Document:

hc1Q2012ex101

Exhibit 10.1

Portions of this exhibit marked by an (***) have been omitted pursuant to a request for
confidential treatment filed separately with the Securities and Exchange Commission.

IMPLEMENTATION AGREEMENT 
 
 
by and between 
 
 
EME HOMER CITY GENERATION L.P., 
and 
 
GENERAL ELECTRIC CAPITAL CORPORATION
 
 
Dated as of March 29, 2012 
 
 
 

 

US1 32371580.2

TABLE OF CONTENTS
Page
		
	ARTICLE I
	DEFINITIONS    2

		
	Section 1.1.
	Defined Terms    2

		
	Section 1.2.
	Definitions    2

		
	Section 1.3.
	Rules of Interpretation    6

		
	ARTICLE II
	ACKNOWLEDGEMENTS aND AGREEMENTS    6

		
	Section 2.1.
	Obligations and Rights    6

		
	Section 2.2.
	[Reserved]    6

		
	Section 2.3.
	Access Rights    6

		
	Section 2.4.
	Non-Solicitation    7

		
	Section 2.5.
	Rent Default Event    7

		
	Section 2.6.
	BOP Agreements    7

		
	ARTICLE III
	OBLIGATIONS IN RESPECT OF THE EPC AGREEMENT    8

		
	Section 3.1.
	Execution of EPC Agreement    8

		
	Section 3.2.
	Actions in Connection with the Execution of the EPC Agreement    8

		
	Section 3.3.
	Secondment Agreements    8

		
	Section 3.4.
	Acknowledgement Regarding the EPC Counterparty’s Right to Assign the EPC Agreement; Homer City Cooperation    8

		
	Section 3.5.
	Modifications to EPC Agreement and/or BOP Agreements    8

		
	Section 3.6.
	No Third Party Beneficiary    9

		
	Section 3.7.
	Actions in Connection with the Performance of Obligations Arising Under the EPC Agreement and BOP Agreements.    9

		
	ARTICLE IV
	IMPLEMENTATION TRANSACTIONS    10

		
	Section 4.1.
	Implementation Transactions    10

		
	Section 4.2.
	Debt Party Consent    10

		
	Section 4.3.
	Assistance with Tender Offer    10

		
	Section 4.4.
	Release of Confidentiality Restrictions    10

		
	Section 4.5.
	Assistance with Rating Agency Review    11

		
	Section 4.6.
	Section 467 Loan Balance    11

		
	ARTICLE V
	TRANSITION SERVICES    11

		
	Section 5.1.
	Transition Services Agreement    11

		
	Section 5.2.
	Provision of Information.    11

		
	Section 5.3.
	Conduct of Business    12

		
	ARTICLE VI
	REPRESENTATIONS, WARRANTIES AND COVENANTS OF HOMER CITY    13

		
	Section 6.1.
	Existence, Power and Authority    13

		
	Section 6.2.
	Authorization    13

		
	Section 6.3.
	No Conflict    13

		
	Section 6.4.
	Consents    13

		
	Section 6.5.
	Legal Proceedings    14

		
	Section 6.6.
	Transfer of Assets    14

		
	Section 6.7.
	BOP Agreements    14

		
	ARTICLE VII
	REPRESENTATIONS AND WARRANTIES OF GE    14

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	Section 7.1.
	Existence, Power and Authority    15

		
	Section 7.2.
	Authorization    15

		
	Section 7.3.
	No Conflict    15

		
	Section 7.4.
	Consents    15

		
	Section 7.5.
	Legal Proceedings    15

		
	ARTICLE VIII
	INDEMNITY    15

		
	Section 8.1.
	General Indemnity by Homer City in Favor of GE    15

		
	Section 8.2.
	Procedure for General Indemnity by Homer City in Favor of GE    16

		
	Section 8.3.
	General Indemnity by GE in Favor of Homer City    16

		
	Section 8.4.
	Procedure for General Indemnity by GE in Favor of Homer City    16

		
	Section 8.5.
	Indemnities Not Exclusive    16

		
	ARTICLE IX
	TERMINATION AND EXCULPATION    17

		
	Section 9.1.
	Termination by GE    17

		
	Section 9.2.
	Automatic Termination    17

		
	Section 9.3.
	Termination by Homer City    17

		
	Section 9.4.
	Termination Amount    18

		
	Section 9.5.
	Termination Acknowledgements    18

		
	Section 9.6.
	Exculpation    19

		
	Section 9.7.
	Non-Exclusive Remedies    19

		
	ARTICLE X
	MISCELLANEOUS    20

		
	Section 10.1.
	Counterparts    20

		
	Section 10.2.
	Governing Law    20

		
	Section 10.3.
	Further Assurances    20

		
	Section 10.4.
	Notices    20

		
	Section 10.5.
	Waiver of Jury Trial    21

		
	Section 10.6.
	CONSENT TO JURISDICTION    21

		
	Section 10.7.
	Binding Effect; Assignment; Entire Agreement    22

		
	Section 10.8.
	Severability    22

		
	Section 10.9.
	Survival of Representations and Warranties, Indemnities and Confidentiality    22

		
	Section 10.10.
	Waivers and Amendments; Non-Contractual Remedies; Preservation of

Remedies    22
		
	Section 10.11.
	Confidentiality    22

		
	Section 10.12.
	Costs and Expenses    23

		
	Section 10.13.
	Balance of Plant    24

		
	Section 10.14.
	Alternative Transaction    24

		
	Section 10.15.
	Cooperation Among the Owner Lessors and Owner Participants    24

		
	Section 10.16.
	Joinder of MetLife    24

		
	Section 10.17.
	Third Party Beneficiaries    24

		
	Section 10.18.
	Side Letter    24

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Exhibits

Exhibit A    EPC Purchase Orders and BOP Agreements

Annexes

Annex I    Assignment Term Sheet
Annex II    Sublease Term Sheet

Schedules

Schedule 1.2    Permitted Encumbrances
Schedule 5.3    Permitted Activities
Schedule 6.5    Pending Legal Proceedings – Homer City
Schedule 6.6    Affiliate Assets
Schedule 7.5    Pending Legal Proceedings – GE 

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This IMPLEMENTATION AGREEMENT (this “Agreement”) is entered into as of March 29, 2012 (the “Effective Date”), by and between EME Homer City Generation L.P. (“Homer City” or the “Facility Lessee”) and General Electric Capital Corporation (“GE”).
W I T N E S S E T H
WHEREAS, pursuant to the Facility Lease Agreement (OL1) (and the Other Facility Leases as defined therein), dated as of December 7, 2001, Homer City entered into a sale/leaseback transaction with the Owner Lessors (each of which is beneficially owned by GE or MetLife, as applicable), of the Homer City Electric Generating Station, an 1,884-MW coal-fired, three unit power generation facility and adjacent coal cleaning facility located near Indiana, Pennsylvania (the “Facility”),  
WHEREAS, concurrently with the execution of the Facility Lease (OL1) and the Other Facility Leases, Homer City and the Owner Lessors, as applicable, also entered into the Participation Agreement (OL1), dated as of December 7, 2001 (as amended, supplemented or otherwise modified from time to time, the “Participation Agreement (OL1)”), among Wells Fargo Bank Northwest, National Association, as independent manager under the Lessor LLC Agreement, General Electric Capital Corporation, as the owner participant, Homer City Funding, LLC, as Lender, The Bank of New York, as the Lease Indenture Trustee, the Lease Indenture Company, the Security Agent, the Bondholder Trustee and the Bondholder Trustee Company, and the Other Participation Agreements (as defined in the Participation Agreement (OL1)); 
WHEREAS, the parties desire that GE, EFS Homer City, LLC, a wholly owned subsidiary of GE (“EFS Homer City”), or another Affiliate of GE reasonably acceptable to Homer City (such party, the “EPC Counterparty”) and Kiewit Power Constructors Co. (“EPC Contractor”) (x) enter into a Turnkey Engineering, Procurement and Construction Agreement in substantially the form as has been negotiated as of the date hereof between EFS Homer City and EPC Contractor and shared with Homer City immediately prior to the execution of this Agreement (the “EPC Agreement”), pursuant to which EPC Contractor will install pollution control equipment (the “Project”) at the Facility by adding flue-gas desulfurization retrofit scrubber systems to Units 1 and 2 of the three coal-fired boilers of the Facility, a baghouse, and other related improvements contemplated by the EPC Agreement. 
WHEREAS, the parties also desire that (a) the EPC Counterparty assume the balance of plant construction agreements (the “BOP Agreements”) and other contracts and purchase orders (including the purchase orders requested from the EPC Contractor (the “EPC Purchase Orders”)) set forth on Exhibit A attached hereto which pertain to construction work and other services in support of the Project, pursuant to which  balance of plant construction and installation work and other services (which is not within the scope of work of the EPC Agreement) will be performed by the contractors party thereto (the “Other Contractors”) in connection with such pollution control equipment (the equipment and improvements to be installed and constructed by the EPC Contractor and the Other Contractors, as applicable, shall be collectively referred to herein as the “Pollution Control Improvements”), and (b) the EPC Counterparty or its Affiliate and Midwest Generation EME, LLC enter into Secondment Agreements with respect to a project manager and an engineering manager, in each case, in substantially the form as has been negotiated as of the 

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date hereof and shared with Homer City immediately prior to the execution of this Agreement (the “Secondment Agreements”);
NOW THEREFORE, in consideration of the foregoing premises, the mutual promises and covenants herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Homer City and GE hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1.    Defined Terms.  Capitalized terms used in this Agreement, including those in the recitals, and not otherwise defined herein, shall have the respective meanings set forth in Appendix A to the Participation Agreement (OL1). 
Section 1.2.    Definitions.  The following capitalized terms shall have the following meanings:
“Affiliate Assets” shall have the meaning ascribed to such term in Section 6.6 hereof.
“Agreement” shall have the meaning ascribed to such term in the preamble hereto.
“Alternative Transaction” shall have the meaning ascribed to such term in Section 10.14 hereof.
“Assignment” shall mean a transaction on substantially the terms and conditions set forth on Annex I.
“Confidentiality Provisions” shall have the meaning ascribed to such term in Section 4.4 hereof.
 “Data Room” shall mean the electronic data site hosted by Intralinks in respect of Homer City code named “Project World Series”.
“Easement and Attachment Agreement” means the Easement, License and Attachment Agreement between Homer City, Penelec and NYSEG, dated as of March 18, 1999, whereby Homer City agreed to provide Penelec and NYSEG with easements with respect to the real property transferred to Homer City and whereby Penelec and NYSEG agreed to provide Homer City with certain attachment rights with respect to certain real property owned by Penelec and NYSEG.
“Effective Date” shall have the meaning ascribed to such term in the preamble hereto.
“EME” means Edison Mission Energy, a Delaware corporation.
“Emission Allowances” means all present and future authorizations to emit specified units of pollutants or hazardous substances, which units are established by the Governmental Authority with jurisdiction over the Facility under (i) an air pollution control and emission reduction program designed to mitigate global warming, interstate or intra-state transport of air

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pollutants; (ii) a program designed to mitigate impairment of surface waters, watersheds, or groundwater; or (iii) any pollution reduction program with a similar purpose. Emission Allowances include allowances, as described above, regardless as to whether the Governmental Authority establishing such allowances designates such allowances by a name other than “allowances”. 
 “Emission Reduction Credits” means credits, in units that are established by the Governmental Authority with jurisdiction over the Facility that has obtained the credits, resulting from reductions in the emissions of air pollutants from an emitting source or facility (including, without limitation, and to the extent allowable under applicable law, reductions from shut-downs or control of emissions beyond that required by applicable law) that: (i) have been identified by the PaDEP as complying with applicable Pennsylvania law governing the establishment of such credits (including, without limitation, that such emissions reductions are enforceable, permanent, quantifiable and surplus) and listed in the Emissions Reduction Credit Registry maintained by the PaDEP or with respect to which such identification and listing are pending; or (ii) have been certified by any other applicable Governmental Authority as complying with the law and regulations governing the establishment of such credits (including, without limitation, certification that such emissions reductions are enforceable, permanent, quantifiable and surplus).  The term includes emission reduction credits that have been approved by the PaDEP and are awaiting USEPA approval.  The term also includes certified air emissions reductions, as described above, regardless as to whether the Governmental Authority certifying such reductions designates such certified air emissions reductions by a name other than “emission reduction credits.”
“EPC Agreement” shall have the meaning ascribed to such term in the recitals hereto.
“EPC Contractor” shall have the meaning ascribed to such term in the recitals hereto.
“EPC Purchase Orders” shall have the meaning ascribed to such term in the recitals hereto.
“EPC Termination Event” means (x) the termination of the EPC Agreement by GE or EFS Homer City, (y) the furnishing of a notice of termination under the EPC Agreement by the EPC Contractor if such notice is accepted by the EPC Counterparty, or if such notice is not accepted, such notice has not been withdrawn by the EPC Contractor by or before the forty fifth (45th) day after the issuance of such notice, or (z) a modification or amendment of the EPC Agreement or the occurrence of any other event, in the case of each of clauses (x), (y) or (z), having the practical effect of terminating work on the Project; provided, that, no action, event or circumstance arising under the EPC Agreement after Substantial Completion (as defined in the EPC Agreement) shall constitute an EPC Termination Event.
“Facility” shall have the meaning ascribed to such term in the recitals hereto.
“Facility Lease” shall mean each Facility Lease Agreement entered into by and between an Owner Lessor and the Facility Lessee in respect of the lease of an Undivided Interest in the Facility.

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“Facility Leases” shall mean, collectively, the GE Facility Leases and the MetLife Facility Lease.
“Facility Lessee” shall have the meaning ascribed to such term in the recitals hereto.
“GE” shall have the meaning ascribed to such term in the preamble hereto.
“GE Facility Leases” shall mean, collectively, each Facility Lease entered into by and between a GE Owner Lessor and Homer City pursuant to the GE Participation Agreements, each dated as of December 7, 2001. 
“GE OL Undivided Interests” shall mean, collectively, the Undivided Interests in the Facility of each of the GE Owner Lessors pursuant to the GE Participation Agreements and GE Facility Leases.
“GE Owner Lessors” shall mean collectively Homer City OL1 LLC, Homer City OL2 LLC, Homer City OL3 LLC, Homer City OL4 LLC, Homer City OL5 LLC, Homer City OL7 LLC, and Homer City OL8 LLC.
“GE Participation Agreements” shall mean, collectively, each of the Participation Agreements entered into by and between the GE Owner Lessors and Homer City, each dated as of December 7, 2001.
“Good Utility Practices” mean any of the practices, methods and acts engaged in or approved by a significant portion of the coal-fired electric utility industry during the relevant time period, or any of the practices, methods or acts which, in the exercise of reasonable judgment in light of the facts known at the time the decision was made, could have been expected to accomplish the desired result at a reasonable cost consistent with good business practices, reliability, safety and expedition.  Good Utility Practices are not intended to be limited to the optimum practices, methods or acts to the exclusion of all others, but rather to be acceptable practices, methods or acts generally accepted in the coal-fired electric utility industry.
“Homer City” shall have the meaning ascribed to such term in the recitals hereto.
“Homer City Termination Date” shall have the meaning ascribed to such term in Section 9.3 hereof.
“Implementation Transaction” shall mean the Sublease or an Assignment.
“Lease Indenture Secured Party” shall have the meaning set forth in the Lease Indenture.
“Legal Proceedings” shall have the meaning ascribed to such term in Section 6.5 hereof.
“MetLife” shall mean Metropolitan Life Insurance Company.
“MetLife Facility Lease” shall mean Facility Lease Agreement (OL6), entered into by and between MetLife Owner Lessor and Homer City, dated as of December 7, 2001, as

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transferred by GE to MetLife pursuant to that certain Sale Agreement (Homer City OL6), dated as of September 19, 2005.
“MetLife OL Undivided Interest” shall mean the Undivided Interests in the Facility of the MetLife Owner Lessor pursuant to the MetLife Participation Agreement and MetLife Facility Lease.
“MetLife Owner Lessor” shall mean Homer City OL6 LLC.
“MetLife Participation Agreement” shall mean Participation Agreement (OL6), entered into by and among the MetLife Owner Lessor, Homer City, GE, Wells Fargo Bank Northwest, National Association, The Bank of New York, and Homer City Funding, LLC, dated as of December 7, 2001, as transferred by GE to MetLife pursuant to that certain Sale Agreement (Homer City OL6), dated as of September 19, 2005.
“NYSEG” means New York State Electric & Gas Corporation, a New York corporation.
“Owner Lessors” shall mean the GE Owner Lessors and the MetLife Owner Lessor, collectively.  
“Owner Participants” shall mean GE and MetLife, collectively.  
“Participation Agreement (OL1)” shall have the meaning ascribed to such term in the recitals hereto.
“Participation Agreements” shall mean the GE Participation Agreements and the MetLife Participation Agreement.
“Penelec” means the Pennsylvania Electric Company, a Pennsylvania corporation.
 “Permitted Encumbrances”  means: (i) the easements and access rights that have been granted by Homer City to Penelec and NYSEG pursuant to the Easement and Attachment Agreement, including, without limitation, easements authorizing access, use, maintenance, construction, repair, replacement and other activities by Penelec and NYSEG, as further described in the Easement and Attachment Agreement; (ii) those exceptions to title to the Transferred Assets and those Encumbrances set forth in Schedule 1.2 and any comparable exceptions to title or Encumbrances arising after December 16, 2011; (iii) statutory liens for taxes or other governmental charges or assessments not yet due or delinquent or the validity of which is being contested in good faith by appropriate proceedings provided that the aggregate amount being so contested does not exceed $1 million; (iv) mechanics’, carriers’, workers’, repairers’ and other similar liens arising or incurred in the ordinary course of business relating to obligations as to which there is no default on the part of Homer City or the validity of which are being contested in good faith, and which do not, individually or in the aggregate, exceed $1 million; (v) zoning, entitlement, conservation restriction and other land use and environmental regulations by Governmental Authorities; and (vi) such other liens, imperfections in or failure of title, charges, licenses, easements, restrictions and Encumbrances which do not materially, individually or in the aggregate, detract from the value of the Transferred Assets as currently used or materially interfere with the present use of the Transferred Assets and do not secure

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indebtedness.  For purposes of this definition, “Encumbrances” means any mortgages, pledges, liens, security interests, conditional and installment sale agreements, activity and use limitations, conservation easements, deed restrictions, encumbrances and charges of any kind.
 “Pollution Control Improvements” shall have the meaning ascribed to such term in the recitals hereto.
“Project” shall have the meaning ascribed to such term in the recitals hereto.
 “Protected Actions” shall have the meaning ascribed to such term in Section 10.11 hereof.
“Secondment Agreements” shall have the meaning ascribed to such term in the recitals hereto.  
 “Sublease” shall mean a transaction on substantially the terms and conditions set forth on Annex III.
“Termination Amount” shall have the meaning ascribed to such term in Section 9.4 hereof.
“Transferred Assets” shall have the meaning ascribed to such term in Section 6.6 hereof.
“Transaction Agreement” shall mean a master transaction agreement implementing an Implementation Transaction, substantially on the terms and conditions set forth in Annex I, in the case of an Assignment and Annex II in the case of a Sublease.
Section 1.3.    Rules of Interpretation.  The rules of interpretation set forth in the Participation Agreement (OL1) shall apply to this Agreement, including its preamble and recitals. 
ARTICLE II
ACKNOWLEDGEMENTS AND AGREEMENTS
Section 2.1.    Obligations and Rights.  The parties acknowledge that the EPC Counterparty’s execution of the EPC Agreement (i) in no way implies any obligation on the part of the Owner Participants or any of their Affiliates to take any other action under the Operative Documents or under the EPC Agreement and (ii) in no way implies that the Owner Participants are waiving any of their rights under the Operative Documents.  Except to the extent modified in Section 2.5, Section 8.5, Section 10.12 and Section 10.13, the terms and conditions set forth in this Agreement in no way limit, alter or amend the provisions of any of the Operative Documents, each of which remains in full force and effect in accordance with the terms thereof.  
Section 2.2.    [Reserved]
Section 2.3.    Access Rights.  Homer City, in its capacity as Facility Lessee, agrees, in connection with (and for the purpose of facilitating) the transactions contemplated by this Agreement, the performance of the work contemplated by the EPC Agreement and the BOP Agreements, and GE’s due diligence investigation, to provide reasonable access to the Facility to

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GE, the EPC Contractor, and the BOP Contractors and their representatives upon reasonable advance notice; provided, that such access shall be sufficient to permit the EPC Contractor, any counterparty to a BOP Agreement, and each of their respective subcontractors and representatives, subcontractors and designees, as applicable, to complete the work contemplated by the EPC Agreement and the BOP Agreements in accordance with the terms and conditions thereof without undue delay or interference; provided, further, that, in all cases, such access shall (i) be subject to compliance by such persons with applicable health and safety laws and regulations and the health and safety policies of Homer City and (ii) not unreasonably interfere with or endanger the operations of the Facility (taking into account the purpose and intent of the EPC Agreement), it being understood that the performance of the work contemplated by the EPC Agreement will necessarily result in certain interference with the operations of the Facility.
Section 2.4.    Non-Solicitation.  GE agrees that neither it nor its Affiliates shall, directly or indirectly, during the Restricted Period (as defined below), hire or solicit for employment as an employee, consultant or otherwise, in each case in connection with the Project or the transactions contemplated by this Agreement, any person who is as an employee of Homer City or any of its Affiliates without the written consent of Homer City or such Affiliate, as applicable; provided, that in connection with the consummation of an Implementation Transaction or an Alternative Transaction, GE may hire or solicit for employment employees of Homer City in accordance with the terms and conditions of the applicable Transaction Agreement; and provided further, that nothing herein shall prevent GE or its Affiliates from hiring an employee of Homer City or any of its Affiliates who responds to a general solicitation for employment that is not targeted at any such employee.  For purposes of this Section 2.4, the “Restricted Period” shall mean, with respect to any employee of Homer City or any of its Affiliates, the period commencing on the date hereof and ending on the date which is twenty-four (24) months following the termination of such employee’s employment with Homer City or the applicable Affiliate; provided that the Restricted Period shall, solely in respect of Homer City, automatically terminate upon the consummation of an Implementation Transaction or an Alternative Transaction, as applicable. 
Section 2.5.    Rent Default Event.  To the extent permitted under the Operative Documents, GE hereby waives, and agrees to cause the GE Owner Lessors to waive, and to use commercially reasonable efforts to cause the MetLife Owner Lessor to waive, any Rent Default Event occurring during the effectiveness of this Agreement that would have occurred after the Effective Date but for the existence of this waiver, and GE agrees to (and shall cause the GE Owner Lessors and use commercially reasonable efforts to cause the MetLife Owner Lessor, as applicable, to) evidence any such waiver in a form reasonably acceptable to the parties hereto promptly following request therefor by Homer City.  The waiver set forth in this Section 2.5 shall be effective for all purposes under the Operative Documents, provided that (i) each such waiver shall constitute a Rent Default Event for the purposes of Section 6.10(b) of the Participation Agreement, (ii) interest shall accrue on any unpaid Rent at the Overdue Rate, and (iii) any unpaid Rent and accrued interest in respect thereof shall be due in accordance with the Operative Documents.
Section 2.6.    BOP Agreements.  Without limiting Section 6.7. for the avoidance of doubt, the parties hereto acknowledge and agree that additional contracts and/or purchase orders

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for additional services or work to be performed may need to be entered into by the EPC Counterparty and/or GE in respect of the Pollution Control Improvements.
ARTICLE III
OBLIGATIONS IN RESPECT OF THE EPC AGREEMENT
Section 3.1.    Execution of EPC Agreement.  GE shall cause the EPC Counterparty to (x) enter into the EPC Agreement on or before twenty (20) days after the Effective Date and (y) subject to obtaining the applicable consents under the Operative Documents, assume the BOP Agreements and the EPC Purchase Orders, in each case, in accordance with Section 3.7; provided that, subject to Section 3.5, the EPC Counterparty shall have the right in its sole and absolute discretion to suspend or terminate the EPC Agreement and the BOP Agreements (to the extent it has entered into them) in accordance with the terms thereof.  
Section 3.2.    Actions in Connection with the Execution of the EPC Agreement.  Homer City shall cooperate with, and provide assistance to, GE and its Affiliates in connection with the drafting, negotiation and execution of the EPC Agreement including, without limitation, taking the following actions: (a) provide material documents, access to key employees and advisors, and material information and reports (internal and third-party) that Homer City may have in its possession relating to the ownership, operation or maintenance of the Facility as GE or its Affiliates may reasonably request, (b) provide to GE, reports and information with respect to the Facility and the Pollution Control Improvements as GE or its Affiliate may reasonably request, and (c) take such other actions as may be reasonably requested by GE in connection with or incidental to the foregoing.  
Section 3.3.    Secondment Agreements.  In connection with the entry by the EPC Counterparty into the EPC Agreement and the assumption of the BOP Agreements and the EPC Purchase Orders, Midwest Generation EME, LLC and the EPC Counterparty (or another Affiliate of GE reasonably acceptable to Homer City) shall enter into the Secondment Agreements.
Section 3.4.    Acknowledgement Regarding the EPC Counterparty’s Right to Assign the EPC Agreement; Homer City Cooperation.  GE may, in its sole and absolute discretion, choose to assign or cause the EPC Counterparty to assign the EPC Agreement and the BOP Agreements to one or more of the GE Owner Lessors, to a contract trust owned by one or more GE Owner Lessors, to an entity to which the interest of Homer City in the Facility Leases is transferred, or to any other entity designated by GE.  In the event that GE or the EPC Counterparty elects to effect any such assignment, Homer City shall, at the cost and expense of GE, use commercially reasonable efforts to assist with and effect any assignment of the EPC Agreement and the BOP Agreements as may be requested by GE or the EPC Counterparty.
Section 3.5.    Modifications to EPC Agreement and/or BOP Agreements.  GE shall not, and shall cause the EPC Counterparty not to, amend, waive or otherwise modify, or suspend performance under or terminate, the EPC Agreement or the BOP Agreements in a manner (i) which is reasonably likely to negatively impact the safety of any employee or the public or (ii) that would violate applicable laws or regulations (environmental or otherwise), excluding, in each case, any negative impacts on the health or safety of any employees or the public or any

