
of the Company on March 21, 2001 and paid on April 13, 2001.

 

Section 3.8 Litigation. (a) With the
exception of what is stated in Appendices 3.8 (a), 3.8 (b) and 3.14 (b), as of
the Date of the Tender, the Company has not received any

 

13

 

written communication pertaining to any proceeding, legal action,
investigation or assessment pending with respect to the Company or otherwise
regarding the Facilities of the Company, before any competent governmental
authority or tribunal. Furthermore, from January 1, 2001 to the Date of
the Tender, the Company has not received any written communication regarding
any judgment, order, or other court action handed down with respect to the
Company or the Facilities of the Company, such as has not been covered by
provisions on the Certified Balance Sheet.

 

(b) All of the proceedings, legal actions, investigations or
assessments pending against the Company before any competent governmental
authority or tribunal per Exhibit 3.8 (b) will not be able to cause, taken in
their totality, any Contingent Liabilities against the Company greater than
€ 1,000,000 (one million).

 

(c) With the exception of what is stated in Appendices 3.8 (a), 3.8 (b)
and 3.14 (b), as of the Date of the Tender, the Company has not received any
written communication regarding any proceeding, legal action, investigation or
assessment that has been threatened against the Company by third parties, such
as may be rationally expected by the Seller to be able to cause, in their
entirety, Contingent Liabilities against the Company greater than
€ 1,000,000 (one million).

 

Section 3.9 Legal Compliance. With
the exception of what is stated in Exhibit 3.9, or in the Information
Memorandum, (i) the activities of the Company have not been carried out in
violation of normative, administrative or regulatory enactments (including any
applicable Environmental Standard or Tax Rule, except as specifically
stipulated and provided for in the following Sections 3.10 and 3.14, respectively,
and (ii) all the permits, the licenses, the concessions, the approvals and the
authorizations (including any applicable Environmental Permit) necessary to
carry on its own activities in the manner that the Company is currently doing,
have been obtained, are valid and in force, and, where necessary, all of the
petitions, declarations, notifications, certifications and any other action
required by law for the continuation of the performing of the activities in the
way currently being carried out by the Company have been properly presented,
and (iii) each of the thermoelectric facilities is authorized to use fuel
conforming, in type and quality, to the fuel used respectively in the course of
2000.

 

Section 3.10 Environmental Issues.
(a) As of January 1, 1996, with the exception of what is stated in Exhibit
3.10 (a), and reserving what is set forth in the following Section 5.10, there
have not been any emissions in the environment or dumping of wastes or sewage
coming from the Facilities of any polluting, contaminating, chemical or
biological, industrial, hazardous or nonhazardous substance, contrary to the
Environmental Standards, that have harmed or may harm the activities of the
Company as they are currently being carried out, or the assets and financial situation
of the Company.

 

(b) With the exception of what is stated in Appendices 3.10 (b) and 3.8
(a), as of the Date of the Tender, neither the Seller nor the Company have
received any written communication with regard to any still pending
administrative or court proceeding or petition with respect to the Facilities
of the Company that charges any real, potential, threatened or alleged (i)
violation of Environmental Standards or (ii) legal action aimed at modifying,
suspending, or revoking any Environmental Permit, such as might harm the
activities of the Company as currently being carried out.

 

14

 

Section
3.11 Facilities. (a) The Company has full and
exclusive ownership of all the Facilities.

 

(b)
The Company has full and exclusive ownership or use, de facto or by right, of
the real estate on which the Facilities are built. Exhibit 3.11 contains a list
of all the real estate underlying the Facilities of which the Company has the
use, de facto or by right.

 

(c)
All the Facilities and real estate underlying the Facilities are free of Liens,
except for those Liens which (i) do not prevent the Company from using the
Facilities, as currently used by the Company, and which (ii) in general, do not
impede the regular and unopposed conduction of the Company’s business, as the
Company presently conducts it.

 

(d)
The Facilities are adequate to the use for which they are currently intended,
and compliant with laws and regulations concerning construction, city planning,
fire prevention and safety.

 

Section
3.12 Contracts. (a) Other than the contracts
listed in Exhibits 3.12 and 3.15, the understandings with local authorities as
set forth in Exhibit 5.6 (ii), and any contract executed after the Date of
Tender, pertaining to and compliant with the specific provisions under Sections
5.1 and 5.14, the Company is not a party in any further (i) energy transfer
contracts, (ii) contracts for the supply of fuels required to operate the
Facilities; (iii) fuel transport contracts, (iv) contracts governing any loans
granted to the Company, or other debt instruments of the Company, other than
Intra-group Debt, (v) other contracts entered into with the Seller or Seller’s
Affiliated Companies, (vi) contracts or instruments containing restrictions to
the payment of dividends, (vii) contracts limiting the Company’s freedom to
compete with third parties, (viii) service contracts involving obligations for
the Company to pay amounts individually exceeding € 500,000 (five hundred
thousand) per year. Complete true copies of the contracts listed in Exhibit
3.12 (subject to the provisions under Exhibit 3.12) have been produced in the
Data Room or otherwise made available to the Buyers.

 

(b)
The Company has received no written notice regarding any breach by the Company
of any contract listed in Exhibit 3.12, which may affect the Company’s business
as currently conducted, or the Company’s capital and financial position.

 

Section
3.13 Insurance. The Company has insurance
coverage obtained by the Seller with respect to: the Facilities; liability to
third parties, including environmental hazards, and to employees and
independent contractors; transport; vocational and non-vocational injuries
suffered by employees and directors; the policies are similar to those
available to all of the other power generating Companies owned by the Seller.
The coverage provided by these policies shall cease on the Closing Date.

 

Section
3.14 Tax Obligations. (a) Except as
indicated in Exhibit 3.14 (a), either the Seller - solely as regards direct and
indirect taxes for the years 1997, 1998 and 1999, in connection with the
business unit assigned under the

 

15

 

Deed
of Assignment - or the Company (i) have duly and promptly filed the tax returns
and provided the tax-related information required by law, and paid all the
taxes and other fiscal charges debited to them, on the basis of such returns
and information, and (i) have not benefited from any tax breaks which may
result in future tax obligations.

 

(b)
Except as indicated in Exhibit 3.14 (b), to the best of the Seller’s knowledge,
as of the Date of the Tender the Company has received no requests for
outstanding payments related to any unsettled, incorrect or delayed payment of
taxes of any nature, and neither the Seller nor the Company have received any
written notice regarding any investigations or assessments on liabilities of
the Company for taxes of any nature.

 

Section
3.15 Collective bargaining
agreements and subordinate employment relationships. (a) Except
for the Memorandum of Understanding, and except as provided by law or under
Section 5.1 (d) below, or under Exhibits 3.7 and 3.15, the Company does not
have in force (i) any contracts applicable to its executives; (ii) any
agreements with its employees or Union representatives, resulting in charges
related to salaries, social security or pensions exceeding those required by
law or by collective labor agreements, or constraints of any nature not
required by law or by collective labor agreements under Exhibit 3.15, or
otherwise exceeding an overall annual amount of € 300,000 (three hundred
thousand), or (iii) any incentive plan, deferred compensation plan, or other
similar plans or agreements with, or to the benefit of, its directors,
executives or employees.

 

(b)
As of the Date of this Contract, the Company has a number of employees not
exceeding 1,583 (of which 12 are executives).

 

(c)
All obligations related to salaries, social security, insurance and pension
pertaining to the Seller - solely as regards employees transferred in
connection with the Deed of Assignment, and solely as regards the part under
its responsibility until October 1, 1999 - or to the Company have been
duly performed, and no claims exists on the subject which may cause the Company
to be liable for charges related to salaries, social security, insurance or
pensions exceeding an overall annual amount of € 300,000 (three hundred
thousand).

 

Section
3.16 Absence of Intermediaries.
All negotiations for the finalization of this Contract and of the related
agreements have not been conducted through any intermediaries or agents of the
Seller or of the Company such as may give rise for the Buyer or for the Company
to the obligation to pay commissions or fees of whatever nature to said
intermediaries or agents.

 

Section
3.17 Intellectual Property Rights.
(a) The Company is the owner, or is authorized to use legitimately, all the
patents and other intellectual property rights, whether registered or not,
required and sufficient to its day-by-day business, as currently conducted, and
to operate the Facilities. The use of such patents or other intellectual
property rights shall not constitute a violation, breach or counterfeiting of
others’ rights, and no objections to such use have been raised by third
parties. With the exception of the provisions under the license agreement for
the “Elettrogen” trademark stipulated by the Company and the Seller on
December 3, 2000, no fees, royalties or other payments are due by the
Company for the use of such patents or other intellectual property rights.

 

16

 

Section
3.18 No further
representations or warranties by the Seller. Except as warranted
and represented by the Seller in this Article III, neither the Seller, nor any
of the Seller’s Subsidiaries (including the Company) intend to make any
additional representations or provide further warranties to the Buyers. The
Parties expressly recognize that even the contents of the documents or
information made available to the Buyers in the Data Room, the Information
Memorandum, any answers to questions regarding the Information Memorandum, or
any other document distributed or made available in connection with this
Contract or with the Transaction should not be construed as being part of any
representations made or warranties provided by the Seller to the Buyers.
Consequently, the Seller shall not acknowledge any such additional
representation or warranty, other than those contained in this Article III,
made in connection with the Company or with any other issue related to this
Contract or the Transaction.

 

ARTICLE IV

 

BUYERS’
REPRESENTATIONS AND WARRANTIES

 

Each
of the Buyers, jointly with the others, warrants and represents to the Seller
as follows, with respect to both the Date of this Contract and the Closing
Date:

 

Section
4.1 The Buyers’ existence,
business standing, authorizations, bankruptcy proceedings and lack
of insolvency status. (a) Each of the Buyers is a duly organized and
validly existing company according to the legislation indicated in the Offer,
and is authorized to conduct its business in the manner in which it currently
conducts it. None of the Buyers is subject to insolvency procedures or is in a
condition of insolvency.

 

(b)
Each of the Buyers has the capacity and is provided with all the powers
required to execute and perform this Contract and all the Transaction
Documentation to which each of the Buyers is a party, their performance and
fulfillment of the obligations contained therein. (including the transaction
listed in Section 2.4 above). The execution and performance of this Contract,
and of all the Transaction Documentation to which each of the Buyers is a
party, have been duly authorized in compliance with the Articles of Association
of each of the Buyers. Assuming that the Transaction Documents have been duly
authorized and signed by the Seller as well as by each of the other parties to
the Transaction Documents, this Contract and each of the Transaction Documents
constitutes an effective and binding obligation for each of the Buyers in
compliance with the provisions herein.

 

Section
4.2 Absence of related parties,
third-party consent and authorizations. (a) The execution of
this Contract and the Transaction Documents, the performance thereof and the
fulfillment of the obligations set forth therein (including the transactions
listed in Section 2.4 above) by each of the Buyers shall not cause (i) any
violations of their respective Articles of Association, (ii) any
non-performance of contractual obligations, or violation of a judge’s or
arbitrator’s decision, order or measure applicable to each of the Buyers, (iii)
any violation of regulatory or administrative provisions applicable to each of
the Buyers, or (iv) any other violation (or judicial or arbitration proceedings
ongoing at the Date of this Contract) such as to affect the validity,
effectiveness and performance of this Contract.

 

17

 

(b)
Other than the authorization by the antitrust authority, as set forth in
Section 6.1 (a) below, the execution of this Contract and the Transaction
Documents, the performance thereof and the fulfillment of the obligations set
forth therein by each of the Buyers (i) do not require consent, authorization,
approval or issue of licenses by public administrations or private individuals,
nor do they (ii) grant to third parties rights of whatever nature which may
negatively impact the Transaction.

