Document:

Exhibit 10.kkkk

 

EXECUTION COPY

 

 

ASSET PURCHASE AGREEMENT

 

BY AND AMONG

 

PSI ENERGY, INC.

 

AND

 

THE CINCINNATI GAS &
ELECTRIC COMPANY

 

(AS BUYERS)

 

AND

 

ALLEGHENY ENERGY SUPPLY COMPANY,
LLC,

 

ALLEGHENY ENERGY SUPPLY WHEATLAND

 

GENERATING FACILITY, LLC

 

AND

 

LAKE ACQUISITION COMPANY, L.L.C.

 

(AS SELLER PARTIES)

 

 

DATED AS OF MAY 6, 2005

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE I
  DEFINITIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  1.1.

  	
  Definitions

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE II
  PURCHASE AND SALE

  	
   

  
	
   

  	
   

  	
   

  
	
  2.1.

  	
  Purchase and Sale

  	
   

  
	
  2.2.

  	
  Excluded Assets

  	
   

  
	
  2.3.

  	
  Assumed Liabilities

  	
   

  
	
  2.4.

  	
  Excluded Liabilities

  	
   

  
	
  2.5.

  	
  Procedures for Acquired Assets
  Not Transferable

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE III
  PURCHASE PRICE

  	
   

  
	
   

  	
   

  	
   

  
	
  3.1.

  	
  Purchase Price

  	
   

  
	
  3.2.

  	
  Possible Purchase Price
  Adjustment

  	
   

  
	
  3.3.

  	
  Allocation of Purchase Price

  	
   

  
	
  3.4.

  	
  Proration

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV
  THE CLOSING

  	
   

  
	
   

  	
   

  	
   

  
	
  4.1.

  	
  Time and Place of Closing

  	
   

  
	
  4.2.

  	
  Payment of Purchase Price

  	
   

  
	
  4.3.

  	
  Deliveries by the Sellers

  	
   

  
	
  4.4.

  	
  Deliveries by the Buyers

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE V
  REPRESENTATIONS AND WARRANTIES OF THE SELLER PARTIES

  	
   

  
	
   

  	
   

  	
   

  
	
  5.1.

  	
  Organization; Qualification

  	
   

  
	
  5.2.

  	
  Authority Relative to this
  Agreement

  	
   

  
	
  5.3.

  	
  Capitalization and Other
  Matters

  	
   

  
	
  5.4.

  	
  Consents and Approvals; No
  Violation

  	
   

  
	
  5.5.

  	
  Reports

  	
   

  
	
  5.6.

  	
  Absence of Certain Changes or
  Events; No Undisclosed Liabilities

  	
   

  
	
  5.7.

  	
  Indebtedness of the Sellers

  	
   

  
	
  5.8.

  	
  Real Property and Related
  Matters

  	
   

  
	
  5.9.

  	
  Insurance

  	
   

  
	
  5.10.

  	
  Environmental Matters

  	
   

  
	
  5.11.

  	
  Labor and Employment Matters

  	
   

  
	
  5.12.

  	
  ERISA; Employee Benefit Plans

  	
   

  
	
  5.13.

  	
  Contracts

  	
   

  
	
  5.14.

  	
  Legal Proceedings

  	
   

  
	
  5.15.

  	
  Compliance
  with Permits and Laws

  	
   

  

 

i

 

	
  5.16.

  	
  Regulation; Sole
  Purpose

  	
   

  
	
  5.17.

  	
  Tax Matters

  	
   

  
	
  5.18.

  	
  Related Party
  Matters

  	
   

  
	
  5.19.

  	
  Assets
  Other than Real Property Interests

  	
   

  
	
  5.20.

  	
  Intellectual
  Property

  	
   

  
	
  5.21.

  	
  Due Diligence
  Materials

  	
   

  
	
  5.22.

  	
  No
  Knowledge of Certain Conditions

  	
   

  
	
  5.23.

  	
  Disclaimer
  of Other Representations and Warranties

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI REPRESENTATIONS AND WARRANTIES OF THE BUYERS

  	
   

  
	
   

  	
   

  	
   

  
	
  6.1.

  	
  Organization

  	
   

  
	
  6.2.

  	
  Authority
  Relative to this Agreement

  	
   

  
	
  6.3.

  	
  Consents
  and Approvals; No Violation

  	
   

  
	
  6.4.

  	
  Availability of
  Funds

  	
   

  
	
  6.5.

  	
  Litigation

  	
   

  
	
  6.6.

  	
  No
  Knowledge of Certain Conditions

  	
   

  
	
  6.7.

  	
  Due
  Diligence Investigation and Other Acknowledgements

  	
   

  
	
  6.8.

  	
  Disclaimer
  of Other Representations and Warranties

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII COVENANTS OF THE PARTIES

  	
   

  
	
   

  	
   

  	
   

  
	
  7.1.

  	
  Conduct of Business

  	
   

  
	
  7.2.

  	
  Access to
  Information

  	
   

  
	
  7.3.

  	
  Expenses

  	
   

  
	
  7.4.

  	
  Further Assurances

  	
   

  
	
  7.5.

  	
  Public Statements

  	
   

  
	
  7.6.

  	
  Consents
  and Approvals; Other Obligations

  	
   

  
	
  7.7.

  	
  Regulatory
  Approvals

  	
   

  
	
  7.8.

  	
  Fees and Commissions

  	
   

  
	
  7.9.

  	
  Tax Matters

  	
   

  
	
  7.10.

  	
  Employees

  	
   

  
	
  7.11.

  	
  Risk of Loss

  	
   

  
	
  7.12.

  	
  Tax Clearance
  Certificates

  	
   

  
	
  7.13.

  	
  Non-Use of
  Allegheny Marks After the Closing

  	
   

  
	
  7.14.

  	
  Insurance

  	
   

  
	
  7.15.

  	
  No Solicitation

  	
   

  
	
  7.16.

  	
  Notifications

  	
   

  
	
  7.17.

  	
  Notice of
  Allocation of Acquired Assets

  	
   

  
	
  7.18.

  	
  Post-Closing
  Start-Up

  	
   

  
	
  7.19.

  	
  Waiver of
  Indiana Responsible Transfer Property Law

  	
   

  
	
  7.20.

  	
  Certain
  Transmission Matters

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII CONDITIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  8.1.

  	
  Conditions
  to Each Party’s Obligations to Effect the Transaction

  	
   

  
	
  8.2.

  	
  Conditions
  to Obligation of the Buyers

  	
   

  

 

ii

 

	
  8.3.

  	
  Conditions
  to Obligation of the Seller Parties

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX INDEMNIFICATION

  	
   

  
	
   

  	
   

  	
   

  
	
  9.1.

  	
  Indemnification

  	
   

  
	
  9.2.

  	
  Defense of Claims

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE X TERMINATION AND ABANDONMENT

  	
   

  
	
   

  	
   

  	
   

  
	
  10.1.

  	
  Termination

  	
   

  
	
  10.2.

  	
  Procedure
  and Effect of Termination

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE XI MISCELLANEOUS PROVISIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  11.1.

  	
  Amendment
  and Modification

  	
   

  
	
  11.2.

  	
  Waiver of
  Compliance

  	
   

  
	
  11.3.

  	
  Survival

  	
   

  
	
  11.4.

  	
  Notices

  	
   

  
	
  11.5.

  	
  Assignment;
  No Third-Party Beneficiaries

  	
   

  
	
  11.6.

  	
  Governing
  Law

  	
   

  
	
  11.7.

  	
  Counterparts

  	
   

  
	
  11.8.

  	
  Interpretation

  	
   

  
	
  11.9.

  	
  Schedules
  and Exhibits

  	
   

  
	
  11.10.

  	
  Entire
  Agreement

  	
   

  
	
  11.11.

  	
  Bulk Sales
  or Transfer Laws

  	
   

  
	
  11.12.

  	
  Consent to
  Jurisdiction

  	
   

  
	
  11.13.

  	
  Waiver of
  Jury Trial

  	
   

  
	
  11.14.

  	
  Waiver of
  Consequential, Etc. Damages

  	
   

  
	
  11.15.

  	
  Specific
  Performance

  	
   

  
	
  11.16.

  	
  Change of
  Structure

  	
   

  
	
  11.17.

  	
  Certain
  Approvals

  	
   

  

 

	
  EXHIBITS

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBIT A

  	
  Form of Assignment and
  Assumption Agreement

  	
   

  
	
  EXHIBIT B

  	
  Form of Bill of Sale

  	
   

  
	
  EXHIBIT C

  	
  Form of Deeds

  	
   

  
	
  EXHIBIT D

  	
  Form of
  FIRPTA Affidavit

  	
   

  
	
  EXHIBIT E

  	
  Indiana
  Settlement Agreement

  	
   

  

 

iii

 

SCHEDULES

 

	
  1.1(a)(37)(A)

  	
   

  	
  Seller Parties’
  Knowledge Persons

  
	
  1.1(a)(37)(B)

  	
   

  	
  Buyers’
  Knowledge Persons

  
	
  2.1(a)(i)

  	
   

  	
  AESC Contracts
  and Leases

  
	
  2.1(a)(ii)

  	
   

  	
  AESC Vehicles

  
	
  2.1(b)(ii)

  	
   

  	
  Personal
  Property

  
	
  2.1(b)(iii)

  	
   

  	
  Permits and
  Environmental Permits

  
	
  2.1(b)(iv)

  	
   

  	
  Assumed
  Contracts

  
	
  2.1(b)(viii)

  	
   

  	
  Emission
  Allowances

  
	
  2.2(f)

  	
   

  	
  Excluded
  Contracts and Leases

  
	
  2.4(i)

  	
   

  	
  Excluded
  Liabilities

  
	
  5.4(a)

  	
   

  	
  Consents and
  Approvals

  
	
  5.5

  	
   

  	
  Reports

  
	
  5.6(a)

  	
   

  	
  Absence of
  Certain Changes

  
	
  5.8

  	
   

  	
  Lake Owned Real
  Property, Wheatland Owned Real Property and Other Real Property Interests

  
	
  5.8(a)

  	
   

  	
  Exceptions to
  Title

  
	
  5.8(d)

  	
   

  	
  Title Policies

  
	
  5.8(f)

  	
   

  	
  Leases

  
	
  5.10(a)

  	
   

  	
  Environmental
  Matters

  
	
  5.10(b)

  	
   

  	
  Environmental
  Permits

  
	
  5.10(c)

  	
   

  	
  Emission
  Allowances

  
	
  5.11

  	
   

  	
  Employees who
  Provide Services for Wheatland Facility

  
	
  5.12(a)

  	
   

  	
  Benefit Plans

  
	
  5.12(f)

  	
   

  	
  Benefit Plan
  Claims

  
	
  5.13(a)

  	
   

  	
  Material
  Contracts

  
	
  5.13(c)

  	
   

  	
  Transferability
  of Material Contracts

  
	
  5.15(a)

  	
   

  	
  Compliance with
  Permits

  
	
  5.15(b)

  	
   

  	
  Sellers’ Permits

  
	
  5.17

  	
   

  	
  Taxes

  
	
  5.18

  	
   

  	
  Related Party
  Matters

  
	
  5.19(a)

  	
   

  	
  Title to
  Acquired Assets

  
	
  5.20

  	
   

  	
  Intellectual
  Property

  
	
  7.1(a)

  	
   

  	
  Sellers’ Conduct
  of Business

  
	
  7.1(a)(xiii)

  	
   

  	
  Maintenance
  Expenditures

  
	
  7.1(b)

  	
   

  	
  AESC’s Conduct
  of Business

  
	
  7.6(d)

  	
   

  	
  Guarantees

  

 

iv

 

ASSET PURCHASE AGREEMENT

 

ASSET
PURCHASE AGREEMENT (this “Agreement”), dated as of May 6, 2005, by
and among PSI Energy, Inc., an Indiana corporation (“PSI Energy”),
and The Cincinnati Gas & Electric Company, an Ohio corporation (“CG&E”
and, together with PSI Energy, collectively, the “Buyers”), and
Allegheny Energy Supply Wheatland Generating Facility, LLC, a Delaware limited
liability company and a wholly owned subsidiary of AESC (“Wheatland LLC”),
Lake Acquisition Company, L.L.C., a Delaware limited liability company and a
wholly owned subsidiary of AESC (“Lake LLC” and, together with Wheatland
LLC, each, individually, a “Seller” and, collectively, the “Sellers”),
and Allegheny Energy Supply Company, LLC, a Delaware limited liability company
(“AESC” and, together with the Sellers, the “Seller Parties”).

 

W  I
T  N  E  S  S  E  T  H

 

WHEREAS,
Wheatland LLC owns, among other things, a 508-MW (nominal rating) natural
gas-fired generating facility located in Wheatland, Indiana (the “Wheatland
Facility”) and certain other assets associated therewith, and Lake LLC owns
certain real property relating to the Wheatland Facility; and

 

WHEREAS,
the Buyers desire to purchase and assume, and the Sellers desire to sell and
convey, certain assets and liabilities relating to the Wheatland Facility, upon
the terms and subject to the conditions hereinafter set forth.

 

NOW, THEREFORE, in consideration of the foregoing and
the mutual covenants, representations, warranties and agreements hereinafter
set forth, the parties hereto agree as follows:

 

ARTICLE I

DEFINITIONS

 

1.1.          Definitions.

 

(a)           As used in
this Agreement, the following terms have the meanings specified in this Section 1.1(a).  For capitalized terms used in this Agreement
but not defined in this subsection (a), see subsection (b).