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violation of law or regulation (environmental or otherwise) resulting from delays in the installation of, or failure to install, the Pollution Control Improvements or otherwise from the failure to complete the Project.  GE shall, promptly following execution thereof, deliver to Homer City, copies of any amendments or modifications to, or waivers of, the EPC Agreement and/or the BOP Agreements.
Section 3.6.    No Third Party Beneficiary.  Nothing herein shall cause (or be deemed to cause) Homer City or its Affiliates to be a third party beneficiary under the EPC Agreement or the BOP Agreements.
Section 3.7.    Actions in Connection with the Performance of Obligations Arising Under the EPC Agreement and BOP Agreements.  
(a)    Homer City shall use commercially reasonable efforts to cooperate with, and provide assistance to, GE, GE’s Affiliates and GE’s designees in connection with the performance of the obligations of the EPC Counterparty arising under the EPC Agreement and the BOP Agreements, including, but not limited to, taking such actions or providing such assistance as is reasonably requested by GE, GE’s Affiliates or GE’s designees.  In connection with the foregoing, Homer City shall take such actions as are reasonably necessary or desirable to enable the EPC Counterparty to fulfill their obligations under the EPC Agreement and the BOP Agreements (other than with respect to payment or indemnity obligations of the EPC Counterparty under such agreements), including, but not limited to, the obligations of the EPC Counterparty under Sections 4.1, 4.2, 4.3, 4.4, 4.5, 4.8, and 4.9 of the EPC Agreement.    GE shall reimburse Homer City for its actual and documented costs and expenses reasonably incurred by Homer City in connection with the foregoing obligations provided that such costs and expenses shall not include any salaries, benefits or other compensation of Homer City’s employees. 
(b)    Subject to obtaining any required third party consents, Homer City agrees, pursuant to a mutually acceptable transfer agreement, to transfer and assign to the EPC Counterparty, all obligations, rights, benefits and entitlements that Homer City may have (other than any rights, benefits or entitlements of Homer City in its capacity as Facility Lessee) arising out of (i) the EPC Purchase Orders and (ii) the BOP Agreements, including in each case all ownership interests in any assets and work product resulting therefrom, and agrees that regardless of whether or not such transfer and assignment shall have occurred, it shall not have any interest in the EPC Agreement or the work product resulting therefrom by reason of the EPC Purchase Orders and the BOP Agreements.  Homer City shall be responsible for payment with respect to all work performed prior to the date hereof under the EPC Purchase Orders and the BOP Agreements. In addition, with respect to those EPC Purchase Orders and BOP Agreements not yet fully performed by the applicable counterparties thereto, and such other purchase orders as may be subsequently issued by Homer City, (i) Homer City shall continue to perform all of its obligations thereunder, other than payment and indemnity obligations with respect to work performed after the date hereof, which shall be for the account of the EPC Counterparty and (ii) subject to obtaining required third party consents, Homer City and the EPC Counterparty shall use commercially reasonable efforts to cause each such EPC Purchase Order or BOP Agreement to be terminated and replaced with a new purchase order or agreement directly between EFS

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Homer City and the applicable counterparty, on substantially the same terms and conditions as apply to the original.
ARTICLE IV
IMPLEMENTATION TRANSACTIONS
Section 4.1.    Implementation Transactions.  GE may, in its sole discretion, request that Homer City consummate one or more Implementation Transactions and, following such request, Homer City agrees to promptly consummate any such Implementation Transaction selected by GE, in each case, in accordance with the terms and conditions set forth in the Annexes (including the Transaction Agreement, if applicable) applicable to any such Implementation Transaction.  For sake of clarity, and without limiting Section 9.2 of this Agreement, for so long as this Agreement shall remain in effect, the fact that GE may have requested that Homer City pursue any particular Implementation Transaction shall not prevent GE from requesting that Homer City pursue any other Implementation Transaction or an Alternative Transaction (including following the consummation of any Sublease); provided, however, that GE agrees that once an Implementation Transaction or Alternative Transaction (other than any Sublease) has been signed (whether or not such Implementation Transaction or Alternative Transaction has been consummated), GE will not request that Homer City pursue any other Implementation Transaction or Alternative Transaction for so long as the parties are actively pursuing the consummation thereof unless GE shall have reasonably determined that it is reasonably likely that a condition to the closing of such Implementation Transaction or Alternative Transaction is not capable of being satisfied in a reasonably timely fashion.
Section 4.2.    Debt Party Consent.  If, in connection with any Implementation Transaction or Alternative Transaction, GE shall seek any consent or waiver from the holders of the notes issued under the Lease Indentures and/or the holders of the bonds issued under the Fundco Indenture, or any other Lease Indenture Secured Party under the Operative Documents, to any waiver of, or amendment to, any provisions of the Operative Documents, Homer City shall, upon GE’s request, use commercially reasonable efforts to take such actions as are reasonably requested by GE in connection with obtaining any such consents or waivers.   
Section 4.3.    Assistance with Tender Offer.  In the event that GE or any of its Affiliates or designees launch a tender offer for the purchase of the bonds issued under the Fundco Indenture, then, at GE’s request, Homer City shall provide, at Homer City’s cost and expense, all such assistance and cooperation in connection with any such tender offer as is reasonably requested by GE and shall use commercially reasonable efforts to assist GE in the completion of any such tender offer (it being understood and agreed, that in no event shall such efforts require the payment of any amount by Homer City other than for its own costs and expenses).  
Section 4.4.    Release of Confidentiality Restrictions.  Homer City acknowledges that the consummation of any of the transactions described in Article IV hereof may require the dissemination and disclosure of information that, pursuant to Section 17.19 of each Participation Agreement, Section 10.11 of this Agreement, and certain other confidentiality agreements and provisions, is required to be kept confidential (collectively, the “Confidentiality Provisions”).  Homer City shall, to the extent in its control, waive any such Confidentiality Provisions to the extent reasonably requested by GE in connection with the implementation of any such

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transaction.  The foregoing notwithstanding, in no event shall Homer City be required to waive (or be deemed to have waived) any Confidentiality Provision to the extent the information subject to such Confidentiality Provision is required by contract or applicable law, regulation or legal process to remain confidential in accordance with the terms thereof; provided that Homer City agrees to use commercially reasonable efforts, at GE’s reasonable request, to obtain consent to the waiver of any Confidentiality Provisions that are required by contract to remain confidential.
Section 4.5.    Assistance with Rating Agency Review.  If GE or any of its Affiliates seek rating agency review of the bonds issued pursuant to the Fundco Indenture (including in connection with any credit enhancement), then, at GE’s request, Homer City shall provide such reasonable assistance and cooperation in connection with any such rating agency review as is reasonably requested by GE and shall use commercially reasonable efforts to assist GE in the completion of any such rating agency review.  The parties agree that any fees, costs and expenses of the ratings agencies shall be borne by GE.
Section 4.6.    Section 467 Loan Balance.  Homer City acknowledges and agrees that the execution and delivery of this Agreement does not alter, modify, change, amend or waive any obligation of GE to pay any Lessor Section 467 Loan Balance and that no Lessor Section 467 Loan Balance or Lessor Section 467 Interest shall be due or payable solely as result of the execution and delivery of this Agreement.  For the avoidance of doubt, it is understood and agreed that the treatment of the Lessor Section 467 Loan Balance and any Lessor Section 467 Interest in connection with the consummation of any Implementation Transaction shall be addressed in the Annex relating to such Implementation Transaction.
ARTICLE V
TRANSITION SERVICES
Section 5.1.    Transition Services Agreement.  In connection with any Implementation Transaction or Alternative Transaction, EME and GE (or a designee of GE) shall enter into a mutually acceptable transition services agreement (the “Transition Services Agreement”); provided, that is understood, acknowledged and agreed that (1) for services provided by EME and its Affiliates (other than Edison Mission Marketing & Trading, Inc. (“EMMT”)) that have historically had costs allocated to Homer City, the amounts payable therefor under the Transition Services Agreement shall be consistent with the past practice of allocating such costs to Homer City, (2) the costs of any services provided by EMMT to Homer City shall be mutually agreed by the relevant parties and (3) costs in respect of certain services provided by EME and its Affiliates have not previously been allocated to Homer City and that costs with respect to such services shall be mutually agreed in the Transition Services Agreement by the relevant parties.
Section 5.2.    Provision of Information. 
(a)    During the effectiveness of this Agreement, Homer City will, at reasonable times and upon reasonable notice: (i) provide GE and its Affiliates and their respective employees, agents and advisors (including, without limitation, accountants, counsel, environmental consultants, financial advisors and other authorized representatives) (collectively, “Representatives”) with access to  the Data Room and use commercially reasonable efforts to

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update the Data Room on a monthly basis with current information of the type or nature of the information contained in the Data Room on the date hereof; (ii) give GE and its Representatives reasonable access at reasonable times with reasonable advance notice to its managerial personnel and to all books, records, plans, equipment, offices and other facilities and properties constituting the Transferred Assets; (iii) furnish GE and its Representatives with (A) such financial data as required to be delivered by Homer City under Section 5.1 of each Participation Agreement, (B) if requested by GE or its Representatives, copies of such financial data which has been or is subsequently developed by Homer City or any of its Representatives on Homer City’s behalf and (C) such other operating information as GE and its Representatives may from time to time reasonably request; and (iv) furnish GE and its Representatives at their request a copy of each material report, schedule or other document filed by Homer City or any of its Affiliates with respect to the Transferred Assets with the Federal Energy Regulatory Commission or any successor agency thereto, the Pennsylvania Department of Environmental Protection and any successor agency thereto (“PaDEP”) or any federal, state, local or other governmental, regulatory or administrative agency, commission, department, board, or other governmental subdivision, court, tribunal, arbitrating body or other governmental authority (“Governmental Authority”); provided, however, that (A) any such access (and resulting inspections and investigations) shall be conducted in such a manner as not to interfere unreasonably with the operation of the Transferred Assets or any ongoing proceeding before any Governmental Authority, (B) Homer City shall not be required to take any action which would constitute a waiver of the attorney-client privilege, and (C) Homer City need not supply GE and its Representatives with any information which Homer City is under a legal or contractual obligation not to supply.  Homer City shall use commercially reasonable efforts to cooperate with GE and its Representatives so as to permit any access or provide any information in a manner not inconsistent with the foregoing, or otherwise make the restrictions set forth in the above clauses (A), (B) and (C) inapplicable. In the event that access is not granted by Homer City in accordance with clauses (A), (B) and (C) above, Homer City shall provide GE with an explanation regarding its decision to deny access.  Notwithstanding anything in this Section 5.2 to the contrary, Homer City will not furnish or provide access to any employee personnel records or medical information unless required by law or specifically authorized by the affected employee, and GE and its Representatives shall not have the right to perform or conduct any environmental sampling or testing at, in, on, or underneath the Transferred Assets.
(b)    All information furnished to or obtained by GE and its Representatives pursuant to this Section 5.2 shall be subject to the provisions of Section 17.19 of each Participation Agreement and Section 10.11 of this Agreement and shall be treated as confidential nonpublic information.  Except as specifically provided herein or in Section 17.19 of each Participation Agreement, nothing in this Section 5.2 shall impair or modify any of the rights or obligations of the parties under each Participation Agreement, which rights and obligations shall remain in effect until termination of such agreements in accordance with their terms
Section 5.3.    Conduct of Business.  Except (i) as contemplated or permitted by this Agreement, (ii) for actions approved by GE in writing (which approval shall not be unreasonably withheld, conditioned or delayed), (iii) as required by applicable law, regulation or order, (iv) as may be required to comply with Homer City’s obligations under the Operative Documents, or (v) as set forth on Schedule 5.3, during the effectiveness of this Agreement, Homer City shall use commercially reasonable efforts to operate and maintain its business and the Facility in all

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material respects (A) according to its ordinary and usual course of business consistent with past practice and (B) consistent with Good Utility Practice (clauses (A) and (B), collectively “GE’s Preferred Approach”) unless Homer City reasonably determines that a deviation from GE’s Preferred Approach is required by or prudent in light of Homer City’s financial condition, liquidity needs or fiduciary duties; provided that Homer City agrees to use commercially reasonable efforts to consult in good faith with GE in advance of any material deviations from GE’s Preferred Approach and consider, in good faith, any alternative courses of action proposed by GE. 
ARTICLE VI
REPRESENTATIONS, WARRANTIES AND COVENANTS OF HOMER CITY
Homer City represents and warrants, and covenants with respect to Section 6.6, to GE, as of the Effective Date, as follows:
Section 6.1.    Existence, Power and Authority.  Homer City is a limited partnership duly organized, validly existing and in good standing under the laws of the State of Pennsylvania and has the requisite power and authority to enter into this Agreement and to perform its obligations contemplated hereby.
Section 6.2.    Authorization.  The execution and delivery by Homer City of this Agreement, and the performance by Homer City of the transactions contemplated hereby, have been duly authorized by all requisite organizational action and proceedings of Homer City.  This Agreement has been, or prior to the Effective Date will be, duly executed and delivered by Homer City, and the provisions herein are, or when so executed will be, the legally valid and binding obligations of Homer City, enforceable against Homer City in accordance with the terms hereof, except as such enforceability may be limited by applicable bankruptcy, insolvency, or similar laws from time to time in effect which affect creditors’ rights generally or by equitable principles.
Section 6.3.    No Conflict.  Neither the execution and delivery of this Agreement, nor the performance by Homer City of the obligations contemplated herein (subject, with respect to any Implementation Transaction, to the satisfaction of the applicable conditions set forth in the Annex related to such Implementation Transaction), will (a) violate any provision of Homer City’s organizational documents, (b) conflict with or result in a breach of any material agreement to which Homer City is a party or by which Homer City is bound, (c) violate any judgment, order, injunction, decree or award of any court, administrative agency or government body against, or be binding upon, Homer City, (d) constitute a violation by Homer City of any law or regulation applicable to Homer City, or (e) conflict with or result in a breach by Homer City of any Operative Document.
Section 6.4.    Consents.  With respect to any Implementation Transaction, and subject to the satisfaction of the applicable conditions set forth in the Annex related to such Implementation Transaction, the execution, delivery and performance by Homer City of this Agreement does not require any approval or consent of any third-party or of any trustee or holder of any indebtedness or obligation of Homer City, or any filing or recording with, or any consent or approval of, or the taking of any other action with respect to, any government body, except such as have been

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obtained or effected on or before the Effective Date (it being understood that certain of the Implementation Transactions may require such approvals or consents). 
Section 6.5.    Legal Proceedings.  Other than as set forth on Schedule 6.5, (a) there are no actions, suits or proceedings (“Legal Proceedings”) pending, and Homer City has no knowledge of any such Legal Proceedings threatened, against Homer City or any Affiliate of Homer City with respect to the Facility, and (b) Homer City has no knowledge of any investigations by any government body pending or threatened with respect to the Facility or the transaction contemplated hereby that, if adversely determined, would materially hinder or prevent Homer City’s ability to perform its obligations set forth herein or adversely affect the right, title, or interest of Homer City with respect to its assets, properties, rights or liabilities.
Section 6.6.    Transfer of Assets.  Except to the extent set forth on Annex I, Homer City covenants that it shall, in connection with the consummation of any Implementation Transaction, (i) transfer, or cause to be transferred, to GE or its designee, all properties, assets and rights of whatever nature or kind owned by Homer City (including any assets reflected on Homer City’s most recent financial statements) (collectively, the “Transferred Assets”), (ii) use commercially reasonable efforts to assist GE in identifying any material assets or rights (for example, parent software licenses) not owned by Homer City (but owned by an Affiliate of Homer City) and used in the ordinary course of business in support of Homer City’s operation of the Facility (the “Affiliate Assets”) which, to Homer City’s knowledge, consist of the assets set forth on Schedule 6.6 and (iii) use commercially reasonable efforts to, at GE’s cost and expense (provided, that Homer City shall use commercially reasonable efforts to minimize such costs and expenses), facilitate, to the extent practicable, the transfer of, or replacement for the Affiliate Assets and any other properties, assets or rights necessary for the ownership, maintenance or operation of the Facility not owned by Homer City.  If any Affiliate Asset is identified following the execution of this Agreement and is not set forth on Schedule 6.6, the failure to include the Affiliate Asset on Schedule 6.6 shall not be a default under this Agreement and such additional Affiliate Assets will be added to Schedule 6.6; provided that prior to the consummation of an Implementation Transaction, Homer City shall cause its Affiliates to permit Homer City to continue to use such Affiliate Assets on the same terms and conditions, in all material respects, as used immediately prior to the date of the Implementation Agreement (it being understood and agreed that the treatment of Affiliate Assets following the consummation of an Implementation Transaction shall be addressed in the Transition Services Agreement). 
Section 6.7.    BOP Agreements.  As of the date hereof, Exhibit A lists the current, outstanding contracts or purchase orders related to services (including balance of plant work) to be performed in respect of the Pollution Control Improvements.  For the avoidance of doubt, the parties hereto acknowledge and agree that additional contracts and/or purchase orders for additional services or work to be performed may need to be entered into by the EPC Counterparty and/or GE in respect of the Pollution Control Improvements. 
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF GE
GE represents and warrants to Homer City, as of the Effective Date, as follows:

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Section 7.1.    Existence, Power and Authority.  GE is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has the corporate power and authority to enter into this Agreement and to consummate the transactions contemplated hereby and thereby. 
Section 7.2.    Authorization.  The execution and delivery by GE of this Agreement, and the performance by GE of the transactions contemplated hereby, have been duly authorized by all requisite organizational action and proceedings of GE.  This Agreement has been, or prior to the Effective Date will be, duly executed and delivered by GE, and the provisions herein are, or when so executed will be, the legally valid and binding obligations of GE, enforceable against GE in accordance with their respective terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, or similar laws from time to time in effect which affect creditors’ rights generally or by equitable principles.
Section 7.3.    No Conflict.  Neither the execution and delivery of this Agreement, nor the performance by GE of the obligations contemplated herein (subject, with respect to any Implementation Transaction, to the satisfaction of the applicable conditions set forth in the Annex related to such Implementation Transaction), will (a) violate any provision of GE’s organizational documents, (b) conflict with or result in a breach of any material agreement to which GE is a party or by which GE is bound, (c) violate any judgment, order, injunction, decree or award of any court, administrative agency or government body against, or be binding upon, GE, (d) constitute a violation by GE of any law or regulation applicable to GE or (e) conflict with or result in a breach by GE of any Operative Document.
Section 7.4.    Consents.  The execution, delivery and performance by GE of this Agreement does not require any approval or consent of any third-party or of any trustee or holder of any indebtedness or obligation of GE, or any filing or recording with, or any consent or approval of, or the taking of any other action with respect to, any government body, except such as have been obtained or effected on or before the Effective Date (it being understood that certain of the Implementation Transactions may require such approvals or consents).  
Section 7.5.    Legal Proceedings.  Other than as set forth on Schedule 7.5, there are no Legal Proceedings pending, and GE has no knowledge of any such Legal Proceedings threatened, against GE, any GE Owner Lessor or any Affiliate of GE with respect to the Facility.  GE has no knowledge of any investigations by any government body pending or threatened with respect to the Facility or the transactions contemplated hereby that, if adversely determined, would materially hinder or prevent GE’s ability to perform its obligations set forth herein or adversely affect the right, title, or interest of GE or the GE Owner Lessors in the Facility or the Project.
ARTICLE VIII
INDEMNITY
Section 8.1.    General Indemnity by Homer City in Favor of GE.     Homer City hereby covenants and agrees that upon GE’s demand, it will pay and assume liability for, and indemnify, protect, defend, save and keep harmless GE and its Affiliates, on an after-tax basis, from and against any and all losses (other than any claim relating to any Taxes) which may at any time or from time to time be imposed upon, incurred by or asserted against GE or its Affiliates directly

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resulting from or arising out of the untruthfulness of any of Homer City’s representations or warranties contained herein.
Section 8.2.    Procedure for General Indemnity by Homer City in Favor of GE.  When seeking indemnification pursuant to Section 8.1, GE shall give prompt written notice together with a copy of such claim, process or other legal pleading to Homer City of the assertion of any claim, or the commencement of any action, suit or proceeding, in respect of which indemnity is sought hereunder and will give Homer City such information with respect thereto as Homer City may reasonably request, but no failure to give such notice shall relieve Homer City of any liability hereunder (except to the extent Homer City suffers actual prejudice thereby).  Upon written request by GE, Homer City shall take appropriate action to contest the claim.  Homer City may, at its expense, participate in or assume the defense of any such action, suit or proceeding involving a third party.  Homer City and GE shall in all other respects use commercially reasonable efforts to cooperate with each other to mitigate the cost of any indemnifiable claim or proceeding and to settle the same promptly in a mutually satisfactory manner.  The payment of any indemnity due to GE pursuant to Section 8.1 will be due and payable thirty (30) days after the date that Homer City receives such notice.
Section 8.3.    General Indemnity by GE in Favor of Homer City.     GE hereby covenants and agrees that upon Homer City’s demand, it will pay and assume liability for, and indemnify, protect, defend, save and keep harmless Homer City and its Affiliates, on an after-tax basis, from and against any and all losses (other than any claim relating to any Taxes) which may at any time or from time to time be imposed upon, incurred by or asserted against Homer City or such Affiliate directly resulting from or arising out of the untruthfulness of any of GE’s representations or warranties contained herein. 
Section 8.4.    Procedure for General Indemnity by GE in Favor of Homer City.  When seeking indemnification pursuant to Section 8.3, Homer City shall give prompt written notice together with a copy of such claim, process or other legal pleading to GE of the assertion of any claim, or the commencement of any action, suit or proceeding, in respect of which indemnity is sought hereunder and will give GE such information with respect thereto as GE may reasonably request, but no failure to give such notice shall relieve GE of any liability hereunder (except to the extent GE suffers actual prejudice thereby).  Upon written request by GE, Homer City shall take appropriate action to contest the claim.  GE may, at its expense, participate in or assume the defense of any such action, suit or proceeding involving a third party.  Homer City and GE shall in all other respects use commercially reasonable efforts to cooperate with each other to mitigate the cost of any indemnifiable claim or proceeding and to settle the same promptly in a mutually satisfactory manner.  The payment of any indemnity due to Homer City pursuant to Section 8.3 will be due and payable thirty (30) days after the date that GE receives such notice.
Section 8.5.    Indemnities Not Exclusive.  The indemnities set forth in this Article VIII are in addition to the indemnities set forth in the Operative Documents.  Except to the extent provided for in this Article VIII, nothing herein shall be construed to limit, restrict, or modify the rights of the parties under the Operative Documents to make, pursue, or prosecute indemnity claims in accordance with the terms and conditions thereof.  GE acknowledges and agrees (and shall cause the GE Owner Lessors to acknowledge and agree to the extent applicable) that none of (i) the execution and delivery of this Agreement, (ii) the taking of any actions contemplated

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hereunder (including the installation of the Pollution Control Equipment) and (iii) any breach of this Agreement by Homer City shall give rise to any obligation of Homer City or any of its Affiliates under any tax indemnity agreement or any tax indemnity provision contained in the Operative Documents.  Notwithstanding the foregoing clause (iii), if any event occurs which would result in a breach of this Agreement by Homer City and which would give rise to any rights or remedies available under the Operative Documents in the absence of this Agreement, the foregoing clause (iii) shall not limit any rights or remedies which would be available under the Operative Documents with respect to such event in the absence of this Agreement.  For the avoidance of doubt, it is understood and agreed that the tax implications of the consummation of any Implementation Transaction shall be addressed in the Annex relating to such Implementation Transaction.
ARTICLE IX
TERMINATION AND EXCULPATION
Section 9.1.    Termination by GE.  GE may terminate this Agreement for any reason in its sole discretion at any time by delivery of written notice to Homer City of its election to terminate.  Such election to terminate shall be effective immediately upon receipt of such notice of termination by Homer City.  Upon receiving any such notice of termination, Homer City shall cease to take all such actions contemplated hereby as are specified in such notice and upon such notice the parties shall, subject to Section 10.9, be released from all of their respective obligations hereunder.
Section 9.2.    Automatic Termination.  Unless earlier terminated, this Agreement and, subject to Section 10.9, the obligations of the parties hereunder, shall terminate upon the satisfaction or fulfillment of all of the obligations of the parties hereto and the consummation of an Assignment or an Alternative Transaction.
Section 9.3.    Termination by Homer City.  Homer City may, in its sole discretion, terminate this Agreement by delivery of written notice to GE, on or after that date (a “Homer City Termination Date”) which is the earliest to occur of (x) sixty (60) days following an EPC Termination Event if such EPC Termination Event occurs prior to the three month anniversary of the Effective Date, (y) one hundred eighty (180) days following the occurrence of an EPC Termination Event, if such EPC Termination Event has occurred after the three month anniversary of the Effective Date, and (z) December 31, 2013; provided that if, as of December 31, 2013, GE has actually spent at least $100 million under the EPC Agreement and/or the BOP Agreements then such Homer City Termination Date shall be postponed until the later of (1) December 31, 2014, so long as GE has requested that Homer City consummate one or more Implementation Transactions or an Alternative Transaction and GE continues diligently pursuing consummation thereof in good faith, including the tender of performance of obligations under the definitive agreements for one or more Implementation Transactions or an Alternative Transaction and the exertion of commercially reasonable efforts to satisfy conditions precedent to such consummation, and (2) December 31, 2016, so long as (i) GE has requested that Homer City consummate one or more Implementation Transactions or an Alternative Transaction and GE continues diligently pursuing consummation thereof in good faith, including the tender of performance of obligations under the definitive agreements for one or more Implementation Transactions or an Alternative Transaction and the exertion of commercially reasonable efforts