 

Section 4.3  Buyers’ Shareholders. Each of the
Buyers warrants and represents to the Seller that each of the Buyer is
compliant with all the requirements prescribed under the Prime Minister’s
Decree dated November 8, 2000.

 

Section
4.4 Financial Standing. The Buyers have
sufficient funds, or have undertaken valid and binding commitments with primary
financial institutions (true copies of which are provided to the Seller) to
borrow from such primary financial institutions the funds required by the
Buyers to acquire the Interest under the terms and conditions stated in this
Contract, and the Buyers shall have such funds fully available at the Closing
Date. Each of the Buyers is not aware of any event which would compromise the
Buyer’s ability to use the funds, nor has reasons to believe that such funds
may not be available at the Closing Date.

 

Section
4.5 Irrevocable Commitment in
favor of the Treasury and Industry Ministries. Each of the
Buyers warrants and represents to the Seller that each of the Buyers has duly
signed an irrevocable commitment in favor of the Ministry of the Treasury,
Budget and Economic Planning, and of the Ministry of Industry, Commerce and
Crafts, with respect to the obligations under the Procedure Regulations, in the
form specified in Exhibit 4.5 to this Contract.

 

Section
4.6 Absence of Intermediaries. All
negotiations for the finalization of this Contract and of the related
agreements have not been conducted through any intermediaries or agents of any
of the Buyers, such as may give rise for the Seller to the obligation to pay
commissions or fees of whatever nature to said intermediaries or agents.

 

Section
4.7 Accuracy of the Information
Provided to the Seller in the course of the Transaction. All the
written documents and information sent by the Buyers to the Seller with respect
to the Transaction, (including but not limited to all the information contained
in this Contract and in the Transaction Documents) are correct, accurate and
true.

 

Section
4.8 PUHCA. PUHCA provisions shall not be applicable
to the Company as a result of executing this Contract and performing the
obligations or the transactions set forth herein.

 

Section
4.9 Due Diligence The Buyers hereby recognize
(i) that they conducted legal, tax, accounting and technical due diligence
procedures on the Company, in the Data Room provided to them, from
March 26 to March 31, and examined all the documentation contained
therein or subsequently made available to them, (ii) that they visited the
Facilities of Ostiglia, Monfalcone, Tavazzano, Fiume Santo and Trapani, as well
as the core Facilities of Terni, Cotronei and Catanzaro from March 19,
2001 to April 24, 2001,

 

18

 

and
(iii) that they attended presentations regarding Elettrogen given by Company
executives and directors on March 27, 2001.

 

ARTICLE V

 

SELLER’S AND BUYERS’
OBLIGATIONS

 

Section
5.1 Conducting the Company’s
Business. (a) Except as (x) otherwise required under this Contract, or
(y) otherwise agreed with the Buyers (whose consent shall not be unreasonably
withheld or delayed), from the Effective Date of this Contract to the Closing
Date, the Seller:

 

(i)                         shall provide for the Company (a) to carry
out its day-by-day business and continue its combined cycle conversion plan at
the Ostiglia plant, as well as the construction of the fuel discharge system
and installation of the oil pipeline at the Fiume Santo plant, solely according
to course of business criteria, in compliance with the Company’s operating
practices, and as contemplated in the EPC or in the Oil Pipeline Contract, (b)
not to exercise the right to request the supply of optional services and works,
set forth in Article 3 of the ECP, (c) not to exercise the right to request the
execution of the additional works set forth in Article 3 of the Oil Pipeline
Contract and (d) maintain relations with Enel FTL S.p.A. as supplier and with
Enel Distribuzione S.p.A. as customer;

 

(ii)                      notwithstanding the provisions under (i)
above, the Seller shall provide for the Company not to take any action (except
as indicated in Exhibits 3.12 and 3.15) aimed at: (a) starting activities not
related to the energy sector; (b) acquiring, selling or transferring any
Company asset (except for the purchase of real estate as set forth in Exhibit
5.12 under Section 5.12 below, the sale of energy and purchase of fuels as
required under contracts existing at the Date of the Tender, and the purchase
of spare parts, materials and services for the normal course of business, in compliance
with the Company’s operating practices) for consideration lower than 3% (three
percent) of the Company’s Shareholders’ Equity as shown in the Certified
Balance Sheet; (d) make investments, or series of related investments in fixed
assets (except for investments required for maintenance of the Company’s
Facilities and those set forth in Exhibit 5.1), for an amount exceeding 3%
(three percent) of the Company’s Shareholders’ Equity as shown in the Certified
Balance Sheet; request or obtain additional forms of funding over and above the
Inter-group Debt, with the exception of guarantees issued during the normal
course of business; (f) acquire or otherwise obtain the use of interests in
other companies, businesses or business units, or carry out mergers, split-ups
or similar corporate transactions; (g) change, raise or promise to raise
salaries or other compensation to each of the Company’s employees (including
the executives), except as prescribed in the applicable national collective
labor agreement or individual contracts existing at the Date of the Tender; (h)
appoint or hire executives; or (i) make financial investments for speculation
purposes.

 

19

 

(iii)                   will not allow
(a) any change or modification to the Articles of Incorporation of the Company,
as per Exhibit 1.2 of this contract, (b) the issuance or the sale of stock
representing the capital stock of the Company, the issuance or the sale of
bonds convertible in, options in relation to, warrants to purchase, or
underwriting rights for, stock representing the capital stock of the Company or
the reaching and execution of any agreement that forces the company to perform
any one of the aforementioned activities, that is: (c) that the Company grant
any earnings or reserve or any distribution or extraordinary compensation to
the Seller or its own directors, with the exception of the distribution to the
Seller of the earnings pertaining to the fiscal year ended December 31,
2000, approved by the Shareholders’ Annual General Meeting on March 21,
2001 and done on April 13, 2001;

 

(iv)                  will not
perform, and will not allow any of its subsidiary companies to perform, any
transaction with the Company that is different from the transactions at market
conditions and from those that are planned in the contracts listed in Exhibit
3.12, and in particular, but with no limitation whatsoever, any transaction
with the Company aimed at changing the energy purchase contract, the EPC and
the supply contracts necessary for the transaction of the Facilities, specified
in Exhibit 3.12.

 

(b)
Furthermore the Seller commits itself, starting from the Date of this contract,
and up to the Closing Date, to enable the Buyers, as well as the consultants
that are designated by it, to have access to the Company offices and facilities
during office hours and to examine the accounting books and records and other
documentation relating to the activities of the Company, with an advance notice
of at least 3 (three) days, to be sent in writing to the Seller and the
Company, and in any event without interfering in the normal activity of Company
itself.

 

(c) Any
information or document which the Buyers come in possession of, pursuant to the
aforementioned paragraph (b), will have to be held in the strictest confidence
by the Buyers, conforming and pursuant to the Confidentiality Agreements and,
in the event the transactions envisioned in this Contract are not performed,
these documents or information shall have to be returned or destroyed, as
provided for in the Confidentiality Agreements.

 

(d)
Furthermore the Seller commits itself, starting from the Date of this contract,
and up to the Closing Date, to request, and to make it so that the Company
requests, the advance written consent of the Buyers (who cannot unreasonably
deny or delay their consent without a justifiable reason), in relation to any
act that pertains to the extraordinary management of the Company. It remains
expressly agreed between the Parties that the Company may continue its incentive
program to let employees leave, pursuant to the company management policies.

 

(e) The Buyers
state that they know the terms for exercising the prerogatives pertaining to
the preceding letters (b) and (c) of paragraph (i) in the preceding Section 5.1
(a), as foreseen in the respective articles of the EPC and the Oil Pipeline
contract.

 

Section 5.2 Withdrawing from Intra-group
Contracts. The Seller commits itself towards the Buyers to ensure that
its Affiliated Companies, which have executed with the Company the

 

20

 

contracts
listed in Exhibit 5.2 (i) (the “Intra-group Contracts”), give written notice to
the company within and not later than the Closing Date, basically in the form
detailed in Exhibit 5.2 (ii), in order to allow the Company to withdraw
unilaterally, and without incurring any additional cost, from the Intra-group
Contracts. Furthermore the Seller will assure that a certified copy of the
original of these written communications be delivered to the Buyers on the Date
of Closing.

 

Section 5.3 Expenses, taxes. Independently from the Closing
going through and from the transactions provided for in this Contract and from
the documents relating to the Transaction, and with the exception of what is
otherwise provided for in this Contract, all costs and expenses incurred in
relation to this Contract, to the Documents relating to the Transaction and to
the transactions provided for in it (including fees and expenses for financial,
accounting and legal consultants) will be borne by (i) the Seller, if incurred
by the Seller, or (ii) by the Buyers, if incurred by the Buyers or by its
Affiliate Companies, with the exception of (a) all the expenses relating to
notaries and the dues resulting the execution of this Contract and the provided
transactions and (b) the taxes and dues relating to the use, notification and
registration of this Contract and of the transactions provided for herein,
including the transfer of the Shares, which will be entirely borne by the Buyers,
which will perform all the communications necessary in relation to such
expenses, dues and taxes.

 

Section 5.4 Execution of the Transaction. (a)
Pursuant to the terms and conditions of this Contract, the Parties agree: (i)
to cooperate in doing everything in their power to perform any registration,
give any communication and obtain all the authorizations (government or
otherwise) necessary for performing the transactions provided for herein
(including the communication and approval pursuant to the subsequent Section
6.1), and (ii) to perform, or make it so that it is performed, everything that
is furthermore necessary pursuant to this Contract and the applicable laws and
regulations, to perform and render effective the transactions provided for
herein.

 

(b) In the
event it is necessary, after the Closing Date, to perform further actions in
order to ensure the effects of this Contract, the Sellers and Buyers agree to
cooperate and to perform (or make sure they are performed) all these
aforementioned further actions.

 

Section 5.5 Notices of Events. Before the Closing Date,
the Parties will communicate in a timely manner in writing the occurrence of
any event or circumstance that may hinder or prejudice the taking place of the
event described in subsequent Section 6.1, that is the taking place of one of
the events pursuant to the subsequent Section 6.2.

 

Section 5.6 Commitments pursuant to the
Memorandum of Understanding. The Buyers state to the Seller that
they accept in its entirety and without conditions the commitments in the
Memorandum of Understanding signed by the Ministry of Industry, the unions and
the Seller dated October 4, 1999 (the “Memorandum of Understanding”, a
copy of which is hereby attached as Exhibit 5.6 (i)), expressly exonerating the
Seller from any obligation or responsibility relating directly or indirectly
from the aforementioned Memorandum of Understanding in the period following the
Closing Date, holding the Seller harmless from any Non Operating Expenses that
may derive from it, because of an act, fact or omission on the part of the
Buyers or the Company after the Closing Date, including but not limited to the
following: (i) the commitment not to transfer, directly or indirectly, control
of the Company or any substantial part of it (including any of its facilities),
for a period of 36 (thirty-six) months from the Closing Date; (ii) confirm the
continuing electrical productivity of the facilities while respecting the
existing environmental laws and regulations

 

21

 

as well as the
agreements incurred between the Company and local governments as detailed in
Exhibit 5.6 (ii), (iii) commitment to adopt the industrial plan presented with
the offer, in order to guarantee the continued production of the Facilities,
their energy efficiency, the industrial and financial full exploitation of the
Company and the employment level of the Company as time goes by, without taking
collective measures aimed at reducing the number of employees up to December 31,
2004, and in any event for a period of no less than 3 (three) years from the
Closing Date, (iv) a commitment to confront any question about excess number of
employees at the end of the period specified in the abovementioned letter
(iii), through agreements with unions aimed at retraining and employment under
different capacities of the excess employees, (v) to maintain the financial,
legal and union terms, including the health benefits and the extra employer
contributions to the social security payments for employees that is currently
in force with the company, in a manner that is consistent with what is provided
for in the agreements in force, for three years from the creation of the
Company and in any event up to the signing of the new collective national
employment contract for the electrical industry, as well as (vi) the commitment
to illustrate the Buyer’s commitments as per the preceding letters (i) through
(v) in the course of a specific meeting with the unions, which will have to
take place within 30 (thirty) days from the Closing Date (the “Commitments in
the Memorandum of Understanding”).