 

(1)           “Affiliate”
has the meaning set forth in Rule 12b-2 of the General Rules and
Regulations promulgated under the Exchange Act.

 

(2)           “Allegheny
Marks” means the names and marks “Allegheny Energy” and “Allegheny”
together with all derivations and variations thereof, and the Allegheny Energy, Inc.
corporate logo, together with all derivations or variations thereof.

 

(3)           “Ancillary
Agreements” means the Deeds, the Bill of Sale, the Assignment and
Assumption Agreement, the Sellers Confidentiality Agreement and any other
instruments of sale, transfer, conveyance, assignment or assumption as may be
required to convey the Acquired Assets in accordance with this Agreement.

 

1

 

(4)           “Assignment and
Assumption Agreement” means the agreement between the Buyers and the Seller
Parties pursuant to which, among other things, the Seller Parties shall assign,
and the Buyers shall assume, the Assumed Contracts, in substantially the form
attached hereto as Exhibit A.

 

(5)           “Bill
of Sale” means the bill of sale by which the title to the personal property
included in the Acquired Assets shall be conveyed by the Sellers to the Buyers,
in substantially the form attached hereto as Exhibit B.

 

(6)           “Business
Day” means any day other than Saturday, Sunday and any day that is a legal
holiday or a day on which banking institutions in New York City are
authorized by Law or other governmental action to close.

 

(7)           “Buyers’
Representatives” means the accountants, employees, officers, directors,
counsel, environmental consultants, financial advisors and other authorized
representatives of the Buyers and their Affiliates.

 

(8)           “COBRA”
means the Consolidated Omnibus Reconciliation Act of 1985, as amended, and any
similar applicable state Law.

 

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

 

(10)         “Commercially Reasonable Efforts”
means efforts that are reasonable for a prudent business enterprise in circumstances
similar to those of the performing party, but that do not require the
performing party to expend funds other than expenditures that are customary and
reasonable in transactions of the kind and nature contemplated by this
Agreement in order for the performing party to satisfy its obligations under
this Agreement.

 

(11)         “Confidentiality
Agreement” means that certain Confidentiality Agreement dated as of October 6,
2004, between Cinergy Corp. and AESC,
including any amendments or waivers thereto.

 

(12)         “Credit
Agreement” means that certain Amended and Restated Credit Agreement dated
as of October 28, 2004, among AESC, the Lenders and Loan Parties referred
to therein, Citicorp North America, Inc., as Administrative Agent, and
Citibank, N.A., as Collateral Agent and Intercreditor Agent.

 

(13)         “Deeds”
means special warranty deeds, duly executed by Wheatland LLC and Lake LLC and
duly acknowledged, which convey to the Buyers (i) fee simple title to the
Owned Real Property and (ii) all of the right, title and interest of the
Sellers in and to the Other Real Property Interests, subject, in each case,
only to the Permitted Encumbrances, and which shall be in substantially the
form attached hereto as Exhibit C and otherwise in a form suitable
for recording.

 

(14)         “Due Diligence Materials” means (i) all
due diligence materials provided for review or distributed in written or
digital form by the Seller Parties or the Seller Parties’ Representatives to
the Buyers or the Buyers’ Representatives, (ii) all written, oral or
electronic answers to questions provided by the Seller Parties or the Seller
Parties’ Representatives to the

 

2

 

Buyers or the Buyers’ Representatives, and (iii) all materials
contained in data rooms or privately-accessible internet sites established by
the Seller Parties for purposes of providing due diligence materials to the
Buyers or the Buyers’ Representatives.

 

(15)         “Emission Allowances” means (i) “Allowance,”
as that term is defined in 40 CFR § 72.2, and (ii) “NOx
Allowance,” as that term is defined in 326 Indiana Administrative Code § 10-4-2(37),
in each case, as such terms are defined as of the date hereof.

 

(16)         “Encumbrances”
means any mortgages, pledges, liens, security interests, conditional and
installment sale agreements, charges, restrictions on transfer, proxies and
voting or other similar agreements, claims and other legal and equitable
encumbrances, limitations, title or survey matters and restrictions of any
nature whatsoever.

 

(17)         “Environmental
Laws” means all Laws that relate to pollution or protection of the
environment (including, without limitation, ambient air, surface water,
groundwater, land, surface and subsurface strata) or human health and safety
relating to Hazardous Substance exposure including, without limitation, Laws
which relate to Releases or threatened Releases of Hazardous Substances or
otherwise relate to the manufacture, processing, distribution, use, treatment,
storage, Release, transport or handling of Hazardous Substances.

 

(18)         “ERISA”
means the Employee Retirement Income Security Act of 1974, as amended, and the rules and
regulations promulgated thereunder.

 

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

 

(20)         “Existing Debt Documents” means,
collectively, (i) the Credit Agreement dated as of March 8, 2004,
among Allegheny Energy, Inc., the Lenders and the Lender Parties referred
to therein, and Citicorp North America, Inc., as Administrative Agent, (ii) the
Credit Agreement, (iii) the Amendment Agreement dated as of October 28,
2004, among AESC, the other Grantors referred to therein, Citibank, N.A., as
Collateral Agent, Intercreditor Agent and Depository Bank, and Citicorp North
America, Inc., as Administrative Agent, (iv) the Amendment Agreement
dated as of March 8, 2004, among AESC, the other Grantors referred to
therein, Citibank, N.A., as Collateral Agent, Intercreditor Agent and
Depository Bank, and Citicorp North America, Inc., as Administrative
Agent, (v) the Security and Intercreditor Agreement, (vi) the
Refinancing Indenture referred to in the Security and Intercreditor Agreement,
and (vii) other documents, instruments and agreements executed and
delivered in connection with or otherwise relating to the foregoing agreements,
including any mortgages, deeds of trust, security agreements, financing
statements, pledge agreements and other documents creating or evidencing
Encumbrances securing the indebtedness or other obligations under the
foregoing.

 

(21)         “Extraordinary
Capital Expenditures” means the aggregate amount of all funds actually
expended or Liabilities actually incurred (other than such as constitute
Assumed Liabilities) by the Seller Parties on capital expenditures associated
with the Wheatland Facility or the Site during the period beginning on the date
hereof and ending on the Closing Date, but only to the extent such funds were
expended, in whole or in part, as required by any change in

 

3

 

Law or as required by any Governmental Entity or quasi regulatory
agency, including, without limitation, any independent system operator.

 

(22)         “FERC”
means the Federal Energy Regulatory Commission.

 

(23)         “Federal
Power Act” means the Federal Power Act, as amended, and the rules and
regulations promulgated thereunder.

 

(24)         “Final
Order” shall mean action by the relevant Governmental Entity which has not
been reversed, stayed, enjoined, set aside, annulled or suspended (without regard
to any waiting period prescribed by Law other than waiting periods under the
HSR Act).

 

(25)         “FIRPTA
Affidavit” means the Foreign Investment in Real Property Tax Act
Certification and Affidavit, in substantially the form attached hereto as Exhibit D.

 

(26)         “Good Utility Practice” means any
of the practices, methods and acts engaged in and approved by a significant
portion of the independent electric power generation industry during the
relevant time period that, in the exercise of reasonable judgment in light of
the applicable manufacturer’s recommendations and 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 Practice is intended to consist of practices, methods or acts generally
accepted in the region where the Wheatland Facility is located, and is not
intended to be limited to optimum practices, methods or acts to the exclusion
of all others.

 

(27)         “Governmental
Entity” means any federal, state or local court, governmental or regulatory
authority, agency, commission, body or other governmental entity.

 

(28)         “Hazardous
Substances” means any chemicals, materials or substances defined as or
included in the definition of “hazardous substances,” “hazardous wastes,” “hazardous
materials,” “restricted hazardous materials,” “extremely hazardous substances,”
“toxic substances,” “contaminants” or “pollutants” or words of similar meaning
or substance found in any Environmental Law, or any petroleum and all
derivatives thereof or synthetic substitutes therefor, and any asbestos or
asbestos-containing material.

 

(29)         “Holding
Company Act” means the Public Utility Holding Company Act of 1935, as amended,
and the rules and regulations promulgated thereunder.

 

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

 

(31)         “Improvements”
means all buildings, structures (including all step-up transformers,
transmission facilities and lines and gas handling and storage facilities),
improvements, machinery, equipment, fixtures and construction in progress,
including all piping, cables and similar equipment forming part of the
mechanical, electrical, plumbing or HVAC infrastructure of any building,
structure or equipment, located on the Site, including all generating units
located on and affixed to the Wheatland Facility.

 

4

 

(32)         “Income
Tax Return” means a Tax Return for any Tax based upon or calculated in
whole or in part with respect to net income, gain or profits.

 

(33)         “Indebtedness”
means (i) all indebtedness for borrowed money or for the deferred purchase
price of property or services (other than current trade Liabilities incurred in
the ordinary course of business and payable in accordance with customary
practices), (ii) any other indebtedness that is evidenced by a note, bond,
debenture or similar instrument, (iii) all obligations under financing
leases, (iv) all obligations in respect of acceptances issued or created, (v) all
Liabilities secured by any lien on any property, and (vi) all guarantee
obligations.

 

(34)         “Independent
Accounting Firm” means an independent accounting firm (which may not be the
auditors of any party hereto or any of their Affiliates) of national or
regional reputation mutually appointed by the Seller Parties and the Buyers.

 

(35)         “Information Memorandum” means that certain Information Memorandum regarding
the Facility, dated September, 2004, and any supplements or amendments thereto
to the extent provided to the Buyers or the Buyers’ Representatives.

 

(36)         “Inventories”
means any fuel inventories, materials, spare parts, consumable supplies and chemical
and gas inventories located at the Wheatland Facility, in transit to the
Wheatland Facility, owned by the Sellers or held by the Sellers.

 

(37)         “Knowledge” means, with respect to
an individual, that, with respect to a particular fact or other matter, such
individual is actually aware of such fact or other matter.  With respect to the Seller Parties, “Knowledge”
means the Knowledge of any of the Persons listed on Schedule 1.1(a)(37)(A) (and
any individual who, after the date hereof, replaces any such person’s
employment position).  With respect to
the Buyers, “Knowledge” means the Knowledge of any of the Persons listed on Schedule 1.1(a)(37)(B) (and
any individuals who, after the date hereof, replaces any such person’s
employment position).

 

(38)         “Lake
Owned Real Property” means the real property described in Schedule 5.8
and designated therein as the “Lake Real Property”, together with all rights,
privileges, interests, easements and appurtenances now or hereafter belonging
or in any way pertaining to such real property (including, without limitation,
any mineral rights) and any Improvements located thereon.

 

(39)         “Laws”
means any applicable federal, state or local law, common law, statute, code,
ordinance, rule, regulation, judgment, order, injunction, decree, arbitration
award, agency requirement, license or permit of any Governmental Entity.

 

(40)         “Liabilities”
means any debts, liabilities, commitments or obligations of any kind, character
or nature whatsoever.

 

(41)         “Maintenance
Expenditures” means those maintenance expenditures that are identified on Schedule 7.1(a)(xiii).

 

(42)         “Material
Adverse Effect” means (i) any change or changes in, or effect on, the
Wheatland Facility (excluding the Excluded Assets and the Excluded Liabilities)
that is,

 

5

 

or in the aggregate are, materially adverse to the business, assets,
operations or conditions (financial or otherwise) of the Wheatland Facility, or
(ii) any change or changes in, or effect on, the Sellers (excluding the
Excluded Assets and the Excluded Liabilities), taken as a whole, that is, or in
the aggregate are, reasonably likely to prevent, materially delay or impair any
of the Seller Parties’ ability to consummate the transactions contemplated by
this Agreement.  “Material Adverse
Effect”, however, does not include any effect that is attributable to any
of the following: (a) any change or effect generally affecting the
international, national or regional electric generating, transmission or
distribution industry as a whole, (b) any change or effect resulting from
changes in the international, national or regional wholesale or retail markets
for electric power, (c) any change or effect resulting from changes in the
national or regional markets for the type of fuel used at the Wheatland
Facility, (d) any change or effect resulting from changes in the
international, national or regional electric transmission or distribution
systems, (e) any change or effect resulting from changes in the general
national or regional economic or financial conditions, (f) any change or
effect resulting from changes in Laws or in industry standards, or (g) any
change or effect that is cured to the reasonable satisfaction of the Buyers
before the earlier of the Closing or the termination of this Agreement pursuant
to Section 10.1; except, in the cases of clauses (a) through (f) above,
for such changes or events which materially disproportionately impact the
Sellers or the Acquired Assets.

 

(43)         “Off-Site Location” means any location
other than the Owned Real Property.

 

(44)         “Other Real Property Interests” means
the easements, rights-of-way and other interests in real property identified in
Schedule 5.8 and designated therein as the “Other Real Property
Interests.”

 

(45)         “Owned Real Property” means,
collectively, the Wheatland Owned Real Property and the Lake Owned Real
Property.