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to satisfy all conditions precedent to the closing of any such Implementation Transaction or Alternative Transaction, (ii) GE or its Affiliates have actually spent at least $150 million under the EPC Agreement and/or the BOP Agreements, and (iii) the consummation of one or more of the Implementation Transactions or an Alternative Transaction has been delayed by the failure (x) to obtain any governmental consent the obtainment of which is reasonably necessary to close an Implementation Transaction or an Alternative Transaction or (y) to resolve any Legal Proceedings brought by third parties (excluding Legal Proceedings brought by GE and its Affiliates and/or MetLife and its Affiliates) that has the effect of blocking the consummation of an Implementation Transaction or an Alternative Transaction at such time or making the consummation of an Implementation Transaction or Alternative Transaction commercially impractical; provided that in the case of (x) and (y), all of the conditions to the closing of an Implementation Transaction or the applicable Alternative Transaction capable of satisfaction by GE or its Affiliates shall have been satisfied (excluding, for the avoidance of doubt, any condition that cannot be satisfied until the obtainment of any necessary governmental consent or the resolution of such Legal Proceedings).  Upon receiving any such notice of termination, GE shall cease to take all such actions contemplated hereby as are specified in such notice and upon such notice GE shall, subject to Section 10.9, be released from all of its obligations hereunder.  
Section 9.4.    Termination Amount.  In the event that this Agreement is terminated pursuant to this Article IX, Homer City agrees (i) that subject to obtaining all consents required under the Operative Documents (which Homer City shall use commercially reasonable efforts to obtain), Homer City will repay in full to GE an amount equal to all reasonable and documented costs and expenses, including, without limitation, any cancellation charges incurred and paid by GE in connection with the installation of the Pollution Control Improvements (including all such reasonable and documented costs and expenses arising in connection with the balance of plant) (such amount, the “Termination Amount”) and (ii) that GE may, but shall not be obligated to, agree to accept payment of the Termination Amount through an increase to Component A of Basic Lease Rent (subject to obtaining all consents required under the Operative Documents (which Homer City shall use commercially reasonable efforts to obtain)); provided however, that any obligation of Homer City to pay the Termination Amount shall be made subject to Homer City  having sufficient funds available to it after taking into account its obligations to pay (1) Basic Lease Rent (on the schedule and in the amounts set forth in the Operative Documents), (2) operations and maintenance costs incurred in the ordinary course of business and necessary to achieve or maintain Good Utility Practices or (3) the costs of improvements (capital or otherwise) incurred in the ordinary course of business and necessary to achieve or maintain Good Utility Practices.   
Section 9.5.    Termination Acknowledgements.  The parties hereto acknowledge and agree that (I) no failure to reimburse GE for the Termination Amount shall cause, create or constitute a Lease Event of Default or Lease Indenture Event of Default, (II) Homer City’s right to terminate this Agreement in accordance with Section 9.3 and the effectiveness of any such termination are not contingent upon, or subject to, the actual payment to GE of the Termination Amount, (III) the contingent reimbursement obligation of Homer City in respect of the Termination Amount created by Section 9.4 (or otherwise in this Agreement) shall constitute an obligation to pay Supplemental Lease Rent under the Operative Documents and (IV) the contingent obligation of Homer City to reimburse GE with respect to GE’s payment of the amounts giving rise to Homer City’s contingent reimbursement obligation in respect of the

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Termination Amount shall constitute an Excepted Payment; provided, that, notwithstanding anything in the contrary set forth in the Operative Documents, any obligation to pay Supplemental Lease Rent pursuant to clause (III) shall not be payable on an After-Tax Basis.  In furtherance of the above, GE agrees for itself and agrees to cause the GE Owner Lessors not to demand payments of the Termination Amount except in accordance with Section 9.4 and GE agrees (and agrees to cause the GE Owner Lessors) (i) not to declare a Lease Event of Default, (ii) to cause the GE Owner Lessors not to declare a Lease Event of Default, (iii) to use commercially reasonable efforts to cause the MetLife Owner Lessor not to declare a Lease Event of Default, in each case on account of any non- payment of the Termination Amount; provided, however, that except as expressly provided in this Section 9.5, each of GE and the GE Owner Lessors shall retain all of their respective rights and remedies under the Operative Documents. Notwithstanding the foregoing, should any portion of the Termination Amount remain unpaid on the date of termination such amount shall accrue interest at the Overdue Rate until paid, and Homer City shall make no Restricted Payments to Affiliates of Homer City until the Termination Amount and any interest accrued thereon shall have been paid in full.
Section 9.6.    Exculpation.  For the avoidance of doubt, (i) none of EME, any director or officer of EME, any Affiliate of EME (other than (x) Homer City and (y) for purposes of the Secondment Agreements only, Midwest Generation EME, LLC) nor any of their respective members, managers, shareholders, partners, directors, trustees, officers, employees, agents, advisors, representatives or Affiliates, in each case in their capacity as such for  EME or any Affiliate of EME (other than (x) Homer City and (y) for purposes of the Secondment Agreements only, Midwest Generation EME, LLC) (collectively, the “EME Exculpated Parties”) shall have any liability or obligations under this Agreement to any person for any reason whatsoever, including, without limitation, for any act taken or omitted to be taken in connection with or related to the execution, delivery, formulation, preparation, dissemination, implementation, or administration of this Agreement and (ii) none of any Affiliate of GE (other than GE, the EPC Counterparty and any of their respective assignees or designees) nor any of their respective members, managers, shareholders, partners, directors, trustees, officers, employees, agents, advisors, representatives or Affiliates, in each case in their capacity as such for any such Affiliate of GE (other than GE, the EPC Counterparty and any of their respective assignees or designees) (collectively, the “GE Exculpated Parties”, and together with the EME Exculpated Parties, the “ Exculpated Parties”) shall have any liability or obligations under this Agreement to any person for any reason whatsoever, including, without limitation, for any act taken or omitted to be taken in connection with or related to the execution, delivery, formulation, preparation, dissemination, implementation, or administration of this Agreement. 
Section 9.7.    Non-Exclusive Remedies.  Notwithstanding anything to the contrary contained herein or the termination by any party hereto of this Agreement, following a breach of this Agreement by any other party hereto, each party hereto may exercise, in addition to all other rights and remedies granted in this Agreement, all rights and remedies available to it under law or equity with respect to such breach.

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ARTICLE X
MISCELLANEOUS
Section 10.1.    Counterparts.  This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
Section 10.2.    Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of New York (regardless of the laws that might otherwise govern under applicable New York principles of conflicts of law, other than Section 5-1401 of the New York General Obligations Law) as to all matters, including but not limited to matters of validity, construction, effect and performance.
Section 10.3.    Further Assurances.  Each of the parties hereto agrees to execute, acknowledge, deliver, file and record, or cause to be executed, acknowledged, delivered, filed and recorded, such further documents or other papers, and to do all such things and acts, as any other party may reasonably request in order to carry out the provisions and purposes of this Agreement and the transactions contemplated hereby.  In furtherance of the foregoing, and not in limitation thereof, each of the parties hereto agrees to furnish to the others such powers of attorney as may be necessary to enable the parties to carry out their respective duties and realize the benefits provided by this Agreement.
Section 10.4.    Notices.  Any notice or other communication required or permitted hereunder shall be in writing and shall be delivered personally, sent by facsimile transmission or sent by recognized overnight courier service or certified or express mail, postage prepaid.  If such notice or other communication is sent by facsimile transmission, it shall promptly be confirmed by mail or overnight courier as set forth above.  Any such notice shall be deemed given when so delivered or sent by facsimile transmission or, if mailed, three Business Days after the date of deposit in the United States mail, as follows:
If to GE, to: 
 
General Electric Capital Corporation 
800 Long Ridge Road 
Stamford, CT  06927 
Attention:  Homer City Portfolio Manager 
Telephone:  (203) 357-4005 
Facsimile:  (203) 961-2606

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If to Homer City, to: 
 
EME Homer City Generation L.P. 
c/o Mission Energy Westside, Inc.  
3 MacArthur Boulevard, Suite 100  
Santa Ana, California 92707  
Attention:   Maria Rigatti  
Telephone:  (714) 513-8000 
Facsimile:  (714) 513-8914  
 
With a copy to:
Attention:  Daniel McDevitt  
Telephone:  (312) 583-6000  
Facsimile:  (312) 788-5214
Section 10.5.    Waiver of Jury Trial.  EACH OF THE PARTIES HEREBY WAIVES THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT.  EACH OF THE PARTIES ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO THIS AGREEMENT; THAT EACH HAS RELIED ON SUCH WAIVER IN ENTERING INTO THIS AGREEMENT; AND THAT EACH WILL CONTINUE TO RELY ON SUCH WAIVER IN THEIR RELATED FUTURE DEALINGS.  EACH OF THE PARTIES WARRANTS AND REPRESENTS THAT EACH HAS HAD THE OPPORTUNITY OF REVIEWING THIS JURY WAIVER WITH LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS.
Section 10.6.    CONSENT TO JURISDICTION.  EACH OF THE PARTIES HEREBY CONSENTS TO THE NON-EXCLUSIVE JURISDICTION OF THE SUPREME COURT OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK, AND ANY RELEVANT APPELLATE COURT, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT.  EACH OF THE PARTIES EXPRESSLY SUBMITS AND CONSENTS TO THE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS.  EACH OF THE PARTIES HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE UPON SUCH PARTY BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO SUCH PARTY AT THE ADDRESS SET FORTH IN SECTION 10.4 AND SERVICE SO MADE SHALL BE COMPLETE TEN (10) DAYS AFTER THE SAME HAS BEEN POSTED.

21

Section 10.7.    Binding Effect; Assignment; Entire Agreement.  No party may assign or delegate its rights or obligations hereunder to any other person without the prior written consent of the other parties hereto.  This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and permitted assigns.  No assignment of this Agreement or of any rights hereunder shall relieve the assigning party of any of its obligations or liabilities hereunder.  This Agreement shall not confer any rights or remedies upon any person other than the parties and their respective successors and permitted assigns.  This Agreement, including the Schedules, Exhibits, Annexes, documents, certificates and instruments to be delivered pursuant hereto or attached hereto, embody the entire agreement among the parties hereto with respect to the transactions contemplated hereunder and supersede all negotiations, representations, warranties, commitments, offers, contracts and writings prior to the date hereof (including any offering memorandum, summary worksheets or similar documents).  
Section 10.8.    Severability.  Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision shall be effective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement, and the remainder of such provision and the remaining provisions of this Agreement shall be interpreted, to the maximum extent possible, so as to conform to the original intent of this Agreement.
Section 10.9.    Survival of Representations and Warranties, Indemnities and Confidentiality.  Notwithstanding anything to the contrary set forth herein (including, without limitation, in connection with a termination of this Agreement), all representations and warranties made herein, Article VIII, Article IX, Sections 2.2, 2.4, 2.5, 10.11, and 10.12 hereof shall survive the expiration or termination of this Agreement. 
Section 10.10.    Waivers and Amendments; Non-Contractual Remedies; Preservation of Remedies.  This Agreement may be amended, superseded, modified, supplemented or terminated, and the terms hereof may be waived, only by written instrument signed by each of the parties hereto or, in the case of a waiver, by the party waiving compliance.  No delay on the part of any party in exercising any right, power or privilege hereunder shall operate as a waiver hereof.  No waiver on the part of any party of any such right, power or privilege, nor any single or partial exercise of any such right, power or privilege, shall preclude any further exercise thereof or the exercise of any other such right, power or privilege.  The rights and remedies herein provided are cumulative and are not exclusive of any rights or remedies that any party may otherwise have at law or in equity.
Section 10.11.    Confidentiality.  Subject to Sections 4.4 and 4.5 hereof, each party hereto agrees that it will treat this Agreement and the transactions contemplated thereby as privileged and confidential and will not, without the prior written consent of the other, disclose this Agreement or the transactions contemplated hereby to any third party, except for disclosure to its attorneys, auditors or its successors or permitted assigns and as may be required by applicable law, regulation or legal process or as may be necessary to effect the transactions contemplated hereby, in which case the party so disclosing shall use good faith efforts to limit disclosure to such third parties on a need-to know basis.  In connection with any such disclosure the party

22

making such disclosure shall request and use its commercially reasonable efforts to obtain confidential treatment of such information.  Except as otherwise required by applicable law or regulation, no party shall issue any press release or make any public announcement with respect to this Agreement or the transactions contemplated hereby without each other party’s hereto express written consent.  To the extent Homer City has any obligation to deliver documents, information or other materials, provide access to employees or advisors or otherwise cooperate with GE or any other party (collectively, the “Protected Actions”) the parties hereto acknowledge and agree that under no circumstances will the taking of any Protected Action require the disclosure or dissemination by Homer City (or any person or entity acting at Homer City’s direction) of any privileged information.
Section 10.12.    Costs and Expenses.  Unless otherwise expressly set forth in this Agreement (including in the next succeeding sentence), each party hereto shall be responsible for the costs and expenses of its own counsel and advisors in connection with the drafting, negotiation, execution and consummation of this Agreement and the transactions contemplated by this Agreement (including any Implementation Transaction or Alternative Transaction).  The parties hereto agree that (i) neither Homer City nor GE, the GE Owner Lessors nor any GE Affiliate shall be obligated to pay the costs or expenses incurred by Homer City or any Affiliate of Homer City arising in connection with the drafting or negotiation of this Agreement or the transactions contemplated by this Agreement (including any Implementation Transaction or Alternative Transaction), except as and to the extent set forth in clauses (ii) and (iii) below; (ii) GE shall be responsible for any fees, costs and expenses of the ratings agencies in connection with the transactions contemplated by this Agreement (including Section 4.5); and (iii) GE shall be responsible for Homer City’s and Homer City’s Affiliates’ reasonable and documented costs and expenses (including legal and advisory fees) in excess of $1,000,000 (the “Expense Threshold”) in the aggregate in connection with (1)(x) any activities related to the issuance of new indebtedness related to the Facility requested by GE in connection with any Implementation Transaction or Alternative Transaction (whether or not consummated), (y) any tender offer transaction (whether or not consummated) contemplated by Section 4.3 of this Agreement and (z) any consents or waivers (or the seeking of any consents or waivers) contemplated by Section 4.2 of this Agreement (whether or not obtained), including, without limitation, the costs and expenses of counsel to the holders of the bonds issued under the Fundco Indenture and (2) to the extent such costs and expenses are incurred (A) after June 30, 2012 with respect to an Alternative Transaction or (B) after September 30, 2012 with respect to any Implementation Transaction, any amendment, modification, suspension, termination or consummation of any of the transactions contemplated by this Agreement (including the Implementation Transactions and any Alternative Transaction) and any drafting and/or negotiation related thereto; provided that GE shall only be responsible for 90% of Homer City’s and Homer City’s Affiliates’ reasonable and documented costs and expenses incurred under this clause (2); provided, further, that, if costs and expenses covered by this clause (iii) exceed the Expense Threshold, Homer City agrees, other than in respect to clause (z) above, to consult with GE, from time to time and upon GE’s request, regarding the incurrence of additional costs and expenses (other than with respect to any de minimis or ordinary course costs and expenses).  The parties hereto agree that neither Homer City nor GE, the GE Owner Lessors nor any GE Affiliate shall have any responsibility for fees and expenses (including any success fees) payable to financial advisors, brokers, finders or their equivalent engaged by or otherwise working on behalf of EME or its Affiliates in connection with the transactions contemplated by this Agreement; provided, that the foregoing shall not be

23

construed to prevent, restrict or limit Homer City from engaging and paying financial or legal advisors if and to the extent that the board of directors of Homer City reasonably determines that such engagement is required by or prudent in light of Homer City’s financial condition, liquidity needs or fiduciary duties. The parties hereto agree that the cost and expense reimbursement obligations set forth herein are not subject to setoff or counterclaim.  
Section 10.13.    Balance of Plant.  The parties hereto acknowledge that, solely during the pendency of this Agreement, Homer City shall have no obligation to fund the balance of plant construction or improvements which are required or necessary in conjunction with the Pollution Control Improvements and that all other obligations of Homer City, if any, to fund the balance of plant construction or improvements shall be governed by the Operative Documents. 
Section 10.14.    Alternative Transaction.  In addition, at the request of GE, Homer City agrees to negotiate, in good faith, a transaction with GE in lieu of an Assignment having substantially similar economic, legal, regulatory and tax implications (including with respect to any Lessee Section 467 Loan Balance or Lessor Section 467 Loan Balance) as the Assignment (such transaction in lieu of an Assignment, an “Alternative Transaction”).  Without limiting the immediately preceding sentence, no party to this Agreement is committed to consummate an Alternative Transaction.
Section 10.15.    Cooperation Among the Owner Lessors and Owner Participants.  Whenever any provision references the consent, direction, request or other similar action of the Owner Participants, such reference shall require that GE act in concert with each GE Owner Lessor and use commercially reasonable efforts to cause MetLife to act in concert with GE.
Section 10.16.    Joinder of MetLife.  The parties acknowledge and agree that it is in their mutual interest that MetLife become a party to this Agreement.  The parties agree to take commercially reasonable efforts to facilitate MetLife’s involvement in any Implementation Transaction or Alternative Transaction and to amend this Agreement (including its Exhibits and Annexes) to allow for MetLife to become a party on substantially the same terms and conditions as agreed to by GE.
Section 10.17.    Third Party Beneficiaries.  Neither this Agreement nor any other agreements contemplated hereby are intended to or shall confer upon any Person other than the parties hereto and their respective Affiliates any legal or equitable rights or remedies. Notwithstanding the immediately preceding sentence, Section 9.6 shall be enforceable by the Exculpated Parties, Section 2.4 shall be enforceable by EME and Article III shall be enforceable by the EPC Counterparty.
Section 10.18.    Side Letter.  The parties hereto agree that this Agreement shall supersede, in all respects, the Letter Agreement dated as of March 9, 2012 (the “Letter Agreement”) among GE, Homer City and EFS Homer City and that the Letter Agreement shall automatically terminate and be of no further force and effect immediately upon the effectiveness of this Agreement.
[Signature Page Follows]

24

IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered by their respective officers thereunto duly authorized.

GENERAL ELECTRIC CAPITAL CORPORATION

By:  ___/s/ Mark Mellana_____
Name: Mark Mellana
Title: Authorized Signatory

EME HOMER CITY GENERATION L.P. 
BY:  MISSION ENERGY WESTSIDE, INC., ITS 
GENERAL PARTNER

By:  __/s/ Maria Rigatti________
Name: Maria Rigatti 
Title: Vice President and Chief Financial Officer

Signature Page - Implementation Agreement

Exhibit A

EPC Purchase Orders

Purchase Order 4500085026, dated August 05, 2011, between EME Homer City Generation L.P. and Kiewit Power Constructors Co. 
		
	o
	        Line 10: $ (***) issued on August 05, 2011, for the Initial Open Book bid process 

		
	o
	        Line 20: $ (***) issued on January 12, 2012 pre-LNTP limited Authorization

BOP Agreements

Purchase Order 4500083436, dated June 30, 2011, between EME Homer City Generation L.P. and HDR Engineering, Inc.

Purchase Order 4500084999, dated August 4, 2011, between EME Homer City Generation L.P. and HDR Engineering, Inc.

Purchase Order 4500086125, dated August 29, 2011, between EME Homer City Generation L.P. and Venture Engineering & Construction, LLC

Purchase Order 4500086164, dated August 30, 2011, between EME Homer City Generation L.P. and Cintar, Inc.

Purchase Order 4500071320, dated December 9, 2010, between EME Homer City Generation L.P. and CME Management LLC

Purchase Order 4500091681, dated December 16, 2011, between EME Homer City Generation L.P. and Veolia ES Industrial Services, Inc.

Purchase Order 4500092933, dated January 10, 2012, between EME Homer City Generation L.P. and Patrick Engineering, Inc.

Purchase Order 4500090211, dated November 17, 2011, between EME Homer City Generation L.P. and Patrick Engineering, Inc.

Purchase Order 4500088359, dated October 13, 2011, between EME Homer City Generation L.P. and Patrick Engineering, Inc.

Purchase Order 4500089158, dated October 31, 2011, between EME Homer City Generation L.P. and United Conveyor Corporation

Purchase Order 4500092034, dated December 23, 2011, between EME Homer City Generation L.P. and McCutcheon Enterprises, Inc.

Exhibit A - Page 1

Purchase Order 4500086246, dated August 31, 2011, between EME Homer City Generation L.P. and G.D. Barri & Associates, Inc.

Purchase Order 4500085431, dated August 15, 2011, between EME Homer City Generation L.P. and Per Se Group, Inc.

Purchase Order 4500085434, dated August 15, 2011, between EME Homer City Generation L.P. and Per Se Group, Inc.

Exhibit A - Page 2

Annex I

Assignment Term Sheet
[Attached]

Annex I - Page 1

This Term Sheet is not intended to be a comprehensive list of all relevant terms and conditions with respect to a proposed Transaction, as negotiation of the definitive Transaction Agreement (the "Transaction Agreement") is anticipated to quickly follow this Term Sheet.  This Term Sheet does not constitute an offer to sell or an offer to purchase any assets, rights or properties of any person, nor shall it constitute a commitment to do any of the foregoing.1 

TRANSACTION OVERVIEW
	
		
	 
	 

		
	Description of Transaction;
	EME Homer City Generation L.P. (the “Seller”) will commit to transfer (and to

		
	Structure:
	cause its affiliates to transfer) to a special purpose entity formed by General Electric Capital Corporation (“GE Capital”) or one or more of its designees or, alternatively, to the Owner Lessors directly (the “Transferee”),2 the Transferred Assets, but excluding the Excluded Assets.  The Seller will commit to cause such steps to be taken with respect to the Affiliate Assets as are set forth in this Term Sheet.  The Transferee will commit to assume the Assumed Liabilities, but will not assume the Excluded Liabilities.  The transactions contemplated by this Term Sheet (collectively, the “Transaction”) will be structured as set forth in this Term Sheet, with such changes and modifications as may be negotiated by the parties in good faith.

TRANSACTION TERMS
	
		
	 
	 

		
	Consideration:
	Except as otherwise provided in the Transaction Agreement, the consideration for consummation of the Transaction would include the release of the Seller and its affiliates from their obligations under the leveraged lease documents, together with the assumption by the Transferee of the Assumed Liabilities.

	
		
	 
	 

		
	Transferred Assets:
	"Transferred Assets" shall mean all of Seller's right, title and interest in and to all properties, assets and rights of whatever nature or kind owned by Seller, including without limitation those assets identified in schedules to be attached to the Transaction Agreement (the "Schedules") and those assets described below (but excluding the Excluded Assets, which shall not be transferred), each as in existence on the Closing Date:

	
		
	 
	 

	
	
	 

		
	1 
	If the parties determine that the Transaction could be effected without bondholder consent under the Lease Indenture or Fundco Indenture, the parties will consider in good faith altering the structure of the Transaction and making such changes and modifications to this Term Sheet as may be required to achieve such result, together with such other changes or modifications as may be appropriate in light of the revised structure.  

		
	2 
	Note: GE Capital may cause transferred employees to be employed by an affiliate or other designee not acquiring the Transferred Assets.

Annex I - Page 2

	
		
	 
	 

1) Those certain parcels of real property (including all buildings, facilities and other improvements thereon and all appurtenances thereto) described in the Schedules (the "Real Property"), but subject to normal and customary permitted encumbrances and any exceptions which may be listed in the Schedules and except as otherwise constituting part of the Excluded Assets;
2) All inventories and all emission allowances;
3) All machinery, mobile or otherwise, equipment (including communications equipment), vehicles, tools, furniture and furnishings and other personal property located on the Real Property on the Closing Date, including, without limitation, the items of personal property included in the Schedules, other than property used or primarily usable as part of the transmission assets or otherwise constituting part of the Excluded Assets;
4) Subject to the receipt of any necessary third-party consents and, in the case of the leveraged lease documents, the applicable Transfer Agreement, all Seller's Agreements, including those Seller's Agreements described in the Schedules which meet the agreed-upon thresholds for disclosure as are material to the business and operations of Seller;
5) Subject to the receipt of any necessary third-party consents, all real property leases under which Seller is a lessee or lessor and which relate to the Transferred Assets, including those real property leases described in the Schedules which meet the agreed-upon thresholds for disclosure as are material to the business and operations of Seller ("Real Property Leases");
6) All cash (other than cash or other assets of the type described in Clauses 6 and 10 of the definition of Excluded Assets), cash equivalents and notes receivable (trade or otherwise);
7) All transferable permits;3 
	
		
	 
	 

	
	
	 

		
	3 
	Note: Seller to use commercially reasonable efforts to, at Transferee's cost and expense (provided, that Seller shall use commercially reasonable efforts to minimize such costs and expenses), cooperate with Transferee's reasonable requests to assist it in effecting the transfer of all permits that need to be transferred, modified, amended or revoked and reissued by the applicable regulatory authority.

Annex I - Page 3

	
		
	 
	 

8) All books, operating records, operating, safety and maintenance manuals, engineering design plans, documents, blueprints and as built plans, specifications, procedures and similar items of Seller relating specifically to the aforementioned assets, necessary for the operation of the Facility and in existence on the Closing Date (subject to the right of Seller to retain copies of same for their use for legal and compliance purposes or for any bona fide business purpose in light of the terms of the Agreement) other than such items which are proprietary to third parties and accounting records;
9) All unutilized emission reduction credits generated at the Facility prior to the Closing, including those emission reduction credits identified in the Schedules;
10) All unexpired, transferable warranties and guarantees from third parties (other than EME and its subsidiaries and affiliates) with respect to any item of Real Property or personal property constituting part of the Transferred Assets, as of the Closing Date;
11) The name of the Facility;
12) The intellectual property owned by Seller or described on the Schedules;
13) Subject to the receipt of any necessary third-party consents, the transmission-related revenues attributed to Seller’s transmission of power to the New York power pool (including any agreement or arrangement relating to such revenues);
14) To the extent permitted by applicable law and contractual obligations, (i) the records of Seller that relate to transferred employees to the extent that such records pertain to: (A) skill and development training, (B) seniority histories, (C) salary and benefit information, (D) Occupational, Safety and Health Administration reports and records and (E) active medical restriction forms and (ii) all other records of Seller that relate to transferred employees to the extent that a release of 
	
		
	 
	 

Annex I - Page 4

	
		
	 
	 

     liability from the applicable employees is provided with respect to such
     records;4 5 
15) If (and only if) Transferee has exercised the Retiree Medical Assumption Election, all cash and other assets relating to the EMMT Pre-Pay (as adjusted pursuant to the “EMMT Pre-Pay Adjustment” Section below);
16) The substation equipment set forth in Schedule A to the Interconnection Agreement, dated as of August 1, 1998 (the "Interconnection Agreement"), between the Pennsylvania Electric Company ("Penelec"), New York State Electric & Gas Corporation ("NYSEG") and Seller, and designated therein as being transferred to Seller; and
17) The rights of Seller in and to any causes of action against third parties (including indemnification and contribution) relating to any taxes (other than taxes attributable to income of Seller) imposed by any federal, state or local government on the ownership, operation or use of the Transferred Assets, including any claims for refunds, prepayments, offsets, recoupment, judgments and the like, whether received as payment or credit against future liabilities, relating specifically to the Facility or the site.
	