 

Section 5.7 Antitrust Notice. The Buyers will take care
of providing as soon as possible, and in any event no later than 5 (five) days
from the Date of this Contract, the communication provided for by Article 4 of
EU Regulation 4064/1989 (and subsequent modifications) to the European
Commission. A copy of this communication will be simultaneously provided to the
Seller. The Buyers acknowledge that they have received from the Seller the
information and data relating to the Company necessary for preparing the
aforementioned communications. Furthermore, the Seller will have to provide, in
a timely manner, to the Buyer the additional information and data in its possession,
or in the Company’s possession (those that are not already in the public domain
on not already in the Buyers’ possession) that may be requested by the
pertinent antitrust regulatory agency.

 

Section 5.8 Confidentiality of the Industrial
Plan. The Seller commits itself towards the Buyers (i) to maintain, and
shall make it so that its directors and employees, its affiliates, the
directors and employees of the affiliates maintain in absolute confidentiality
the industrial plan for the Company (as per paragraph (iii) of preceding
Section 5.6) presented by the Buyers to the Seller together with the Offer and
all information contained in it conforming to the Regulations of the Procedure,
and abstain from divulging to third parties (with the exception of the Ministry
of the Treasury, Budget and Economic Planning and the Ministry of Industry,
Commerce and Craftsmanship, and the Committee for Global Consulting and
Guarantee of Privatizations) any information on the subject, and (ii) not to
use, and shall make it so that its directors and employees, its affiliates, the
directors and employees of the affiliates not use, directly or indirectly, any
news, data or information contained in the aforementioned industrial plan and
not otherwise in the possession of the Seller or in the public domain (with the
exception of what is expressly foreseen in the Regulations of the Procedure).

 

Section 5.9 Litigation involving the Seller.
(a) The Parties acknowledge that legal actions initiated or filed by third
parties against the Company or the Seller, listed in Exhibit 3.8 (a) will be
managed, from the Closing Date, in complete autonomy and independence from the
Seller, which commits itself to bearing any related cost, expense or other
prejudice relating to the Company, holding harmless and indemnifying the
Company itself. Furthermore the Parties acknowledge that the Seller will have
the right to any amount owed it, receivable or credit deriving from such
proceedings pursuant to Exhibit 3.8 (a), with respect to

 

22

 

which the
Buyers or the Company shall have no claim towards the Seller. The Buyers commit
from this moment, in relation to these same procedures, (x) to cooperate
actively with the Seller, conferring it the broadest power of attorney for
trial and ensuring that the company give it access to all the documentation and
the information necessary, allowing it also, upon request, access to the
Company offices during office hours, but in any event without prejudicing the
normal work of the Company, after the Closing Date, and furthermore (y) not to
intervene in them, not even at its own expense or with the assistance of a
professional of its choice, and (z) to make it so that the Company conclude
valid and binding transactions with third parties or proceed with giving up the
acts, where necessary, upon request of the Seller at his discretion, as long as
(i) the Seller take on any cost or expense deriving to the Company, and that
(ii) the Company not have to bear any prejudice as a consequence of the
conclusion of these transactions. It furthermore remains expressly agreed
between the Parties that the Seller will inform in a timely manner the Buyers
or the Company about the happenings and developments in the proceedings
specified in Exhibits 3.8 (a), and will not commence, in relation to these same
proceedings, any initiative that may prejudice the Buyers or the Company.
Furthermore, in relation to the actions entertained of the proceedings
initiated by third parties listed in Exhibit 3.8 (a), the Seller is committed
towards the Buyers (i) not to involve the Company in this (in those cases where
the Company is not a Party to the proceeding), in the ways provided for by the
applicable rules of procedure and (ii) to request, where possible, the
elimination of the Company (in those cases where the Company is a Party to the
proceedings) from the legal action, in the manners provided for by the
applicable rules of procedure.

 

(b) The
Parties furthermore acknowledge that those actions initiated by proceedings
started by third parties, against the Company or the Seller, listed in Exhibit
3.8 (b), will be managed, even after the Closing Date, in complete autonomy and
independence from the Company. Furthermore, the Buyers will make it so that the
Company support or hold harmless the Seller in relation to any cost, expense or
other prejudice that may come to the Seller, while instead the Seller’s
obligations stand pursuant to the subsequent Article VII, to indemnify and
reimburse, in the event of a violation of the declarations and guarantees of
the Seller pursuant to paragraph (b) of preceding Section 3.8. Furthermore, the
Parties acknowledge that the Company shall have the right to any amount owed
it, receivable or credit deriving from such proceedings pursuant to Exhibit 3.8
(b), with respect to which the Seller will not have anything to claim from the
Company or from the Buyers. In relation to the actions entertained or the
proceedings initiated by third parties listed in Exhibit 3.8 (b), the Seller
(i) from this moment confers on to the Buyers ample power of attorney, and (ii)
is committed towards the Buyers, upon request of the Buyers at their
discretion, to conclude valid and binding transactions with third parties or
proceed with giving up the acts, where necessary, upon request of the Buyers or
the Company, as long as (x) the Buyers make it so that the Company take on any
cost or expense deriving to the Seller, and that (y) the Seller not have to
bear any prejudice as a consequence of the conclusion of these transactions.
Furthermore, in relation to the actions entertained of the proceedings
initiated by third parties listed in Exhibit 3.8 (b), the Buyers are committed
towards the Seller to make it so that the Company (i) not involve the Seller in
this (in those cases where the Seller is not a Party to the proceeding), in the
ways provided for by the applicable rules of procedure and (ii) to request,
where possible, the elimination of the of the Seller (in those cases where the
Seller is a Party to the proceedings) from the legal action, in the manners
provided for by the applicable rules of procedure.

 

Section 5.10 Conversion costs. In
the event that an administrative measure related to the combined cycle
transformation of the CCGT Facilities, arising between the Closing Date and
December 31, 2003, were to impose specific clean-up obligations on the
company in connection with soil or subsoil pollution at a CCGT

 

23

 

Facility, occurring prior to the Closing Date, the Seller agrees to
indemnify the Buyers for up to 50% (fifty percent) exclusively of the relative
costs and expenses incurred by the Company strictly and directly required for
compliance with the specific obligations set forth in the relevant
administrative measure (the “Conversion Costs,”) and solely on condition that
(i) the Buyers consult with the Seller in a timely manner, (ii) the Seller
specifically approve in writing all the relative Conversion Costs (which
approval may not be reasonably refused) and (iii) that the Buyers provide full
written evidence to the Seller of the corresponding invoices received and of
the related payments made by the Company. It is expressly understood and
stipulated by the Parties that any compensation under this paragraph shall be
actionable by the Buyers only on the terms and conditions and within the limits
specified in this paragraph, and shall not be subject to the limits specified
in Article VII below, with the exception of the Maximum Amount specified in
Section 7.4 below (which shall be applied to the sum paid by the Seller up to
50% (fifty percent) of the Conversion Costs). It is expressly specified and
agreed by the Parties that the Seller’s obligations vis-à-vis the Buyers in
connection with the Conversion Costs are fully governed by this clause, but
excluding any duplication of benefits of this clause and any other compensation
that may be paid by the Seller under this Contract to the Buyers or the Company
in connection with the facts in question. It is further understood by the
Parties that the Seller shall have no further obligation or responsibility with
respect to the Buyers, the Company or third parties, in connection with any
administrative measure (or other commitments included therein) issued after the
Closing Date, involving the combined cycle transformation of the CCGT
Facilities.

 

Section 5.11 “Elettrogen” Brand.
The Buyers (i) acknowledge and agree to see to it that the Company
acknowledges, the full and sole ownership of the “Elettrogen” trademark
belonging to the Seller and (ii) agree to see to it that the Company changes
its own corporate style to another that in no way contains the word
“Elettrogen,” prior to the expiry of the trademark use licensing agreement
described below. The Seller agrees to grant to the Company, on the Closing
Date, a temporary license effective as of the Closing Date and valid for up to
6 (six) months following the Closing Date, for the use of the “Elettrogen”
trademark solely for the purpose of continuing the exercise of the Company’s
activities as it is currently carrying them out. It is understood by the
Parties that this temporary license shall stipulate the same consideration as
indicated in the licensing agreement currently in effect as listed in Exhibit 3.3
(c).

 

Section 5.12 Real Estate. The Seller
agrees to see that title to the real estate listed in Exhibit 5.12 belonging to
Companies controlled by the Seller is transferred to the Company at book value
prior to the Closing Date.

 

Section 5.13 Tax Documentation.
The Seller agrees to furnish to the Buyers at its own expense, and as soon as
available, the documentation pursuant to paragraph three of Art. 6 of Decree
Law No. 358 of October 8, 1997, attesting that the gains on the sale of
the Interest comprise the taxable income of the Seller, or are subject to the
substitute tax pursuant to applicable provisions of the regulations.

 

Section 5.14 Accident in
one alternator at the Fiume Santo generating plant. The Seller
agrees to see to it that the Company uses its best reasonably possible efforts
to complete, prior to the Closing Date, the repairs made necessary following
the incident described in Exhibit 3.6. The Seller

 

24

 

agrees to compensate the Buyers for the costs or expenses incurred by
the Company as strictly and directly necessary to complete such repair work, to
the extent these costs and expenses have not already been incurred by or posted
to the books of the Company prior to the Closing Data, and solely on the
condition that the Buyers provide full written evidence of the related invoices
received and the related payments made by the Company. It is expressly
understood and stipulated by the Parties that any compensation under this
paragraph shall be actionable by the Buyers exclusively on the terms and
conditions and within the limits set forth in this paragraph, and shall not be
subject to the limits specified in Article VII below, with the exception of the
Maximum Amount referred to in Section 7.4 below. It is further understood by
the Parties that the Seller shall have no further obligation or responsibility
vis-à-vis the Buyers, the Company or third parties, in connection with the
incident described in Exhibit 3.6 and that any decision, intervention, expense
or cost or other activity required for the repair of the alternator shall not
be subject to the restrictions or limitations specified in Section 5.1 above.

 

ARTICLE VI

 

TERMS AND
SERIOUS DEFAULT

 

Section 6.1 Suspensive conditions.
(a) The efficacy of the purchase of the Interest by the Buyers pursuant to this
Contract, and the related Closing, shall be understood to be subject to the
suspensive condition that this acquisition shall be approved by (i) the
Autorità Garante della Concorrenza and del Mercato (Compensation and Market
Guarantee Authority) pursuant to Article 16 of Law No. 287/1990, or (ii) the
European Commission, pursuant to Article 4 of Regulation 4064/1989 (as
amended), as specified by the Buyers in Exhibit 6.1 below.