 

(46)         “Permitted
Encumbrances” means (i) those exceptions to title listed in Schedule 5.8
as of the date hereof, (ii) liens for Taxes or other governmental charges
or assessments not yet due and delinquent or the validity of which is being
contested in good faith by appropriate proceedings, (iii) mechanics’,
carriers’, workers’, repairers’ and other similar liens and rights arising or
incurred in the ordinary course of business for amounts not yet due and payable
or the validity of which is being contested in good faith by appropriate
proceedings, (iv) zoning, entitlement, conservation restrictions and other
land use and environmental regulations by any Governmental Entities, and (v) such
other Encumbrances which would not, individually or in the aggregate, be
reasonably likely to have a Material Adverse Effect.

 

(47)         “Person”
means an individual, a partnership, a limited liability company, a joint
venture, a corporation, a trust, an unincorporated organization, an
association, a joint stock company, any other business entity, and a
Governmental Entity or a department or agency thereof.

 

(48)         “Release”
means a release, spill, leak, discharge, disposal of, pumping, pouring,
emitting, emptying, injecting, leaching, dumping or escape into or through the
environment.

 

6

 

(49)         “Response
Actions” means those activities defined in section 101(25) of the
Comprehensive Environmental Response Compensation and Liability Act, 42 U.S.C. § 9601(25).

 

(50)         “Retained
Environmental Liabilities” means the following Liabilities: (i) Liabilities
for Response Actions to the extent required to address the Release of Hazardous
Substances occurring at or from the Owned Real Property on or before the
Closing Date; (ii) Liabilities for loss of life, injury to persons or
property, or damage to natural resources to the extent arising in connection
with the Release of Hazardous Substances on, at or from the Owned Real Property
on or before the Closing Date; (iii) Liabilities arising in connection
with any Hazardous Substances that were disposed of at, or transported by or on
behalf of either of the Sellers to, any Off-Site Location on or before the Closing
Date; or (iv) Liabilities for any violation or alleged violation of or
noncompliance with any Environmental Law by the Sellers or their Affiliates or
predecessor owners of the Wheatland Facility or the Owned Real Property on or
prior to the Closing Date, including any fines and penalties and the costs of
correcting such violations or non-compliance with applicable Environmental
Law.  “Retained Environmental
Liabilities” shall not include any of the following Liabilities: (a) Liabilities
for Response Actions arising in connection with Releases of Hazardous
Substances at or from the Wheatland Facility or the Owned Real Property
specifically authorized by, and in compliance with, any Environmental Permits; (b) any
costs for decommissioning of any equipment or facilities; (c) costs for
upgrades to pollution control or other equipment required by changes in
applicable Environmental Laws that impose compliance deadlines after the
Closing Date; (d) Liabilities arising in connection with any Releases of
Hazardous Substances, or the disposal of Hazardous Substances, on, at or from
the Owned Real Property, initially occurring after the Closing Date; (e) Liabilities
arising in connection with any transportation or disposal of Hazardous
Substances from the Wheatland Facility or the Owned Real Property to any
Off-Site Location which occurs after the Closing Date; or (f) Liabilities
for any violation or alleged violation of or noncompliance with any
Environmental Law by the Buyers or their Affiliates, in connection with the
ownership or operation of the Acquired Assets, which occurs after the Closing
Date.

 

(51)         “SEC”
means the Securities and Exchange Commission.

 

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

 

(53)         “Security and Intercreditor Agreement”
means that certain Amended and Restated Security and Intercreditor Agreement
among AESC, the other Grantors referred to therein, Citibank, N.A., as
Collateral Agent, Intercreditor Agent and Depository Bank, Citicorp North
America, Inc., as Administrative Agent, and Law Debenture Trust Company of
New York, as Indenture Trustee, dated February 21, 2003, as amended and
restated in its entirety on March 8, 2004, and as further amended and
restated in its entirety on October 28, 2004.

 

(54)         “Seller
Parties’ Representatives” means the accountants, employees, officers,
directors, counsel, environmental consultants, financial advisors and other
authorized representatives of any of the Seller Parties and their Affiliates.

 

7

 

(55)         “Site”
means, collectively, the Owned Real Property and the Other Real Property
Interests.

 

(56)         “Subsidiary”
means any corporation, partnership, limited liability company or other entity
in which any Person has direct or indirect equity or ownership interest that
represents fifty percent (50%) or more of the aggregate equity or ownership
interest in such entity, or has the power to vote or direct the voting of
sufficient securities to elect a majority of the directors or governors.

 

(57)         “Taxes”
means all taxes, charges, fees, levies, duties, customs, tariffs, imports,
penalties, assessments or other obligations of the same or of a similar nature
to any of the foregoing imposed by any federal, state or local or foreign
taxing authority, including, without limitation, income or profits, excise,
property, sales, transfer, franchise, payroll, withholding, unemployment,
severance, use, ad valorem, gross receipts, business license, occupation,
stamp, environmental, workers’ compensation, social security or other taxes,
including any interest, penalties or additions attributable thereto, whether
disputed or not.

 

(58)         “Tax
Return” means any return, declaration, claim for refund, report, information
return or other document (including any related or supporting information)
supplied to or required to be filed with any taxing authority with respect to
Taxes.

 

(59)         “Transferring
Employee Records” means all personnel files related to the Sellers’ Employees
that pertain to (i) seniority histories and (ii) salary and benefit
information, but only to the extent disclosure of such information is permitted
by Law.

 

(60)         “Wheatland
Owned Real Property” means the real property described in Schedule 5.8
and designated therein as the “Wheatland Real Property”, together with all
rights, privileges, interests, easements and appurtenances now or hereafter
belonging or in any way pertaining to such real property (including, without
limitation, any mineral rights) and any Improvements located thereon.

 

(b)           Each of
the following terms has the meaning specified in the Section set forth
opposite such term:

 

	
  Term

  	
   

  	
  Section

  	
   

  
	
  Acquired Assets

  	
   

  	
  2.1

  	
  (b)

  
	
  AESC Transferred
  Assets

  	
   

  	
  2.1

  	
  (a)

  
	
  Assumed
  Contracts

  	
   

  	
  2.1

  	
  (b)(iv)

  
	
  Assumed
  Liabilities

  	
   

  	
  2.3

  	
   

  
	
  Bankruptcy and
  Equity Exception

  	
   

  	
  5.2

  	
   

  
	
  Benefit Plans

  	
   

  	
  5.12

  	
  (a)

  
	
  Buyers’ Benefit
  Plans

  	
   

  	
  7.10

  	
  (c)

  
	
  Buyers
  Indemnified Party

  	
   

  	
  9.1

  	
  (a)

  
	
  Buyers-Initiated
  Start-Up

  	
   

  	
  7.18

  	
  (a)

  
	
  Buyers Required
  Regulatory Approvals

  	
   

  	
  6.3

  	
  (b)

  
	
  Capital Expenditures
  Statement

  	
   

  	
  3.2

  	
  (b)

  

 

8

 

	
  Term

  	
   

  	
  Section

  	
   

  
	
  Closing

  	
   

  	
  4.1

  	
   

  
	
  Closing Date

  	
   

  	
  4.1

  	
   

  
	
  CPCN

  	
   

  	
  6.3

  	
  (b)

  
	
  Direct Claim

  	
   

  	
  9.2

  	
  (c)

  
	
  Environmental
  Permits

  	
   

  	
  5.10

  	
  (a)(i)

  
	
  ERISA Affiliate

  	
   

  	
  5.12

  	
  (a)

  
	
  Excluded Assets

  	
   

  	
  2.2

  	
   

  
	
  Excluded
  Liabilities

  	
   

  	
  2.4

  	
   

  
	
  FERC

  	
   

  	
  5.5

  	
   

  
	
  FERC Approvals

  	
   

  	
  6.3

  	
  (b)

  
	
  Final
  Extraordinary Capital Expenditures Amount

  	
   

  	
  3.2

  	
  (c)

  
	
  GAAP

  	
   

  	
  3.2

  	
  (a)

  
	
  Indemnifiable
  Loss

  	
   

  	
  9.1

  	
  (a)

  
	
  Indemnifying
  Party

  	
   

  	
  9.1

  	
  (d)

  
	
  Indemnitee

  	
   

  	
  9.1

  	
  (c)

  
	
  Indiana
  Settlement Agreement

  	
   

  	
  6.3

  	
  (c)

  
	
  Intellectual
  Property

  	
   

  	
  5.20

  	
   

  
	
  IRS

  	
   

  	
  5.12

  	
  (a)

  
	
  IURC

  	
   

  	
  5.4

  	
  (b)

  
	
  Leases

  	
   

  	
  5.8

  	
  (f)

  
	
  Material
  Contracts

  	
   

  	
  5.13

  	
  (a)

  
	
  Notice of
  Disagreement

  	
   

  	
  3.2

  	
  (c)

  
	
  Permits

  	
   

  	
  5.15

  	
  (a)

  
	
  Prior Welfare
  Plans

  	
   

  	
  7.10

  	
  (b)

  
	
  Proposed
  Acquisition Transaction

  	
   

  	
  7.15

  	
   

  
	
  Property Taxes

  	
   

  	
  3.4

  	
  (a)(i)

  
	
  Purchase Price

  	
   

  	
  3.1

  	
   

  
	
  Replacement
  Welfare Plans

  	
   

  	
  7.10

  	
  (b)

  
	
  Reviewing
  Parties

  	
   

  	
  7.16

  	
  (f)

  
	
  Sellers
  Confidentiality Agreement

  	
   

  	
  7.2

  	
  (b)

  
	
  Sellers’
  Employees

  	
   

  	
  5.11

  	
   

  
	
  Sellers
  Indemnified Party

  	
   

  	
  9.1

  	
  (b)

  
	
  Sellers-Initiated
  Start-Up

  	
   

  	
  7.18

  	
  (b)

  
	
  Sellers Required
  Regulatory Approvals

  	
   

  	
  5.4

  	
  (b)

  
	
  Support
  Obligations

  	
   

  	
  7.6

  	
  (d)

  
	
  Survey

  	
   

  	
  4.3

  	
  (o)

  
	
  Termination Date

  	
   

  	
  10.1

  	
  (b)

  
	
  Third Party
  Claim

  	
   

  	
  9.2

  	
  (a)

  
	
  Title Company

  	
   

  	
  4.3

  	
  (n)

  
	
  Title Policy

  	
   

  	
  4.3

  	
  (n)

  
	
  Transfer Taxes

  	
   

  	
  7.9

  	
  (a)

  
	
  Wheatland
  Facility

  	
   

  	
  Recitals

  	
   

  

 

(c)           Unless otherwise
specified, any period measured in days shall be measured in calendar days
rather than Business Days.

 

9

 

ARTICLE II

PURCHASE AND SALE

 

2.1.         Purchase and Sale.

 

(a)           Upon the
terms and subject to the conditions set forth in this Agreement, at the
Closing, AESC will sell, transfer, convey, assign and deliver to the Buyers,
and the Buyers will purchase, acquire and assume from AESC, (i) all of the
rights of AESC under the contracts and Leases identified in Schedule 2.1(a)(i) to
the extent they pertain to the Wheatland Facility, including, without
limitation, any right to receive payment, any right to receive goods and
services and any right to assert claims and take other rightful actions in
respect of breaches, defaults and other violations of such contracts and Leases,
and (ii) the vehicles identified on Schedule 2.1(a)(ii) (collectively,
the “AESC Transferred Assets”).

 

(b)           Upon the
terms and subject to the conditions set forth in this Agreement, at the Closing,
the Sellers will sell, transfer, convey, assign and deliver to the Buyers, and
the Buyers will purchase, acquire and assume from the Sellers, all of the
Sellers’ right, title and interest in and to the properties and assets that are
owned by the Sellers (tangible or intangible, including goodwill), wherever
located, including, without limitation, the Sellers’ right, title and interest
in and to the following assets (collectively, together with the AESC
Transferred Assets, the “Acquired Assets”):

 

(i)            the
Site and the Wheatland Facility;

 

(ii)           the
machinery, equipment, Inventories, furniture, boats, vehicles and other
personal property owned by the Sellers and located at or in transit to the
Wheatland Facility (including, without limitation, the step-up transformers and
the items of personal property described in Schedule 2.1(b)(ii) and
all applicable warranties against manufacturers or vendors, to the extent that
such warranties are transferable without further action by the Sellers, and all
items of personal property due under applicable warranties), in each case as in
existence on the Closing Date;

 

(iii)          to
the extent transferable, all Permits and Environmental Permits set forth in Schedule 2.1(b)(iii);

 

(iv)          all
of the rights of the Sellers under the Material Contracts and Leases set forth
in Schedule 2.1(b)(iv) and any similar contracts or leases
entered into, in accordance with Section 7.1(a), after the date hereof and
prior to the Closing Date (collectively, together with the contracts and Leases
included within the definition of AESC Transferred Assets, the “Assumed
Contracts”), including, without limitation, any right to receive payment,
any right to receive goods and services and any right to assert claims and take
other rightful actions in respect of breaches, defaults and other violations of
the Assumed Contracts;

 

(v)           all
books, records, manuals, regulatory documents, real estate documents,
engineering designs, blueprints, as-built plans, specifications, procedures,
studies, reports and equipment repair, safety, maintenance or service records,
lists of present and former

 

10

 

suppliers, lists of
present and former customers, and other such materials (in any form or medium)
of the Sellers, including the Transferring Employee Records;

 

(vi)          all
rights in and to any causes of action, lawsuits, judgments, claims and demands
of any nature available to or being pursued by or on behalf of the Sellers,
whether arising by way of counterclaim or otherwise;

 

(vii)         except
for prepaid expenses and deposits of the Sellers attributable to any Excluded
Assets or Excluded Liabilities, all prepaid expenses, progress payments and
deposits of or by the Sellers, rights to receive a prepaid expense, deposit or
progress payment, and cash in transit that constitutes a prepaid expense,
progress payment or deposit, relating to any Acquired Asset or Assumed
Liability;

 

(viii)        subject
to Section 7.1(a)(xvi), all Emission Allowances set forth on Schedule 2.1(b)(viii),
all Emissions Allowances specifically issued or allocated to the Wheatland
Facility by environmental agencies of the United States of America or the State
of Indiana with a vintage year of 2005 or later (to the extent not already
identified on Schedule 2.1(b)(viii)), and any Emissions Allowance
purchased by the Sellers specifically for the Wheatland Facility on or before
the date hereof;

 

(ix)           all
Intellectual Property and associated licenses, including rights to sue for and
remedies against past, present and future infringements thereof, and rights of
priority and protection of interests therein under the laws of any jurisdiction
worldwide and all tangible embodiments thereof; and

 

(x)            all
other assets, rights and interests of the Sellers;

 

provided, however, that the Acquired
Assets shall not include the Excluded Assets.