		
	 
	 

		
	Excluded Assets:
	"Excluded Assets" shall mean any right, title or interest in or to the following specific assets which are associated with the Transferred Assets, but which are hereby specifically excluded from the transfer and from the definition of Transferred Assets herein:

1) All bank accounts and any income, sales, payroll or other tax receivables;
2) The rights of Seller and its affiliates to the names EME, Edison Mission Energy, Edison Mission Marketing & Trading, Inc., EMMT, Edison Mission, Midwest Generation, LLC, Mission Energy Westside, Inc., Chestnut Ridge Energy Company, and EME Homer City
	
		
	 
	 

	
	
	 

		
	4 
	To the extent that the transferred employees are to be employed by an affiliate or other designee of GE Capital that is not acquiring the Transferred Assets, Seller will deliver its records that relate to transferred employees as set forth in Clause 14 to such affiliate or other designee.

		
	5 
	Note: GE Capital would expect that as part of the employee offer process, such releases would be provided to employees and acceptance of any offer would include such release. 

Annex I - Page 5

	
		
	 
	 

     Generation L.P. or any related or similar trade names, domain names, trademarks, service marks, corporate names or logos, or any part, derivative or combination thereof and all other names, trademarks, service marks, and domain names not expressly set forth in the Schedules;
3) Subject to the Transfer of Affiliate Assets Section and Clause 13 appearing under Transferred Assets above, all tariffs and intercompany agreements and arrangements to which Seller is a party for the purchase or sale of electric capacity and/or energy or for the purchase of transmission or ancillary services, including Seller's market-based rate authorization;
4) Subject to Clause 10 and Clause 17 appearing under Transferred Assets above, the rights of Seller in and to any causes of action against third parties (including indemnification and contribution) relating to any Real Property or personal property, permits, environmental permits, Real Property Leases or Seller's Agreements, if any, including any claims for refunds, prepayments, offsets, recoupment, insurance proceeds, condemnation awards, judgments and the like, whether received as payment or credit against future liabilities, relating specifically to the Facility or the site and relating to any period prior to the Closing Date;
5) Records of Seller that relate to Seller's employees, other than the records referred to in clause 14 of Transferred Assets; 
6) Any and all of Seller's rights in any contract representing an intercompany transaction between Seller and an affiliate of Seller, whether or not such transaction relates to the provision of goods and services, payment arrangements, intercompany charges or balances, or the like, including, if (and only if) the Transferee has not exercised the Retiree Medical Assumption Election, the intercompany balances and the cash related to such intercompany balances between Edison Mission Marketing & Trading, Inc. ("EMMT") and Seller associated with the amounts pre-paid by EMMT to Seller for certain revenues, which pre-paid amounts are net of any intercompany balances existing between EMMT and Seller immediately prior to such prepayments (the
	
		
	 
	 

Annex I - Page 6

	
		
	 
	 

     "EMMT Pre-Pay");
7) All records prepared for purposes of the analysis, consideration, valuation or execution of the transfer of the Transferred Assets and Assumed Liabilities; 
8) All rights of Seller and its affiliates under the Transaction Agreement and related ancillary agreements;
9) All assets under any benefit plans sponsored or maintained by Seller; and
10) An amount of cash sufficient to satisfy the liabilities and obligations set forth in Clauses 3(i), 3(ii), 3(iii) and 3(v) of the definition of Excluded Liabilities, including any liabilities and obligations with respect to any severance or accrued but unused vacation actually payable and to be paid by Seller in accordance with applicable law or existing benefit plan provisions, but only to the extent such liabilities and obligations relate to employees employed by Seller immediately prior to the Closing.6 
	
		
	 
	 

		
	NYSEG and Penelec Assets:
	For the avoidance of doubt, the following assets, which are the property of NYSEG or Penelec, will not be transferred to Transferee:

		
	•
	1) The electrical transmission or distribution facilities (as opposed to generation facilities) of NYSEG or Penelec or any of their respective affiliates located at the site or formerly forming part of the Facility (whether or not regarded as a "transmission" or "generation" asset for regulatory or accounting purposes) and retained by Penelec and NYSEG when Seller acquired the Facility and site in 1999, including all switchyard facilities, substation facilities and support equipment, as well as all permits, contracts and warranties (other than those permits, contracts or warranties owned by Seller or to which Seller has the right to transfer), to the extent they relate to such transmission and distribution assets identified as the "Transmission Assets" in Schedule 2.2(a) of the Asset Purchase Agreement, dated as of August 1, 1998 (the "NYSEG/Penelec Purchase Agreement"), by and among Penelec, NGE Generation, Inc., NYSEG and Mission Energy Westside, Inc. (as assigned by Mission Energy

	
		
	 
	 

	
	
	 

		
	6 
	Seller to provide potential cost of such liabilities and obligations. 

Annex I - Page 7

	
		
	 
	 

   Westside, Inc. to Seller); and
2) Certain switches and meters in the Facility and at the site, gas facilities, revenue meters and remote testing units, drainage pipes and systems, as identified in the Easement, License and Attachment Agreement among Seller, Penelec and NYSEG, dated as of March 18, 1999.
	
		
	 
	 

		
	Retiree Medical Benefits
	At Transferee’s request, Seller shall use commercially reasonable efforts to cooperate and assist with, and shall make available to Transferee such information, data, books, records and personnel as shall be reasonably necessary to permit Transferee and its third party advisors to perform diligence with respect to the actuarial valuation provided by Seller to GE Capital prior to the date of the IA (the amount of such valuation, the "Seller Actuarial Valuation Amount") with respect to the obligations of Seller (the "Seller Retiree Medical Obligations") relating to the retiree medical benefits to employees transferred to Transferee under the Transaction Agreement under benefit plans maintained by Seller and its affiliates for the benefit of such employees (the "Seller Retiree Medical Plans").

Prior to the parties entering into the definitive Transaction Agreement, Transferee may elect to assume the Seller Retiree Medical Obligations from and after the Closing (such election, the "Retiree Medical Assumption Election") under a benefit plan or plans maintained by Transferee (the "Transferee Retiree Medical Plans").
If the Transferee assumes the Seller Retiree Medical Obligations, the Transferee shall fund such Seller Retiree Medical Obligations through the formation of a VEBA (voluntary employees' beneficiary association) trust (or other appropriate trust) and shall only use such funds for the purpose of providing retiree medical or other welfare benefits to employees transferred to Transferee under the Transaction Agreement, and such funds will in no event revert to Transferee.
If the Transferee does not assume the Seller Retiree Medical Obligations, Seller shall fund such Seller Retiree Medical Obligations through the formation of a VEBA trust (or other appropriate trust) and shall only use such funds for the purpose of providing retiree medical or other welfare benefits to employees transferred to Transferee under the
	
		
	 
	 

Annex I - Page 8

	
		
	 
	 

Transaction Agreement, and such funds will in no event revert to Seller.

	
		
	 
	 

		
	EMMT Pre-Pay Adjustment
	Seller shall cause the EMMT Pre-Pay, for the month in which Closing is to occur, to be deposited with Seller prior to such Closing, and if the EMMT Pre-Pay is less than the Seller Actuarial Valuation Amount, Seller shall cause EMMT to pay to Seller the amount (the "Retiree Medical Payment") equal to the difference between the Seller Actuarial Valuation Amount and the EMMT Pre-Pay.  

At or prior to the Closing, Seller and EMMT shall enter into a forbearance  agreement or arrangement which provide that Seller shall not repay the EMMT Pre-Pay until after the Closing Date (as increased pursuant to this "EMMT Pre-Pay Adjustment" provision).
	
		
	 
	 

		
	Assumed Liabilities:
	  "Assumed Liabilities" shall mean the following liabilities and obligations of Seller, direct or indirect, known or unknown, absolute or contingent, in accordance with the respective terms and subject to respective conditions thereof:7 

1) All liabilities and obligations of Seller arising under the leveraged lease documents; 
2) All liabilities and obligations of Seller arising under Seller's Agreements, the Real Property Leases, Permitted Encumbrances and the transferable permits in accordance with the terms thereof (to the extent transferred to Transferee at Closing), and the contracts, licenses, agreements and personal property leases entered into by Seller with respect to the Transferred Assets after the date and consistent with the terms of the Transaction Agreement;
3) All trade payables or other liabilities and obligations relating to the day to day operation of the Facility, whether arising prior to, on or after the Closing Date, but excluding the intercompany balances between
	
		
	 
	 

	
	
	 

		
	7 
	With respect to clauses (1) and (2) under Assumed Liabilities, the parties agree that the Seller's disclosure schedules to the Transaction Agreement shall include, subject to agreed upon materiality thresholds, any known liabilities or obligations of Seller to third parties under the leveraged lease documents and any known liabilities or obligations of Seller to third parties that arise in respect of any breach, default or non-performance under the Seller's Agreements or the Real Property Leases, and Transferee shall be afforded an opportunity to diligence any such matters.

Annex I - Page 9

	
		
	 
	 

   EMMT and Seller associated with the EMMT Pre-Pay;
4) All transfer taxes incurred in connection with the Closing of the Transaction;
5) (i) All liabilities and obligations (a) arising on or after the Closing Date as a result of the employment by Transferee of any employee transferred to Transferee, including obligations arising under any applicable collective bargaining agreement,  and including liabilities and obligations for any claims relating to the transfer of Seller's records that relate to transferred employees or (b) resulting from any failure or alleged failure by Transferee or its designee to comply with all applicable laws when selecting, offering employment to and hiring the transferred employees, and (ii) if (and only if) Transferee has exercised the Retiree Medical Assumption Election, the Seller Retiree Medical Obligations.  The Transferee and its designee will comply with all applicable laws when selecting, offering employment to and hiring the transferred employees;
6) Any liability, obligation, or responsibility under or related to environmental laws or with respect to environmental matters to the extent due to facts, circumstances or conditions that arise on or after the Closing Date that are related to the ownership, operation, or use of the Transferred Assets, including: (i) fines and penalties associated with any violation or alleged violation of environmental laws or environmental permits that occur on or after the Closing Date, and the costs of any necessary corrective actions or mitigation to the extent required after the Closing Date for any violations of environmental laws or permits occurring on or after the Closing Date, provided, for purposes of clarification, that Transferree is not assuming liability relating to actions in connection with the Transferred Assets, occurring prior to the Closing Date, that are alleged to be violations of federal or state NSR or PSD regulations, including allegations that such violations continued after the Closing Date, except as set forth in paragraph 7 below; (ii) loss of life, injury to persons or property or damage to natural resources  caused (or allegedly caused) by hazardous substances initially released at, in, on, under or from the
	
		
	 
	 

Annex I - Page 10

	
		
	 
	 

  Transferred Assets on or after the Closing Date; (iii) the investigation and remediation of the Transferred Assets resulting from hazardous substances initially released at, in or under the Transferred Assets on or after the Closing Date; (iv) the closure of any land-based units on or at the Transferred Assets used for the treatment, storage or disposal of hazardous substances or other wastes, including, without limitation, landfill cells, surface impoundments, or ash impoundments; and (v) the off-site disposal, storage, or transport, or the arrangement for same, of hazardous substances, in connection with the ownership or operation of the Transferred Assets on or after the Closing Date;
7) The following additional liabilities, obligations, or responsibilities under or related to environmental laws or with respect to environmental matters: (i) all costs of necessary corrective actions, mitigation, or other action, including pollution control installation and operation costs, the costs of performing any other emission reduction method or technique and permitting, required after the Closing Date to correct or address any violations or alleged violations of environmental laws or environmental permits occurring prior to the Closing Date (excluding the payment of monetary fines or penalties for such violations or required emission allowance surrenders or forfeitures, which are Excluded Liabilities); (ii) any investigation and remediation of the Transferred Assets (whether or not such remediation commenced before the Closing Date or commences on or after the Closing Date) resulting from a release of hazardous substances prior to the Closing Date at, on, or under the Transferred Assets (but excluding any legal compensatory or punitive damages arising from third party claims for property damage, personal or bodily injury or natural resource damages with respect to such releases, other than as set forth in clause (iv)); (iii) all costs of any necessary corrective action or mitigation undertaken on or at the Transferred Assets to resolve or address third party claims for property damage, personal or bodily injury or natural resource damages resulting from a release of hazardous substances or any emission or discharge prior to the Closing Date at, on or under the Transferred Assets arising as a result of a third
	
		
	 
	 

Annex I - Page 11

	
		
	 
	 

    party claim, (but excluding legal compensatory or punitive damages with respect to such claims, other than as set forth in clause (iv)); (iv) legal compensatory damages or punitive damages arising from third party claims for property damage, personal or bodily injury, or natural resource damages resulting from a release of hazardous substances or any emission or discharge prior to the Closing Date at, on, or under the Transferred Assets, but only if such claims arise due to the negligence or willful misconduct of Transferee on or after the Closing Date with respect to such conditions; and (v) loss of life or injury to persons arising from exposure to asbestos or asbestos-containing materials at the Transferred Assets to the extent that such exposure occurs on or after the Closing Date (such liability to be allocated between Seller and Transferee if a claimant is exposed to asbestos prior to and after the Closing Date);
8) Any and all liabilities or obligations (other than environmental-related liabilities and obligations, which are addressed in clauses (6) and (7), above) to third parties (including employees) for personal injury or tort, or similar causes of action arising out of or related to the ownership or operation of the Transferred Assets on or after the Closing Date, provided that such liabilities or obligations resulted from an action or inaction on the part of or taken on behalf of Transferee on or after the Closing Date;
9) Any fines, penalties or costs imposed by a governmental authority resulting from an investigation, proceeding, request for information or inspection before or by a governmental authority commencing on or after the Closing Date; provided that such fine, penalty or cost resulted from an action or inaction on the part of or taken on behalf of Transferee on or after the Closing Date;
10) Notwithstanding any other clause of this definition of Assumed Liabilities, all liabilities and obligations of Seller, arising on or after the Closing, with respect to the Transferred Assets under the agreements or consent
	
		
	 
	 

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   orders set forth on a Schedule to the Transaction Agreement8 relating to certain environmental matters, to the extent not constituting a liability or obligation to pay funds to a third party except as a result of an action or inaction on the part of or taken on behalf of Transferee on or after the Closing Date; and
11) With respect to the Transferred Assets, any tax (other than taxes attributable to income of Seller) that may be imposed by any federal, state or local government on the ownership, sale, operation or use of the Transferred Assets in taxable periods ending prior to, on or after the Closing Date arising or related to the ownership, operation or use of the Transferred Assets.
	
		
	 
	 

		
	Excluded Liabilities:
	  "Excluded Liabilities" shall mean all of the liabilities and obligations of Seller or any of its affiliates, direct or indirect, known or unknown, absolute or contingent, which relate to, result from or arise out of the ownership, use, or operation of the Transferred Assets (other than the Assumed Liabilities), including:9 

1) Any liabilities or obligations of Seller in respect of any Excluded Assets;
2) Any liabilities or obligations of Seller (including the EMMT Pre-Pay) arising under any contract, representing an intercompany transaction between Seller and an affiliate of Seller, whether or not such transaction relates to the provision of goods and services, payment arrangements, intercompany charges or balances, or the like;
3) Any liabilities or obligations incurred with respect to the employment of any employee by Seller or its affiliates, including, without limitation, any liabilities relating to (i) any employee plans, (ii) any of Seller’s and its affiliates' employee benefit or compensation agreements, plans or other arrangements, (iii) COBRA other than any
	
		
	 
	 

	
	
	 

		
	8 
	Such Schedule to set forth the consent orders to which Seller is subject.

		
	9 
	Indemnification with respect to Excluded Liabilities will be subject to customary and agreed provisions, including provisions relating to Seller's participation and/or control in matters that, in whole or in part, constitute Excluded Liabilities, a requirement that matters being defended by Transferee that are subject to indemnification not be settled absent Seller's consent, and conditioning Seller's indemnification on compliance with such provisions.

Annex I - Page 13

	
		
	 
	 

  qualifying event occurring with respect to and after the date a transferred employee commences employment with Transferee, (iv) any liabilities under WARN or similar law; provided that Seller's liability is conditioned on Transferee providing Seller with at least 90 days written notice of the number of employees that shall be transferred to Transferee so that Seller has time to perform any actions required by WARN or other applicable law; (v) any liability for any workers’ compensation or similar workers’ protection claims with respect to any transferred employee that is the result of an injury or illness originating on or prior to the Closing Date; and (vi) unless Transferee has exercised the Retiree Medical Assumption election, the Seller Retiree Medical Obligations;
4) Any liabilities or obligations in respect of taxes attributable to income of Seller;
5) Any liability of Seller arising out of a breach by Seller of any of its respective obligations under the Transaction Agreement or related ancillary agreements; and
6) The following liabilities and obligations resulting from a release of hazardous substances to soil, groundwater or surface water at, on or under the Transferred Assets prior to the Closing Date that migrates offsite from the Transferred Assets and is not attributable to the negligence or willful misconduct of the Transferee: (i) the investigation and/or remediation of such release at the off-site location, including related costs associated with legal or administrative proceedings in connection with such work; (ii) third party claims for property damage, personal or bodily injury or natural resource damages associated with said release; and (iii) monetary fines and penalties associated with such release.
Provided that it is understood that the listing of any liabilities in any Transaction Agreement that has the effect of making them Excluded Liabilities will affect the division of liabilities as between Seller and Transferee only and will not add to, diminish or affect the liability of any other person or entity including any affiliate of Seller or of Transferee, unless so expressly provided.  Prior to settling any claim for an Excluded Liability, Transferee will comply with all applicable indemnification procedure provisions set forth in the
	
		
	 
	 

Annex I - Page 14

	
		
	 
	 

Transaction Agreement.
	
		
	 
	 

		
	Transfer of Affiliate Assets:
	Edison Mission Marketing & Trading, Inc. ("EMMT") will transfer its arrangements listed on the Schedules to Transferee at the Closing, to the extent that any necessary third party consents have been received.  Transferee will commit to honor the day-ahead trades entered into by EMMT on behalf of Seller in the ordinary course of business and will commit to assume and honor such trades after the Closing.

Seller shall use commercially reasonable efforts to, at Transferee’s cost and expense (provided, that Seller shall use commercially reasonable efforts to minimize such costs and expenses), facilitate, to the extent practicable, the transfer of, or replacement for the Affiliate Assets, any other properties, assets or rights necessary for the ownership, maintenance or operation of the Facility not owned by Seller.
"Affiliate Assets" shall mean material assets or rights (for example, parent software licenses) not owned by Seller (but owned by an affiliate of Seller) and used in the ordinary course of business in support of Seller’s operation of the Facility.
	
		
	 
	 

		
	Closing:
	The closing of the Transaction (the “Closing”) will take place following the satisfaction or waiver of all closing conditions set forth in the Transaction Agreement.  Transferee shall determine the date on which the Closing takes place; provided that such date (i) is the second or third business day of the month in which it occurs, (ii) is otherwise as soon as practicable following the satisfaction or waiver of all closing conditions set forth in the Transaction Agreement and (iii) is on or prior to a Homer City Termination Date as defined in Section 9.3 of the Implementation Agreement (the “IA”); provided that if all closing conditions are satisfied prior to such Homer City Termination Date and the Closing is delayed as a result of the application of clause (i) above to a date that occurs after such Homer City Termination Date, such Homer City Termination Date shall automatically be extended to the date of the Closing as required under such clause.  The date on which Closing takes place is herein referred to as the “Closing Date”.

	
		
	 
	 

		
	Transfer Agreement:
	At the Closing, there will be such bills of sale, assignment agreements and any other instruments of transfer and conveyance as may be required to effect the Transaction (the “Transfer Agreements”).

	
		
	 
	 

Annex I - Page 15

	
		
	 
	 

		
	Representations and
	Seller would provide customary representations and warranties

		
	Warranties/Covenants:
	for transactions of this type, including as to organization and qualification, corporate authorities, consents, no conflicts, financial statements, absence of changes, no undisclosed liabilities, insurance, title to assets, real property matters, environmental matters, labor and benefits matters, material contracts, litigation, compliance with law and permits, taxes, intellectual property matters, brokers' fees and energy regulatory status. 

Transferee would provide customary representations and warranties for transactions of this type, including as to organization, corporate authorities, consents, no conflicts, litigation, no knowledge of Seller's breach of the Transaction Agreement , qualification of Transferee as an exempt wholesale generator and to obtain permits and market-based rate authorization, brokers' fees, energy regulatory status and no additional representations or reliance.
The Seller's covenants with respect to operation of the Facility pending Closing will, unless Transferee provided written notice to Seller that it reasonably believed the Conditions to Closing could be satisfied within six (6) months of the delivery of such notice (the “Covenant Notice”), be as set forth in Section 5.3 of the IA. Upon delivery of the Covenant Notice, Seller’s covenants with respect to the operation of the Facility pending the Closing will be automatically modified to include customary covenants (which take into account Seller's financial condition, liquidity needs and fiduciary duties) for transactions of this type.  Seller's covenants with respect to provision of information will be as set forth in Section 5.2 of the IA.  With respect to covenants other than the covenants described in the preceding sentences, Seller would provide customary covenants for transactions of this type including, without limitation, covenants requiring its cooperation and assistance with GE Capital and the Transferee in connection with the receipt of all necessary consents and approvals for the Transaction.
If, after the delivery of a Covenant Notice by Transferee, and provided that Transferee has been using its commercially reasonable efforts to cause the Closing and the Conditions to Closing of the Transaction to be satisfied as soon as practicable following its delivery of such Covenant Notice, Transferee determines in good faith that the Closing will not occur within the six (6) month period following its delivery of such Covenant
	
		
	 
	 

Annex I - Page 16

	
		
	 
	 

Notice, Transferee shall revoke such Covenant Notice (with the effect as if such Covenant Notice had never been delivered by the Transferee).  Notwithstanding the foregoing, in no event shall Transferee deliver a Covenant Notice more than two times.  
Transferee would also provide other customary covenants for transactions of this type.
	
		
	 
	 

		
	Interconnection Agreement:
	Seller and Transferee will commit to cooperate and to each use commercially reasonable efforts to obtain an assignment, effective as of the Closing, of the Interconnection Agreement to Transferee, including obtaining the prior written consent of Penelec and NYSEG and entering into appropriate instruments of assumption and release; provided that neither Seller nor Transferee shall have any obligation to pay any money or grant any consideration in connection with such assignment.

	
		
	 
	 

		
	Further Assurances:
	In the event that any Transferred Asset shall not have been conveyed to Transferee at the Closing, Seller shall commit to use commercially reasonable efforts to convey such asset to Transferee (at Transferee's expense, not including any internal costs or expenses of Seller or its affiliates) as promptly as is practicable after the Closing and in addition, in the event that any Transferred Asset shall not have been conveyed to Transferee at the Closing by reason of the failure to obtain a third party consent, the parties shall enter into such reasonable arrangements so as to pass the benefits and obligations of the Transferred Assets to the Transferee.

Transferee and Seller each shall use its commercially reasonable efforts to cause the Closing and the conditions to closing of the Transaction to be satisfied as soon as reasonably practicable from and after the execution of the Transaction Agreement.
	
		
	 
	 

		
	Indemnification:
	Seller would provide customary indemnification rights to the Transferee and its affiliates for (i) the Excluded Liabilities, (ii) breaches of covenants, and (iii) subject to certain customary limitations (including caps, baskets and survival periods, in each case to be negotiated), breaches of representations and warranties (but only to the extent such breaches of representations and warranties arise out of fraud, gross negligence or willful misconduct).  Transferee would provide customary indemnification rights to the Seller and its affiliates for the Assumed Liabilities.

	
		
	 
	 

Annex I - Page 17

	
		
	 
	 

Seller and Transferee to agree to certain customary indemnification procedure provisions, including with respect to the control and defense of indemnification claims (including that Seller has the right to consent to any settlement by Transferee of any claim as to which Transferee would seek indemnification from Seller).
	
		
	 
	 

		
	Transition Services Agreements: 
	At the Transferee's election, the Transferee will enter into a transition services agreement with EME and/or a scheduling and dispatch services agreement with Edison Mission Marketing & Trading, Inc., in each case on terms and subject to conditions to be negotiated by the parties thereto.