 

(b) It is understood by the Parties that, in the event the purchase of
the Interest by the Buyers under this Contract is approved not later than by
the Final Term by the authorities indicated in paragraph (a) above, subject to
any significant commitments or conditions, the Buyers shall have the right (i)
to accept these commitments or conditions and proceed with the Closing, or (ii)
not to accept these commitments or conditions and not proceed with the Closing,
advising the Seller in writing that it wishes to avail itself of this clause,
by and not later than the fifth day following the occurrence of the suspensive
condition referred to in paragraph (a) above. As specified in paragraph (d) of
Section 2.2 above, in the case described in point (ii) above, the Seller shall
be fully entitled to withhold the entire First Installment of 5% (five percent)
of the Purchase Price, provided that the Buyers shall then not be entitled to
any further consideration.

 

(c) It is further understood by the Parties
that, in the event the suspensive condition referred to in paragraph (a) above
is not implemented by the Final Term, and only if the Seller advises the Buyers
in writing of the expiration of the Final Term, that the transfer of the
Interest by the Seller to the Buyers shall not take place and this Contract and
any business act accessory or relative thereto shall lose its efficacy, with
the exception of the provisions of this Contract which, by their very nature,
shall continue to have full force and effect. In particular, as described in
paragraph (d) of Section 2.2 above, in the event the suspensive condition
referred to in paragraph (a) above is not fulfilled by the Final Term, the
Seller shall be fully entitled to withhold the entire First Installment of 5%
(five percent) of the Purchase Price, provided that the Buyers shall not be
entitled to any further consideration.

 

25

 

(d) The Buyers declare to the Seller that
they are aware of the importance for the Seller of the event identified as a
suspensive condition pursuant to paragraph (a) above taking place as soon as
possible and they further declare (i) that they have correctly identified as
the authority referred to in Exhibit 6.1, the appropriate antitrust authority responsible for
issuing the related approval, (ii) that they are not aware of any reasons that
would stand in the way of the issuance of such approval that could adversely
affect the performance of this Contract and (iii) that they agree to do
everything that is reasonably possible within their power to obtain the
approval by the appropriate antitrust
authority not later than by the Final Term.

 

(e) The Buyers agree to furnish to the Seller, by and not later than 3
(three) days following the receipt or forwarding of the related documentation,
and for the entire term of the procedure until its conclusion, (i) a copy of
all documentation or written communications sent to or received from the
competent antitrust authority,
(ii) a copy of any communication relative to any requests for additional
information or to the start of any investigation or inquiry by the appropriate
antitrust authority and (iii) a copy of any measure of any type adopted by the
appropriate antitrust authority
in connection with the Transaction notified.

 

(f) The Buyers further agree (i) not to undertake any initiatives that
can directly or indirectly prejudice the approval referred to in paragraph (a)
above, and (ii) to inform the Seller, by and not later than 3 (three) days
after receiving notice, of any objections against approval of the Transaction
by the appropriate antitrust
authority.

 

Section 6.2 Cancellation conditions.
This Contract shall be deemed as conditional, subject to cancellation, upon a
court or arbitration ruling, temporarily enforceable, prohibiting the
conclusion or execution of this Contract, the concluding of agreements or the
carrying out of operations as specified in this Contract unless, by the
deadline indicated above, this decision has been completely annulled or
rejected by another subsequent measure or proceeding. It is understood by the
Parties that, should such a decision be handed down, this Contract shall be
deemed as cancelled only and solely if the Seller advises the Buyers in writing
that Seller wishes to avail itself of this clause, but not before the
fulfillment of the suspensive condition specified in paragraph (a) of Section
6.1 above and, in any event, by and not later than the Closing Date.

 

Section 6.3 Express Defeasance
Clause. (a) The Parties agree here and now that any fact or act of the
Seller, with reference to the period between the Date of this Contract and the
Closing Date, likely to result in contingent liabilities for the Buyers or the
Company exceeding a total of 20% (twenty percent) of the Purchase Price, which
would not have arisen if: (i) the statements and guarantees specified in
Article III above and the Exhibits referred to here, were correct, accurate and
truthful on the Date of this Contract, or (ii) the obligations resulting for
the Seller under Article V of this Contract were fully and correctly carried
out, shall give the Buyers the right to cancel this Contract pursuant to
Article 1456 of the Civil Code, notice of which shall be given in writing to
the Seller within 10 days of the discovery of such fact, and in any event not
later than the Closing Date. The foregoing is in any event without prejudice to
the right of the Buyers not to take advantage of this cancellation clause, to
proceed with the Closing and to ask for the compensation of any Contingent
Liabilities subject to the terms and conditions and within the limits specified
in Article VII below.

 

26

 

(b) The Parties further agree here and now
that, in the event the Closing takes place, the cancellation clause specified
in paragraph (a) above shall have no further effect

 

ARTICLE VII

 

INDEMNITY
OBLIGATIONS

 

Section 7.1 Seller’s
indemnity and reparation obligations. (a) The Seller agrees to
indemnify and compensate in full, withdraw opposition and defend at law the
Buyers, any successors and assigns, in connection with any Contingent Liability
affecting the Company or the Buyers (i) that would not have occurred in the
event the declarations and guarantees referred to in Article III above and the
Exhibits referred to there, were correct, accurate and truthful, with the
exception of the cases in which the Buyers gave their own written consent to
any action or omission that had led to one of the declarations and guarantees
provided by the Seller pursuant to Article III that was not correct, accurate
and truthful or (ii) that would not have occurred if the obligations arising
for the Seller pursuant to Article V of this Contact had been fully and
correctly carried out by the Closing Date or (iii) that took place following an
immediately enforceable court or arbitration ruling (even temporarily), handed
down against the Company, or further to a binding settlement agreement to which
the Company was a part, solely in relation to the actions brought or proceedings
initiated by third parties as listed in Exhibit 3.8 (a).

 

(b) With the exception of the provisions of Sections 5.10 and 5.14
above, any compensation in connection with the Contingent Liabilities referred
to in points (i), (ii) and (iii) of paragraph (a) of this Section 7.1 shall be
actionable by the Buyers solely on the terms and conditions and within the
limits specified in the following paragraphs and Sections 7.3 and 7.4 below.

 

(c) The amount of the obligation to compensate referred to here, in the
event of any Contingent Liabilities incurred by the Buyers or by the Company,
shall be equal to the amount of the Contingent Liabilities (and the costs
connected thereto) remaining after deduction of the following:

 

(i) The amount of the risks and charges fund as posted in the Certified
Balance Sheet in connection with these Contingent Liabilities;

 

(ii) Relative to the Contingent Liabilities which, by their nature,
constitute tax-deductible costs, the amount of the relative tax benefit
actually realized by the Buyers or by the Company; and

 

(iii) The
amount of any compensation that the Buyers and/or the Company had received in
connection with any insurance or on any similar basis, in connection with the
event that led to the Contingent Liability in question.

 

(d) After the Closing Date, the rights to
compensation specified in Article VII and Sections 5.10 and 5.14 in favor of
the Buyers are deemed to be exclusive and therefore substitutive of any other
right (specifically including cancellation of the Contract for any
non-performance) or legal remedy applicable in relation (i) to the warrants and
representations of the Seller pursuant to Article III of this Contract, or (ii)
the obligations of the Seller pursuant to Article V of this Contract.

 

27

 

(e) It is
expressly specified and agreed that any duplication must be avoided as between
any compensation that may be paid by the Seller in connection with this
Contract to the Buyers and, if applicable, to the Company. Moreover, and
without prejudice to the rights of the Buyers against the Seller under this
Contract, the Buyers agree to see that the Company does not make any request
for compensation (including in connection with third party requests against the
Company) in connection with Contingent Liabilities arising from the Deed of
Conveyance. Finally, it is expressly specified and agreed that the amount
referred to in paragraph (c) (i) of this Section 7.1 shall not be deducted from
the amount of the compensation for Contingent Liabilities incurred by the
Company in connection with the causes listed in Exhibit 3.8 (a), as specified
in Section 5.9.

 

Section 7.2
Buyer’s indemnity and reparation obligations. The Buyers agree to fully
compensate, indemnify, withdraw opposition to and defend at law the Seller, its
respective successors and assigns, (i) in connection with any Contingent
Liability incumbent upon the Seller that would not have arisen in the event the
warranties and representations referred to in Article IV above and the Exhibits
referred to there had been correct, accurate and truthful, (ii) in connection
with any non-performance relative to the Commitments of the Memorandum of
Understanding referred to in Section 5.6 above or (iii) in connection with any
third-party claim against the Seller further to any non-performance by the
Buyers of the commitments assumed pursuant to Exhibit 4.5. Any compensation in
connection with the Contingent Liabilities referred to in points (i), (ii) and
(iii) above shall be actionable by the Seller alone, on the terms and
conditions and within the limits specified in Sections 7.3 below and may all be
asserted by the Seller for a period of 5 (five) years of the Closing Date.

 

Section 7.3 Parties
requests pursuant to Sections 7.1 and 7.2. (a) The obligations
referred to in Sections 7.1 and 7.2 above may be invoked, with notice of same
to be sent by registered letter with return receipt requested within 90
(ninety) days of the discovery of the related substantiating fact. In the event
of actions brought or proceedings initiated by third parties, the Party asked
to perform the obligations specified in Sections 7.1 or 7.2 above (hereinafter,
the “Obligated Party,”) shall be permitted to intervene in such actions or
proceedings, at their own expense and with the assistance of a professional of
their own choosing who has not been rejected by the other Party (hereinafter
the “Compensated Party”) on reasonable grounds. It is understood that, in the
event the Obligated Party has intervened in such actions or proceedings, no
transactions may be concluded with third parties or no agreements may be
denounced without the consent of the Obligated Party (which consent may not be
reasonably refused without a justified motive). It is further understood that,
in the event the Obligated Party has not been a party to these actions or
proceedings, the Compensated Party shall nevertheless arrange to keep the
Obligated Party informed of the course of such actions or proceedings, and
shall guarantee it access to the related documentation. It is understood,
finally, that the Contingent Liabilities relative to third-party claims shall
not be compensated and indemnified under this Article VII until such time as
these claims have been not been satisfied in execution of an immediately
enforceable court or arbitration ruling (even temporarily) or a binding
settlement agreement.

 

(b) The Parties hereby mutual acknowledge that, by way of exception to
the provisions of paragraph (a) above, the actions or proceedings listed in
Exhibit 3.8 (a) shall be carried out solely and independently by the Seller.

 

Section 7.4 Limit to
the indemnity obligations relative to representations and warranties.
(a) Without prejudice to the provisions of Article 1229 of the Civil Code, any
compensation or indemnity that the

 

28

 

Seller might be required to pay to the Buyers in connection with any
Contingent Liability incumbent upon the Buyers or the Company under this
Contract, shall be due and payable only as of the time the total of this
compensation and indemnity exceeds a total deductible of 2.5% (two point five
percent) of the Purchase Price (hereinafter, the “Deductible”), and only as to
the portion exceeding the Deductible, in which case the Seller shall be
required to pay compensation and indemnity to the Buyers only up to a maximum
amount equal to the difference between 17.5% (seventeen point five percent) of
the Purchase Price and the Deductible (hereinafter, the “Maximum Amount”). Moreover,
the Buyers may not invoke against the Seller any Contingent Liability incumbent
upon the Buyers or the Company that is individually less than € 100,000 (one
hundred thousand) (hereinafter, the “Minimum Deductible”). It is understood
here and now by the Parties that one or more Minimum Deductibles will not
combine in any way either for the purpose of determining the Deductible, or of
determining the Maximum Amount. The Parties further agree that the indemnity
relative to Sections 3.1 to 3.4 above is neither subject to the Deductible (and
will not be involved in determining the Deductible) nor to the Maximum Amount.
The Parties further agree that the Seller’s obligations to compensate and
indemnify in connection with the non-performance of Section 5.9 above and point
(iii) of paragraph (a) of Section 7.1 above are not subject to the Deductible
(and are not involved in the determination of the Deductible).