 

2.2.         Excluded Assets.  Notwithstanding any provision herein to the
contrary, the Acquired Assets shall exclude the following assets (collectively,
the “Excluded Assets”):

 

(a)           all cash,
cash equivalents, bank deposits, accounts receivable of the Sellers or with
respect to the Wheatland Facility as of the Closing and any Tax receivables of
the Sellers;

 

(b)           any refund
or credit of Taxes paid by the Seller Parties in respect of the Sellers or the
Acquired Assets or for which the Seller Parties are required to reimburse the
Buyers, whether such payment is actually received as a refund or as a credit
against Taxes payable;

 

(c)           all
interests in and to the Allegheny Marks, and the Maximo software license (it
being understood that the database information, including historical
information, related to the Wheatland Facility used with the Maximo software
shall be an Acquired Asset);

 

(d)           all
personnel, medical and benefits records of the Seller Parties or their
Affiliates, other than Transferring Employee Records;

 

11

 

(e)           any amount
received after the Closing Date for electricity sold and delivered on or prior
to the Closing Date;

 

(f)            those
contracts and Leases listed on Schedule 2.2(f);

 

(g)           any asset
sold, transferred or otherwise disposed of in accordance with Section 7.1(a)(v);
and

 

(h)           all
properties and assets of AESC other than the AESC Transferred Assets.

 

2.3.         Assumed Liabilities. 
On the terms and subject to the conditions set forth herein, from and
after the Closing, the Buyers shall assume and satisfy or perform all of the
Liabilities of the Seller Parties that relate directly or indirectly to, in
respect of, or otherwise arising from the ownership, use or operation of the
Acquired Assets (collectively, the “Assumed Liabilities”), including,
without limitation, the following Liabilities:

 

(a)           all
Liabilities of the Seller Parties arising under the Assumed Contracts in
accordance with the terms thereof (other than Liabilities attributable to any
failure by any of the Seller Parties prior to or on the Closing Date to comply
with the terms thereof);

 

(b)           all
Liabilities relating to any Environmental Law other than Retained Environmental
Liabilities; and

 

(c)           all
Liabilities in respect of Taxes attributable to the Acquired Assets for taxable
periods, or portions thereof, beginning after the Closing Date (as prorated
under Section 3.4(a)(i) for Taxes described therein), and all
Liabilities for Transfer Taxes pursuant to Section 7.9(a);

 

provided, however, that the Assumed
Liabilities shall not include the Excluded Liabilities.

 

2.4.         Excluded Liabilities. 
Notwithstanding the provisions of Section 2.3, the Buyers shall not
assume the following Liabilities (collectively, the “Excluded Liabilities”),
which shall remain the exclusive responsibility of the Seller Parties or their
Affiliates:

 

(a)           the
Retained Environmental Liabilities;

 

(b)           any
Liability of the Seller Parties or their Affiliates and predecessors in respect
of or otherwise arising from the Excluded Assets, except to the extent caused
by the acts or omissions of the Buyers or the Buyers’ Representatives or by the
Buyers’ ownership, lease, maintenance or operation of the Acquired Assets;

 

(c)           any
Liability of the Seller Parties or their Affiliates and predecessors arising
from the execution, delivery or performance of this Agreement or any Ancillary
Agreement or the transactions contemplated hereby or thereby;

 

(d)           any
Liability of the Seller Parties or their Affiliates and predecessors under
contracts or Leases which are not Assumed Contracts, except to the extent
caused by the

 

12

 

acts or omissions of the Buyer or the Buyers’ Representatives or by the
Buyers’ ownership, lease, maintenance or operation of the Acquired Assets;

 

(e)           any
Liability of the Seller Parties or their Affiliates and predecessors for any
fines or penalties imposed by a Governmental Entity resulting from any (i) investigation
or proceeding by a Governmental Entity pending on or prior to the Closing Date
or (ii) acts or omissions of the Seller Parties or their Affiliates and
predecessors on or prior to the Closing Date;

 

(f)            any
Liability in respect of Taxes attributable to the Acquired Assets for taxable
periods, or portions thereof, ending on or before the Closing Date (as prorated
under Section 3.4(a)(i) for Taxes described therein), except for
Transfer Taxes pursuant to Section 7.9(a);

 

(g)           any
Liability of the Seller Parties or their Affiliates arising from the breach or
default by the Seller Parties or their Affiliates, prior to the Closing Date,
of any Assumed Contracts or any other contract, license, agreement or personal
property lease entered into by any of the Seller Parties or their Affiliates
with respect to the Purchased Assets;

 

(h)           any
Liability of the Seller Parties or their Affiliates and predecessors relating
to any cause of action pending, or threatened in writing, prior to the Closing
Date against the Seller Parties or their Affiliates and predecessors or their
assets;

 

(i)            any
Liabilities relating to any matters identified on Schedule 2.4(i);
and

 

(j)            all
Liabilities of the Seller Parties for Indebtedness incurred on or prior to the
Closing.

 

2.5.         Procedures for Acquired Assets Not Transferable.  If any consent required to transfer or assign
any of the Assumed Contracts, Permits, Environmental Permits or any other
property or rights included in the Acquired Assets cannot be obtained prior to
the Closing Date and the Closing occurs, or, if an attempted assignment thereof
would be ineffective or would adversely affect the rights of any of the Seller
Parties thereunder so that the Buyers would not in fact receive all such
rights, this Agreement and the related instruments of transfer shall not
constitute an assignment or transfer thereof and the Buyers shall not assume
the Seller Parties’ obligations with respect thereto.  In the event any such consent is not obtained
on or prior to the Closing Date, the Seller Parties shall continue to use
Commercially Reasonable Efforts to obtain any such consent after the Closing
Date until such consent has been obtained. 
If such efforts are unsuccessful, the Seller Parties and the Buyers will
cooperate to achieve a mutually agreeable arrangement under which the Buyers
would obtain the benefits and assume the obligations from and after the Closing
Date in accordance with this Agreement, including subcontracting, sublicensing
or subleasing to the Buyers, or under which the Seller Parties would enforce
for the benefit of the Buyers any and all rights of the Seller Parties against
a third party thereto, in any case with the Buyers assuming the Seller Parties’
obligations to the extent such obligations would have constituted an Assumed
Liability if such assignment had occurred on the Closing Date.  Each Seller will pay promptly to the Buyers
when received all monies received by such Seller after the Closing Date under
any such contracts for any claim or right or any benefit

 

13

 

arising thereunder to the extent that the Buyers would
be entitled thereto pursuant hereto. 
Nothing in this Section 2.5 shall be deemed to (a) constitute
an agreement to exclude from the Acquired Assets any assets described in Section 2.1
or (b) alter the rights or obligations of the Buyers pursuant to Section 7.6
or Section 8.1(c).

 

ARTICLE III

PURCHASE PRICE

 

3.1.         Purchase Price.  Upon
the terms and subject to the conditions set forth in this Agreement, at the
Closing, in exchange for the Acquired Assets, the Buyers shall pay to the
Sellers an amount equal to One Hundred Million Dollars ($100,000,000) (the “Purchase
Price”) and shall assume the Assumed Liabilities.  The parties acknowledge that the Final
Extraordinary Capital Expenditures Amount, if any, shall be treated as a
post-Closing adjustment to the Purchase Price.

 

3.2.         Possible Purchase Price Adjustment.

 

(a)           Before
expending any funds for an Extraordinary Capital Expenditure, (i) the
Seller Parties shall give the Buyers written notice of such proposed
Extraordinary Capital Expenditure, including supplementary materials explaining
the proposed Extraordinary Capital Expenditure and, if applicable, diagrams or
technical drawings, and, if requested by the Buyers, reasonable supporting
materials supporting the Seller Parties’ conclusion that the Extraordinary
Capital Expenditure is required by a change in Law or by any Governmental
Entity or quasi regulatory agency, at least 10 Business Days prior to the date
of the proposed Extraordinary Capital Expenditure, (ii) the Sellers shall
consider in good faith the Buyers’ reasonable comments on the proposed
Extraordinary Capital Expenditure, and (iii) the parties shall have
attempted in good faith to agree on the appropriate response to the
circumstance that requires the Extraordinary Capital Expenditure.  The amount of Extraordinary Capital
Expenditures, if any, to be included in the Capital Expenditures Statement and
the Final Extraordinary Capital Expenditures Amount shall be reduced, in an
amount to be mutually agreed upon by the parties in good faith, to account for
the ownership and usage of any project or addition funded by an Extraordinary
Capital Expenditure (including, if appropriate, the fair depreciation of such
project or addition under United States generally accepted accounting
principles (“GAAP”) allocable to the period in which the Seller Parties
owned the project) by the Seller Parties prior to the Closing Date.

 

(b)           In the
event the Seller Parties have incurred an Extraordinary Capital Expenditure in
accordance with Section 3.2(a), then within 30 days after the Closing, the
Seller Parties will prepare and deliver to the Buyers a statement (the “Capital
Expenditures Statement”) setting forth the Extraordinary Capital
Expenditures, if any, including detailed supporting material.  The Buyers agree to cooperate with the Seller
Parties in connection with the preparation of the Capital Expenditures
Statement and related information, and shall provide to the Seller Parties such
books, records and information as may be reasonably requested from time to
time.

 

14

 

(c)           During the
30-day period following the delivery by the Seller Parties of the Capital
Expenditures Statement, the Buyers and the Buyers’ Representatives may review
such statement.  The Seller Parties agree
to cooperate with the Buyers in such review and to provide the Buyers with the
information used to prepare the Capital Expenditures Statement and any other
related information as reasonably requested by the Buyers.  The Buyers shall provide any comments or
objections they have with respect to the Capital Expenditures Statement to the
Seller Parties in writing within such 30-day period (the “Notice of
Disagreement”).  The Buyers and the
Seller Parties shall attempt in good faith to resolve any differences and
issues as set forth in the Notice of Disagreement.  If no Notice of Disagreement is delivered or
the matters set forth in the Notice of Disagreement are so resolved, then the
Capital Expenditures Statement, as adjusted for any changes as are agreed upon
by the Buyers and the Seller Parties, shall be final and binding upon the
Buyers and the Seller Parties and shall constitute the “Final Extraordinary
Capital Expenditures Amount.”  If the
matters raised by the Buyers in the Notice of Disagreement cannot be resolved
between the Buyers and the Seller Parties within 15 days following delivery by
the Buyers of the Notice of Disagreement, the question or questions in dispute
shall be promptly submitted to the Independent Accounting Firm, which shall be
instructed to determine and report to the parties, within 30 days after
receiving such submission, upon such remaining disputed amounts, and such
report shall be final, binding and conclusive on the parties hereto with
respect to the amounts disputed.  Any
amount (i) mutually agreed to in writing by the Seller Parties and the
Buyers with respect to an amount that was disputed by the Buyers or (ii) finally
determined by the Independent Accounting Firm shall be the “Final
Extraordinary Capital Expenditures Amount.” 
The fees and disbursements of the Independent Accounting Firm shall be
borne equally by the Buyers and the Seller Parties.  Notwithstanding any other provision of this
Agreement, in no event shall the Final Extraordinary Capital Expenditures
Amount exceed $2,000,000.

 

(d)           Within
five Business Days after the final determination of the Final Extraordinary
Capital Expenditures Amount, if any, the Buyers shall pay to the Seller Parties
an amount equal to the Final Extraordinary Capital Expenditures Amount.  Any amount paid under this Section 3.2(d) shall
be paid with interest for the period commencing on the Closing Date through the
date of payment, calculated at the 90-day U.S. treasury bill rate as published
in The Wall Street Journal in the “Money Rates” section on the Closing
Date, and in cash by federal or other wire transfer of immediately available
funds to the bank account or accounts designated by the Seller Parties in
writing.