	
		
	 
	 

OTHER CONSIDERATIONS
	
		
	 
	 

		
	Conditions:
	The obligations of Seller to effect the Transaction would be conditioned upon satisfaction or waiver of the following: 

•    the execution of the Transfer Agreements, Transition Services Agreements and related ancillary agreements;
•    at the election of the Transferee, either (i) the receipt of all consents and approvals required for the assignment of the Interconnection Agreement to the Transferee or (ii) the Transferee entering into a replacement interconnection agreement;
•    no statute, rule or regulation enacted by any federal or state government or governmental agency or injunction, order or decree issued by any federal or state court shall be in effect that restrains, enjoins, prevents or prohibits the consummation of the Transaction; 
•    the receipt of all required approvals and authorizations from regulatory authorities;
•    the receipt of material third party consents (including material consents arising under the Lease Indenture and Fundco Indenture), or, at the option of Transferee the execution and delivery of mutually agreeable legally enforceable indemnification arrangements in favor of Seller; 
•    the bring down of the representations and warranties of the Transferee in the Transaction Agreement; and
•    the performance by the Transferee in all material
	
		
	 
	 

Annex I - Page 18

	
		
	 
	 

respects of all covenants in the Transaction Agreement to be performed by the Transferee on or prior to the Closing.
The obligations of Transferee to effect the Transaction would be conditioned upon satisfaction or waiver of the following; 
•    the execution of the Transfer Agreements, Transition Services Agreements and related ancillary agreements;
•    at the election of the Transferee, either (i) the receipt of all consents and approvals required for the assignment of the Interconnection Agreement to the Transferee or (ii) the Transferee entering into a replacement interconnection agreement;
•    the absence of a material adverse change in the business, operations, assets or condition of Seller between the date of the Transaction Agreement and the Closing;
•    the receipt of all required approvals and authorizations from regulatory authorities;
•    the receipt of material third party consents (including material consents arising under the Lease Indenture and Fundco Indenture);
•    the bring down of the representations and warranties of the Seller in the Transaction Agreement; 
•    the performance by the Seller in all material respects of all covenants in the Transaction Agreement to be performed by the Seller on or prior to the Closing;
•    no statute, rule or regulation enacted by any federal or state government or governmental agency or injunction, order or decree issued by any federal or state court shall be in effect that restrains, enjoins, prevents or prohibits the consummation of the Transaction;
•    the lack of any pending or threatened legal proceedings by any third party, including governmental authorities, that is reasonably likely to result in a material adverse effect on the Transferee or any of its affiliates from and after the Closing; and
•    Transferee entering into, if applicable (at Transferee’s
	
		
	 
	 

Annex I - Page 19

	
		
	 
	 

election), O&M agreements with respect to the Transferred Assets following the Closing.
	
		
	 
	 

		
	Termination:
	The Transaction Agreement may be terminated:

•    By mutual written consent of the Transferee and the Seller, any time prior to the Closing;
•    By Transferee, for any reason in its sole discretion (i) if GE Capital at the same time terminates the IA pursuant to Section 9.1 of the IA or (ii) absent termination of the IA, if Transferee elects to enter into a separate Implementation Transaction contemplated by the IA following the time Transferee determines that it is reasonably likely that a condition precedent to either party’s obligation to close the Transaction is not capable of being satisfied in a timely manner; 
•    By Seller, upon the termination of the IA by Seller pursuant to Section 9.3 of the IA, on or after a Homer City Termination Date;
•    By either party, if (i) any governmental authority has issued a final and nonappealable order, judgment, decree or ruling permanently restraining, enjoining or otherwise prohibiting the Closing or (ii) any statute, rule, order or regulation shall have been enacted or issued by any governmental authority which, directly or indirectly, prohibits the Closing; provided that the terminating party shall have fulfilled its obligations under the Transaction Agreement with respect to regulatory consents and approvals;
•    By either party, if the other party has materially breached the Transaction Agreement (rendering the satisfaction of any condition of the non-breaching party impossible) and such breach has not been cured or waived; provided that the terminating party is not in material breach of the Transaction Agreement; or
•    By Transferee, if a casualty has occurred which has had a material adverse effect and the parties have failed to agree on a settlement relating to such casualty.
	
		
	 
	 

		
	Tax Matters
	Provisions regarding tax matters to be negotiated.

	
		
	 
	 

		
	Binding Effect:
	The parties understand and acknowledge that this Term Sheet

	
		
	 
	 

Annex I - Page 20

	
		
	 
	 

and any amendment hereto is not, and shall not be construed to be, a legally binding agreement, and the failure to execute and deliver definitive agreements shall impose no liability on GE Capital or the Seller.
	
		
	 
	 

		
	Definitions:
	Capitalized terms used in this Term Sheet without definition shall have the meanings assigned to such terms in the Implementation Agreement by and between the Seller and GE Capital.

"Seller's Agreements" means Seller's contracts, agreements, licenses and leases relating to the ownership, operation and maintenance of the Facility and site and being assigned to Transferee as part of the Transferred Assets, including without limitation the Agreement, dated January 1, 2008 – December 31, 2012 (or any successor agreement thereto), between Seller and Local Union 459 of the International Brotherhood of Electrical Workers, and, for the avoidance of doubt, excluding the NYSEG/Penelec Purchase Agreement.
	
		
	 
	 

Annex I - Page 21

Annex II

Sublease Term Sheet
[Attached]

EME HOMER CITY GENERATION L.P.
a wholly-owned subsidiary of
MISSION ENERGY WESTSIDE, INC.
and
CHESTNUT RIDGE ENERGY COMPANY
SUMMARY OF PRINCIPAL TERMS AND CONDITIONS

SUBLEASE 

OF 

HOMER CITY GENERATING STATION
A 1,884 Megawatt (net), Coal-Fired Electric Generation Power Facility
located northeast of Pittsburgh, Pennsylvania

	
			
	A.     PRINCIPAL PARTICIPANTS

	1.    Lessors:
	 
	The Delaware limited liability companies created by the Owner Participant, with respect to each Undivided Interest are, respectively, Homer City OL1 LLC, Homer City OL2 LLC, Homer City OL3 LLC, Homer City OL4 LLC, Homer City OL5 LLC, Homer City OL6 LLC, Homer City OL7 LLC and Homer City OL8 LLC, and referred to herein collectively as the "Owner Lessors" and together with the Owner Participants and the Lessee, the "Lease Parties".

	2.    Owner Participants:
	 
	General Electric Capital Corporation, a Delaware corporation ("GECC"), and Metropolitan Life Insurance Company, a New York corporation ("MetLife").  GECC and MetLife are referred to herein collectively as the "Owner Participants".

	3.    Lessee/Sublessor:
	 
	EME Homer City Generation L.P. ("Homer City"), in its capacity as lessee under the Facility Lease, the "Lessee," and in its capacity as sublessor under the Facility Sublease, the "Sublessor").

Homer City is a wholly-owned subsidiary of Mission Energy Westside, Inc. and Chestnut Ridge Energy Company, which in turn are indirect wholly-owned subsidiaries of Edison Mission Energy ("EME"). 

	4.    Sublessee:
	 
	A [TYPE OF ENTITY] newly formed and owned by the Owner Participants or any affiliates thereof (the "Sublessee," and together with the Sublessor, the "Sublease Parties").

	

Capitalized terms used but not defined herein shall have the meaning ascribed to them in Appendix A to the Participation Agreement.  For purposes of these Terms and Conditions, in certain instances, we will refer to one Participation Agreement and one Facility Lease.  However, the proposed transaction will include all eight Facility Leases and related Operative Documents (as defined in each Participation Agreement).  Sublease of Homer City's leasehold interest under each Facility Lease and related Operative Documents will take place concurrently and such assignments will be conditioned on each other.

Annex II - Page 1

	
			
	B.    THE FACILITIES

	1.    The Facility: 
	 
	The 1,884-megawatt (net) coal-fired electric generation power facility commonly known as the Homer City Station (the "Facility").

	2.    Facility Ownership:
	 
	The Facility is owned by the Owner Lessors, and is currently leased to Homer City under eight facility lease agreements, each dated as of December 7, 2001 (collectively, the "Facility Leases").

	3.    The Facility Site:
	 
	The Facility is located on a portion of an approximately [          ]-acre parcel of land (such portion, the "Facility Site") located near the Borough of Homer City, County of Indiana, Pennsylvania.

	4.    Facility Site Ownership:
	 
	The Facility Site is currently owned by Homer City.  The Facility Site is currently leased to the Owner Lessors under eight site leases (collectively, the "Facility Site Leases") and subleased back to Homer City under eight parallel site subleases (collectively, the "Facility Site Subleases"), all of which were executed concurrently with the Facility Leases. 

	5.    Sublease Closing Date Transactions:
	 
	On the Sublease Closing Date, the Sublessor will sublease the Facility to the sublessee pursuant to a sublease (the "Facility Sublease"). 

On the Sublease Closing Date, the Sublessor will sub-sublease the Facility Site to the Sublessee pursuant to the Site Sub-Subleases (the "Site Sub-Sublease").

	6.    Support Arrangements:
	 
	An O&M Agreement with a third party O&M provider on mutually satisfactory terms, including without limitation, uninterrupted access and operation rights with respect to (i) the assets set forth in Exhibit B to each Facility Lease and (ii) other Transferred Assets (as defined in the Term Sheet attached as Annex I to that certain Implementation Agreement, dated March 29, 2012, between GECC and Homer City (the "Assignment TS") and not including any Excluded Assets (as defined in the Assignment TS).

A Transaction Services Agreement.

On the Sublease Closing Date, the Sublessee will assume the Sublessor's obligations or will enter into back-to-back agreements with the Sublessor or its Affiliates with respect to the agreements

Annex II - Page 2

	
			
	 
	 
	relating to the Facility to which Sublessor or its Affiliates are party on the Sublease Closing Date.10 The parties will in good faith negotiate such agreements and assignments consistent with the Assignment TS but subject to the covenants of the Operative Documents.

Provisions of the Assignment TS set forth in the section entitled "Transfer of the Affiliate Assets" are incorporated herein by reference mutatis mutandis.

	7.    Allocation of Liabilities
	 
	Liabilities of the Sublessor and the Sublessee before and after the Sublease Closing Date will reflect the allocation of liabilities set forth in the Assignment TS.

	
	
	 

		
	10 
	A schedule of such mutually acceptable agreements will be developed based on the definition of the Seller's Agreements in the Assignment TS mutatis mutandis. Agreements such as collective bargaining agreements will be assigned, other contractual obligations, such as coal contracts will be subject to back-to-back arrangements, in each case consistent with the Assignment TS.

Annex II - Page 3

	
			
	C.    OWNERSHIP AND LEASING STRUCTURE

	1.    Sublease Closing Date
	 
	The date when all the closing conditions are satisfied and the parties execute the Sublease Operative Documents (the "Sublease Closing Date ").  The Sublessee shall determine the date on which the Sublease closing shall take place; provided that such date (i) is the second or third business day of the month in which it occurs and (ii) is otherwise as soon as practicable following the satisfaction or waiver of all closing conditions set forth in the Sublease Operative Documents.

	2.    Sublease Subject to the Facility Lease and Operative Documents
	 
	The Sublessor and the Sublessee acknowledge and agree that the Facility Sublease will be subject and subordinate to all of the terms and conditions of the Facility Lease.  Neither the Sublessor nor any of its Affiliates shall be deemed to have assumed any duty or obligation of the Owner Lessor under the Facility Lease and shall not be liable or responsible in any manner whatsoever for any failure of the Owner Lessor to perform any such duty or obligation.  The Sublessee will abide by, comply in all respects with, and fully and completely perform all terms, covenants, conditions, and provisions of the Facility Lease and the other Operative Documents (including, without limitation, terms, covenants, conditions, and provisions relating to operation, maintenance, insurance and alterations) as if the Sublessee were the Lessee under the Facility Lease and the other Operative Documents, provided that Sublessee will have responsibility for Sublessor's liabilities under the Facility Lease and other Operative Documents.

To the extent that the Facility Lease or any other Operative Document imposes or requires the performance of the Lessee thereunder of any duty or obligation that is more stringent than or in conflict with any term, covenant, condition, or provision of the Facility Sublease, the applicable term, covenant, condition, or provision of the Facility Lease or such other Operative Document will control and will constitute the duties and obligations of Sublessee under the Facility Sublease as to the subject matter of such term, covenant, condition, or provision.  The Sublessee will not engage in or permit any conduct that would: (i) constitute a breach of or default under the Facility Lease; or (ii) result in the Owner Lessor being entitled to terminate the Facility Lease or to terminate the Sublessor’s right as lessee under the Facility Lease, or to exercise any other rights or remedies to which the Owner Lessor may be entitled for a default or breach under the Facility Lease.

	3.    Conditions Precedent:
	 
	The obligations of (i) the Sublessor to sublease the Facility to the Sublessee and (ii) the Sublessee to sublease the Facility from the Sublessor shall be subject to completion of the following conditions on the Sublease Closing Date:

Annex II - Page 4

	
			
	 
	 
	(a)    all conditions set forth in Section 19.1 of each Facility Lease;

	 
	 
	(b)    the Owner Lessors shall have released Homer City and its Affiliates from obligations under the Tax Indemnity Agreement, the Special Tax Indemnity Agreement and other tax indemnity provisions of the Operative Documents, subject to the provisions of Section B.7 hereof; and

	 
	 
	(c)    delivery by the Sublessee or an Affiliate thereof of credit support for the Sublessee's obligations under the Sublease Operative Documents (other than obligations with respect to Basic Lease Rent and Termination Value) in form and substance reasonably satisfactory to the Sublessor and the Sublessee ("Sublease Credit Support"); and

	 
	 
	(d)    resolution of the prepayment to EMMT for power under the Master Purchase and Sale Agreement in accordance with the Assignment TS.

	 
	 
	The Sublessor and the Sublessee shall each notify the other as soon as possible if it believes that any closing condition may not be timely satisfied.

Annex II - Page 5

	
			
	D.    THE FACILITY SUBLEASE

	1.    Sublease Term:
	 
	The Facility Sublease term will run until the earlier of (i) expiration of the Facility Lease on August 7, 2035 (the "Sublease Term"), (ii) termination of the Facility Leases in accordance with their terms and (iii) such earlier date as an Implementation Transaction or an Alternative Transaction (each as defined in the Implementation Agreement) is consummated or another consensual transaction is consummated that results in the Sublessee or an Affiliate thereof or another entity designated by GE obtains full operational control and economic ownership of the Facility and the Sublessor's interest under the Facility Leases. Indemnity and release provisions will survive termination of the Facility Sublease.

	2.    Sublease Renewal Options:
	 
	No renewal rights.  The Facility Lessee will agree not to exercise its renewal rights under the Facility Lease without the prior written consent of the Sublessee.

	3.    Facility Sublease Rent:
	 
	The Sublessee shall pay to the Sublessor any and all Sublease Base Rent (which shall be in the same amount as the Basic Lease Rent payable under the Facility Lease) and all Supplemental Sublease Rent, promptly as the same shall become due and owing, or where no due date is specified, promptly after demand by the Sublessor, and in the event of any failure on the part of the Sublessee to pay any Sublease Base Rent and Supplemental Sublease Rent, the Sublessor shall have all the same rights, powers and remedies as are provided for herein or by law or equity or otherwise for the failure to pay Sublease Base Rent or Supplemental Sublease Rent.

"Supplemental Sublease Rent" shall mean all (A) Supplemental Lease Rent (other than Supplemental Lease Rent payable as a result of any Sublessor Retained Obligation (to be defined consistent with the allocation of liabilities agreed in the Assignment TS) and (B) any and all amounts, liabilities and obligations (other than Sublease Base Rent) that the Sublessee assumes or agrees to pay under the Facility Sublease Documents to the Sublessor or any other Person.

	4.    Net Sublease:
	 
	The Facility Sublease will be a net sublease. The Sublessee will be responsible for, among other things, operating, repairing, insuring and maintaining the Facility and the Transferred Assets, and for all costs, expenses and liabilities incurred in connection therewith.  Insurance with respect to the Facility shall comply with the requirements of the Facility Lease and shall name the Sublessor as an additional insured on all policies relating to the Facility and the Transferred Assets.

Annex II - Page 6

	
			
	5.    Covenants of the Sublessee
	 
	SPV type covenants (including limitations on incurrence of debt, liens and business activities) to be agreed.

	6.    Event of Loss and Right to Rebuild or Replace
	 
	Event of Loss provisions and right to rebuild will be consistent with the requirements of the Facility Lessee and the Sublessor will only pass through the rights it has under the Facility Lease subject to the same terms and conditions.

	7.    Termination Values:
	 
	Termination Value shall be calculated in accordance with the Facility Agreement and will be equal to the corresponding Termination Value payable under the Facility Lease.

	8.    Payment of Termination Value:
	 
	If an Event of Loss occurs where the Sublessee elects not to rebuild or replace the Facility or fails to satisfy the conditions applicable to such rebuilding or replacement, then on a TV Payment Date applicable to such Event of Loss, the Sublessee shall pay to the Sublessor the sum of the following:

	 
	 
	(a)  the Termination Value on the TV Payment Date; plus

	 
	 
	(b)  all reasonable documented out-of-pocket costs and expenses incurred in connection with the Event of Loss by the Sublessor and the other Lease Parties; plus

	 
	 
	(c)  any other payments under the Sublease or under any other Sublease Document due and unpaid on the TV Payment Date.

	 
	 
	Upon payment of such amounts (the "Event of Loss Payment") the Sublease and the Facility Site Sub-Sublease shall terminate.

	 
	 
	Unless the Sublessee has elected to rebuild or replace the Facility, any insurance proceeds or proceeds of Requisition shall be used to pay, or to reimburse the Sublessor for, the Event of Loss Payment. Such proceeds in excess of the Event of Loss Payment shall be for the account of the Sublessee, the Sublessor, and the Lessor in accordance with their respective interests in the Facility immediately before the Event of Loss.

	9.    Return of Facility:
	 
	All of the provisions in the Facility Lease governing the return of the Facility to the Lessor will be incorporated into the Facility Sublease mutatis mutandis. References to the "Lessee" in those provisions will be deemed to be references to the Sublessee.

	10.    Quiet Enjoyment:
	 
	So long as no Event of Default has occurred and is continuing under the Sublease and no Lease Event of Default has occurred and is continuing under the Facility Lease, the Sublessee's right of quiet enjoyment under the Facility Sublease may not be disturbed by the Sublessor or any party acting by, through or under such party.

	11.    Transfers:
	 
	The Sublessee shall not have the right to assign or sublet the Facility Sublease or any Facility Sublease document, or any interest therein. However,, should the Sublessee wish to transfer

Annex II - Page 7

	
			
	 
	 
	its interest in the Facility, upon an election to terminate the Facility Sublease by the Sublessee, the Sublessor will enter into a new sublease, with a party designated by the Sublessee (the "New Sublease") on substantially the same terms as the Facility Sublease (including the Sublease Credit Support). All of the Conditions Precedent to the execution of the Facility Sublease will also apply to any execution of a New Sublease.

	12.    Events of Default:
	 
	The following (and only the following) shall constitute events of default under the Facility Sublease (each, an "Event of Default"):

	 
	 
	(a)  all of the events of default under the Facility Lease will be incorporated into the Facility Sublease mutatis mutandis. References to the "Lessee" in those provisions will be deemed to be references to the Sublessee;

	 
	 
	(b)  failure by the Sublessee to make payment when due of any Sublease Rent or to perform or observe any covenant, obligation or agreement to be performed or observed under the Facility Sublease or any other Facility Sublease Document subject to the cure periods consistent with the Facility Lease;

	 
	 
	(c)  customary bankruptcy and insolvency events of default with respect to the Sublessee;

	 
	 
	(d)  acceleration of any indebtedness of the Sublessee (excluding obligations under the [Facility Sublease Documents]) in excess of $[xx] million in the aggregate;

	 
	 
	(e)  any Facility Sublease Document to which the Sublessee is a party is terminated or ceases to be in full force and effect; and

	 
	 
	(f)  any judgment against the Sublessee in excess of $[xx] million that is not vacated, discharged or effectively stayed or bonded within 60 days.

	13.    Early Termination Options:
	 
	In addition to the early termination rights set forth in the Facility Lease, which shall be incorporated into the Sublease, mutatis mutandis, the Sublessee shall have the right, at any time, to terminate the Sublease at any time in connection with the consummation of an Implementation Transaction or an Alternative Transaction. The Facility Lessee will agree not to exercise any of its early termination rights under the Facility Leases without the prior written consent of the Sublessee.

Annex II - Page 8

	
			
	E.    GENERAL INDEMNITY

	 
	 
	The indemnity provisions will be consistent with the indemnity provisions of the Facility Lease and all references to the Operative Documents should include the Sublease Operative Documents. In addition, the indemnity will also cover:

	 
	 
	(a)    the continuing fees (if any) and expenses of any Facility Lease Party acting as a trustee or agent (including the reasonable fees and expenses of its counsel, accountants and other professional persons) arising out of discharge of its duties under or in connection with the Facility Lease Documents; 

	 
	 
	(b)    in any other way relating to the Facility Lease or the Facility Sublease, or the transaction contemplated by the Facility Sublease Documents; and

	 
	 
	(c)    any and all costs and expenses (including without limitation, property taxes, insurance etc) with respect to the Transferred Assets.

	 
	 
	The general indemnity will be subject to customary exclusions to be agreed.11

	
	
	 

		
	11 
	[The parties will consider, in good faith, whether credit support from a creditworthy entity should be provided for the Sublessee's indemnity obligations under the Sublease.]

Annex II - Page 9

	
			
	F.    GENERAL TAX INDEMNITY

	 
	 
	The Sublessee will, on an after-tax basis, indemnify the Sublessor and its respective members, partners, agents, employees, servants and affiliates for, hold them harmless from, and defend them against, any and all liability for Taxes resulting from or attributable to the ownership of any interest in or the operation of the Facility, the Facility Site, the Ground Interest or any Component or portion thereof or any interest therein, the Indenture Estate, the Collateral or upon any Operative Document or interest therein, for any taxable period that includes, or begins after, the Closing Date on the same terms and conditions as set forth under the General Tax Indemnity provisions of the Participation Agreement.  The Owner Participants shall release the Sublessor from any and all liability under Section 10.2 of each Participation Agreement subject to the provisions of Section B.7 hereof.

Annex II - Page 10

	
			
	G.    INCOME TAX INDEMNITY

	 
	 
	The Sublessee will, on an after-tax basis, indemnify the Sublessor and its respective members, partners, agents, employees, servants and affiliates for, hold them harmless from, and defend them against, all amounts which the Sublessor is responsible to pay to the Owner Participant under the Participation Agreement, the Tax Indemnity Agreement or the Special Indemnity Agreement for any taxable period commencing after, or including, the Closing Date on the same terms and conditions as are set forth in the Tax Indemnity Agreement, except that such indemnity will also include an indemnity for breach of the Tax Representations set forth below (the "Income Tax Indemnity").

	 
	 
	(a)    The Sublessee represents and warrants to, and covenants (such representations, warranties and covenants constituting the "Tax Representations") with, the Sublessor that  

	 
	 
	neither the Sublessee nor any Affiliate of the Sublessee will take any position in any income tax filing that is inconsistent with the characterization of the Facility Lease as terminating on or prior to the Sublease Closing Date.

Annex II - Page 11

Schedule 1.2 – Permitted Encumbrances
Surety Bond-Mining (General), dated March 12, 2001, by EME Homer City Generation L.P. and Argonaut Insurance Company
Surety Bond, dated February 3, 1999, by EME Homer City Generation L.P. and Safeco Insurance Company of America
In 2006, EME Homer City Generation L.P. filed an appeal with the Court of Common Pleas concerning Pennsylvania franchise tax and corporate net income tax for the 2001 tax year.  Under Pennsylvania procedure, this required posting of security (letter of credit or appeal bond) while the appeal was pending; it also resulted in the posting of a lien notice at the courthouse.  The amount of security required was 120% of the unpaid tax plus penalty (approximately $9.5 million).  At the time of filing the appeal, only the net income tax was unpaid.  This matter was settled in 2008 and the Court issued an Authority to Satisfy, acknowledging full payment and satisfaction of the lien and authorizing the Court Prothonotary to record the full satisfaction.  EME Homer City Generation L.P. recently sent the Authority to Satisfy to the Prothonotary along with a request that the lien be cleared at the courthouse.  EME Homer City Generation L.P. has received notification that the lien has been satisfied.
Encumbrances in connection with the Operative Documents, including those encumbrances set forth in the UCC table, below.  
Below, please find a table of UCC financing statements filed against EME Homer City Generation L.P. with the Secretary of the Commonwealth of Pennsylvania as of December 1, 2011.