 

(b) The Seller’s obligations to compensate and indemnify referred to in
Sections 7.1 above may be invoked in the manner specified in this Article VII
until December 31, 2002, with the exception of (i) the declarations made
and the guarantees furnished by the Seller to the Buyers pursuant to Sections
3.4, 3.14 and 3.15 above, which may also be invoked by the Buyers during the
statute of limitations temporarily applicable, (ii) for the declarations made
and the guarantees furnished by the Seller to the Buyers pursuant to Section
3.10 above, which may all be invoked by the Buyers until December 31, 2003
and (iii) for the Seller’s obligations to indemnify and compensate in
connection with the non-performance per Section 5.9 above and point (iii) of
paragraph (a) of Section 7.1 above, which may all be invoked by the Buyers for
a period of 10 (ten) years from the Closing Date.

 

ARTICLE VIII

 

GENERAL
CLAUSES

 

Section 8.1 Disclosure. (a) The Parties
agree not to issue, either through third parties or persons under their
control, any press releases or other announcements regarding this Contract and
the other operations referred to hereunder, without the prior authorization of
the other Party. It is understood that such authorization shall not be
reasonably refused. The Buyers hereby take note that, as of the Date of this
Contract and the Closing Date or immediately following these dates, the Seller
shall be required to issue public notices and inform the Stock Exchange entities,
respectively, of the signing of this Contract and the implementation of the
Closing and the relevant information in connection with the Transaction. The
Buyers here and now express their consent to such communications.

 

Section 8.2 Amendments. Amendments to
one or more of the clauses of this Contract shall be binding on the Parties
only if set forth in writing and duly signed by both Parties.

 

29

 

Section 8.3 Waivers. At any time prior to
the Closing, the Seller may, at its own discretion (i) extend the period
specified in this Contract for the performance of each obligation or activity
specified herein as incumbent upon the Buyers, or (ii) waive one or more of the
obligations identified in this Contract as incumbent upon the Buyers. Any
extension per point (i) above or waiver per point (ii) above shall be valid and
binding only if granted by the Seller via a written communication to the
Buyers.

 

Section 8.4 Assignments. This Contract
may not be assigned by either of the Parties without the prior written
authorization of the other Party. The Parties agree here and now that the
Buyers shall have the right to assign this Contract to a company completely
controlled by the Buyers, in the same proportions as specified in point (viii)
of paragraph (a) of Section 2.4, upon written communication to the Seller in
which the Buyers jointly and unconditionally guarantee all the obligations of
said wholly-controlled Subsidiary pursuant to this Contract and the Documents
of the Transaction.

 

Section 8.5 Ineffectiveness
vis-à-vis third parties. This Contract is effective only as between the
Parties. In no event can what is expressly indicated or can be implicitly
deduced from the Contract be construed in such a way as to confer any rights,
powers or benefits to third parties or to any person not covered by the
Contract, with the exception of (i) the irrevocable commitment of the Buyers to
the Ministry of Treasury, Budget and Economic Planning and the Ministry of
Industry, Commerce and Trades, in connection with the commitments specified in
the Procedural Standards set forth in Exhibit 4.5 to this Contract and (ii) the
commitments under the Memorandum of Understanding pursuant to Section 5.6
above.

 

Section 8.6 Previous agreements.
The Preliminary Considerations (which constitute an integral and substantial
part of this Contract), the clauses and the Exhibits to this Contract, contain
the entire agreement governing the relations between the Parties in connection
with the matters regulated by same, and any prior understandings and agreements
between the Parties relative to the same matters are hereby superseded, with
the exception of the Confidentiality Agreements.

 

Section 8.7
Partial annulment, invalidity of ineffectiveness of the Contract. Even
in the event that any provision of this Contract were to be declared null and
void, invalid or ineffective, the remaining provisions of this Contract shall
retain full force and effect unless the elimination of the null, invalid or ineffective
provision distorts in any relevant way the express will and objectives of the
Parties in stipulating this Contract and of the Documents of the Transaction.
In that event, the Parties shall attempt to replace the defective provisions,
redefining their respective rights and obligations in the context of the new
situation.

 

Section 8.8. Article and Section
Headings. The titles of the Sections and Articles of this Contract are
provided by way of illustration only and may not be used by the Parties or by
third parties for purposes of interpretation.

 

Section 8.9 Calculation of
deadlines. Any term fixed for the performance of obligations incumbent
upon each of the Parties under this Contract shall be determined in accordance
with the provisions of Article 1187 of the Civil Code.

 

Section 8.10 Notices. Under pain of
inefficacy, and unless otherwise provided in this Contract, all communications
relative to this Contract and to the transactions specified

 

30

 

herein shall be sent by registered mail with return receipt requested,
preceded by a fax, to the following addresses and numbers:

 

For communications to the Seller:

 

Enel S.p.A.

Viale Regina Margherita 137

00187 Rome

Attention:

Dr. Mario Barozzi/Atty. Salvatore Cardillo

Fax: 0039-06-85092042

 

cc.:

Cleary, Gottlieb, Steen & Hamilton

Piazza di Spagna, 15

00187 Rome

Attention:

Atty. Giuseppe Scassellati-Sofrzolini/Stefano Sciolla, Esqs.

Fax: 0039-06-69200665

 

For communications to the Buyers, to the address and attention of the
joint representative of the Buyers specified in the Offer, or to any other
address that one Party may indicate in the future and in writing to the other
Party. Each communication shall be deemed as brought to the attention of the
addressee at the time it is received.

 

Section 8.11 Applicable law. This
Contract is governed exclusively by Italian law, to whose provisions reference
is made for all matters not expressly stipulated hereunder.

 

Section 8.12 Disputes. Any dispute
arising in connection with the existence, interpretation, validity, efficacy or
execution of this Contract shall be subject to the exclusive jurisdiction of
the Courts of Rome, and the Parties here and now waive the ordinary rules of
jurisdiction for the territory. To that end, the Buyers accept this exclusive
jurisdiction and waive the right to apply to any competing or alternative
forum.

 

* * *

 

We hereby request that you confirm your full acceptance of this
proposed contract (including the Exhibits) by sending us a letter in which you
transcribe the text of this letter (including every Exhibit) duly signed by you
in acceptance and initialed on every page for identification purposes.

 

Best regards,

 

	
  ENDESA S.A.

  
	
   

  
	
   

  	
   

  	
   

  
	
  (legal representative)

  

 

31

 

	
  ASM BRESCIA S.p.A.

  
	
   

  
	
   

  	
   

  	
   

  
	
  (legal representative)

  
	
   

  
	
   BANCO SANTANDER CENTRAL HISPANO S.A.

  
	
   

  
	
   

  	
   

  	
   

  
	
  (legal representative)

  

 

* * *

 

We hereby confirm our full acceptance of your proposed contract,
transcribed herein (including the relative Exhibits). Moreover, this is to
confirm that the undersigned Managing Director has appointed Eng. Paolo
Pallotti to initial the Exhibits hereto, on each page, for identification.

 

	
  Best regards,

  
	
   

  
	
   

  
	
  ENEL S.p.A.

  
	
   

  
	
  [signature] July 31, 2001

  
	
  (Legal representative)

  

 

32

 

Irrevocable commitment to the Ministries of
the Treasury, Budget, and Economic Planning, and to the Ministry of Industry,
Commerce, and Craftsmanship

 

1.                                       ENDESA
S.A., a company under Spanish law with headquarters at Calle Principe de
Vergara 187, 28002 Madrid (Spain), with a capital stock of
€ 1,270,502,540.40 entirely underwritten and paid up, registered with the
Business Register of Madrid, Book 736, sheet 196, page 434, C.I.F. A-28023430;
ASM BRESCIA SpA, a company under Italian law with headquarters at Via Lamarmora
230, 25124 Brescia, Italy, with a capital stock of 1,360,536,000,000 Lire
entirely underwritten and paid up, registered with the Brescia Business
Register under number 03125280176, Brescia REA No. 402664; and BANCO SANTANDER
CENTRAL HISPANO S.A., a company under Spanish law with headquarters at Paseo de
Pereda 9-12, Santander (Spain), with a capital stock of € 2,280,768,206.50
entirely underwritten and paid up, registered with the Business Register of
Cantabria, sheet 286, page 64, C.I.F. A-3900001 (referred to collectively as
the “Buyers”) declare that they have presented an Industrial Plan (the
“Industrial Plan”), enclosed as Exhibit “A,” to be considered an integral part
of the irrevocable offer to acquire the entire capital stock of Elettrogen SpA
(“Elettrogen”) turned over to Enel on June 15, 2001. Following the
effective date of the purchase of the entire capital stock of Elettrogen (the
“Closing Date”) pursuant to the purchase contract signed today between Enel
SpA, as Seller, and the Buyers (the “Contract”), the Buyers shall see to it
that the Board of Directors of Elettrogen approves the Industrial Plan.

 

2.                                       In keeping with
the provisions of the transfer plan (the “Transfer Plan”) approved by Decree of
the President of the Council of Ministers dated August 4, 1999, and by the
Industrial Plan called for by Decree of the Minister of the Treasury in
cooperation with the Minister of Industry dated January 25, 2000 (the
“Interministerial Decree”), the Industrial Plan contains the commitments of the
Buyers with regard to: (i) conversion to combined cycle of all the facilities
indicated as convertible, with indication of scheduling and investment plans;
(ii) guarantees as to the employment levels for the personnel involved; and
(iii) a minimum period during which the electrical power production activity
will be maintained at the sites.

 

3.                                       In accordance
with the provisions of the memorandum of understanding signed by the Minister of
Industry, Commerce, and Crafts, the union representatives, and Enel SpA on
October 4, 1999 (the “Memorandum of Understanding”), the Buyers jointly
accept:

 

3.1                                 not to transfer
control of Elettrogen or any substantial part thereof (including any of its facilities),
either directly or indirectly, during the 36 months following the Closing Date;

 

3.2                                 to continue the
production activity of Elettrogen in compliance with laws and environmental
regulations and the agreements with the local administrative bodies

 

33

 

listed hereunder in Exhibit “B” [corresponding to Exhibit 5.6 (ii) of
the Contract];

 

3.3                                 to ensure that
Elettrogen (i) does not proceed with collective personnel reduction procedures
prior to December 31, 2004 and, in any event, for a period of at least 3
(three) years following the Closing Date, and (ii) handles any excess personnel
at the end of said period by means of agreements with the unions aimed at
reclassifying and relocating the employees in question;

 

3.4                                 to maintain the
economic, regulatory, and collective bargaining terms, including the medical
assistance and unemployment benefits, of the personnel currently employed at
Elettrogen in a form corresponding to the provisions of the agreements in
effect, for three years following the charter of Elettrogen and until the new
national collective bargaining contract is entered into for the electrical
power sector; and

 

3.5                                 to present the main
points of the Industrial Plan and highlight the commitments referred to in
paragraphs 3.1, 3.2, and 3.3 above in a meeting with the unions within 30 days
following the Closing Date.