 

3.3.         Allocation of Purchase Price.  The Buyers and the Seller Parties shall use
Commercially Reasonable Efforts to agree upon an allocation among the Acquired
Assets of the portion of the Purchase Price set forth in Section 3.1,
together with Assumed Liabilities, consistent with section 1060 of the
Code and the treasury regulations thereunder within 180 days of the date of
this Agreement but in no event less than 30 days prior to the Closing.  Any post-Closing adjustments with respect to
the Purchase Price for purchase price allocation purposes shall be jointly made
and agreed to within 30 days following the determination of the Final
Extraordinary Capital Expenditures Amount in a manner consistent with the
allocation determined pursuant to this Section 3.3.  In the event the parties are unable to agree
upon such an allocation, then the matter shall be resolved in accordance with Section 7.9(f).  Each of the Buyers and the Seller

 

15

 

Parties agree to file IRS Form 8594, and all
federal, state, local and foreign Tax Returns, in accordance with such agreed
allocation.  Each of the Buyers and the
Seller Parties shall report the transactions contemplated by this Agreement for
Tax purposes in a manner consistent with the allocation determined pursuant to
this Section 3.3.  Each of the
Buyers and the Seller Parties agrees to provide each other promptly with any
other information reasonably required to complete Form 8594.  Each of the Buyers and the Seller Parties
shall notify each other in the event of an examination, audit or other
proceeding regarding the agreed upon allocation of the Purchase Price.

 

3.4.         Proration.

 

(a)           The Buyers
and the Seller Parties agree that those items listed below, to the extent they
relate to the Acquired Assets, will be prorated as of the Closing Date, with
the Seller Parties liable to the extent such items relate to any time period
through the Closing Date, and the Buyers liable to the extent such items relate
to periods subsequent to the Closing Date:

 

(i)            any
ad valorem taxes imposed on tangible or intangible property (“Property Taxes”)
shall be prorated based on the number of days in such taxable period up to and
including the Closing Date, and on the number of days in such taxable period
after the Closing Date, provided that, for purposes of this Agreement, the
taxable period of any Property Tax shall be the calendar year during which the
statutory assessment date falls (for the avoidance of doubt, the items listed
in this Section 3.4(a)(i) include, without limitation, any Property
Taxes with respect to the taxable period including the Closing Date, and all
prior taxable periods, for which the Seller Parties have not (A) received
from the county treasurer a statement of current and delinquent taxes and
special assessments, or (B) paid the amount shown as due on such
statement);

 

(ii)           any
permit, license, registration, or compliance assurance fees with respect to any
Permit;

 

(iii)          sewer
rents and charges for water, telephone, electricity and other utilities and
similar charges of the Sellers; and

 

(iv)          any
payment obligations for goods purchased or delivered, or services rendered,
including rent under any Leases or leases of personal property that are Assumed
Contracts by which either Seller is bound.

 

(b)           In
connection with the prorations referred to in (a) above, in the event that
actual figures are not available at the Closing Date, the proration shall be
based upon the actual Taxes or fees for the preceding year (or appropriate
period) for which actual Taxes or fees are available and such Taxes or fees
shall be reprorated upon request of either the Seller Parties or the Buyers
made within 30 days of the date that the actual amounts become available.  The Buyers shall cooperate with the Seller
Parties in the prosecution of tax proceedings which have not been completed by
the Closing Date.  The Seller Parties and
the Buyers agree to furnish each other with such documents and other records as
may be reasonably requested in order to confirm all adjustment and proration
calculations made pursuant to this Section 3.4.

 

16

 

ARTICLE IV

THE CLOSING

 

4.1.         Time and Place of Closing. 
Upon the terms and subject to the satisfaction of the conditions
contained in Article VIII of this Agreement, the closing of the purchase
and sale of the Acquired Assets contemplated by this Agreement (the “Closing”)
will take place at Skadden, Arps, Slate, Meagher & Flom LLP, 1440 New
York Avenue, N.W., Washington, D.C., at 10:00 A.M. (local time) on such
date as the parties may agree, which date is as soon as practicable, but no
later than five Business Days following the date on which all of the conditions
contained in Article VIII have been satisfied or waived (except for those
conditions which by their nature can only be satisfied at the Closing); or at
such other place or time as the parties may agree.  The date and time at which the Closing
actually occurs is hereinafter referred to as the “Closing Date.”

 

4.2.         Payment of Purchase Price. 
The Buyers shall pay to the Sellers at the Closing an amount in United
States dollars in the aggregate equal to the Purchase Price, by wire transfer
of immediately available funds to the bank account or accounts designated by
the Sellers, in writing, on or prior to the 2nd Business Day
immediately preceding the Closing Date.

 

4.3.         Deliveries by the Sellers. 
At the Closing, the Seller Parties will deliver the following to the
Buyers:

 

(a)           the Deeds;

 

(b)           the Bill
of Sale, duly executed by the applicable Seller Parties;

 

(c)           the
Assignment and Assumption Agreement, duly executed by the applicable Seller
Parties, in recordable form if necessary;

 

(d)           each other
Ancillary Agreement required to be delivered under this Agreement, duly
executed by the applicable Seller Parties;

 

(e)           the FIRPTA
Affidavit, duly executed by AESC;

 

(f)            certificates
of title for the vehicles and boats which are part of the Acquired Assets, duly
executed by the applicable Seller Parties;

 

(g)           all
attornment agreements, notices and other documents and instruments required for
the assignment or other transfer of any of the Assumed Contracts from the
applicable Seller Parties to the Buyers, duly executed by the applicable Seller
Parties and, in the case of any leases, upon the reasonable request of the
Buyers, in recordable form;

 

(h)           Uniform
Commercial Code and other Encumbrance searches with respect to the Acquired
Assets, and such duly executed UCC-3 Termination or Partial Release Statements
and other releases as may be required to convey the Acquired Assets free and
clear of all Encumbrances (except for Permitted Encumbrances) in accordance
with this Agreement;

 

(i)            copies of
all consents, waivers or approvals obtained by the Sellers with respect to the
transfer of the Acquired Assets or the consummation of the transactions

 

17

 

contemplated by this Agreement and the Ancillary Agreements, to the
extent required under this Agreement or the Ancillary Agreements;

 

(j)            all of
the books, records and other materials of the Sellers set forth in Section 2.1(b)(v);

 

(k)           a
certificate from an authorized officer of each of the Seller Parties in
accordance with Section 8.2(e);

 

(l)            any
amounts for which the Seller Parties are liable pursuant to Section 3.4;

 

(m)          any
disclosure document required to be delivered in accordance with the Indiana
Responsible Transfer Property Law (Ind. Code § 13-251-3-1 et seq.);

 

(n)           an ALTA (Form B-1992)
Owner Policy of Title Insurance, with an endorsement providing “extended
coverage” over the standard exceptions contained in such form of Owner Policy
of Title Insurance and such other endorsements as are reasonably requested by
the Buyers (the “Title Policy”), issued by Chicago Title Insurance Company
(the “Title Company”), in the amount of $100,000,000, and insuring that (i) good
and marketable title to the Owned Real Property and (ii) valid easement
interests in the Other Real Property Interests are vested in the Buyers,
subject to no exceptions to title other than the Permitted Encumbrances;

 

(o)           a survey
of the Site (the “Survey”) prepared by a surveyor licensed in the State
of Indiana, (i) certified to the Seller Parties, the Buyers and the Title
Company in accordance with a form of certification which is reasonably
acceptable to the Buyers, such certification to include a statement that the
survey has been prepared in accordance with “Minimum Standard Detail
Requirements for ALTA/ACSM Land Title Surveys” jointly adopted by ALTA, ACSM
and NSPS in 1999 and including Items 1, 4, 6, 7(a), 7(b)(1), 7(c), 8-10, 11(b) and
13-16, (ii) showing no gaps, gores, encroachments or other matters which
are not Permitted Encumbrances, (iii) showing that the easements created
by (A) that certain Easement Agreement, dated March 10, 2000, between
West Fork Land Development Company, L.L.C. and Larry B. Murray and (B) that
certain Easement Agreement, dated March 10, 2000, between West Fork Land
Development Company, L.L.C. and Charles L. Murray and Barbara Nell Murray,
constitute a continuous easement corridor between the fee parcels owned by
Wheatland LLC and the fee parcels owned by Lake LLC and (iv) plotting the
location of the water pipeline, gas transmission pipeline and electrical
transmission poles and lines serving the Wheatland Facility and confirming that
such pipelines, poles and lines lie wholly within the Owned Real Property or
the Other Real Property Interests; and

 

(p)           such real
estate transfer declarations, disclosures or forms and such other documents,
instruments or agreements, if any, as shall have been reasonably requested by
the Title Company in order to issue the Title Policy to the Buyers and to
consummate the Closing.

 

4.4.         Deliveries by the Buyers. 
At the Closing, the Buyers will deliver the following to the Seller
Parties:

 

(a)           the
Purchase Price by wire transfer of immediately available funds, together with
any amounts for which the Buyers are liable pursuant to Section 3.4;

 

18

 

(b)           the
Assignment and Assumption Agreement, duly executed by the Buyers and in
recordable form if necessary;

 

(c)           each other
Ancillary Agreement required to be delivered under this Agreement, duly
executed by the Buyers as applicable;

 

(d)           a
certificate from an authorized officer of each of the Buyers referred to in Section 8.3(d);
and

 

(e)           such other
agreements, documents, instruments and writings as are required to be delivered
by the Buyers at or prior to the Closing Date pursuant to this Agreement or
otherwise required in connection herewith.

 

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF THE SELLER PARTIES

 

The Seller Parties jointly and severally represent and
warrant to the Buyers, except as set forth on the corresponding sections of the
Seller Parties’ Schedules, as follows:

 

5.1.         Organization; Qualification. 
Each of the Seller Parties is a limited liability company duly
organized, validly existing and in good standing under the laws of the State of
Delaware.  Each of the Sellers has all
requisite limited liability company power and authority to own, lease and
operate its respective properties and to carry out its respective business as
is now being conducted, and is duly qualified and in good standing to do
business in each jurisdiction in which the nature of its business or the
ownership or leasing of its assets and properties makes such qualification
necessary (including Indiana, as applicable), except where the failure to have
such power and authority, or to be so qualified or in good standing, would not,
individually or in the aggregate, be reasonably likely to have a Material
Adverse Effect.  The Sellers have made
available to the Buyers complete and correct copies of the Sellers’ respective
Certificates of Formation and Limited Liability Company Agreements, each as
currently in effect.

 

5.2.         Authority Relative to this Agreement.  Each of the Seller Parties has full limited
liability company power and authority to execute and deliver this Agreement
and, as of the Closing, will have full limited liability company power and
authority to execute and deliver the Ancillary Agreements, as applicable, and
to consummate the transactions contemplated hereby and thereby.  The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been, and, as
of the Closing, the execution and delivery of the Ancillary Agreements and the
consummation of the transactions contemplated thereby will have been, duly and
validly authorized by the Boards of Managers of each of the Seller Parties, and
no other limited liability company proceedings on the part of the Seller
Parties are necessary to authorize this Agreement or, as of the Closing, the
Ancillary Agreements, as applicable, or to consummate the transactions
contemplated hereby and thereby.  This
Agreement has been, and, as of the Closing, the Ancillary Agreements, as
applicable, will be, duly and validly executed and delivered by the Seller
Parties, as applicable.  Assuming that
this Agreement and, as of the Closing, the Ancillary Agreements constitute
valid and binding agreements of the respective Buyers, subject to receipt of
the Sellers Required Regulatory Approvals and the Buyers Regulatory Required
Approvals, this Agreement constitutes, and the Ancillary Agreements will

 

19

 

constitute, valid and
binding agreements of the Seller Parties, enforceable against the Seller
Parties in accordance with their respective terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors’ rights and to general
equity principles (the “Bankruptcy and Equity Exception”).

 

5.3.         Capitalization and Other Matters.  AESC owns, beneficially and of record, all of
the issued and outstanding limited liability company interests in the Sellers,
free and clear of all Encumbrances, other than Encumbrances pursuant to the
Existing Debt Documents.  Neither of the
Sellers has any equity or other investment interest in any other Person.

 

5.4.         Consents and Approvals; No Violation.

 

(a)           Other than
obtaining the Sellers Required Regulatory Approvals and the Buyers Required
Regulatory Approvals, and except as set forth on Schedule 5.4(a),
neither the execution and delivery of this Agreement and, on the Closing Date,
the Ancillary Agreements, as applicable, by the Seller Parties nor the sale by
the Sellers of the Acquired Assets pursuant to this Agreement or performance by
the Seller Parties under this Agreement or the Ancillary Agreements, as
applicable, will (i) conflict with or result in any breach of any
provision of the respective Certificates of Formation or Limited Liability
Company Agreements of the Seller Parties; (ii) require any consent,
approval, authorization or permit of, or filing with or notification to, any
Governmental Entity, except (A) where the failure to obtain such consent,
approval, authorization or permit, or to make such filing or notification,
would not, individually or in the aggregate, be reasonably likely to have a
Material Adverse Effect or (B) for those requirements which become
applicable to the Sellers as a result of the specific regulatory status of the
Buyers (or any of their Affiliates) or as a result of any other facts that
specifically relate to the business or the activities in which either of the
Buyers (or any of their Affiliates) is or proposes to be engaged; (iii) require
any consent, approval or notice, or result in a default (with or without notice
or lapse of time or both) (or give rise to any right of termination,
cancellation or acceleration), under any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, license, agreement or other instrument
or obligation to which any of the Seller Parties is a party, other than the
Existing Debt Documents, or by which any of the Seller Parties may be bound,
except for such defaults (or rights of termination, cancellation or
acceleration) as to which requisite waivers or consents have been obtained or
which would not, individually or in the aggregate, be reasonably likely to have
a Material Adverse Effect; or (iv) violate any Law or Permit applicable to
any of the Seller Parties, or their respective assets, which violation would,
individually or in the aggregate, be reasonably likely to have a Material
Adverse Effect; and without limiting the generality of the foregoing, the
transactions contemplated by this Agreement comply with the provisions of the
Existing Debt Documents and the Seller Parties have obtained the board approval
and the appraisal required under Section 5.02(e)(v) of the Credit
Agreement.