	
							
	UCC Date
	UCC Ref #
	Debtor Name
	Secured Party
	Jurisdiction
	Type
	Description

	12/17/2001
	34721711
	EME Homer City Generation L.P.
	The Bank of New York, as Security Agent
	PA
	Financing Statement
	“Homer City OL5 c/o Wells Fargo Bank Minnesota, N.A. Corporate Trust Services” listed as assignor secured party

	12/12/2006
	2006121207351
	 
	The Bank of New York, as Security Agent
	PA
	Financing Statement Amendment
	Continuation of 34721711

	12/12/2006
	2006121207630
	 
	The Bank of New York, as Security Agent
	PA
	Financing Statement Amendment
	Amendment of 34721711 re: address of secured party

	11/9/2011
	2011110902175
	 
	Bank of New York as Security Agent The
	PA
	Financing Statement Amendment
	Continuation of 34721711

Schedule 1.2 - Page 1

	
							
	UCC Date
	UCC Ref #
	Debtor Name
	Secured Party
	Jurisdiction
	Type
	Description

	12/17/2001
	34721732
	EME Homer City Generation L.P.
	The Bank of New York, as Security Agent
	PA
	Financing Statement
	“Homer City OL4 c/o Wells Fargo Bank Minnesota, N.A. Corporate Trust Services” listed as assignor secured party

	12/12/2006
	2006121207438
	 
	The Bank of New York, as Security Agent
	PA
	Financing Statement Amendment
	Continuation of 34721732

	12/12/2006
	2006121207654
	 
	The Bank of New York, as Security Agent
	PA
	Financing Statement Amendment
	Amendment of 34721732 re: address of secured party

	11/9/2011
	2011110902214
	 
	Bank of New York as Security Agent The
	PA
	Financing Statement Amendment
	Continuation of 34721732

	12/17/2001
	34721753
	EME Homer City Generation L.P.
	The Bank of New York, as Security Agent
	PA
	Financing Statement
	“Homer City OL3 c/o Wells Fargo Bank Minnesota, N.A. Corporate Trust Services” listed as assignor secured party

	12/12/2006
	2006121207414
	 
	The Bank of New York, as Security Agent
	PA
	Financing Statement Amendment
	Continuation of 34721753

	12/12/2006
	2006121207553
	 
	The Bank of New York, as Security Agent
	PA
	Financing Statement Amendment
	Amendment of 34721753 re: address of secured party

	11/9/2011
	2011110902238
	 
	Bank of New York as Security Agent The
	PA
	Financing Statement Amendment
	Continuation of 34721753

	12/17/2001
	34721774
	EME Homer City Generation L.P.
	The Bank of New York, as Security Agent
	PA
	Financing Statement
	“Homer City OL2 c/o Wells Fargo Bank Minnesota, N.A. Corporate Trust Services” listed as assignor secured party

	12/12/2006
	2006121207399
	 
	The Bank of New York, as Security Agent
	PA
	Financing Statement Amendment
	Continuation of 34721774

	12/12/2006
	2006121207678
	 
	The Bank of New York, as Security Agent
	PA
	Financing Statement Amendment
	Amendment of 34721774 re: address of secured party

	11/9/2011
	2011110902252
	 
	Bank of New York as Security Agent The
	PA
	Financing Statement Amendment
	Continuation of 34721774

Schedule 1.2 - Page 2

	
							
	UCC Date
	UCC Ref #
	Debtor Name
	Secured Party
	Jurisdiction
	Type
	Description

	12/17/2001
	34730155
	EME Homer City Generation L.P.
	The Bank of New York, as Security Agent
	PA
	Financing Statement
	“Homer City OL6 c/o Wells Fargo Bank Minnesota, N.A. Corporate Trust Services” listed as assignor secured party

	10/10/2006
	2006101001173
	 
	The Bank of New York, as Collateral Agent
	PA
	Financing Statement Amendment
	Continuation of 34730155

	10/13/2006
	2006101303767
	 
	The Bank of New York, as Collateral Agent
	PA
	Financing Statement Amendment
	Amendment of 34730155 re: address of secured party and to change capacity of secured party from “Security Agent” to “Collateral Agent”

	7/2/2007
	2007070501076
	EME Homer City Generation L.P.
	The Bank of New York, as Collateral Agent
	PA
	Financing Statement Amendment
	Amendment of 34730155 to change capacity of secured party from “Collateral Agent” to “Security Agent”

	11/9/2011
	2011110902276
	 
	Bank of New York as Security Agent The
	PA
	Financing Statement Amendment
	Continuation of 34730155

	12/17/2001
	34730222
	EME Homer City Generation L.P.
	The Bank of New York, as Security Agent
	PA
	Financing Statement
	“Homer City OL1 c/o Wells Fargo Bank Minnesota, N.A. Corporate Trust Services” listed as assignor secured party

	12/12/2006
	2006121207337
	 
	The Bank of New York, as Security Agent
	PA
	Financing Statement Amendment
	Continuation of 34730222

	12/12/2006
	2006121207577
	 
	The Bank of New York, as Security Agent
	PA
	Financing Statement Amendment
	Amendment of 34730222 re: address of secured party

	11/9/2011
	2011110902353
	 
	Bank of New York as Security Agent The
	PA
	Financing Statement Amendment
	Continuation of 34730222

	12/18/2001
	34730243
	EME Homer City Generation L.P.
	The Bank of New York, as Security Agent
	PA
	Financing Statement
	“Homer City OL7 c/o Wells Fargo Bank Minnesota, N.A. Corporate Trust Services” listed as assignor secured party

Schedule 1.2 - Page 3

	
							
	UCC Date
	UCC Ref #
	Debtor Name
	Secured Party
	Jurisdiction
	Type
	Description

	12/12/2006
	2006121207375
	 
	The Bank of New York, as Security Agent
	PA
	Financing Statement Amendment
	Continuation of 34730243

	12/12/2006
	2006121207591
	 
	The Bank of New York, as Security Agent
	PA
	Financing Statement Amendment
	Amendment of 34730243 re: address of secured party

	11/9/2011
	2011110902339
	 
	Bank of New York as Security Agent The
	PA
	Financing Statement Amendment
	Continuation of 34730243

	12/17/2001
	34730264
	EME Homer City Generation L.P.
	The Bank of New York, as Security Agent
	PA
	Financing Statement
	“Homer City OL8 c/o Wells Fargo Bank Minnesota, N.A. Corporate Trust Services” listed as assignor secured party

	12/12/2006
	2006121207313
	 
	The Bank of New York, as Security Agent
	PA
	Financing Statement Amendment
	Continuation of 34730264

	12/12/2006
	2006121207539
	 
	The Bank of New York, as Security Agent
	PA
	Financing Statement Amendment
	Amendment of 34730264 re: address of secured party

	11/9/2011
	2011110902377
	 
	Bank of New York as Security Agent The
	PA
	Financing Statement Amendment
	Continuation of 34730264

	12/19/2001
	34731687
	EME Homer City Generation L.P.
	The Bank of New York, as collateral agent
	PA
	Financing Statement
	 

	12/5/2006
	2006120506354
	 
	The Bank of New York, as Collateral Agent
	PA
	Financing Statement Amendment
	Continuation of 34731687

	12/12/2006
	2006121207616
	 
	The Bank of New York, as Collateral Agent
	PA
	Financing Statement Amendment
	Amendment of 34731687 re: address of secured party

	11/9/2011
	2011110902113
	 
	The Bank of New York as Collateral Agent
	PA
	Financing Statement Amendment
	Continuation of 34731687

	11/22/2006
	2006112201055
	EME Homer City Generation L.P.
	VFS Leasing Co.
	PA
	Financing Statement
	 

Schedule 1.2 - Page 4

	
							
	UCC Date
	UCC Ref #
	Debtor Name
	Secured Party
	Jurisdiction
	Type
	Description

	10/26/2011
	2011102605935
	EME Homer City Generation L.P.
	VFS Leasing Co.
	PA
	Financing Statement Amendment
	Continuation of 2006112201055

	1/11/2007
	2007011101419
	EME Homer City Generation L.P.
	VFS Leasing Co.
	PA
	Financing Statement
	 

	2/5/2008
	2008020508010
	EME Homer City Generation L.P.
	Varilease Finance, Inc.
	PA
	Financing Statement
	 

	2/28/2008
	2008022804351
	 
	Varilease Finance, Inc.
	PA
	Financing Statement Amendment
	Assignment of 2008020508010 to Somerset Leasing Corp. VII

	3/20/2008
	2008032005068
	EME Homer City Generation
	American Agip Co., Inc.
	PA
	Financing Statement
	 

	2/9/2009
	2009020903402
	EME Homer City Generation L.P.
	VFS Leasing Co.
	PA
	Financing Statement
	 

	6/16/2010
	2010061601682
	EME Homer City Generation L.P.
	Caterpillar Financial Services Corporation
	PA
	Financing Statement
	 

	7/12/2010
	2010071205343
	EME Homer City Generation L.P.
	Caterpillar Financial Services Corporation
	PA
	Financing Statement
	 

	4/4/2011
	2011040407598
	EME Homer City Generation L.P.
	VFI - SPV V Corp.
	PA
	Financing Statement
	 

	7/11/2011
	2011071107347
	 
	VFI - SPV V Corp.
	PA
	Financing Statement Amendment
	Assignment of 2011040407598 to Republic Bank, Inc.

	8/4/2011
	2011080407089
	 
	Republic Bank, Inc.
	PA
	Financing Statement Amendment
	Assignment of 2011040407598 to Somerset Capital Group, Ltd.

	8/8/2011
	2011080807188
	 
	Somerset Capital Group, Ltd.
	PA
	Financing Statement Amendment
	Assignment of 2011040407598 to Somerset Leasing Corp. I

All exceptions to title set forth in the following:
(1)    Commonwealth Land Title Insurance Company, Commitment for Title Insurance, numbered 111018PIT-H-Plant, dated October 24, 2011;

Schedule 1.2 - Page 5

(2)    Commonwealth Land Title Insurance Company, Commitment for Title Insurance, numbered 111018PIT-Reservoir, dated October 24, 2011;
(3)    Commonwealth Land Title Insurance Company, Commitment for Title Insurance, numbered 111018PIT-C-Wright, dated October 24, 2011;
(4)    Commonwealth Land Title Insurance Company, Commitment for Title Insurance, numbered 111018PIT-D, dated October 24, 2011;
(5)    Commonwealth Land Title Insurance Company, Commitment for Title Insurance, numbered 111018PIT-F-Coral, dated October 24, 2011;
(6)    Commonwealth Land Title Insurance Company, Commitment for Title Insurance, numbered 111018PIT-G-Senate, dated October 24, 2011;
(7)    Commonwealth Land Title Insurance Company, Commitment for Title Insurance, numbered 111018PIT-B-Steffee, dated October 24, 2011;
(8)    Commonwealth Land Title Insurance Company, Commitment for Title Insurance, numbered 111018PIT-A-Kuzemczak, dated October 24, 2011; and
(9)    Commonwealth Land Title Insurance Company, Commitment for Title Insurance, numbered 111018PIT-E-Tanoma, dated October 24, 2011.

Schedule 1.2 - Page 6

Schedule 5.3 – Permitted Activities

Reduction in Homer City's coal inventory below the (***) day level; provided that any reduction of its coal inventory below a (***) day level will be deemed a deviation from GE’s Preferred Approach and Homer City shall undertake its consultation obligation and consider, in good faith, alternative courses of action proposed by GE under and consistent with Section 5.3 of the Implementation Agreement. 
The Unit (***) spring (***) day outage originally scheduled for (***) through (***)has been postponed until (***),(***) through (***).  Major work items include: (***).
A (***) day outage has been added to the schedule starting (***).  Work includes, but is not limited to: (***). 

Schedule 5.3 - Page 1

Schedule 6.5 – Pending Legal Proceedings – Homer City

	
	
	The proceedings referenced in the Complaint, dated January 4, 2011, by the United States Environmental Protection Agency against EME Homer City Generation L.P., Homer City OL1 LLC, Homer City OL2 LLC, Homer City OL3 LLC, Homer City OL4 LLC, Homer City OL5 LLC, Homer City OL6 LLC, Homer City OL7 LLC, Homer City OL8 LLC, New York State Electric and Gas Corporation, and Pennsylvania Electric Co.

	The proceedings referenced in the Class Action First Amended Complaint, dated May 31, 2011, by Scott Jackson and Maria Jackson against EME Homer City Generation L.P., Homer City OL1 LLC, Homer City OL2 LLC, Homer City OL3 LLC, Homer City OL4 LLC, Homer City OL5 LLC, Homer City OL6 LLC, Homer City OL7 LLC, Homer City OL8 LLC, New York State Electric and Gas Corporation, Pennsylvania Electric Co., Edison Mission Energy, Mission Energy Holding Co., and Edison International

	The proceedings referenced in the Citation and Notification of Penalty, issued on July 26, 2011 by the U.S. Department of Labor, Occupational Safety and Health Administration to EME Homer City Generation L.P.

	The proceedings referenced in the Notice of Probable Violation, issued on July 11, 2011 by the U.S. Department of Transportation, Pipeline and Hazardous Materials Safety Administration to EME Homer City Generation L.P.

	The proceedings referenced in the Consent Assessment of Civil Penalty, dated October 1, 2009, between PaDEP and EME Homer City Generation L.P.

	The proceedings referenced in the Letter re: Department of Environmental Protection v. EME Homer City Generation, L.P., No. 293 M.D. 2007, dated August 3, 2007, from EME Homer City Generation L.P. to PaDEP

	The proceedings referenced in the Letter re: Department of Environmental Protection v. EME Homer City Generation, L.P., No. 293 M.D. 2007, dated November 26, 2008, from EME Homer City Generation L.P. to PaDEP

	The proceedings referenced in the Complaint, dated February 27, 2009, by Exergetic Systems, LLC against Energy Future Holding Corp., Texas Competitive Electric Holdings Co. LLC, TXU Energy Retail Co. LLC, Edison Mission Energy, and Midwest Generation LLC

	The proceedings referenced in the Letter re: Department of Environmental Protection v. EME Homer City Generation, L.P., No. 293 M.D. 2007, dated January 21, 2009, from EME Homer City Generation L.P. to PaDEP

	The proceedings referenced in the Letter re: Department of Environmental Protection v. EME Homer City Generation, L.P., No. 293 M.D. 2007, dated April 13, 2009, from EME Homer City

Schedule 6.5 - Page 1

	
	
	Generation L.P. to PaDEP

	The proceedings referenced in the Letter re: Department of Environmental Protection v. EME Homer City Generation, L.P., No. 293 M.D. 2007, dated April 27, 2009, from EME Homer City Generation L.P. to PaDEP

	The proceedings referenced in the Letter re: EME Homer City Generation, LP, Center Township, Indiana County Consent Decree, No. 293 M.D. 2007, dated June 23, 2010, from EME Homer City Generation L.P. to PaDEP

	The proceedings referenced in the Notice of Violation, dated December 12, 2011, by PaDEP to Edison Mission Energy/Homer City

	The proceedings referenced in the Letter re: Notice of Intent to Sue under the Federal Clean Air Act and Pennsylvania Air Pollution Control Act, dated February 13, 2012, from Earthjustice to EME Homer City Generation L.P., Homer City OL1 LLC, Homer City OL2 LLC, Homer City OL3 LLC, Homer City OL4 LLC, Homer City OL5 LLC, Homer City OL6 LLC, Homer City OL7 LLC and Homer City OL8 LLC.

	The proceedings referenced in Tibble, et. al. v. Edison International, et. al. – The plaintiffs in Tibble allege that the defendants breached various fiduciary duties and committed various prohibited transactions with respect to the Edison 401(k) Plan.  The District Court in Tibble found in favor of the defendants on all claims, except for one breach of fiduciary duty claim, as a result of which defendants were ordered to pay damages of $370,732.  Appeals by both parties are pending.  Although EME Homer City Generation L.P. is not named as a defendant in the lawsuit, EME Homer City Generation L.P. could be responsible under the terms of the Edison 401(k) Plan to make corrective contributions on behalf of its current and former employees who benefit from a judgment favorable to the plaintiffs.  Additionally, if the District Court’s rulings are upheld on appeal, EME Homer City Generation L.P. may be required to pay the portion of damages allocable to its participants in the Edison 401(k) Plan.

	Sales and Use Tax: In 2011, EME Homer City Generation L.P. was assessed taxes, penalties and interest in connection with a Pennsylvania sales and use tax audit for the period May 1, 2006 through October 31, 2010.  In response to the assessment, EME Homer City Generation L.P. filed a Petition for Reassessment with the Pennsylvania Board of Appeals.  EME Homer City Generation L.P. is contesting, and has not paid, that portion of the assessment pertaining to the purchase and installation of certain equipment related to its selective catalytic reduction (SCR) system.  Approximately $54,650 of use tax is in dispute with this matter, plus penalties and interest.  EME Homer City Generation L.P.’s position is that the assessed purchases are exempt from sales or use tax pursuant to the manufacturing exemption under Pennsylvania Regulation 32.32.  The auditor has asserted that the purchases in question constitute "pre-production" storage tanks which are not eligible for the exemption.  A hearing on this matter was held on September 22, 2011.  The hearing officer was recently granted an extension of time to decide the appeal; to date, no decision has been communicated concerning the appeal.

Schedule 6.5 - Page 2

Schedule 6.6 – Affiliate Assets

Edison Mission Marketing & Trading, Inc. Capacity Sales:
	
							
	Planning Period
	Auction Type
	Resource Name
	Resource Type
	LDA Name
	(***)
	(***)

	2011/2012
	BASE
	HOMER CITY 1
	GEN
	RTO
	(***)
	(***)

	2011/2012
	BASE
	HOMER CITY 2
	GEN
	RTO
	(***)
	(***)

	2011/2012
	BASE
	HOMER CITY 3
	GEN
	RTO
	(***)
	(***)

	2012/2013
	BASE
	HOMER CITY 1
	GEN
	MAAC
	(***)
	(***)

	2012/2013
	BASE
	HOMER CITY 2
	GEN
	MAAC
	(***)
	(***)

	2012/2013
	BASE
	HOMER CITY 3
	GEN
	MAAC
	(***)
	(***)

	2013/2014
	BASE
	HOMER CITY 1
	GEN
	MAAC
	(***)
	(***)

	2013/2014
	BASE
	HOMER CITY 2
	GEN
	MAAC
	(***)
	(***)

	2013/2014
	BASE
	HOMER CITY 3
	GEN
	MAAC
	(***)
	(***)

	2014/2015
	BASE
	HOMER CITY 1
	GEN
	MAAC
	(***)
	(***)

	2014/2015
	BASE
	HOMER CITY 2
	GEN
	MAAC
	(***)
	(***)

	2014/2015
	BASE
	HOMER CITY 3
	GEN
	MAAC
	(***)
	(***)

Edison Mission Marketing & Trading, Inc. Capacity Purchases:
	
						
	Planning Period
	Auction Type
	LDA Name
	Segment Name
	(***)
	(***)

	2012/2013
	FIRST
	MAAC
	5
	(***)
	(***)

	2012/2013
	FIRST
	MAAC
	6
	(***)
	(***)

	2012/2013
	FIRST
	MAAC
	7
	(***)
	(***)

	2012/2013
	FIRST
	MAAC
	8
	(***)
	(***)

	2012/2013
	FIRST
	MAAC
	9
	(***)
	(***)

	2012/2013
	FIRST
	MAAC
	10
	(***)
	(***)

All day-ahead and real-time sales of energy produced by the Facility and sold by EME Homer City Generation L.P. to Edison Mission Marketing & Trading, Inc., and then resold by Edison Mission Marketing & Trading, Inc. to PJM Interconnection, L.L.C. or New York Independent System Operator, Inc., pursuant to an intercompany agreement between  Edison Mission Marketing & Trading, Inc. and EME Homer City Generation L.P., which have not been delivered as of the closing of the applicable Implementation Transaction.
Agreement re: Transmission Rights, dated June 11, 2010, between New York State Electric & Gas Corporation and Edison Mission Marketing & Trading, Inc.

Schedule 6.6 - Page 1

Any Emission Allowances and Emission Reduction Credits held by Edison Mission Marketing & Trading, Inc. on behalf of EME Homer City Generation L.P.
Reference is made to the financial transmission rights set forth on the spreadsheet attached hereto.
	
		
	Software
	Business Process Supported

	Adobe Software
	Illustrator, PhotoShop, Reader, Pro

	Autodesk - AutoCad
	Engineering design and review software

	Business Objects Reporting
	Enterprise Reporting Platform

	CCure
	Security and badging software

	Citrix - Terminal Server
	Virtual Desktop Application

	Commvault - Simpana
	Tape back-up solution

	StackVision - Continuous Emission Monitoring System
	Stack monitoring software

	DocuMint/Loveland
	Instrument calibration and maintenance documentation

	Ellipse - Read Only
	Plant Finance, Materiels Managment, and Maintenance Management. (EAM -- Enterprise Asset Management)

	EMBARCADERO TECHNOLOGIES, INC.
	Database Modeling software

	EMC Corporation - VMAX
	Enterprise Storage solution

	EMC - eRoom
	Enterprise Collaboration & Document Mgmt

	Esker, Inc.
	Faxing Software

	ESS
	Environmental Safety and Compliance

	GE - XA21 Generation Management System
	Generation Management System

	General Physics - Learning Mgmt System
	Learning Management System

	GMS - Unit Capability Forms
	Plant capability tracking tool

	Informatica - ETL
	Extract, Transform & Load software

	Informatica - Metadata Manager
	Database data management tool

	LANDESK Management Agent
	Inventory, Remote Control, Application deployment

	Latisys-Internet Service Provider
	Interet service provider for Homer City

	Morningstar - Data Provider
	Market data provider

	IBM - Lotus Notes
	Email, Calendar & Scheduling

	Navigant - Microgads
	Tracks and reports generator outages and deratings

	Microsoft - Windows OS
	Windows operating system

	Microsoft - Office
	Office Software - Word, Excel, etc.

	Net MRI
	Network Log Management

	NiSoft - Eclipse
	Lock-out Tagout & Safety Permitting

Schedule 6.6 - Page 2

	
		
	Novell - Identity Asset Mgmt
	Provisioning and access mgmt

	Open Text Inc. - Livellink
	Enterprise document management

	Openlink - Endur
	Trading and Risk Management System

	Oracle
	Transactional Database.

	OSI Soft - Pi
	Plant Information historian

	Netwrix - Password Manager
	Self service password reset

	Presensoft
	Instant Messenger Tracking and Logging

	PSINET
	Network bandwidth montoring software

	Q1 Labs
	Network event monitoring tool

	Quest Toad
	Database administration software

	Redhat Linux
	Database operating system with support

	SAP ECC
	Enterprise Resource Planning Tools

	Shavlik
	Server patch management software

	IBM - Sherpa Mail Attender
	Email health monitoring tool

	SKM Powertools
	Engineering Software

	SnagIT
	Image capturing software to help with documentation.

	Sophos
	Desktop and server anti-virus

	SQL Server
	Transactional Database

	Teamstudio, Inc.
	Desktop rollout packaging

	Tube Track
	Boiler tube leaks tracking system

	Ventex - nMarket & Offer Manager
	ISO Bidding and Scheduling System

	Verisign
	Certificate provider and domain name registrar

	Websense
	Enterprise web-filtering software

	Winshuttle
	SAP software uploads

	Wolfram Research - Mathworks
	Modeling and analytics software

Schedule 6.6 - Page 3

Schedule 7.5 – Pending Legal Proceedings – GE

Schedule 6.5 is incorporated herein by reference.

Schedule 7.5 - Page 1exh10_1.htm

 

Exhibit 10.1

 

	
  

	
SECURITIES PURCHASE AGREEMENT

 

This Securities Purchase Agreement (this “Agreement”) is dated as of May 1, 2012, between ZBB Energy Corporation, a Wisconsin corporation (the “Company”), and each purchaser identified on the signature pages hereto (each, including its successors and assigns, a “Purchaser” and collectively the “Purchasers”).

 

WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to an effective registration statement under the Securities Act of 1933, as amended (the “Securities Act”), the Company desires to issue and sell to each Purchaser, and each Purchaser, severally and not jointly, desires to purchase from the Company, registered notes of the Company as more fully described in this Agreement; and

 

WHEREAS, substantially concurrent with the execution and delivery of this Agreement by the parties hereto and subject to the terms and conditions set forth in a Securities Purchase Agreement separate from this Agreement (the “Other Securities Agreement”), the Company will issue and sell to the purchasers party thereto unregistered notes of the Company described therein (the “Other Notes”) and such Other Notes shall be pari passu with the Securities (defined below) insofar as their priority or preference and relative rights are concerned;

 

NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the Company and each Purchaser agree as follows:

 

ARTICLE I.

DEFINITIONS

 

1.1  Definitions.  In addition to the terms defined elsewhere in this Agreement, for all purposes of this Agreement, the following terms have the meanings set forth in this Section 1.1:

 

“Acquiring Person” shall have the meaning ascribed to such term in Section 4.5.

 

“Action” shall have the meaning ascribed to such term in Section 3.1(j).

 

“Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person as such terms are used in and construed under Rule 405 under the Securities Act.

 

“Board of Directors” means the board of directors of the Company.

 

“Business Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.

 

“Closing” means the closing of the purchase and sale of the Securities pursuant to Section 2.1.

 

 

 

  

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“Closing Date” means the Trading Day on which all of the Transaction Documents have been executed and delivered by the applicable parties thereto, and all conditions precedent to (i) the Purchasers’ obligations to pay the Subscription Amount and (ii) the Company’s obligations to deliver the Securities, in each case, have been satisfied or waived, but in no event later than the third Trading Day following the date hereof.

 

“Commission” means the United States Securities and Exchange Commission.

 

“Common Stock” means the common stock of the Company, par value $0.01 per share, and any other class of securities into which such securities may hereafter be reclassified or changed.

 

“Common Stock Equivalents” means any securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.

 

“Company Counsel” means K&L Gates, with offices located at 214 N. Tryon Street, 47th Floor, Charlotte, NC 28202.

 

“Disclosure Schedules” means the Disclosure Schedules of the Company delivered concurrently herewith.

 

“Evaluation Date” shall have the meaning ascribed to such term in Section 3.1(r).

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

“Exempt Issuance” means the issuance of (a) shares of Common Stock or options to employees, officers, directors or consultants of the Company pursuant to any stock or option plan duly adopted for such purpose, by a majority of the non-employee members of the Board of Directors or a majority of the members of a committee of non-employee directors established for such purpose, (b) securities upon the exercise or exchange of or conversion of any Securities issued hereunder and/or other securities exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the date of this Agreement, provided that such securities have not been amended since the date of this Agreement to increase the number of such securities or to decrease the exercise price, exchange price or conversion price of such securities, and (c) securities issued pursuant to acquisitions or strategic transactions approved by a majority of the disinterested directors of the Company, provided that any such issuance shall only be to a Person (or to the equityholders of a Person) which is, itself or through its subsidiaries, an operating company or an owner of an asset in a business synergistic with the business of the Company and shall provide to the Company additional benefits in addition to the investment of funds, but shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities.

 

 

  

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“GAAP” shall have the meaning ascribed to such term in Section 3.1(h).

 

“Indebtedness” shall have the meaning ascribed to such term in Section 3.1(z).

 

“Intellectual Property Rights” shall have the meaning ascribed to such term in Section 3.1(o).

 

“Liens” means a lien, charge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.

 

“Material Adverse Effect” shall have the meaning assigned to such term in Section 3.1(a).

 

“Material Permits” shall have the meaning ascribed to such term in Section 3.1(m).

 

“Notes” means, collectively, the Zero Coupon Convertible Subordinated Notes delivered to the Purchasers at the Closing in accordance with Section 2.2(a) hereof, in the form of Exhibit A attached hereto.

 

 “Note Shares” means the shares of Common Stock issuable upon conversion of the Notes.

 

“Other Notes” shall have the meaning ascribed to such term in the preambles.

 

“Other Securities Purchase Agreement” shall have the meaning ascribed to such term in the preambles.

 

 “Participation Maximum” shall have the meaning ascribed to such term in Section 4.11(a).

 

“Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

 

“Pre-Notice” shall have the meaning ascribed to such term in Section 4.11(b).

 

“Pro Rata Portion” shall have the meaning ascribed to such term in Section 4.11(e).

 

“Proceeding” means an action, claim, suit, investigation or proceeding (including, without limitation, an informal investigation or partial proceeding, such as a deposition), whether commenced or threatened.

 

“Prospectus” means the final prospectus filed for the Registration Statement.

 

 

  

3

  

 

“Prospectus Supplement” means the supplement to the Prospectus complying with Rule 424(b) of the Securities Act that is filed with the Commission and delivered by the Company to each Purchaser at the Closing.