 

4.                                       Pursuant to and
for the effects of the Decree of the President of the Council of Ministers
dated November 8, 2000, the Buyers confirm that neither Italian nor
foreign public agencies, including economic agencies, nor Italian nor foreign
public companies as identified by directive 93/38/CE and by Legislative Decree
No. 158 dated March 15, 1998, collectively hold more than 30% (thirty
percent) of the Buyers’ capital stock.

 

5.                                       In keeping with
Article 1, letter a), of the Decree of the President of the Council of
Ministers dated November 8, 2000, for a period of five years following the
Closing Date, each of the Buyers may transfer shares of Elettrogen or—if the
Buyers transfer the Contract to a Company controlled entirely by the Buyers (as
defined in the Contract), pursuant to corresponding Section 8.4 (the “Assignee
Company”)—may transfer shares of the Assignee Company if, and only if, said
transfer does not involve the individual or joint acquisition of more than 30%
(thirty percent) of the capital stock of Elettrogen or the Assignee Company by
public agencies or public companies.

 

6.                                       The Buyers agree
to maintain the stability of the Elettrogen shareholdership as provided for in
Article 1, letter d), of the DPCM dated November 8, 2000 as a function of
achieving the objectives indicated in the Industrial Plan of the submitted
offer. To this end, the agreement entered into between the Buyers is appended
hereto as Exhibit “C.”

 

7.                                       In keeping with
the provisions of the transfer plan referred to in the Decree of the President
of the Council of Ministers dated August 4, 1999, the Buyers are aware and
accept that they will be

 

34

 

called to
comply with all the contractual commitments directly or indirectly incumbent
upon Elettrogen at the time of transfer of the Interest to the Buyers.

 

8.                                       This irrevocable
commitment shall remain valid until complete performance of the commitments
called for herein and compliance with the provisions applicable hereto or
referred to herein.

 

 

	
  Rome, July 30, 2001

  
	
   

  
	
   

  
	
   

  	
  [signature]

  
	
   

  	
  ENDESA S.A.

  
	
   

  	
  (the legal representative)

  
	
   

  	
   

  
	
   

  	
  ASM BRESCIA SpA

  
	
   

  	
  [signature]

  
	
   

  	
  (the legal representative)

  
	
   

  	
   

  
	
   

  	
  BANCO SANTANDER CENTRAL HISPANO S.A.

  
	
   

  	
  [signature]

  
	
   

  	
  (the legal representative)

  

 

35

 

EXHIBIT 2.2
(i)

 

Purchase Price

 

36

 

The Purchase Price for the Interest is equal to € 2,630,000,000
(two billion six hundred thirty million).

 

i

 

EXHIBIT 2.2
(ii)

 

Price Adjustment

 

37

 

The Price Adjustment (“AP”), equal to the algebraic sum between the
Difference of the Intra-group Debt (“DD”) and the Difference of the Net Working
Capital (“DCCN”), is figured as follows:

 

AP = DD / DCCN

 

Note that:

 

(i)                                     DD is a
non-negative value insofar as the Intra-group Debt as of the Closing Date will
not be greater than the Intra-group Debt as of December 31, 2000, which is
equal to € 1,060,659,341.04 (2,053,722,862,278 Lire); and

 

(ii)                                  DCCN may be a
positive or negative value depending on whether the Net Working Capital as of
the Closing Date is greater or less than the Net Working Capital as of
December 31, 2000, which is equal to € 109,793,813 (212,485,908,250
Lire).

 

PAC = PA + AP

 

Where:

 

PAC = Purchase Price as of Closing.

 

PA = Purchase Price referred to in Exhibit 2.2 (i)

 

iExhibit 4.2

 

PUT AND CALL
OPTION AGREEMENT

 

BETWEEN 

 

ENDESA, S.A.

 

AND

 

BANCO SANTANDER CENTRAL HISPANO, S.A.

 

In Madrid on June 13,
2001.

 

BY AND BETWEEN

 

Mr. Rafael Miranda Robredo,
of Spanish nationality, of legal age, with address in Madrid at Calle Príncipe
de Vergara 187, holding National Identification Card number 13045173-X.

 

Mr. José Manuel Arrojo
Botija, of Spanish nationality, of legal age, with address in Madrid at calle
Marcelino Santa María number 7, holding National Identification Card number
51628104.

 

ACTING

 

The former, in the name and on
behalf of the company Endesa, S.A., with registered offices in
Madrid at Calle Príncipe de Vergara number 187, incorporated for an indefinite
term by virtue of a public deed authorized by the Notary Public of Madrid, Mr.
Rafael López de Haro y Moya on July 19, 1944 and duly recorded in the
Companies Registry of Madrid in volume 736, folio 196, page 434, with Tax
Identification Code Number A-28023430 (hereinafter referred to as Endesa).

 

In his position as Chief
Executive Officer of the Company, pursuant to the public deed authorized on
May 5, 2000 by the Public Notary of Madrid, Mr. Santiago Rubio Liniers,
with number 855 of his records and duly recorded in the Companies Registry of
Madrid in Volume 14779, folio 46, page M-6405.

 

The latter,  in the name and on behalf of  the
company Banco
Santander-Central Hispano S.A.  with
registered offices in Santander at Paseo de Pereda 9-12 and incorporated by the
merger by take-over of the Banco Central Hispanoamericano by the Banco de
Santander, pursuant to the public deed of April 13, 1999, authorized by
the Public Notary Mr. Antonio Fernandez-Golfín Aparicio, with number 1212 of
his records and recorded in the Companies Registry of Cantabria in volume 676,
page S-1960, folio 28 (hereinafter referred to as BSCH).

 

In his position as
attorney-in-fact for the company by virtue of the public deed authorized on
February 26, 1999 by Mr. José María Prada Diez, Notary Public of
Santander, with number 643 of his records. His authority is completed by the
agreement adopted by the Delegated Risk Commission on June 7, 2001.

 

In the positions in which
they act, both parties mutually and reciprocally acknowledge that they hold the
required legal authority and sufficient powers of attorney to enter into this
Agreement and, for such purpose hereby

 

WITNESSETH

 

One. - Whereas, on
May 31, 2001, ENDESA and BSCH signed a Joint Holding Agreement to compete
with another company in the tender to purchase 100% of the stock capital of the
Italian company “Elettrogen S.p.A.”, currently owned by the company “Enel
S.p.A.”, also of Italian nationality, by incorporating a company for such
purpose (hereinafter referred to as the “Consortium”).

 

 

Two.- Whereas, by virtue of such
Agreement, BSCH has undertaken the commitment to take part in the
aforementioned purchase process through the Consortium by means of subscribing
to a percentage no higher than 40% of the capital of Elettrogen, directly or
indirectly through a newly incorporated Company (hereinafter referred to as
Newco), with a maximum payment of the equivalent to one thousand million US
dollars (US$1,000,000,000) in Euros, such holding depending on the latter being
the successful bidder for “Elettrogen S.p.A.” and obtaining as many legal or administrative
authorizations for such purpose as may be required in Spain and Italy, as well
as within the scope of the European Union.

 

Three. - Whereas, within the
framework of the aforementioned agreed action plan, ENDESA and BSCH have agreed
to grant a put and call option for each and all of the shares that BSCH may
become a holder of in “Elettrogen, S.p.A.” through the Consortium, directly or
indirectly through Newco (hereinafter referred to as “the Shares”), pursuant to
that stated in the previous Recital.

 

Four. - Whereas, for the
purpose of regulating that stated above, both parties have agreed to carry out
the formalities for this agreement, stipulating the terms and conditions that
must govern the legal relationship between them, which they carry out by virtue
of this agreement pursuant to the following:

 

CLAUSES

 

ONE. -                                    OBJECT OF
THE AGREEMENT

 

The object of this
agreement is the total number of Shares of which BSCH may become owner, on the
basis that the purchase commitment for the Shares by BSCH, directly through the
Consortium or indirectly by means of its holding in Newco, will be a percentage
no higher than 40% of the capital of “Elettrogen, S.p.A”, with a maximum
payment of the equivalent to one thousand million American dollars (US$1,000,000,000)
in Euros, pursuant to that stated in Recital Two.

 

The Shareholders shall be
directly entitled to the interim or supplementary dividends paid to BSCH by
“Elettrogen S.p.A.”, or through Newco, as of the time of the subscription and
payment of the shares.

 

TWO. -                                  PUT AND
CALL OPTION RIGHTS

 

2.1.                                                                          CALL
OPTION IN FAVOR OF ENDESA.

 

2.1.1 – General.
By virtue of this document, BSCH assigns an irrevocable call option on the
Shares in favor of ENDESA, which duly accepts, by virtue of which ENDESA shall
be entitled to purchase the Shares from BSCH, and the latter being bound to
sell them, pursuant to the terms and conditions stipulated in this agreement.
This call option shall be granted free of charge.

 

2.1.2. - Scope.
The call option may be exercised by all or several of the Shareholders, on
one or several occasions, all of the foregoing pursuant to the criteria of
ENDESA.

 

2.1.3. - Term for
exercise.  ENDESA may exercise the share option, on one or
several occasions, pursuant to its own criteria, at any time from the date of
subscription and payment of the Shares by BSCH up to the fifth year, counted
from such date, by means of written notification sent to BSCH with at least 30
working days prior notice before the date on which ENDESA plans to exercise the
option. The notification must state the number of shares, the exact date on
which ENDESA wishes to carry out the transfer, which must be carried out within
a term of 30 working days at the latest after the date the notification is
received. At the end of the fifth year, counted from the date of subscription
and payment of the Shares without ENDESA having exercised its call option, it
shall be deemed that ENDESA has waived its right to exercise the call option,
thereby duly releasing BSCH from all its obligations.

 

2

 

Within the term of five
working days counted from the time of reception of the notification from
ENDESA, referred to in the previous paragraph, BSCH shall inform ENDESA of the
price corresponding to the number of shares that it intends to transfer, by
virtue of applying that stipulated in clause 2.1.4 below.

 

2.1.4. - Price for
exercise. The price for exercising the call option that ENDESA
should pay BSCH for each purchase of the Shares (hereinafter referred to as the
“Price for Exercise”), shall be the result obtained from applying the following
formula:

 

Initial Price x the Sum of 
(1+in)n

 

Where:

 

Initial Price:  This is the balance obtained
from multiplying the subscription price of each of the Shares that BSCH has
paid by the number of Shares that BSCH transfers each time, plus the result of
capitalizing the interest rate (in) at the end of each quarter.

 

n: This means each of the annual periods, or fraction thereof, that have
elapsed after the date of payment of the Shares by BSCH up to the date on which
ENDESA purchases the Shares, for the purpose of exercising the call option.

 

in: [Euriborn
+ margin] x D/360

 

Where: Euriborn:
means EURIBOR at three months after the period corresponding to “n” pursuant to
that established above.

 

Margin: 0.55% annual

D: Actual days elapsed
during the period “n”

 

For the purpose of this
agreement, the EURIBOR (EURO INTERBANK OFFERED RATE) rate shall be understood
to be the sum of two components, the details on which are provided below:

 

• The interest rate that, pursuant to the regulations established for
this purpose by the European Banking Federation, is displayed on the REUTER
screen corresponding to the page EURIBOR01 (or the screen that may replace it
or is equivalent thereto, in the case that the aforementioned screen is not
available), as the rate traded on the stock market at eleven am (11:00 a.m.) on
the second working day before the beginning of each period “n” and three month
term.

 

• The taxes, rates, duties, surcharges, whether of the State or not,
which are currently levied  or may be
levied in the future to obtain funds in the Interbank Market, as well as the
brokerage or fees that are paid for obtaining such funds and the duties that
are levied on such fees or brokerage.