 

(b)           Except for
(i) any filings or approvals required under the Federal Power Act, (ii) the
filings by the Seller Parties required by the HSR Act and the expiration or
earlier termination of all waiting periods under the HSR Act, and (iii) the
required approvals from the Indiana Utility Regulatory Commission (the “IURC”)
(the filings and approvals referred to in clauses (i) through (iii) are
collectively referred to as the “Sellers Required Regulatory Approvals”),
no declaration, filing or registration with, or notice to, or authorization,
consent or

 

20

 

approval of any Governmental Entity is necessary for the consummation
by the Seller Parties of the transactions contemplated hereby or by the
Ancillary Agreements, other than such declarations, filings, registrations,
notices, authorizations, consents or approvals which, if not obtained or made,
would not, individually or in the aggregate, be reasonably likely to have a
Material Adverse Effect.

 

5.5.         Reports.  Except as set forth in Schedule 5.5,
since January 1, 2004, each of the Seller Parties has filed or caused to
be timely filed with the SEC (limited to filings on Form 10-K and Form 10-Q,
and any amendments thereof, with respect to filings under the Exchange Act) and
the Federal Energy Regulatory Commission (the “FERC”), as the case may
be, all material forms, statements, reports and documents (including all
exhibits, amendments and supplements required to be filed by them) with respect
to the business and operations of the Sellers under each of the Federal Power
Act and the Holding Company Act and the respective rules and regulations
thereunder, all of which complied in all material respects with all applicable
requirements of the appropriate act and the rules and regulations
thereunder in effect on the date each such report was filed, and there are no
material misstatements or omissions in respect of such reports.

 

5.6.         Absence of Certain Changes or Events; No Undisclosed Liabilities.

 

(a)           Except as
disclosed in Schedule 5.6(a), since December 31, 2004, each of
the Sellers has conducted its business only in the ordinary course of business
consistent with past practice and Good Utility Practice and there has not
been:  (i) any Material Adverse
Effect; (ii) any damage, destruction or casualty loss with respect to the
Acquired Assets, whether covered by insurance or not, which would, individually
or in the aggregate, be reasonably likely to have a Material Adverse Effect; (iii) any
entry into any agreement, commitment or transaction (including, without
limitation, any Indebtedness, capital expenditure or capital financing) by any
of the Seller Parties, which is material to the business or operations of the
Sellers; (iv) any change in financial or Tax accounting methods,
principles or practices, of the Sellers, or with respect to any of the Acquired
Assets, except as required under GAAP; (v) any election, revocation, or
amendment of any Tax election of the Sellers or with respect to any of the
Acquired Assets; (vi) any filing of any amended Tax Return of the Sellers
or with respect to any of the Acquired Assets; (vii) an entry into any
closing agreement affecting any Tax liability or refund of the Sellers or with
respect to any of the Acquired Assets; or (viii) a settlement or
compromise of any Tax liability or refund of the Sellers or with respect to any
of the Acquired Assets.

 

(b)           There are
no Liabilities of the Seller Parties relating to the Wheatland Facility or the
Site of a nature that would be required to be accrued in accordance with GAAP
on a balance sheet of any Seller Party if such Seller Party had prepared such a
balance sheet.

 

5.7.         Indebtedness of the Sellers. 
Except for Indebtedness pursuant to the Existing Debt Documents, neither
Seller has any Indebtedness.

 

5.8.         Real Property and Related Matters.

 

(a)           Except as
set forth in Schedule 5.8(a) and except for Permitted Encumbrances, (i) Wheatland
LLC holds (A) good, valid and marketable title in fee simple to

 

21

 

each parcel included in the Wheatland Owned Real Property and (B) a
valid perpetual easement to each parcel subject to the Other Real Property
Interests that are appurtenant to the Wheatland Owned Real Property and (ii) Lake
LLC holds (A) good, valid and marketable title in fee simple to each
parcel included in the Lake Owned Real Property and (B) a valid perpetual
easement to each parcel subject to the Other Real Property Interests that are
appurtenant to the Lake Owned Real Property. 
The Other Real Property Interests are in full force and effect.  The Owned Real Property is the only real
property owned by the Sellers, and the Other Real Property Interests constitute
all easements,
rights-of-way or other rights of the Sellers to use real property owned by
Persons other than the Sellers.  The
Site is the only real property necessary for the use and operation of the
Wheatland Facility as currently used and operated.  No other Person has, directly or indirectly,
any interest in the Site (whether legal or equitable), except for Permitted
Encumbrances, and no other Person has any contract, option, right of first
refusal or other agreement to purchase the Site or any part thereof.

 

(b)           To the
Seller Parties’ Knowledge, each of the Wheatland Owned Real Property and the
Lake Owned Real Property is an independent property that does not rely on any
facilities, Improvements or easements (other than public facilities and public
roads) located on any property other than the Site to fulfill any requirement
of any Governmental Entity, for the furnishing to the Wheatland Owned Real
Property or the Lake Owned Real Property of any access, essential building
systems or utilities or for the use or operation of the Wheatland Facility.

 

(c)           Each of
the Wheatland Owned Real Property and the Lake Owned Real Property is a
separate real estate tax parcel, separate and apart from any property other
than the Owned Real Property.  The Seller
Parties have not received any notice of any real property special tax
assessments or reassessment of the Site. 
There are no unpaid charges, debts, Liabilities or claims arising from
the construction, occupancy, use or operation of the Site which could give rise
to any mechanic’s or materialman’s or other statutory lien against the Site
other than charges incurred in the ordinary course of business and which shall
be timely paid.

 

(d)           To the
Seller Parties’ Knowledge, true and accurate copies of the existing owner’s
title insurance policy with respect to the Site issued to Wheatland LLC and
Lake LLC and the lender’s title insurance policy issued to Citibank, N.A., as
Collateral Agent, are attached hereto as Schedule 5.8(d).

 

(e)           There are
no tax proceedings pending in respect of the Site.

 

(f)            Schedule 5.8(f) describes
all of the leases, licenses and occupancy agreements affecting the Site and to
which either of the Seller Parties is a party, whether as lessor or lessee (the
“Leases”).  No third party has any
occupancy or use rights with respect to the Owned Real Property except pursuant
to the Leases.  All Leases are in full
force and effect.  All material
obligations of the Seller Parties under the Leases and, to the Seller Parties’
Knowledge, all material obligations of the other parties to the Leases under
such Leases, in each case, to be performed through the date hereof have been
performed in full.  The Seller Parties
have not received any notice of default by either of the Sellers under any of
the Leases.

 

22

 

(g)           There are no surface
conditions, and to the Seller Parties’ Knowledge, there are no subsurface
conditions, upon the Site which constitute, or which with the passing of time
may constitute, a public nuisance.  To the
Seller Parties’ Knowledge, the Site does not contain any archeological
artifacts, human remains or other historical or archeological materials which
are regulated under any Laws.

 

(h)           To the
Seller Parties’ Knowledge, there are no public improvements pending,
contemplated or proposed relating to the Site. 
None of the Seller Parties have commenced any improvements upon the
Owned Real Property, nor to the Seller Parties’ Knowledge, are any such
improvements contemplated or proposed to be commenced upon the Owned Real
Property.

 

(i)            The Site
is served by public electric, telephone and utility services which are made
available to the Site from public utility easements, appurtenant insured
easements or public rights-of-way.  All
such utilities are adequate and have sufficient capacity for operation and use
of the Wheatland Facility as currently operated and used and for compliance
with the Assumed Contracts.

 

(j)            (i) The
obligations of the Sellers with regard to all applicable covenants, easements
and restrictions affecting the Site have been and are being performed in a
proper and timely manner by the Sellers, except for such matters which would
not, individually or in the aggregate, be reasonably likely to have a Material
Adverse Effect, (ii) the Sellers are not currently in default under any
agreement, order, judgment or decree relating to the Site, and no conditions or
circumstances exist which, with the giving of notice or passage of time, would
constitute a default or breach with respect to any such agreement, order,
judgment or decree, except for such default or breach which would not,
individually or in the aggregate, be reasonably likely to have a Material
Adverse Effect, (iii) the Sellers have received no notice of, and are not
otherwise aware of, any claims, causes of action, lawsuits or legal proceedings
pending or threatened regarding the ownership, use or possession of the Site
including, without limitation, condemnation or similar proceedings and (iv) the
Sellers have received no notice of any violation of any zoning, subdivision,
platting, building, fire, insurance, safety, health, environmental or other
applicable laws, ordinances or regulations (whether related to the Site or the
occupancy thereof).

 

(k)           The Wheatland Facility
is located entirely on the Owned Real Property (other than improvements
required to connect the Wheatland Facility with the electric transmission grid,
natural gas pipelines and water reserves, which are properly located on real
property subject to the Other Real Property Interests).

 

5.9.         Insurance.  All
material policies of fire, liability, worker’s compensation and other forms of
insurance owned or held by the Seller Parties or their Affiliates that insure
any of the Acquired Assets are in full force and effect, subject to the terms
of each policy, all premiums with respect thereto have been paid (other than
retroactive premiums which may be payable with respect to comprehensive general
liability and worker’s compensation insurance policies), and no notice of
cancellation or termination has been received with respect to any such policy
which was not replaced on substantially similar terms prior to the date of such
cancellation.  During the past 12 months,
the Seller Parties or their Affiliates have not been refused any insurance with

 

23

 

respect to the Acquired
Assets nor has such coverage been limited by any insurance carrier to which
Seller Parties or their Affiliates has applied for any such insurance or with
which it has carried insurance.

 

5.10.       Environmental
Matters.

 

(a)           Except as
set forth in Schedule 5.10(a), and except for such matters that
would not, individually or in the aggregate, be reasonably likely to have a
Material Adverse Effect:

 

(i)            The Sellers have obtained all
permits, licenses, registrations, exemptions and other authorizations which are
required under the Environmental Laws for the ownership, use and operation of
the Wheatland Facility and the Owned Real Property as presently operated (“Environmental
Permits”).  All such Environmental
Permits are in effect, and, to the Seller Parties’ Knowledge, no appeal or any
other action is pending to revoke any such Environmental Permits.  The Sellers have filed (or will have filed by
the Closing Date) all applications necessary to renew any necessary
Environmental Permits in a timely fashion.

 

(ii)           The Sellers have been and are in compliance
with applicable Environmental Laws and Environmental Permits.  To the Seller Parties’ Knowledge, predecessor
owners and operators of the Wheatland Facility and the Owned Real Property were
in compliance with applicable Environmental Laws and Environmental Permits.

 

(iii)          The Sellers have made available to the Buyers
complete copies of all the environmental studies on the Wheatland Facility or
the Owned Real Property in their
possession, including, without limitation, environmental audit reports and
Phase I or Phase II environmental assessments, if any.

 

(iv)          There is no civil, criminal or administrative
action, suit, demand, claim, hearing, notice of violation, investigation,
proceeding, notice or demand letter existing or pending that has not been
resolved with no further obligations on the part of the Sellers or, to the
Seller Parties’ Knowledge, threatened, relating to the Wheatland Facility or
the Site pursuant to any Environmental Laws or relating Hazardous Substances,
including, without limitation, claims for personal or bodily injury with
respect to exposure to Hazardous Substances.

 

(v)           The Sellers have not, and, to the Seller
Parties’ Knowledge, no other Person has Released any Hazardous Substances on,
beneath or adjacent to the Site,
except for Releases of Hazardous Substances that are not likely to result in a
claim against the Sellers.  To the
Seller Parties’ Knowledge, there are no Hazardous Substances present on,
beneath or adjacent to the Site, except for such Hazardous Substances that are
not likely to result in a claim against the Sellers.

 

(vi)          To the
Seller Parties’ Knowledge, no
Release or Response Action has occurred at the Site that could reasonably be expected to result
in the assertion or creation of an Encumbrance on the Site by any Governmental Entity with respect
thereto, nor has

 

24

 

any
such assertion of an Encumbrance been made by any Governmental Entity with
respect thereto.

 

(vii)         Neither of the Sellers has entered into or
agreed to any outstanding consent decree or order, or is subject to any
outstanding judgment, judicial or administrative decree or judicial or
administrative order relating to compliance with any Environmental Law or to
Response Actions to address a Release or threatened Release of Hazardous
Substances under any Environmental Law.

 

(b)           The Seller Parties have listed
the current Environmental Permits in Schedule 5.10(b), and have
made available to the Buyers a complete copy of each Environmental Permit.

 

(c)           Schedule 5.10(c) lists
all Emission Allowances for 2005 and future years that have been (i) issued
or allocated by the U.S. Environmental Protection Agency or the Indiana
Department of Environmental Management specifically for the Wheatland Facility
or (ii) purchased by the Sellers specifically for the Wheatland Facility
on or before the date hereof.