 

“Purchaser Party” shall have the meaning ascribed to such term in Section 4.8.

 

“Registration Statement” means the effective registration statement with Commission file No. 333-171957 which registers the sale of the Notes and the Note Shares to the Purchasers.

 

“Required Approvals” shall have the meaning ascribed to such term in Section 3.1(e).

 

“Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.

 

“Rule 424” means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.

 

“SEC Reports” shall have the meaning ascribed to such term in Section 3.1(h).

 

“Securities” means the Notes, the Note Shares, the Warrants and the Warrant Shares.

 

 “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

 “Short Sales” means all “short sales” as defined in Rule 200 of Regulation SHO under the Exchange Act (but shall not be deemed to include the location and/or reservation of borrowable shares of Common Stock). 

 

 “Subscription Amount” means, as to each Purchaser, the aggregate amount to be paid for Notes and Warrants purchased hereunder as specified below such Purchaser’s name on the signature page of this Agreement and next to the heading “Subscription Amount,” in United States dollars and in immediately available funds.

 

“Subsequent Financing” shall have the meaning ascribed to such term in Section 4.11(a).

 

“Subsequent Financing Notice” shall have the meaning ascribed to such term in Section 4.11(b).

 

 

  

4

  

 

“Subsidiary” means any subsidiary of the Company as set forth on Schedule 3.1(a), and shall, where applicable, also include any direct or indirect subsidiary of the Company formed or acquired after the date hereof.

 

“Trading Day” means a day on which the principal Trading Market is open for trading.

 

“Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE AMEX, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange or the OTC Bulletin Board (or any successors to any of the foregoing).

 

“Transaction Documents” means this Agreement, the Security Agreement, the Notes, the Warrants and any other documents or agreements executed in connection with the transactions contemplated hereunder.

 

“Transfer Agent” means Computershare, the current transfer agent of the Company, with a mailing address of 2 North LaSalle Street, Chicago, IL 60602 and a facsimile number of 312-601-4348, and any successor transfer agent of the Company.

 

“Warrants” means, collectively, the Common Stock purchase warrants delivered to the Purchasers at the Closing in accordance with Section 2.2(a) hereof, which Warrants shall be exercisable commencing 181 days following the date hereof and have a term of exercise equal to 5 years, in the form of Exhibit B attached hereto.

 

“Warrant Shares” means the shares of Common Stock issuable upon exercise of the Warrants.

 

ARTICLE II.

PURCHASE AND SALE

 

2.1 Closing.  On the Closing Date, upon the terms and subject to the conditions set forth herein, substantially concurrent with the execution and delivery of this Agreement by the parties hereto, the Company agrees to sell, and the Purchasers, severally and not jointly,  agree to purchase, up to an aggregate of $3,000,000 of Notes and Warrants.  Each Purchaser shall deliver to the Company, via wire transfer or a certified check of immediately available funds equal to such Purchaser’s Subscription Amount as set forth on the signature page hereto executed by such Purchaser and the Company shall deliver to each Purchaser its respective Notes and a Warrant as determined pursuant to Section 2.2(a), and the Company and each Purchaser shall deliver the other items set forth in Section 2.2 deliverable at the Closing.  Upon satisfaction of the covenants and conditions set forth in Sections 2.2 and 2.3, the Closing shall occur at the offices of Company Counsel or such other location as the parties shall mutually agree.

 

2.2 Deliveries.

 

(a) On or prior to the Closing Date, the Company shall deliver or cause to be delivered to each Purchaser the following:

 

  

5

  

(i) this Agreement duly executed by the Company;

 

(ii) a Note registered in the name of such Purchaser in a principal amount equal to such Purchaser’s Subscription Amount times 110%;

 

(iii) a Warrant registered in the name of such Purchaser to purchase up to a number of shares of Common Stock equal to 55% times such Purchaser’s Subscription Amount divided by $0.53, which equals the closing price of the Company’s common stock on the date prior to the date hereof and shall be the exercise price of the Warrants (such Warrant certificate may be delivered within three Trading Days of the Closing Date);

 

(iv) a Security Agreement in the form of Exhibit D attached hereto (the “Security Agreement”) duly executed by the Company and

 

(v) the Prospectus and Prospectus Supplement (which may be delivered in accordance with Rule 172 under the Securities Act).

 

(b) On or prior to the Closing Date, each Purchaser shall deliver or cause to be delivered to the Company the following:

 

(i) this Agreement duly executed by such Purchaser; and

 

(ii) such Purchaser’s Subscription Amount by wire transfer to the account in accordance with the wiring instructions attached hereto as Exhibit C attached hereto.

 

2.3 Closing Conditions.

 

                 (a)           The obligations of the Company hereunder in connection with the Closing are subject to the following conditions being met:

 

(i) the accuracy in all material respects on the Closing Date of the representations and warranties of the Purchasers contained herein (unless as of a specific date therein);

 

(ii) all obligations, covenants and agreements of each Purchaser required to be performed at or prior to the Closing Date shall have been performed;

 

(iii) The Company shall have received clearance from NYSE Amex for the issuance of the Securities; and

 

(iv) the delivery by each Purchaser of the items set forth in Section 2.2(b) of this Agreement.

 

(b) The respective obligations of the Purchasers hereunder in connection with the Closing are subject to the following conditions being met:

 

  

6

  

(i) the accuracy in all material respects when made and on the Closing Date of the representations and warranties of the Company contained herein (unless as of a specific date therein);

 

(ii) all obligations, covenants and agreements of the Company required to be performed at or prior to the Closing Date shall have been performed;

 

(iii) the delivery by the Company of the items set forth in Section 2.2(a) of this Agreement;

 

(iv) there shall have been no Material Adverse Effect with respect to the Company since the date hereof; and

 

(v) from the date hereof to the Closing Date, trading in the Common Stock shall not have been suspended by the Commission or the Company’s principal Trading Market (except for any suspension of trading of limited duration agreed to by the Company, which suspension shall be terminated prior to the Closing), and, at any time prior to the Closing Date, trading in securities generally as reported by Bloomberg L.P. shall not have been suspended or limited, or minimum prices shall not have been established on securities whose trades are reported by such service, or on any Trading Market, nor shall a banking moratorium have been declared either by the United States or New York State authorities nor shall there have occurred any material outbreak or escalation of hostilities or other national or international calamity of such magnitude in its effect on, or any material adverse change in, any financial market which, in each case, in the reasonable judgment of each Purchaser, makes it impracticable or inadvisable to purchase the Securities at the Closing.

 

ARTICLE III.

REPRESENTATIONS AND WARRANTIES

 

3.1 Representations and Warranties of the Company.  Except as otherwise disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2011, any Company Quarterly Report on Form 10-Q filed since September 8, 2011, the filing date of the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2011, or any of the Company’s Current Reports on Form 8-K filed since such date (including any exhibit thereto and document incorporated by reference therein), and except as set forth in the Disclosure Schedules, which Disclosure Schedules shall be deemed a part hereof, the Company hereby makes the following representations and warranties to each Purchaser:

 

(a) Subsidiaries.  All of the direct and indirect subsidiaries of the Company are set forth on Schedule 3.1(a).  The Company owns, directly or indirectly, the capital stock or other equity interests of each Subsidiary as described on Schedule 3.1(a) free and clear of any Liens other than Permitted Liens, and all of the issued and outstanding shares of capital stock of each Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights to subscribe for or purchase securities.  If the Company has no subsidiaries, all other references to the Subsidiaries or any of them in the Transaction Documents shall be disregarded.

 

  

7

  

(b) Organization and Qualification.  The Company and each of the Subsidiaries is an entity duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted.  Neither the Company nor any Subsidiary is in violation nor default of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents.  Each of the Company and the Subsidiaries is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not have or reasonably be expected to result in: (i) a material adverse effect on the legality, validity or enforceability of any Transaction Document, (ii) a material adverse effect on the results of operations, assets, business, prospects or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole, or (iii) a material adverse effect on the Company’s ability to perform in any material respect on a timely basis its obligations under any Transaction Document (any of (i), (ii) or (iii), a “Material Adverse Effect”) and no Proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.

 

(c) Authorization; Enforcement.  The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by each of the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder.  The execution and delivery of each of the Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company, the Board of Directors or the Company’s stockholders in connection therewith other than in connection with the Required Approvals.  Each Transaction Document to which it is a party has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with the terms hereof and thereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

 

(d) No Conflicts.  The execution, delivery and performance by the Company of the Transaction Documents, the issuance and sale of the Securities and the consummation by it of the transactions contemplated hereby and thereby to which it is a party do not and will not (i) conflict with or violate any provision of the Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws or other organizational or charter documents, or (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon any of the properties or assets of the Company or any Subsidiary, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected, or (iii) subject to the Required Approvals, conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or a Subsidiary is subject (including federal and state securities laws and regulations), or by which any property or asset of the Company or a Subsidiary is bound or affected; except in the case of each of clauses (ii) and (iii), such as could not have or reasonably be expected to result in a Material Adverse Effect.

 

  

8

  

(e) Filings, Consents and Approvals.  The Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than: (i) the filings required pursuant to Section 4.4 of this Agreement, (ii) the filing with the Commission of the Prospectus Supplement, (iii) application(s) to each applicable Trading Market for the listing of the Securities for trading thereon in the time and manner required thereby and (iv) such filings as are required to be made under applicable state securities laws (collectively, the “Required Approvals”).

 

(f) Issuance of the Securities; Registration.  The Securities are duly authorized and, when issued and paid for in accordance with the applicable Transaction Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company.  The Note Shares, when issued in accordance with the terms of the Notes, will be validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company.  The Warrant Shares, when issued in accordance with the terms of the Warrants, will be validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company.  The Company has reserved from its duly authorized capital stock the maximum number of shares of Common Stock issuable pursuant to the Notes and the Warrants. The Company has prepared and filed the Registration Statement in conformity with the requirements of the Securities Act, which became effective on March 21, 2011 (the “Effective Date”), including the Prospectus, and such amendments and supplements thereto as may have been required to the date of this Agreement.  The Registration Statement is effective under the Securities Act and no stop order preventing or suspending the effectiveness of the Registration Statement or suspending or preventing the use of the Prospectus has been issued by the Commission and no proceedings for that purpose have been instituted or, to the knowledge of the Company, are threatened by the Commission.  The Company, if required by the rules and regulations of the Commission, proposes to file the Prospectus, with the Commission pursuant to Rule 424(b).  At the time the Registration Statement and any amendments thereto became effective, at the date of this Agreement and at the Closing Date, the Registration Statement and any amendments thereto conformed and will conform in all material respects to the requirements of the Securities Act and did not and will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading; and the Prospectus and any amendments or supplements thereto, at time the Prospectus or any amendment or supplement thereto was issued and at the Closing Date, conformed and will conform in all material respects to the requirements of the Securities Act and did not and will not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

 

 

  

9

  

 

(g) Capitalization.  The capitalization of the Company is as set forth on Schedule 3.1(g).  The Company has not issued any capital stock since its most recently filed periodic report under the Exchange Act, other than pursuant to the exercise of employee stock options under the Company’s stock option plans, the issuance of shares of Common Stock to employees pursuant to the Company’s employee stock purchase plans and pursuant to the conversion and/or exercise of Common Stock Equivalents outstanding as of the date of the most recently filed periodic report under the Exchange Act.  No Person has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by the Transaction Documents.  Except as a result of the purchase and sale of the Securities, there are no outstanding options, warrants, scrip rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exercisable or exchangeable for, or giving any Person any right to subscribe for or acquire, any shares of Common Stock, or contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become bound to issue additional shares of Common Stock or Common Stock Equivalents.  The issuance and sale of the Securities will not obligate the Company to issue shares of Common Stock or other securities to any Person (other than the Purchasers) and will not result in a right of any holder of Company securities to adjust the exercise, conversion, exchange or reset price under any of such securities. All of the outstanding shares of capital stock of the Company are validly issued, fully paid and nonassessable, have been issued in compliance with all federal and state securities laws, and none of such outstanding shares was issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities.  No further approval or authorization of any stockholder, the Board of Directors or others is required for the issuance and sale of the Securities.  There are no stockholders agreements, voting agreements or other similar agreements with respect to the Company’s capital stock to which the Company is a party or, to the knowledge of the Company, between or among any of the Company’s stockholders.

 

(h) SEC Reports; Financial Statements.  The Company has filed all reports, schedules, forms, statements and other documents required to be filed by the Company under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the date hereof (or such shorter period as the Company was required by law or regulation to file such material) (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, together with the Prospectus and the Prospectus Supplement, being collectively referred to herein as the “SEC Reports”) on a timely basis or has received a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration of any such extension.  As of their respective dates, the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act, as applicable, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The Company has never been an issuer subject to Rule 144(i) under the Securities Act. The financial statements of the Company included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing.  Such financial statements have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis during the periods involved (“GAAP”), except as may be otherwise specified in such financial statements or the notes thereto and except that unaudited financial statements may not contain all footnotes required by GAAP, and fairly present in all material respects the financial position of the Company and its consolidated Subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments.

 

  

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(i) Material Changes; Undisclosed Events, Liabilities or Developments.  Since the date of the latest audited financial statements included within the SEC Reports, except as specifically disclosed in a subsequent SEC Report filed prior to the date hereof, (i) there has been no event, occurrence or development that has had or that could reasonably be expected to result in a Material Adverse Effect, (ii) the Company has not incurred any liabilities (contingent or otherwise) other than (A) trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in the Company’s financial statements pursuant to GAAP or disclosed in filings made with the Commission, (iii) the Company has not altered its method of accounting, (iv) the Company has not declared or made any dividend or distribution of cash or other property to its stockholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock and (v) the Company has not issued any equity securities to any officer, director or Affiliate, except pursuant to existing Company stock option plans.  The Company does not have pending before the Commission any request for confidential treatment of information.  Except for the issuance of the Securities contemplated by this Agreement or as set forth on Schedule 3.1(i), no event, liability, fact, circumstance, occurrence or development has occurred or exists or is reasonably expected to occur or exist with respect to the Company or its Subsidiaries or their respective business,  properties, operations, assets or financial condition that would be required to be disclosed by the Company under applicable securities laws at the time this representation is made or deemed made that has not been publicly disclosed at least 1 Trading Day prior to the date that this representation is made.

 

(j) Litigation.  There is no action, suit, inquiry, notice of violation, proceeding or investigation pending or, to the knowledge of the Company, threatened against or affecting the Company, any Subsidiary or any of their respective properties before or by any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an “Action”) which (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the Securities or (ii) could, if there were an unfavorable decision, have or reasonably be expected to result in a Material Adverse Effect.  Neither the Company nor any Subsidiary, nor any director or officer thereof, is or has been the subject of any Action involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty.  There has not been, and to the knowledge of the Company, there is not pending or contemplated, any investigation by the Commission involving the Company or any current or former director or officer of the Company.  The Commission has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company or any Subsidiary under the Exchange Act or the Securities Act.

 

  

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(k) Labor Relations.  No material labor dispute exists or, to the knowledge of the Company, is imminent with respect to any of the employees of the Company, which could reasonably be expected to result in a Material Adverse Effect.  None of the Company’s or its Subsidiaries’ employees is a member of a union that relates to such employee’s relationship with the Company or such Subsidiary, and neither the Company nor any of its Subsidiaries is a party to a collective bargaining agreement, and the Company and its Subsidiaries believe that their relationships with their employees are good.  No executive officer, to the knowledge of the Company, is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement or non-competition agreement, or any other contract or agreement or any restrictive covenant in favor of any third party, and the continued employment of each such executive officer does not subject the Company or any of its Subsidiaries to any liability with respect to any of the foregoing matters.  The Company and its Subsidiaries are in compliance with all U.S. federal, state, local and foreign laws and regulations relating to employment and employment practices, terms and conditions of employment and wages and hours, except where the failure to be in compliance could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

(l) Compliance.  Neither the Company nor any Subsidiary: (i) is in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has the Company or any Subsidiary received notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived), (ii) is in violation of any judgment, decree or order of any court, arbitrator or governmental body or (iii) is or has been in violation of any statute, rule, ordinance or regulation of any governmental authority, including without limitation all foreign, federal, state and local laws relating to taxes, environmental protection, occupational health and safety, product quality and safety and employment and labor matters, except in each case as could not have or reasonably be expected to result in a Material Adverse Effect.

 

  

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(m) Regulatory Permits.  The Company and the Subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct their respective businesses as described in the SEC Reports, except where the failure to possess such permits could not reasonably be expected to result in a Material Adverse Effect (“Material Permits”), and neither the Company nor any Subsidiary has received any notice of proceedings relating to the revocation or modification of any Material Permit.

 

(n) Title to Assets.  The Company and the Subsidiaries have good and marketable title in fee simple to all real property owned by them and good and marketable title in all personal property owned by them that is material to the business of the Company and the Subsidiaries, in each case free and clear of all Liens, except for the Liens identified on Schedule 3.1(n) and Liens as do not materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by the Company and the Subsidiaries and Liens for the payment of federal, state or other taxes, the payment of which is neither delinquent nor subject to penalties.  Any real property and facilities held under lease by the Company and the Subsidiaries are held by them under valid, subsisting and enforceable leases with which the Company and the Subsidiaries are in compliance.  The assets listed on Schedule 3.1(n) under the caption “Tier Assets” are not encumbered by any Liens.

 

(o) Patents and Trademarks.  The Company and the Subsidiaries have, or have rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names, trade secrets, inventions, copyrights, licenses and other intellectual property rights and similar rights necessary or material for use in connection with their respective businesses as described in the SEC Reports and which the failure to so have could have a Material Adverse Effect (collectively, the “Intellectual Property Rights”).  None of, and neither the Company nor any Subsidiary has received a notice (written or otherwise) that any of, the Intellectual Property Rights has expired, terminated or been abandoned, or is expected to expire or terminate or be abandoned, within two (2) years from the date of this Agreement.  Neither the Company nor any Subsidiary has received, since the date of the latest audited financial statements included within the SEC Reports, a written notice of a claim or otherwise has any knowledge that the Intellectual Property Rights violate or infringe upon the rights of any Person, except as would not have a Material Adverse Effect.  To the knowledge of the Company, all such Intellectual Property Rights are enforceable and there is no existing infringement by another Person of any of the Intellectual Property Rights.  The Company and its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of all of their intellectual properties, except where failure to do so could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

(p) Insurance.  The Company and the Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses in which the Company and the Subsidiaries are engaged, including, but not limited to, directors and officers insurance coverage at least equal to the aggregate Subscription Amount.  Neither the Company nor any Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business without a significant increase in cost.

 

  

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(q) Transactions With Affiliates and Employees.  Except as set forth in the SEC Reports, none of the officers or directors of the Company and, to the knowledge of the Company, none of the employees of the Company is presently a party to any transaction with the Company or any Subsidiary (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner, in each case in excess of $120,000 other than for (i) payment of salary or consulting fees for services rendered, (ii) reimbursement for expenses incurred on behalf of the Company (iii) other employee benefits, including stock option agreements under any stock option plan of the Company and (iv) the acquisition of Other Notes pursuant to the Other Securities Purchase Agreement.

 

(r) Sarbanes-Oxley; Internal Accounting Controls.  The Company is in material compliance with any and all applicable requirements of the Sarbanes-Oxley Act of 2002 that are effective as of the date hereof, and any and all applicable rules and regulations promulgated by the Commission thereunder that are effective as of the date hereof and as of the Closing Date.  The Company and the Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that: (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. The Company has established disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and designed such disclosure controls and procedures to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms.  The Company’s certifying officers have evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by the Company’s most recently filed periodic report under the Exchange Act (such date, the “Evaluation Date”).  The Company presented in its most recently filed periodic report under the Exchange Act the conclusions of the certifying officers about the effectiveness of the disclosure controls and procedures based on their evaluations as of the Evaluation Date.  Since the Evaluation Date, there have been no changes in the Company’s internal control over financial reporting (as such term is defined in the Exchange Act) that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

  

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(s) Certain Fees.  Except as set forth in the Prospectus Supplement, no brokerage or finder’s fees or commissions are or will be payable by the Company to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by the Transaction Documents.  The Purchasers shall have no obligation with respect to any fees or with respect to any claims made by or on behalf of other Persons for fees of a type contemplated in this Section that may be due in connection with the transactions contemplated by the Transaction Documents.

 

(t) Investment Company. The Company is not, and is not an Affiliate of, and immediately after receipt of payment for the Securities, will not be or be an Affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as amended.  The Company shall conduct its business in a manner so that it will not become an “investment company” subject to registration under the Investment Company Act of 1940, as amended.

 

(u) Registration Rights.  No Person has any right to cause the Company to effect the registration under the Securities Act of any securities of the Company.

 

(v) Listing and Maintenance Requirements.  The Common Stock is registered pursuant to Section 12(b) or 12(g) of the Exchange Act, and the Company has taken no action designed to, or which to its knowledge is likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act nor has the Company received any notification that the Commission is contemplating terminating such registration.  The Company has not, in the 12 months preceding the date hereof, received notice from any Trading Market on which the Common Stock is or has been listed or quoted to the effect that the Company is not in compliance with the listing or maintenance requirements of such Trading Market.

 

(w) Application of Takeover Protections.  The Company and the Board of Directors have taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Company’s certificate of incorporation (or similar charter documents) or the laws of its state of incorporation that is or could become applicable to the Purchasers as a result of the Purchasers and the Company fulfilling their obligations or exercising their rights under the Transaction Documents, including without limitation as a result of the Company’s issuance of the Securities and the Purchasers’ ownership of the Securities.

 

(x) Disclosure.  Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, the Company confirms that neither it nor any other Person acting on its behalf has provided any of the Purchasers or their agents or counsel with any information that it believes constitutes or might constitute material, non-public information which is not otherwise disclosed in the Prospectus Supplement.   The Company understands and confirms that the Purchasers will rely on the foregoing representation in effecting transactions in securities of the Company.  All of the disclosure furnished by or on behalf of the Company to the Purchasers regarding the Company, its business and the transactions contemplated hereby, including the Disclosure Schedules to this Agreement, is true and correct and does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. The press releases disseminated by the Company during the twelve months preceding the date of this Agreement taken as a whole do not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made and when made, not misleading.  The Company acknowledges and agrees that no Purchaser makes or has made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in Section 3.2 hereof.

 

  

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(y) No Integrated Offering. Assuming the accuracy of the Purchasers’ representations and warranties set forth in Section 3.2, neither the Company, nor any of its Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause this offering of the Securities to be integrated with prior offerings by the Company for purposes of any applicable shareholder approval provisions of any Trading Market on which any of the securities of the Company are listed or designated.

 

(z) Solvency.  Based on the consolidated financial condition of the Company as of the Closing Date, after giving effect to the receipt by the Company of the proceeds from the sale of the Securities hereunder, the fair saleable value of the Company’s assets exceeds the amount that will be required to be paid on or in respect of the Company’s existing debts and other liabilities (including known contingent liabilities) as they mature.  The Company does not intend to incur debts beyond its ability to pay such debts as they mature (taking into account the timing and amounts of cash to be payable on or in respect of its debt).  The Company has no knowledge of any facts or circumstances which lead it to believe that it will file for reorganization or liquidation under the bankruptcy or reorganization laws of any jurisdiction within one year from the Closing Date.  Schedule 3.1(z) sets forth as of the date hereof all outstanding secured and unsecured Indebtedness of the Company or any Subsidiary, or for which the Company or any Subsidiary has commitments.  For the purposes of this Agreement, “Indebtedness” means (x) any liabilities for borrowed money or amounts owed in excess of $50,000 (other than trade accounts payable incurred in the ordinary course of business), (y) all guaranties, endorsements and other contingent obligations in respect of indebtedness of others, whether or not the same are or should be reflected in the Company’s balance sheet (or the notes thereto), except guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; and (z) the present value of any lease payments in excess of $50,000 due under leases required to be capitalized in accordance with GAAP.  Neither the Company nor any Subsidiary is in default with respect to any Indebtedness.

 

(aa) Tax Status.  Except for matters that would not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect, the Company and each Subsidiary (i) has made or filed all United States federal and state income and all foreign income and franchise tax returns, reports and declarations required by any jurisdiction to which it is subject, (ii) has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations and (iii) has set aside on its books provision reasonably adequate for the payment of all material taxes for periods subsequent to the periods to which such returns, reports or declarations apply.  There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company or of any Subsidiary know of no basis for any such claim.

 

 

  

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(bb) Foreign Corrupt Practices.  Neither the Company, nor to the knowledge of the Company, any agent or other person acting on behalf of the Company, has (i) directly or indirectly, used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, (ii) made any unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns from corporate funds, (iii) failed to disclose fully any contribution made by the Company (or made by any person acting on its behalf of which the Company is aware) which is in violation of law, or (iv) violated in any material respect any provision of the Foreign Corrupt Practices Act of 1977, as amended.

 

(cc) Other Securities Purchase Agreement.  The amount of Notes to be sold pursuant to the Other Securities Purchase Agreement is $630,000 and the purchasers thereunder are set forth on Schedule 3.1(cc).  The terms of the Other Securities Purchase Agreement are identical to the terms of this Agreement except that the Notes being sold thereunder are not being registered under the Securities Act.

 

3.2 Representations and Warranties of the Purchasers.  Each Purchaser, for itself and for no other Purchaser, hereby represents and warrants as of the date hereof and as of the Closing Date to the Company as follows (unless as of a specific date therein):

 

(a) Organization; Authority.  Such Purchaser is either an individual or an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization with full right, corporate or partnership power and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of this Agreement and performance by such Purchaser of the transactions contemplated by this Agreement have been duly authorized by all necessary corporate, partnership, limited liability company or similar action, as applicable, on the part of such Purchaser.  Each Transaction Document to which it is a party has been duly executed by such Purchaser, and when delivered by such Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of such Purchaser, enforceable against it in accordance with its terms, except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

 

(b) Understandings or Arrangements.  Such Purchaser is acquiring the Securities as principal for its own account and has no direct or indirect arrangement or understandings with any other persons to distribute or regarding the distribution of such Securities (this representation and warranty not limiting such Purchaser’s right to sell the Securities pursuant to the Registration Statement or otherwise in compliance with applicable federal and state securities laws).  Such Purchaser is acquiring the Securities hereunder in the ordinary course of its business.