 

• The result shall be rounded up, if necessary, to the closest multiple
of a thirty-second of a per cent (1/32%).

 

The interest rate (in)
calculated in the agreed manner shall be capitalized at the end of each
quarter, counted from the date that the formalities for this agreement are
carried out, and shall be added to the Initial Price and shall, in turn, accrue
interest and shall be paid as part of the price for exercise on the date on
which the formalities for the transfer of the shares are carried out.

 

The interest rate
applicable to the successive interest periods “n”, established according to
that stipulated in the sections above, shall be notified by BSCH to ENDESA by
letter, fax or any other means permitted by law, on the working day at the
start of each of such interest periods.

 

2.2.                         PUT
OPTION IN FAVOR OF BSCH

 

2.2.1- General.  By means of
this document, ENDESA assigns an irrevocable put option on the Shares in favor
of BSCH, by virtue of which BSCH shall be entitled to sell the Shares to

 

3

 

ENDESA, which shall be
bound to purchase them. This put option shall be granted free of charge.

 

2.2.2. - Extension.
The put option may be exercised on all of the Shares that BSCH still holds between
the fifth year, counted from the date of subscription and payment of such
Shares, until thirty working days after these five years have elapsed.

 

2.2.3. - Term for
exercise.  BSCH shall be entitled to sell all the Shares that it
still owns to ENDESA, by means of written notification sent to the latter with
at least 15 working days prior notice before the date on which the sale is
planned to be carried out, from the fifth year counted from the date of
subscription and payment of the Shares until thirty working days after the five
years have elapsed, both dates inclusive, unless any of the causes for early
exercise of the put option arise, as stated in section 2.2.5 below. In the
event that BSCH has not exercised the put option once such term has elapsed,
ENDESA shall be duly released from any obligations.

 

The notification must state
the exact date on which BSCH wishes to carry out the transfer, which shall be
within 15 working days at the latest after the date on which ENDESA receives
the notification from BSCH. If ENDESA should be in arrears due to default in
payment of any amount derived from the Price for Exercise, it shall be bound to
pay BSCH delayed payment interest at the rate resulting from adding half a
point (0.5) to the interest rate that would be applicable, pursuant to that
agreed above. Such rate shall be applicable on the unpaid amounts, the interest
shall be accrued by calendar days and shall be capitalized on a weekly basis
until the date of reimbursement of the interest to BSCH, pursuant to that
stipulated in article 317 of the Commercial Code.

 

2.2.4. - Price for
exercise or sale price.  The price that ENDESA must pay BSCH for
exercising the put option shall be the amount obtained from applying that
stipulated in section 2.1.4 above (“Price for Exercise”).

 

2.2.5. - Early
exercise of the put option.  Notwithstanding that stated in the
previous section, BSCH may exercise the put option in advance, at any time, in
the event that one of any of the following cases of acceleration arises:

 

a)                                     In the event that ENDESA breaches any obligation or clause of this
agreement, in the case that, at the demand of BSCH, it is not duly remedied.

 

b)                                    If ENDESA no longer has a shareholding percentage in the capital of
Elettrogen S.p.A. or Newco, and which under no circumstances may be lower than
25%, which would imply that it would no longer be in the position of a
strategic or reference partner.

 

Should the previous circumstance arise, BSCH
shall be entitled to sell all the Shares that the latter owns to ENDESA and the
latter shall irrevocably be bound to purchase and acquire such Shares, at the
sales price defined in section 2.2.4 above.

 

2.3                                                                               COMMON ASPECTS OF THE PUT
AND CALL OPTION

 

2.3.1.-Possibility to purchase the shares by another or
other companies

 

At the time that ENDESA states its intention
to exercise the call option, in accordance with that set forth in section
2.1.3., it may notify BSCH of a third institution to which BSCH must transfer
the Shares, object of the option. This notification must at all times be made
in the same notice stating that the option will be exercised in order to be
callable for BSCH. Otherwise, if BSCH exercises the put option, ENDESA may,
within 10 working days after receiving such notice, appoint a third institution
to which BSCH must transfer the Shares, object of the option. When this term
has elapsed, ENDESA’s right to make such appointment shall be deemed as duly
terminated.

 

The appointment of a third institution to
acquire the Shares shall not suspend the term granted by BSCH to authorize the
Share transfer agreement.

 

4

 

In all cases, ENDESA shall be jointly and
severally liable for the fulfillment of all the obligations set forth in this
agreement, in particular, those related to payment, regarding the third
acquiring party.

 

2.3.2.- Exercising one option and termination of the other: Fully
exercising the put or call option by ENDESA or BSCH, respectively, shall
terminate the option of the other party; both parties being bound to fulfill
their rights and obligations with respect to the option exercised. If the call
option is partially exercised, the termination of the put option shall solely
and exclusively be related to the number of Shares acquired by exercising such partial
call option.

 

2.3.3.-Remedy of any encumbrance:  The
Shares, object of the put or call option, shall be transferred by BSCH, free of
all liens and encumbrances, and BSCH shall be responsible for the remedy of any
encumbrance on the Shares in accordance with law.

 

2.3.4.-Extension  The options granted in this agreement expressly
include any security that could substitute or be related to the Shares in the
event of a merger, winding-up, capital increase or decrease that leads to the
substitution of the current shares in circulation, redemption, conversion,
spin-off or any other similar circumstance.

 

2.3.5.-Decrease in price  If, during the valid term
of this agreement, amounts for dividends or interim dividends are allotted,
capital reductions are carried out, returning the contributions, or in any
other manner, if “Elettrogen, S.p.A.” or Newco effectively remunerates the
shareholders, the following steps shall be taken:

 

a)              On the date of the actual payment by BSCH of the
aforementioned amounts, a payment will take place, which will include the
amount of the Shares that were subscribed and paid-up at the appropriate time
by BSCH, in addition to the interest accrued by that date related to such
payment, in accordance with that set forth in section 2.1.4 above.

 

b)             The amount corresponding to the amounts actually
paid by BSCH, i.e. once the withholding, taxes and encumbrances currently
applicable on the date of the payment of such amounts to BSCH have been
deducted will be deducted from the amount resulting from the calculation
mentioned in the previous point.

 

5

 

c)              The final amount, once the deduction referred to in
the previous point has been carried out, will continue to accrue the relevant
interest, in accordance with that set forth in section 2.1.4 of this agreement.

 

d)             If reductions in capital are carried out, returning
contributions to the shareholders, ENDESA shall be irrevocably bound to pay the
accrued interest related to the returned contributions to BSCH, counted from
the date of subscription and payment of the Shares until the date they are
actually paid to BSCH, and this must take place in accordance with the interest
calculation referred to in section 2.1.4 of this agreement. The amount of
interest thus accrued in favor of BSCH shall be added to the Exercise Price of
the remaining Shares that will still be held by BSCH.

 

THREE.                                  OBLIGATIONS
AND AUTHORIZING PARTIES

 

3.1. For the term
that the options are valid, BSCH will be bound not to create any liens,
charges, limitations on disposal or encumbrances of any kind on the Shares, and
not to dispose of the Shares without the prior consent of ENDESA.

 

3.2. Exercising
the political and economic rights of the Shares shall be held, in all cases, by
BSCH until the Put or Call Option referred to in this agreement has been fully
exercised.

 

3.3. Given that as
of today’s date, the subscription and payment of the Shares has not taken place
and, as a result, the agreements and obligations undertaken on the Shares under
this agreement depend on their final subscription and payment, the parties
undertake that on the date such subscription takes place they will sign a
document that will be attached as a schedule to this agreement and that will
include the date, number, par  value,
subscription price and any other circumstances related to the Shares, and any
costs related to such document shall be at the expense of ENDESA.

 

FOUR.                                    PERFORMANCE
OF THE PURCHASE

 

Once the exercise
of each put or call option has been notified, the parties undertake to carry
out the transfer of the Shares on the date stipulated in the notice, by virtue
of which BSCH shall sell the Shares to ENDESA and BSCH shall receive the Price
of the sale from ENDESA at the same time.

 

For such purpose,
the parties undertake to carry out whatever steps may be required to perform
such purchase.

 

All costs
resulting from authorizing the purchase agreement shall be at the expense of
ENDESA.

 

The formalities
for such transaction shall be carried out by a Spanish or Italian Commissioner
of Oaths appointed by ENDESA.

 

FIVE.                                      TERM

 

This term of this
agreement shall be from the date of subscription and payment of the Shares
until the date on which the formalities for the transfer of the Shares have
been carried out at the time of exercising the options. Once the options have
been exercised, as set forth in sections 2.1.3 and 2.2.3 of this agreement,
without such transfer having taken place, this agreement shall be deemed null
and void.

 

6

 

For the purpose of
calculating the terms set forth in this agreement, if the expiration date of
any of the terms is a non-working day, it shall be deemed that such term shall
expire on the following working day.

 

SIX.                                        NOTICES

 

The addresses for
the purpose of notification between the parties referred to in this agreement
are expressly agreed and listed below, unless any changes occur, which must be
notified to the other party in writing at least 15 days prior to such change
taking place.

 

ENDESA

For the attention
of Mr. Antonio Redondo Cuesta

Address: Príncipe
de Vergara 187 Madrid

Tel: 91 213 00 00

 

BSCH

For the attention
of Mr. Javier Laborda Fuerte

Address: Plaza de
Canalejas no. 1

Tel: 91 558 11 11

 

SEVEN.                                  REPRESENTATIONS
AND GUARANTEES

 

As an essential
part of this agreement, the parties represent and guarantee that:

 

(i)             They hold full capacity and have granted the
appropriate authority in the suitable manner to sign and fulfill this agreement
and the clauses thereof in the same terms, and that once signed, undertake a
valid and binding obligation thereto, which shall be fully enforceable against
them, and there shall be no impediment whatsoever for the judgments by the
Courts not to be acknowledged and enforced, which they shall be subject to by
virtue of Clause Eleven of this agreement.

 

(ii)          Signing this agreement and the fulfillment of the
obligations therein shall not imply any infringement of any provision in its
By-laws or any corporate agreement, or the breach of any other agreement or
contract with third parties, or of any order, decree, public or private legal
rule or judgment by any Court or Tribunal or Public Authorities to which the
parties are subject or with respect to which they may be bound due to the
authorization, fulfillment or performance of this agreement. The representation
made hereby shall be deemed as duly valid and in force during the whole term of
this agreement.

 

EIGHT.                                   INDEMNITY

 

The parties
reciprocally undertake to hold each other fully harmless for any loss, breach,
claim or expense that could arise due to failure to fulfill any commitment or
obligation undertaken in this agreement or that may arise due to any false or
inaccurate representation or guarantee.

 

NINE.                                     NON-DISCLOSURE

 

The contents of
this agreement and any information that the parties may become aware of by

 

7

 

virtue of that
stated herein, shall be deemed as strictly confidential and may not be revealed
in any manner to third parties without the prior written consent of the
parties.

 

The non-disclosure
obligation set forth in this clause may not be claimed with respect to
information that:

 

a.-           Is provided by the Parties to their advisors,
attorneys, auditors or consultants, who however shall be notified of the
confidential nature of the information.

 

b.-          Is already held, or has been revealed by other means
to the party who receives it;

 

c.-           Is public, or has been made public;

 

d.-          Must be revealed based on an order, mandate, legal
proceedings or an injunction made by a government or legal authority or any
other kind of authority, in particular, with respect to the stock market.