 

(d)           The
representations and warranties made in this Section 5.10 are the exclusive
representations and warranties of the Seller Parties relating to Environmental
Laws, Environmental Permits or other environmental matters, and no other
provision of this Agreement shall be deemed to constitute, directly or
indirectly, a representation or warranty with respect to such matters.

 

5.11.       Labor and
Employment Matters.  With respect to the
business or operations of the Sellers, except for such matters that would not,
individually or in the aggregate, be reasonably likely to have a Material
Adverse Effect:  (a) each of the
Seller Parties is in compliance with all applicable Laws respecting employment
and employment practices, terms and conditions of employment, health and
safety, and wages and hours; (b) none of the Seller Parties has received
notice of any charge or complaint against it pending before the Equal
Employment Opportunity Commission, the National Labor Relations Board or any
other Governmental Entity regarding an unlawful employment practice; (c) there
is no labor strike, slowdown or work stoppage actually pending or, to the
Seller Parties’ Knowledge, threatened against or affecting the Seller Parties
and none of the Seller Parties has experienced any strike, slowdown or work
stoppage in the past 5 years; (d) none of the Seller Parties has
received notice that any representation petition respecting the employees of
the Seller Parties has been filed with the National Labor Relations Board, no
union claims to represent any of the employees of the Seller Parties, and there
has been no labor union, prior to the date hereof, organizing or attempting to
organize any employees of the Seller Parties into one or more collective
bargaining units; (e) there are no complaints, lawsuits, arbitrations or
other proceedings pending or, to the Seller Parties’ Knowledge, threatened by
or on behalf of any present or former employee of the Seller Parties arising
out of or relating in any way to any present or former employee’s hiring by,
employment with or separation from the Seller Parties, specifically including,
without limitation, any claim for breach of any express or implied contract of
employment, wrongful termination or infliction of emotional distress, or any
claim under any applicable Law respecting employment, employment practices,
terms and conditions of employment, health and safety, and wages and hours; and
(f) to the Seller Parties’ Knowledge, no Sellers’ Employee, during the
course of and

 

25

 

as part of his or her employment with the Sellers
or their Affiliates, has been exposed to Hazardous Substances exceeding
permissible exposure limits established by applicable Law.  Schedule 5.11 lists the three
employees of the Seller Parties or their Affiliates who provide services on a
full time basis for the Wheatland Facility as of the date hereof (collectively,
the “Sellers’ Employees”) and identifies the employer of each such
Sellers’ Employee.

 

5.12.       ERISA;
Employee Benefit Plans.

 

(a)           Schedule 5.12(a) lists
all deferred compensation, incentive compensation, bonus, vacation, equity
compensation and equity based or ownership plans, policies, programs,
agreements and arrangements, all other “employee benefit plans,” within the
meaning of section 3(3) of ERISA and all employment, retention,
consulting, change in control, termination or severance agreements, programs,
plans, policies or arrangements, covering the Sellers’ Employees, including
such policies of any Person that is considered a single employer with any of
the Seller Parties under section 4001 of ERISA or section 414 of the
Code (each, an “ERISA Affiliate”) (collectively, the “Benefit Plans”).  True and complete copies of all Benefit Plans
(or if the Benefit Plan is not a written plan, a description thereof), any
related trust or other funding vehicle, the latest version of any reports or
summaries required under ERISA or the Code including, without limitation,
summary plan descriptions and summary material modifications, a copy of the
three most recent annual reports and actuarial reports, to the extent required
by ERISA or the Code, and the most recent determination letter received from
the Internal Revenue Service (the “IRS”) with respect to each Benefit
Plan intended to qualify under section 401 of the Code have been provided
or made available to the Buyers.  The
Sellers have had no employees and do not sponsor, maintain or contribute to
Benefit Plans on behalf of the Sellers’ Employees.

 

(b)           All
Benefit Plans that are subject to ERISA, other than “multiemployer plans”
within the meaning of sections 3(37) or 4001(a)(3) of ERISA, are in
compliance with their terms, and in material compliance with all applicable
Laws, including, without limitation, the Code and ERISA.  Each Benefit Plan intended to be qualified
within the meaning of section 401(a) of the Code has received a
current favorable IRS determination letter with respect to such
qualifications.  None of the Seller
Parties or, to the Seller Parties’ Knowledge, any ERISA Affiliate has engaged
in a transaction with respect to any Benefit Plan that could subject any of the
Seller Parties to a tax or penalty imposed by either sections 4975 or 4976 of
the Code or section 409 or 502(i) of ERISA in an amount that would be
material.

 

(c)           There has
been no amendment to, or announcement or other communication by the Seller
Parties or, to the Seller Parties’ Knowledge, any ERISA Affiliate regarding any
change in employee participation or coverage under, any Benefit Plan which
would increase materially the benefits provided to the Sellers’ Employees under
such plan above the level of the benefits provided thereunder for the most
recent fiscal year.  Neither the
execution of this Agreement nor the consummation of any of the transactions
contemplated hereby or the termination of employment after the date hereof will
entitle any Sellers’ Employees to severance pay or other payments (but not
including any payments made pursuant to any tax-qualified retirement plan), any
increase in severance pay or other payments, or any acceleration of vesting of
any payment or benefit, or would result in any funding of any payment or
benefit by the Seller Parties.

 

26

 

(d)                                 Neither
the Seller Parties nor any ERISA Affiliate (i) has failed to fulfill its
obligations under the minimum funding requirements of section 302 of
ERISA, to the extent applicable; or (ii) has any actual or potential
withdrawal liability resulting from a complete or partial withdrawal (as
defined in sections 4203 and 4205 of ERISA) from any multiemployer plan (as
defined in sections 3(37) and 4001(a)(3) of ERISA).  No Liability under Title IV of ERISA has been
incurred by the Seller Parties or any ERISA Affiliate that has not been
satisfied in full as of the date of this Agreement.  No event has occurred in connection with any
of the employee benefit plan of the Seller Parties or any ERISA Affiliate that
has, will or may result in any Liability for which any transferee of assets of
the Sellers may be responsible, whether by operation of Law, by contract or
otherwise.  The transactions contemplated
by this Agreement will not, either alone or in combination with any other event
or events, cause the Buyers to incur any Liabilities under Title IV of ERISA or
section 4980B of the Code.

 

(e)                                  To
the Seller Parties’ Knowledge, none of the Seller Parties nor any ERISA
Affiliate has used the services of workers provided by third party contract
labor suppliers, temporary employees, “leased employees” (as that term is
defined in section 414(n) of the Code), or independent contractors to an
extent that would reasonably be expected to result in the disqualification of
any of the Benefit Plans or the imposition of penalties or excise taxes with
respect to the Benefit Plans by the IRS, the Department of Labor, or the
Pension Benefit Guaranty Corporation.

 

(f)                                    Except
as set forth in Schedule 5.12(f), there are no pending or
threatened claims by or on behalf of any Benefit Plan, by any employee,
beneficiary or alternate payee against any such Benefit Plan, or otherwise
involving any such Benefit Plan (other than routine claims for benefits)
against the Seller Parties or any ERISA Affiliate.

 

5.13.                     Contracts.

 

(a)                                  Schedule 5.13(a) lists
the following agreements and contracts to which any of the Seller Parties
(limited in the case of AESC, to the extent such agreements or contracts are
included in the definition of AESC Transferred Assets) is a party or by which
either of the Sellers or the Wheatland Facility is bound (the “Material
Contracts”):

 

(i)                                     gas
pipeline interconnection agreements, gas supply agreements, gas purchase and
sale agreements, and gas transportation agreements;

 

(ii)                                  power
purchase agreements, electricity transmission agreements, and electricity
interconnection agreements;

 

(iii)                               swap,
exchange, commodity option or hedging agreements;

 

(iv)                              material
operating and maintenance agreements;

 

(v)                                 material
equipment lease, purchase and sale contracts;

 

(vi)                              any
contract (i) requiring known or liquidated expenditures or payments by any
of the Seller Parties in excess of $100,000 in any calendar year or (ii) that
cannot

 

27

 

be terminated without
penalty by the Seller Party that is a party to such contract upon 90 days’
notice or less;

 

(vii)                           any
pending sale or lease of real property of either Seller or any pending sale or
lease of personal property of either Seller (other than sales of electric
energy in the ordinary course of business) in excess of $100,000;

 

(viii)                        any
contract that contains a covenant not to compete applicable to any Seller
Party;

 

(ix)                                any
other agreement material to either Seller, the Acquired Assets or the Wheatland
Facility; and

 

(x)                                   any
amendment relating to any of the foregoing.

 

(b)                                 The
Seller Parties have provided or made available to the Buyers true, correct and
complete copies of all the Material Contracts.

 

(c)                                  Each
of the Material Contracts (i) constitutes a valid and binding obligation
of the respective Seller Parties and, to the Seller Parties’ Knowledge,
constitutes a valid and binding obligation of the other parties thereto, (ii) is
in full force and effect, and (iii) except as set forth in Schedule 5.13(c),
may be transferred to the Buyers pursuant to this Agreement, without the
consent of, or notice to, any third party.

 

(d)                                 No
Seller Party and, to the Seller Parties’ Knowledge, no other party to any of
the Material Contracts, is in breach or default under, and, to the Seller
Parties’ Knowledge, no event has occurred that, with notice or lapse of time,
would constitute a breach or default or permit termination, modification or
acceleration of, any of the Material Contracts, except for such breaches,
defaults or events as to which requisite waivers have been, or prior to the
Closing will have been, obtained or that would not, individually or in the
aggregate, be reasonably likely to have a Material Adverse Effect.

 

5.14.                     Legal Proceedings.  Since
December 31, 2004, there have been no claims, actions, proceedings or
investigations pending or, to the Seller Parties’ Knowledge, threatened in
writing against any Seller before any Governmental Entity, which (a) involve
in the aggregate an amount greater than $100,000 or (b) if adversely determined
would, individually or in the aggregate, be reasonably likely to have a
Material Adverse Effect.  Neither the
Sellers, the Acquired Assets nor the Assumed Liabilities are subject to any
outstanding judgments, rules, orders, writs, injunctions or decrees of any
Governmental Authority relating specifically to the Sellers, the Acquired
Assets or the Assumed Liabilities that would, individually or in the aggregate,
be reasonably likely to have a Material Adverse Effect.

 

5.15.                     Compliance with Permits and Laws.

 

(a)                                  Each
of the Sellers has all material permits, subdivision approvals, variances,
licenses, franchises and other governmental authorizations, consents and
approvals (other than with respect to Environmental Laws which are addressed in
Section 5.10) (collectively, “Permits”) necessary to operate its
respective businesses as presently conducted.

 

28

 

Except as set forth in Schedule 5.15(a),
no Seller has received any notification that it or the Site is in material
violation of any Permits or Laws applicable to it or the Acquired Assets.  Each Seller and the Site is in material
compliance with all Permits and Laws applicable to it or the Acquired Assets.

 

(b)                                 Schedule 5.15(b) lists
all Permits obtained by the Sellers in connection with the ownership or
operation of the Wheatland Facility and the Site and all consent orders to
which any Seller is subject.  The Seller
Parties have provided or made available to the Buyers true, correct and
complete copies of all Permits and consent orders.  All such Permits have become final and
nonappealable and, except as would, individually or in the aggregate, be
reasonably likely to have a Material Adverse Effect, are valid and in full
force and effect.

 

5.16.                     Regulation; Sole Purpose.

 

(a)                                  Wheatland
LLC is an “exempt wholesale generator” as defined by the Holding Company Act
and is authorized by the FERC to sell electric energy at market-based rates
pursuant to an approved rate schedule on file with the FERC.  The Wheatland Facility is an “eligible
facility” as defined in the Holding Company Act.  Neither Seller is subject to regulation as a
public utility, public service company or an electric company or similar entity
subject to regulation by a Governmental Authority.

 

(b)                                 Wheatland
LLC has not conducted, and is not conducting, any business or operations, other
than the development, construction, ownership, operation and maintenance of the
Wheatland Facility, including the generation and sale of electric energy at
wholesale from the Wheatland Facility, and the ownership of the Wheatland Owned
Real Property.

 

5.17.                     Tax Matters.

 

(a)                                  Except
as set forth in Schedule 5.17, (i) all material Tax Returns
required to be filed on or before the Closing Date, by or with respect to any
Seller or any of the Acquired Assets, have been or will be timely filed on or
before the Closing Date in all jurisdictions in which such Tax Returns are
required to be filed; (ii) such Tax Returns are or will be true, correct,
and complete in all material respects; and (iii) all Taxes shown to be due
on such Tax Returns have been or will be timely paid in full.

 

(b)                                 No
statute of limitations of any jurisdiction regarding the assessment or
collection of any Tax of either Seller or with respect to any of the Acquired
Assets has been extended or waived, which extension or waiver remains in
effect.

 

(c)                                  There
are no audits, claims, assessments, levies, administrative proceedings, or
lawsuits pending, or to the Seller Parties’ Knowledge, threatened against either
Seller or with respect to any of the Acquired Assets by any taxing authority.

 

(d)                                 The
Sellers have each qualified as, and been treated as, an entity disregarded as
separate from its owner for federal, state and local income Tax purposes at all
times since the date of its formation.