 

 

  

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(c) Purchaser Status.  At the time such Purchaser was offered the Securities, it was, and as of the date hereof it is, and on each date on which it exercises any Warrants, it will be either: (i) an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act or (ii) a “qualified institutional buyer” as defined in Rule 144A(a) under the Securities Act.  Such Purchaser is not required to be registered as a broker-dealer under Section 15 of the Exchange Act.

 

(d) Experience of Such Purchaser.  Such Purchaser, either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Securities, and has so evaluated the merits and risks of such investment.  Such Purchaser is able to bear the economic risk of an investment in the Securities and, at the present time, is able to afford a complete loss of such investment.

 

(e) Certain Transactions and Confidentiality.  Other than consummating the transactions contemplated hereunder, such Purchaser has not, nor has any Person acting on behalf of or pursuant to any understanding with such Purchaser, directly or indirectly executed any purchases or sales, including Short Sales, of the securities of the Company during the period commencing as of the time that such Purchaser first received a term sheet (written or oral) from the Company or any other Person representing the Company setting forth the material terms of the transactions contemplated hereunder and ending immediately prior to the execution hereof.  Notwithstanding the foregoing, in the case of a Purchaser that is a multi-managed investment vehicle whereby separate portfolio managers manage separate portions of such Purchaser’s assets and the portfolio managers have no direct knowledge of the investment decisions made by the portfolio managers managing other portions of such Purchaser’s assets, the representation set forth above shall only apply with respect to the portion of assets managed by the portfolio manager that made the investment decision to purchase the Securities covered by this Agreement.  Other than to other Persons party to this Agreement, such Purchaser has maintained the confidentiality of all disclosures made to it in connection with this transaction (including the existence and terms of this transaction). Notwithstanding the foregoing, for avoidance of doubt, nothing contained herein shall constitute a representation or warranty, or preclude any actions, with respect to the identification of the availability of, or securing of, available shares to borrow in order to effect Short Sales or similar transactions in the future.

 

(f) Non-Registration of Warrants and Warrant Shares.  Purchaser understands that issuance of the Warrants and the Warrant Shares is not being registered with the Commission and that accordingly Purchaser must hold the Warrants and the shares issuable up exercise thereof indefinitely unless they are registered with the Commission and qualified by state authorities, or an exemption from such registration and qualification requirements is available.  Purchaser represents that Purchaser is familiar with Rule 144 promulgated under the Securities Act, as presently in effect, and understands the resale limitations imposed thereby.

 

 

  

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(g) Prior Liens.  Purchaser understands that the Company has previously granted the liens and encumbrances described on Schedule 3.1(n) attached hereto (“Permitted Liens”), to the lenders identified thereon (the “Senior Lenders”) under its loan agreements with the Senior Lenders and such liens shall have priority over the liens granted under the Security Agreement to secure the Notes.

 

(h) Other Notes.  Purchaser understands that the Company will be issuing the Other Notes pursuant to the Other Securities Agreement and that the Other Notes will be pari passu with the Notes insofar as their priority or preference and relative rights are concerned, and the Company shall not pay interest or principal on either the Notes or the Other Notes other than on a pro rata basis.

 

The Company acknowledges and agrees that the representations contained in Section 3.2 shall not modify, amend or affect such Purchaser’s right to rely on the Company’s representations and warranties contained in this Agreement or any representations and warranties contained in any other Transaction Document or any other document or instrument executed and/or delivered in connection with this Agreement or the consummation of the transaction contemplated hereby.

 

ARTICLE IV.

OTHER AGREEMENTS OF THE PARTIES

 

4.1 Warrant Shares.  If all or any portion of a Warrant is exercised at a time when there is an effective registration statement to cover the issuance or resale of the Warrant Shares or if the Warrant is exercised via cashless exercise, the Warrant Shares issued pursuant to any such exercise shall be issued free of all legends.  If at any time following the date hereof the Registration Statement (or any subsequent registration statement registering the sale or resale of the Warrant Shares) is not effective or is not otherwise available for the sale or resale of the Note Shares, the Company shall immediately notify the holders of the Notes in writing that such registration statement is not then effective and thereafter shall promptly notify such holders when the registration statement is effective again and available for the sale or resale of the Note Shares (it being understood and agreed that the foregoing shall not limit the ability of the Company to issue, or any Purchaser to sell, any of the Note Shares in compliance with applicable federal and state securities laws).  The Company shall use best efforts to keep the Registration Statement effective during the term of the Notes.

 

4.2 Furnishing of Information.  Until the earliest of the time that (i) no Purchaser owns Securities or (ii) the Warrants have expired, the Company covenants to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to the Exchange Act even if the Company is not then subject to the reporting requirements of the Exchange Act.  As long as any Purchaser owns Securities, if the Company is not required to file reports pursuant to the Exchange Act, it will prepare and furnish to the Purchasers and make publicly available in accordance with Rule 144(c) such information as is required for the Purchasers to sell the Securities, including without limitation, under Rule 144. The Company further covenants that it will take such further action as any holder of Securities may reasonably request, to the extent required from time to time to enable such Person to sell such Securities without registration under the Securities Act, including without limitation, within the requirements of the exemption provided by Rule 144.

 

 

  

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4.3 Integration.  The Company shall not sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Securities for purposes of the rules and regulations of any Trading Market such that it would require shareholder approval prior to the closing of such other transaction unless shareholder approval is obtained before the closing of such subsequent transaction.

 

4.4 Securities Laws Disclosure; Publicity.  The Company shall by 8:30 a.m. (New York City time) on the Trading Day immediately following the date hereof, issue a Current Report on Form 8-K, and including the Transaction Documents as exhibits thereto, within the time required by the Exchange Act.  From and after the issuance of such Form 8-K, the Company shall have publicly disclosed all material, non-public information delivered to any of the Purchasers by the Company or any of its subsidiaries, or any of their respective officers, directors, employees or agents in connection with the transactions contemplated by the Transaction Documents.  The Company and each Purchaser shall consult with each other in issuing any other public disclosures with respect to the transactions contemplated hereby, and neither the Company nor any Purchaser shall issue any press release nor otherwise make any such public statement without the prior consent of the Company, with respect to any press release of any Purchaser, or without the prior consent of each Purchaser, with respect to any press release of the Company, which consent shall not unreasonably be withheld or delayed, except if such disclosure is required by law, in which case the disclosing party shall promptly provide the other party with prior notice of such public statement or communication.  Notwithstanding the foregoing, the Company shall not publicly disclose the name of any Purchaser, or include the name of any Purchaser in any filing with the Commission or any regulatory agency or Trading Market, without the prior written consent of such Purchaser, except (a) as required by federal securities law in connection with the filing of final Transaction Documents (including signature pages thereto) with the Commission, (b) to the extent such disclosure is required by law, in which case the Company shall provide the Purchasers with prior notice of such disclosure permitted under this clause (b), and (c) to the extent such disclosure is required by Trading Market regulations.

 

4.5 Shareholder Rights Plan.  No claim will be made or enforced by the Company or, with the consent of the Company, any other Person, that any Purchaser is an “Acquiring Person” under any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or similar anti-takeover plan or arrangement in effect or hereafter adopted by the Company, or that any Purchaser could be deemed to trigger the provisions of any such plan or arrangement, by virtue of receiving Securities under the Transaction Documents or under any other agreement between the Company and the Purchasers.

 

4.6 Non-Public Information.  Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, the Company covenants and agrees that neither it, nor any other Person acting on its behalf will provide any Purchaser or its agents or counsel with any information that the Company believes constitutes material non-public information, unless prior thereto such Purchaser shall have executed a written agreement with the Company regarding the confidentiality and use of such information.  The Company understands and confirms that each Purchaser shall be relying on the foregoing covenant in effecting transactions in securities of the Company.

 

 

  

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4.7 Use of Proceeds.  Except as set forth on Schedule 4.7 attached hereto, the Company shall use the net proceeds from the sale of the Securities hereunder for working capital purposes and shall not use such proceeds for: (a) the satisfaction of any portion of the Company’s debt (other than payment of regular monthly debt payments and trade payables in the ordinary course of the Company’s business and prior practices), (b) the redemption of any Common Stock or Common Stock Equivalents, (c) the settlement of any outstanding litigation or (d) in violation of the FCPA or OFAC regulations.

 

4.8 Indemnification of Purchasers.   Subject to the provisions of this Section 4.8, the Company will indemnify and hold each Purchaser and its directors, officers, shareholders, members, partners, employees and agents (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title), each Person who controls such Purchaser (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, shareholders, agents, members, partners or employees (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title) of such controlling persons (each, a “Purchaser Party”) harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts paid in settlements, court costs and reasonable attorneys’ fees and costs of investigation that any such Purchaser Party may suffer or incur as a result of or relating to (a) any breach of any of the representations, warranties, covenants or agreements made by the Company in this Agreement or in the other Transaction Documents or (b) any action instituted against a Purchaser in any capacity, or any of them or their respective Affiliates, by any stockholder of the Company who is not an Affiliate of such Purchaser, with respect to any of the transactions contemplated by the Transaction Documents (unless such action is based upon a breach of such Purchaser’s representations, warranties or covenants under the Transaction Documents or any agreements or understandings such Purchaser may have with any such stockholder or any violations by such Purchaser of state or federal securities laws or any conduct by such Purchaser which constitutes fraud, gross negligence, willful misconduct or malfeasance).  If any action shall be brought against any Purchaser Party in respect of which indemnity may be sought pursuant to this Agreement, such Purchaser Party shall promptly notify the Company in writing, and the Company shall have the right to assume the defense thereof with counsel of its own choosing reasonably acceptable to the Purchaser Party.  Any Purchaser Party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Purchaser Party except to the extent that (i) the employment thereof has been specifically authorized by the Company in writing, (ii) the Company has failed after a reasonable period of time to assume such defense and to employ counsel or (iii) in such action there is, in the reasonable opinion of counsel, a material conflict on any material issue between the position of the Company and the position of such Purchaser Party, in which case the Company shall be responsible for the reasonable fees and expenses of no more than one such separate counsel.  The Company will not be liable to any Purchaser Party under this Agreement (y) for any settlement by a Purchaser Party effected without the Company’s prior written consent, which shall not be unreasonably withheld or delayed; or (z) to the extent, but only to the extent that a loss, claim, damage or liability is attributable to any Purchaser Party’s breach of any of the representations, warranties, covenants or agreements made by such Purchaser Party in this Agreement or in the other Transaction Documents. The indemnification required by this Section 4.8 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or are incurred. The indemnity agreements contained herein shall be in addition to any cause of action or similar right of any Purchaser Party against the Company or others, and (y) any liabilities the Company may be subject to pursuant to law.

 

 

  

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4.9 Reservation of Common Stock. As of the date hereof, the Company has reserved and the Company shall continue to reserve and keep available at all times, free of preemptive rights, a sufficient number of shares of Common Stock for the purpose of enabling the Company to issue Note Shares pursuant to any conversion of Notes and Warrant Shares pursuant to any exercise of the Warrants.

 

4.10 Listing of Common Stock. The Company hereby agrees to use reasonable best efforts to maintain the listing or quotation of the Common Stock on the Trading Market on which it is currently listed, and concurrently with the Closing, the Company shall apply to list or quote all of the Note Shares and Warrant Shares on such Trading Market and promptly secure the listing of all of the Note Shares and Warrant Shares on such Trading Market. The Company further agrees, if the Company applies to have the Common Stock traded on any other Trading Market, it will then include in such application all of the Note Shares and Warrant Shares, and will take such other action as is necessary to cause all of the Note Shares and Warrant Shares to be listed or quoted on such other Trading Market as promptly as possible.  The Company will then take all action reasonably necessary to continue the listing and trading of its Common Stock on a Trading Market and will comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules of the Trading Market.

 

4.11 Participation in Future Financing.

 

(a) From the date hereof until the date that is the twelve (12) month anniversary of the Closing Date, upon any issuance by the Company or any of its Subsidiaries of Common Stock or Common Stock Equivalents for cash consideration, Indebtedness or a combination of units hereof (a “Subsequent Financing”), each Purchaser shall have the right to participate in up to an amount of the Subsequent Financing equal to 50% of the Subsequent Financing (the “Participation Maximum”) on the same terms, conditions and price provided for in the Subsequent Financing, unless the Subsequent Financing is a registered public offering, in which case the Company shall offer each Purchaser the right to participate in such public offering when it is lawful for the Company to do so, but no Purchaser shall be entitled to purchase any particular amount of such public offering. 

 

(b) At least five (5) Trading Days prior to the closing of the Subsequent Financing, the Company shall deliver to each Purchaser a written notice of its intention to effect a Subsequent Financing (“Pre-Notice”), which Pre-Notice shall ask such Purchaser if it wants to review the details of such financing (such additional notice, a “Subsequent Financing Notice”).  Upon the request of a Purchaser, and only upon a request by such Purchaser, for a Subsequent Financing Notice, the Company shall promptly, but no later than one (1) Trading Day after such request, deliver a Subsequent Financing Notice to such Purchaser.  The Subsequent Financing Notice shall describe in reasonable detail the proposed terms of such Subsequent Financing, the amount of proceeds intended to be raised thereunder and the Person or Persons through or with whom such Subsequent Financing is proposed to be effected and shall include a term sheet or similar document relating thereto as an attachment.   

 

 

  

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(c) Any Purchaser desiring to participate in such Subsequent Financing must provide written notice to the Company by not later than 5:30 p.m. (New York City time) on the fifth (5th) Trading Day after all of the Purchasers have received the Pre-Notice that the Purchaser is willing to participate in the Subsequent Financing, the amount of the Purchaser’s participation, and representing and warranting that the Purchaser has such funds ready, willing, and available for investment on the terms set forth in the Subsequent Financing Notice.  If the Company receives no such notice from a Purchaser as of such fifth (5th) Trading Day, such Purchaser shall be deemed to have notified the Company that it does not elect to participate. 

 

(d) If by 5:30 p.m. (New York City time) on the fifth (5th) Trading Day after all of the Purchasers have received the Pre-Notice, notifications by the Purchasers of their willingness to participate in the Subsequent Financing (or to cause their designees to participate) is, in the aggregate, less than the total amount of the Subsequent Financing, then the Company may effect the remaining portion of such Subsequent Financing on the terms and with the Persons set forth in the Subsequent Financing Notice. 

 

(e) If by 5:30 p.m. (New York City time) on the fifth (5th) Trading Day after all of the Purchasers have received the Pre-Notice, the Company receives responses to a Subsequent Financing Notice from Purchasers seeking to purchase more than the aggregate amount of the Participation Maximum, each such Purchaser shall have the right to purchase its Pro Rata Portion (as defined below) of the Participation Maximum.  “Pro Rata Portion” means the ratio of (x) the Subscription Amount of Securities purchased on the Closing Date by a Purchaser participating under this Section 4.11 and (y) the sum of the aggregate Subscription Amounts of Securities purchased on the Closing Date by all Purchasers participating under this Section 4.11.

 

(f) The Company must provide the Purchasers with a second Subsequent Financing Notice, and the Purchasers will again have the right of participation set forth above in this Section 4.11, if the Subsequent Financing subject to the initial Subsequent Financing Notice is not consummated for any reason on the terms set forth in such Subsequent Financing Notice within 30 Trading Days after the date of the initial Subsequent Financing Notice.

 

(g) Notwithstanding the foregoing, this Section 4.11 shall not apply in respect of (i) an Exempt Issuance or (ii) an underwritten public offering of Common Stock.

 

4.12 Prohibition on Variable Rate Transactions.  From the date hereof until the Notes have been repaid in full, the Company shall be prohibited from effecting or entering into an agreement to effect any issuance by the Company or any of its Subsidiaries of Common Stock or Common Stock Equivalents for cash consideration (or a combination of units hereof) involving a Variable Rate Transaction.  “Variable Rate Transaction” means a transaction in which the Company (i) issues or sells any debt or equity securities that are convertible into, exchangeable or exercisable for, or include the right to receive additional shares of Common Stock either (A) at a conversion price, exercise price or exchange rate or other price that is based upon and/or varies with the trading prices of or quotations for the shares of Common Stock at any time after the initial issuance of such debt or equity securities, or (B) with a conversion, exercise or exchange price that is subject to being reset at some future date after the initial issuance of such debt or equity security or upon the occurrence of specified or contingent events directly or indirectly related to the business of the Company or the market for the Common Stock or (ii) enters into any agreement, including, but not limited to, an equity line of credit, whereby the Company may sell securities at a future determined price.  Any Purchaser shall be entitled to obtain injunctive relief against the Company to preclude any such issuance, which remedy shall be in addition to any right to collect damages.

  

4.13 Equal Treatment of Purchasers.  No consideration (including any modification of any Transaction Document) shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of any of the Transaction Documents unless the same consideration is also offered to all of the parties to the Transaction Documents.  For clarification purposes, this provision constitutes a separate right granted to each Purchaser by the Company and negotiated separately by each Purchaser, and is intended for the Company to treat the Purchasers as a class and shall not in any way be construed as the Purchasers acting in concert or as a group with respect to the purchase, disposition or voting of Securities or otherwise.

 

 

  

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4.14 Certain Transactions and Confidentiality. Each Purchaser, severally and not jointly with the other Purchasers, covenants that neither it nor any Affiliate acting on its behalf or pursuant to any understanding with it will execute any purchases or sales, including Short Sales of any of the Company’s securities during the period commencing with the execution of this Agreement and ending at such time that the transactions contemplated by this Agreement are first publicly announced pursuant to the Form 8-K as described in Section 4.4.  Each Purchaser, severally and not jointly with the other Purchasers, covenants that until such time as the transactions contemplated by this Agreement are publicly disclosed by the Company pursuant to the Form 8-K as described in Section 4.4, such Purchaser will maintain the confidentiality of the existence and terms of this transaction and the information included in the Disclosure Schedules.  Notwithstanding the foregoing and notwithstanding anything contained in this Agreement to the contrary, the Company expressly acknowledges and agrees that (i) no Purchaser makes any representation, warranty or covenant hereby that it will not engage in effecting transactions in any securities of the Company after the time that the transactions contemplated by this Agreement are first publicly announced pursuant to the Form 8-K as described in Section 4.4, (ii) no Purchaser shall be restricted or prohibited from effecting any transactions in any securities of the Company in accordance with applicable securities laws from and after the time that the transactions contemplated by this Agreement are first publicly announced pursuant to the Form 8-K as described in Section 4.4 and (iii) no Purchaser shall have any duty of confidentiality to the Company or its Subsidiaries after the issuance of the Form 8-K as described in Section 4.4.  Notwithstanding the foregoing, in the case of a Purchaser that is a multi-managed investment vehicle whereby separate portfolio managers manage separate portions of such Purchaser’s assets and the portfolio managers have no direct knowledge of the investment decisions made by the portfolio managers managing other portions of such Purchaser’s assets, the covenant set forth above shall only apply with respect to the portion of assets managed by the portfolio manager that made the investment decision to purchase the Securities covered by this Agreement.

 

4.15  Delivery of Warrants After Closing.  The Company shall deliver, or cause to be delivered, the respective Warrant certificates purchased by each Purchaser to such Purchaser within 3 Trading Days of the Closing Date.

 

ARTICLE V.

MISCELLANEOUS

 

5.1 Termination.  This Agreement may be terminated by any Purchaser, as to such Purchaser’s obligations hereunder only and without any effect whatsoever on the obligations between the Company and the other Purchasers, by written notice to the other parties, if the Closing has not been consummated on or before May 8, 2012; provided, however, that no such termination will affect the right of any party to sue for any breach by the other party (or parties).

 

 

  

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5.2 Fees and Expenses.  Except as expressly set forth in the Transaction Documents to the contrary, each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement.  The Company shall pay all Transfer Agent fees, stamp taxes and other taxes and duties levied in connection with the delivery of any Securities to the Purchasers.

 

5.3 Entire Agreement.  The Transaction Documents, together with the exhibits and schedules thereto, the Prospectus and the Prospectus Supplement, contain the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules.

 

5.4 Notices.  Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of: (a) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto prior to 5:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (c) the second (2nd) Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service or (d) upon actual receipt by the party to whom such notice is required to be given.  The address for such notices and communications shall be as set forth on the signature pages attached hereto.

 

5.5 Amendments; Waivers.  No provision of this Agreement may be waived, modified, supplemented or amended except in a written instrument signed, in the case of an amendment, by the Company and the Purchasers holding at least 67% in interest of the Notes based on the initial Subscription Amounts hereunder or, in the case of a waiver, by the party against whom enforcement of any such waived provision is sought.  No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right.

 

5.6 Headings.  The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.

 

5.7 Successors and Assigns.  This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns.  The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of each Purchaser (other than by merger).  Any Purchaser may assign any or all of its rights under this Agreement to any Person to whom such Purchaser assigns or transfers any Securities, provided that such transferee agrees in writing to be bound, with respect to the transferred Securities, by the provisions of the Transaction Documents that apply to the “Purchasers.”

 

 

  

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5.8 No Third-Party Beneficiaries.  This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except as otherwise set forth in Section 4.8.

 

5.9 Governing Law.  All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof.  Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement and any other Transaction Documents (whether brought against a party hereto or its respective affiliates, directors, officers, shareholders, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the City of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, borough of Manhattan for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or is an inconvenient venue for such proceeding.  Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.

 

5.10 Survival.  The representations and warranties contained herein shall survive the Closing and the delivery of the Securities for twelve (12) months.

 

5.11 Execution.  This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart.  In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.

 

5.12 Severability.  If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

 

 

  

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5.13 Rescission and Withdrawal Right.  Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) any of the other Transaction Documents, whenever any Purchaser exercises a right, election, demand or option under a Transaction Document and the Company does not timely perform its related obligations within the periods therein provided, then such Purchaser may rescind or withdraw, in its sole discretion from time to time upon written notice to the Company, any relevant notice, demand or election in whole or in part without prejudice to its future actions and rights; provided, however, that in the case of a rescission of an exercise of a Warrant, the applicable Purchaser shall be required to return any shares of Common Stock subject to any such rescinded exercise notice concurrently with the return to such Purchaser of the aggregate exercise price paid to the Company for such shares and the restoration of such Purchaser’s right to acquire such shares pursuant to such Purchaser’s Warrant (including, issuance of a replacement warrant certificate evidencing such restored right).

 

5.14 Replacement of Securities.  If any certificate or instrument evidencing any Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof (in the case of mutilation), or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction.  The applicant for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs (including customary indemnity) associated with the issuance of such replacement Securities.

 

5.15 Remedies.  In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of the Purchasers and the Company will be entitled to specific performance under the Transaction Documents.  The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations contained in the Transaction Documents and hereby agree to waive and not to assert in any action for specific performance of any such obligation the defense that a remedy at law would be adequate.

 

5.16 Payment Set Aside.  To the extent that the Company makes a payment or payments to any Purchaser pursuant to any Transaction Document or a Purchaser enforces or exercises its rights thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other person under any law (including, without limitation, any bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred.

 

5.17 Independent Nature of Purchasers’ Obligations and Rights.  The obligations of each Purchaser under any Transaction Document are several and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance or non-performance of the obligations of any other Purchaser under any Transaction Document.  Nothing contained herein or in any other Transaction Document, and no action taken by any Purchaser pursuant thereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents.  Each Purchaser shall be entitled to independently protect and enforce its rights including, without limitation, the rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other Purchaser to be joined as an additional party in any proceeding for such purpose.  The Company has elected to provide all Purchasers with the same terms and Transaction Documents for the convenience of the Company and not because it was required or requested to do so by any of the Purchasers.  It is expressly understood and agreed that each provision contained in this Agreement and in each other Transaction Document is between the Company and a Purchaser, solely, and not between the Company and the Purchasers collectively and not between and among the Purchasers.

 

 

  

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5.18 Liquidated Damages.  The Company’s obligations to pay any partial liquidated damages or other amounts owing under the Transaction Documents is a continuing obligation of the Company and shall not terminate until all unpaid partial liquidated damages and other amounts have been paid notwithstanding the fact that the instrument or security pursuant to which such partial liquidated damages or other amounts are due and payable shall have been canceled.

 

5.19 Saturdays, Sundays, Holidays, etc.  If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then such action may be taken or such right may be exercised on the next succeeding Business Day.

 

5.20 Construction. The parties agree that each of them and/or their respective counsel has reviewed and had an opportunity to revise the Transaction Documents and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of the Transaction Documents or any amendments hereto. In addition, each and every reference to share prices and shares of Common Stock in any Transaction Document shall be subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock that occur after the date of this Agreement.

 

5.21 WAIVER OF JURY TRIAL.  IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY JURY.

 

(Signature Pages Follow)

 

 

 

  

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IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

 

	
ZBB ENERGY CORPORATION

 

 

	
Address for Notice:

	
By:__________________________________________

     Eric Apfelbach

     President and CEO

 

 

	
Attention: Will Hogoboom

N93 W14475 Whittaker Way

Menomonee Falls, WI 53051

Fax: (262) 253-9822

	
With a copy to (which shall not constitute notice):

 

 

 

	
K&L Gates, LLP

Attention: Mark Busch

214 N. Tryon Street, 47th Floor

Charlotte, NC 28202

Fax: (704) 353-3140

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGES FOR PURCHASERS FOLLOW]

 

 

 

 

  

  

  

 

 

 

[PURCHASER SIGNATURE PAGES TO ZBB SECURITIES PURCHASE AGREEMENT]

IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

 

Name of Purchaser: ________________________________________________________

 

Signature of Authorized Signatory of Purchaser: _________________________________

 

Name of Authorized Signatory: _______________________________________________

 

Title of Authorized Signatory: ________________________________________________

 

Email Address of Authorized Signatory:_________________________________________

 

Facsimile Number of Authorized Signatory: __________________________________________

 

Address for Notice of Purchaser:

Address for Delivery of Securities for Purchaser (if not same as address for notice):

Subscription Amount: $_________________

EIN Number:

[SIGNATURE PAGES CONTINUE]

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