 

TEN.                                       COSTS
AND EXPENSES 

 

The costs related
to granting and authorizing this agreement by a Commissioner of Oaths, in addition
to those incurred due to exercising the put and call options, as appropriate,
or any other costs incurred by or resulting from the fulfillment of the
commitments undertaken by the parties to this agreement, shall be at the
expense of ENDESA.

 

If, in accordance
with the applicable tax regulations, ENDESA is obliged to deduct or withhold
any kind of tax or encumbrance or if BSCH is obliged to pay any tax related to
the payments made by virtue of this agreement, with the exception of income
tax, ENDESA must pay BSCH any additional amounts that may be required to make
the net amount that ENDESA receives equivalent to the amount that it would have
received had such payment not been subject to any deductions, payments or
withholding, unless such deduction, payment or withholding may be recovered by
BSCH, in which case, once such deduction, payment or withholding is effectively
recovered, BSCH shall be bound to return the amounts effectively returned.

 

ELEVEN.                               ASSIGNMENT

 

In accordance with
that set forth in the Agreement referred to in Recital One, ENDESA is aware of
and expressly accepts the possibility that BSCH may partly or fully assign its
rights in this agreement, with the exception of the ownership of the Shares, in
favor of other financial institutions located in the European Union, with the
prior agreement of ENDESA, whose consent may not be refused without just cause
and without this affecting the term and other conditions related to exercising
the rights referred to in this document.

 

Should the aforementioned
assignment actually take place, the institutions that, when appropriate,
guarantee BSCH for the commitments undertaken by ENDESA in this agreement,
shall be entitled to acquire the Shares, with no restriction whatsoever, if
ENDESA fails to fulfill its purchase obligation set forth in section 2.2 above,
and, as a result, being subrogated in the contractual position of BSCH in this
agreement.

 

The rights and
obligations referred to in this document may be freely transferred by ENDESA to
any of its fully owned companies by means of written notification to BSCH
within a minimum of seven (7) days and ENDESA shall continue to grant the joint
and several guarantee for the fulfillment of all the obligations related to
this agreement, in particular, with respect to payment.

 

8

 

TWELVE.                              JURISDICTION

 

This agreement is
deemed to be of a commercial nature and shall firstly be governed by the
Clauses contained herein and, for all that is not stipulated therein, the
contracting parties shall refer to abide by the provisions of the Commercial
Code and any additional provisions, regarding normal Spanish commercial uses
and habits and otherwise that set forth in the Civil Code.

 

The parties agree
that any doubt or dispute regarding the application or interpretation of this
agreement shall be settled in good faith, by submitting them to the joint
decision of the executive management of both companies, respectively.

 

In the event that
an agreement cannot be reached by means of that stated in the previous
paragraph, the parties agree that the dispute shall be settled by legal
arbitration entrusted to the Civil and Commercial Court of Arbitration (CIMA)
of Madrid, pursuant to its By-laws. The decision must be adopted within six (6)
months after the arbitrator accepts his/her appointment. The parties undertake
to faithfully and promptly fulfill the decision adopted by such arbitrator.

 

THIRTEEN.                           PUBLIC
DEED

 

This agreement
shall be authorized in a public deed or by another authorized public document
at the request of either of the parties, including any clauses that may be
necessary to provide it with the power of enforcement, when appropriate, and
all the expenses, rights and taxes that may be accrued by virtue of such authorization
shall be at the expense of ENDESA, and the requested party shall be bound to
authorize the relevant document within five working days after the receipt of
such request. In the case of BSCH, such request and subsequent obligation by
ENDESA to authorize this agreement in a public deed may only be carried out
when ENDESA has undergone substantial losses in its equity or when the
company’s solvency level has significantly decreased.

 

In witness whereof, regarding all the
foregoing, the contracting parties have read this agreement, accept, ratify and
sign it in two copies, which the parties state they have received in this
procedure, in the place and on the date stated ut supra.

 

 

	
  [Illegible Signature]

  	
  [Illegible Signature]

  
	
  pp

  	
  pp

  
	
  ENDESA, S.A.

  	
  BANCO SANTANDER

  
	
   

  	
  CENTRAL HISPANO, S.A.

  

 

 

9

 

SCHEDULE TO THE PUT AND
CALL OPTION AGREEMENT BETWEEN ENDESA, S.A AND BANCO SANTANDER CENTRAL HISPANO,
S.A., IN MADRID, ON JUNE 13, 2001.

 

In Rome, on September 20, 2001.

 

BY AND BETWEEN

 

On the one side, Mr. Jesús Olmos Clavijo, of
legal age, married, with address at, Principe de Vergara number 187, Madrid.

 

On the other side, Mr. José Manuel Arroyo
Botija, of legal age, with address at, Plaza de Canalejas number 1, Madrid.

 

ACTING

 

Mr. Jesús Olmos Clavijo, in his position as
attorney-in-fact and in the name and on behalf of the company ENDESA, S.A.
(hereinafter referred to as “ENDESA”), with registered offices at, Principe de
Vergara number 187, Madrid, a company duly incorporated and recorded in the
Companies Registry of Madrid, with Tax Identification Code number A-28023430.
He acts hereby by virtue of the power of attorney deed authorized by the Notary
Public of Madrid, Mr. Santiago Rubio Liniers, on July 31, 2000, with number
1792 of his records, duly recorded in the Companies Registry of Madrid.

 

Mr. José Manuel Arrojo Botija, in his
position as attorney-in-fact and in the name and on behalf of the company BANCO
SANTANDER CENTRAL HISPANO, S.A. (hereinafter referred to as “BSCH”), with
registered offices at Paseo de Pereda 9-12, Santander, a company duly
incorporated and recorded in the Companies Registry of Cantabria, with Tax
Identification Code number A-39000013. He acts hereby by virtue of the power of
attorney deed authorized by the Notary Public of Santander, Mr. José María
Prada Diez, on February 26, 1999, with number 643 of his records, duly
recorded in the Companies Registry of Cantabria.

 

In the positions in which they act, the
parties acknowledge that they hold sufficient legal capacity to enter into this
Schedule to the Put and Call Option Agreement stated ut supra, and as recitals
set forth the following:

 

WITNESSETH

 

1.-     Whereas, by virtue of the agreement
stated ut supra, ENDESA and BSCH agreed to undertake a Put and Call Option
Agreement regarding each and all of the shares that BSCH holds (hereinafter
referred to as the “Shares”), whether directly or indirectly, in the company
Elettrogen, S.p.A.. The parties are aware of the contents and conditions thereof
and thus they need not be repeated hereby.

 

II. -    Whereas, it was agreed upon in section
3.3. of Clause Three of the aforementioned agreement that on the date the
Shares, object of the Put and Call Option, were fully subscribed and paid up,
the date of acquisition, the number of the shares to be assigned, their par
value, the price for subscription and any other matters related to the Shares,
would be put in writing by means of this Schedule to the Agreement.

 

10

 

III.-  Whereas, in view of the fact that the
circumstance stipulated in the previous Recital has taken place by means of the
purchase by BSCH of the shares in the company Endesa Holding Italia, S.R.L.,
the full owner of the shares in “Endesa Italia, s.r.l.”, which, in turn, is the
owner of all the shares in “Elettrogen S.p.A.”, and for the purpose of
documenting and recording the aforementioned subscription and payment of the
Shares, as well as to remedy the error present in the formula set forth in
section 2.1.4 of Clause Two of the Agreement, both parties carry out the
formalities for this Schedule to such Agreement, which shall be subject to the
following:

 

CLAUSES

 

ONE. - The parties
acting hereby state that the Shares, which have been fully subscribed and paid
up by BSCH under the Put and Call Option Agreement stipulated above, are those
described below:

 

DATE FOR
SUBSCRIPTION AND PAYMENT:

 

4,000
Shares: Subscribed and paid up at the time of incorporation
of the company, authorized by the Notary Public of Milan, Mr. Stefano Rampolla,
on September 14, 2001.

 

280,320,000
Shares: Subscribed and paid up on September 19, 2001,
by virtue of a resolution adopted at the General Shareholders’ Meeting, held on
September 17, 2001, to increase the capital, the formalities of which were
authorized by the Notary Public of Milan, Mr. Zabban.

 

In order to determine the price stipulated
in section 2.1.4. of the Agreement, to which this document is a schedule, to
exercise the Put and Call Option, it is deemed that the subscription of each of
the Shares, for the purpose of determining the Initial Price, shall be the
result of dividing the total purchase price (876,004,000 Euros) by the total
number of shares to be acquired (280,324,000), and the date for subscription
and payment shall be deemed to be the September 19, 2001.

 

THE ISSUING INSTITUTION:

 

Endesa
Holding Italia S.R.L. is a company that was incorporated on
September 14, 2001, by the Notary Public of Milan, Mr. Stefano Rampolla,
with number 1332 of his records, with registered offices at Largo Donegani
number 2, in Milan (Italy) and Tax Identification Code number 03251970962. It
is recorded in the Companies Registry of Milan with number 1660882.

 

NUMBER OF SHARES TO BE ACQUIRED:

 

280,324,000
Shares, duly recorded in the Shareholders’ Register Book
of the issuing institution.

 

PAR VALUE:

 

1 Euro per Share for the first 4,000 shares
subscribed and 1 Euro plus an issue premium of 2.125 Euros for the remaining
280,320,000 Shares.

 

TOTAL PURCHASE PRICE:

 

876,004,000
Euros.

 

11

 

TWO. - Likewise, at
the time of signing this Schedule, ENDESA and BSCH agree to remedy the error
made when drawing up the formula set forth in section 2.1.4. - Price for
Exercise  of the Agreement stated ut supra. The following
formula shall be applicable hereinafter:

 

 

	
   

  	
  t=n

  
	
  Initial Price x  

  	
   

  	
  (1+it)  

  
	
   

  	
  t=1

  

 

 

In which the following items shall mean:

 

Initial
Price: This is the balance obtained from multiplying the
subscription price of each of the Shares, which have been subscribed by BSCH,
by the number of Shares that BSCH may transfer from time to time.

 

n: This
means each of the annual periods or parts of the year that have elapsed since
the date on which the Shares were paid up by BSCH until the date on which
ENDESA acquires the Shares, by means of exercising the Put or Call Option.

 

it:
[Euriborn + Margin]x D/360n

 

Both the definition of the Euribor interest
rate, the applicable margin and other covenants set forth in section 2.1.4. of
Clause Two of the Agreement stated ut supra, shall remain the same.

 

Therefore, such section shall only be
modified to the extent stated above, to take effect from the date on which the
formalities of the Agreement, to which this document is a Schedule, are authorized.

 

THREE. - This document
shall be deemed an integral part of the Put and Call Option Agreement stated
above, the contents of which are ratified by the parties acting hereby. All the
terms and conditions thereof shall remain fully in force, with no modifications
whatsoever, except those made by virtue of this document, which do not imply a
modifying novation or termination of such agreement.

 

FOUR. - Any
costs incurred due to this document shall be at the expense of ENDESA.

 

In witness whereof, the parties hereby sign
this Schedule in two copies, which they declare to have received in this
procedure, in the place and on the date stated ut supra.

 

 

	
  ENDESA, S.A.

  	
  BANCO SANTANDER

  
	
  By the Attorney-in-fact

  	
  CENTRAL HISPANO, S.A.

  
	
   

  	
  By the attorney-in-fact

  
	
   

  	
   

  
	
  [illegible signature]

  	
  [illegible signature]

  
	
   

  	
   

  
	
  Mr. Jesús Olmos Clavijo

  	
  Mr. José Manuel Arrojo Botija

  

 

12

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