 

29

 

(e)                                  There
are no Encumbrances for Taxes on any of the Acquired Assets, except for
Permitted Encumbrances.

 

(f)                                    To
the Seller Parties’ Knowledge, no claim has ever been made by an authority in a
jurisdiction where a Tax Return is not filed by, or with respect to, either
Seller or any of the Acquired Assets, that either Seller or any of the Acquired
Assets are or may be subject to taxation in that jurisdiction.

 

(g)                                 The
Sellers have each withheld and paid all material Taxes required to have been
paid in connection with amounts paid or owing to any employee, independent
contractor, creditor, member or other third party.

 

(h)                                 True
and complete copies of all Income Tax Returns filed by either Seller, or any
Tax Returns (other than Income Tax Returns) filed with respect to any of the
Acquired Assets, and all written communications to or from any taxing authority
since January 1, 2003 have been made available to the Buyers for inspection.

 

(i)                                     None
of the assets of the Sellers (i) is required to be treated as “tax-exempt
use property” within the meaning of section 168(h) of the Code, (ii) is
subject to the provisions of section 168(f) of the Code, or (iii) directly
or indirectly secures any debt the interest on which is tax exempt under section 103(a) of
the Code.

 

5.18.                     Related Party Matters. 
Except as set forth in Schedule 5.18, neither Seller is
party to any agreement, contract, commitment, transaction or proposed
transaction with any of its Affiliates.

 

5.19.                     Assets Other than Real Property Interests.

 

(a)                                  Except as set forth in Schedule 5.19(a),
each of the Seller Parties has good and valid title to all of its
respective properties and assets constituting the Acquired Assets other than
the Site (it being understood that the Site is covered by Section 5.8), in
each case free and clear of all Encumbrances except any Permitted Encumbrances.

 

(b)                                 All
the material tangible personal property of the Sellers has been maintained in
all material respects in accordance with the past practice of the Sellers and
Good Utility Practice.  Each item of
material tangible personal property of the Sellers is in all material respects
in good working order, ordinary wear and tear excepted.  All leased personal property of the Sellers
is in all material respects in the condition required of such property by the
terms of the lease applicable thereto during the term of the lease and upon the
expiration thereof.

 

(c)                                  Other
than the Acquired Assets and the Excluded Assets listed in clauses (a) through
(g) of Section 2.2, none of the Seller Parties or their Affiliates
owns any material assets relating to the Site or the Wheatland Facility.

 

5.20.                     Intellectual Property. 
The Sellers own, or possess licenses or other valid rights to use, all
patents, patent rights, trademarks, trademark rights, trade names, trade name
rights, copyrights, service marks, service mark rights, trade secrets,
applications to register, and registrations for, the foregoing trademarks, service
marks, know-how and other proprietary rights

 

30

 

and information
(collectively, the “Intellectual Property”) necessary in connection with
the business of the Sellers as currently conducted, except where the failure to
possess such rights or licenses or valid rights to use would not, individually
or in the aggregate, be reasonably likely to have a Material Adverse
Effect.  The conduct of the businesses of
the Sellers as currently conducted does not infringe upon any Intellectual
Property of any third party, except where such infringement would not,
individually or in the aggregate, be reasonably likely to have a Material
Adverse Effect.  No person is infringing
upon any Intellectual Property of the Sellers, except where such infringement
would not, individually or in the aggregate, be reasonably likely to have a
Material Adverse Effect.  Except as set
forth in Schedule 5.20, the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby will not
result in the loss of, or any Encumbrance on, the rights of the Sellers with
respect to the Intellectual Property owned or used by them, except where such
loss or encumbrance would not, individually or in the aggregate, be reasonably
likely to have a Material Adverse Effect.

 

5.21.                     Due Diligence Materials. 
All of the Due Diligence Materials that are photostatic, facsimile or
electronic copies conform in all material respects with the original documents.

 

5.22.                     No Knowledge of Certain Conditions.  To the Seller Parties’ Knowledge, and
assuming the accuracy of the Buyers’ representations and warranties in this
Agreement, the parties’ compliance with their obligations under this Agreement,
and the making or obtaining, as applicable, of the Buyers Required Regulatory
Approvals, the Sellers Required Regulatory Approvals and any other third party
consents contemplated herein, no condition or circumstance exists as of the
date of this Agreement that will excuse the Seller Parties from their timely
performance of their obligations under this Agreement.

 

5.23.                     Disclaimer of Other Representations and Warranties.

 

(a)                                  EXCEPT FOR THOSE REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH IN
THIS ARTICLE V OR ELSEWHERE IN THIS AGREEMENT OR THE ANCILLARY AGREEMENTS,
THE SELLER PARTIES MAKE NO REPRESENTATIONS OR WARRANTIES OF ANY KIND OR NATURE,
EXPRESS OR IMPLIED, AS TO THE ACQUIRED ASSETS, INCLUDING, WITHOUT LIMITATION,
THE SITE OR THE WHEATLAND FACILITY, THE OPERATIONS OF THE WHEATLAND FACILITY,
OR THE PROSPECTS (FINANCIAL AND OTHERWISE), RISKS AND OTHER INCIDENTS OF THE
WHEATLAND FACILITY OR THE ACQUIRED ASSETS, INCLUDING, WITHOUT LIMITATION, WITH
RESPECT TO THE ACTUAL OR RATED GENERATING CAPABILITY OF THE WHEATLAND FACILITY
OR THE ABILITY OF THE BUYERS TO GENERATE OR SELL ELECTRICAL ENERGY.

 

(b)                                 WITHOUT LIMITING THE FOREGOING, AND EXCEPT FOR THOSE REPRESENTATIONS
AND WARRANTIES EXPRESSLY SET FORTH IN THIS ARTICLE V OR ELSEWHERE IN THIS
AGREEMENT OR THE ANCILLARY AGREEMENTS, THE SELLER PARTIES MAKE NO
REPRESENTATIONS OR WARRANTIES OF MERCHANTABILITY, USAGE OR SUITABILITY OR
FITNESS FOR ANY PARTICULAR PURPOSE WITH RESPECT TO THE ACQUIRED ASSETS OR ANY
PART THEREOF, OR AS TO THE WORKMANSHIP THEREOF, OR THE ABSENCE OF ANY
DEFECTS THEREIN, WHETHER LATENT OR PATENT, OR COMPLIANCE OF SUCH PROPERTIES OR
ASSETS WITH ANY LAWS, INCLUDING, WITHOUT LIMITATION, ENVIRONMENTAL LAWS, OR AS
TO THE CONDITION OF THE ACQUIRED ASSETS OR ANY PART THEREOF, OR AS TO THE
ABSENCE OF 

 

31

 

HAZARDOUS SUBSTANCES OR LIABILITY
OR POTENTIAL LIABILITY UNDER ENVIRONMENTAL LAWS WITH RESPECT TO THE ACQUIRED
ASSETS.  ANY SUCH OTHER REPRESENTATIONS
AND WARRANTIES ARE HEREBY EXPRESSLY DISCLAIMED.

 

(c)                                  EXCEPT FOR THOSE REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH IN
THIS ARTICLE V OR ELSEWHERE IN THIS AGREEMENT OR THE ANCILLARY AGREEMENTS,
THE ACQUIRED ASSETS ARE SOLD “AS IS, WHERE IS” ON THE CLOSING DATE, AND IN
THEIR CONDITION ON THE CLOSING DATE “WITH ALL FAULTS.”

 

(d)                                 WITHOUT LIMITING THE FOREGOING, EXCEPT AS OTHERWISE SET FORTH IN THIS
AGREEMENT OR THE ANCILLARY AGREEMENTS, NO MATERIAL OR INFORMATION PROVIDED BY
OR COMMUNICATIONS MADE BY THE SELLER PARTIES OR THE SELLER PARTIES’
REPRESENTATIVES, INCLUDING, WITHOUT LIMITATION, ANY INFORMATION OR MATERIAL
CONTAINED IN THE DUE DILIGENCE MATERIALS OR IN THE INFORMATION MEMORANDUM, WILL
CAUSE OR CREATE ANY WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, CONDITION,
VALUE OR QUALITY OF THE ACQUIRED ASSETS.

 

ARTICLE VI

REPRESENTATIONS AND WARRANTIES OF
THE BUYERS

 

The Buyers jointly and
severally represent and warrant to the Seller Parties, except as set forth on
the corresponding sections of the Buyers’ Schedules, as follows:

 

6.1.                            Organization.  PSI
Energy is a corporation duly organized, validly existing and in good standing
under the laws of the State of Indiana. 
CG&E is a corporation duly organized, validly existing and in good
standing under the laws of the State of Ohio.  Each of PSI Energy and CG&E has all
requisite corporate power and authority to own, lease and operate its
properties and to carry out its respective business as is now being conducted,
and is duly qualified and in good standing to do business in each jurisdiction
in which the nature of its business or the ownership or leasing of its assets
and properties makes such qualification necessary, except where the failure to
have such power and authority, or to be so qualified or in good standing, would
not individually or in the aggregate, be reasonably likely to prevent or
materially delay or impair such Buyer’s ability to consummate the transactions
contemplated by this Agreement.  The
Buyers have made available to the Seller Parties complete and correct copies of
their respective Articles of Incorporation and By-Laws, each as currently in
effect.

 

6.2.                            Authority Relative to this Agreement.  Each of the Buyers has full corporate power
and authority to execute and deliver this Agreement and, as of the Closing
Date, will have full corporate power and authority to execute and deliver the
Ancillary Agreements, as applicable, and to consummate the transactions
contemplated hereby and thereby.  The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been, and, as of the Closing, the
execution and delivery of the Ancillary Agreements and the consummation of the
transactions contemplated thereby will have been, duly and validly authorized
by the Boards of Directors of each of the Buyers, and no other corporate
proceedings on the part of the Buyers are necessary to authorize this Agreement
and, as of the Closing, the Ancillary Agreements, as applicable, or to
consummate the transactions contemplated hereby or

 

32

 

thereby.  This Agreement has been, and, as of the
Closing, the Ancillary Agreements, as applicable, will have been, duly and
validly executed and delivered by the Buyers, as applicable.  Assuming that this Agreement and, as of the
Closing, the Ancillary Agreements constitute valid and binding agreements of
the respective Seller Parties, subject to receipt of the Sellers Required
Regulatory Approvals and the Buyers Required Regulatory Approvals, this
Agreement constitutes, and the Ancillary Agreements will constitute, valid and
binding agreements of the Buyers, enforceable against the Buyers in accordance
with their respective terms, subject to the Bankruptcy and Equity Exception.

 

6.3.                            Consents and Approvals; No Violation.

 

(a)                                  Other
than obtaining the Sellers Required Regulatory Approvals and the Buyers
Required Regulatory Approvals, neither the execution and delivery of this
Agreement and, on the Closing Date, the Ancillary Agreements, as applicable, by
the Buyers nor the purchase by the Buyers of the Acquired Assets pursuant to
this Agreement or performance by the Buyers under this Agreement or the
Ancillary Agreements, as applicable, will (i) conflict with or result in
any breach of any provision of the respective Articles of Incorporation or
By-Laws of the Buyers, (ii) require any consent, approval, authorization
or permit of, or filing with or notification to, any Governmental Entity,
except where the failure to obtain such consent, approval, authorization or
permit, or to make such filing or notification, would not, individually or in
the aggregate, be reasonably likely to prevent or materially delay or impair
the Buyers’ ability to consummate the transactions contemplated by this
Agreement, (iii) require any consent, approval or notice, or result in a
default (with or without notice or lapse of time or both) (or give rise to any
right of termination, cancellation or acceleration), under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, license, agreement,
lease or other instrument or obligation to which any of the Buyers or their
respective Subsidiaries is a party or by which any of the Buyers or their
respective Subsidiaries may be bound, except for such defaults (or rights of
termination, cancellation or acceleration) as to which requisite waivers or
consents have been obtained or which, individually or in the aggregate, are not
reasonably likely to prevent or materially delay or impair the Buyers’ ability
to consummate the transactions contemplated by this Agreement, or (iv) violate
any Law or permit applicable to any of the Buyers, or their respective assets,
which violation would, individually or in the aggregate, be reasonably likely
to prevent or materially delay or impair the Buyers’ ability to consummate the
transactions contemplated by this Agreement.

 

(b)                                 Except
for (i) any filings or approvals under section 203 and section 205
the Federal Power Act (the “FERC Approvals”); (ii) the filings by
the Buyers required by the HSR Act and the expiration or earlier termination of
all waiting periods under the HSR Act; and (iii) subject to Section 11.16,
(A) IURC approval of a certificate of public convenience and necessity (“CPCN”)
and deferred ratemaking treatment for transaction costs, capital improvement
costs, carrying costs and depreciation costs (i.e., return on and return of)
associated with the Acquired Assets consistent with the Indiana Settlement
Agreement and (B) any required approvals from the SEC under the Holding
Company Act (the filings and approvals referred to in clauses (i) through
(iii), collectively, the “Buyers Required Regulatory Approvals”), no
declaration, filing or registration with, or notice to, or authorization,
consent or approval of any Governmental Entity is necessary for the
consummation by the Buyers of the transactions contemplated hereby or by the
Ancillary Agreements, other than such declarations, filings,

 

33

 

registrations, notices,
authorizations, consents or approvals which, if not obtained or made, are not
reasonably likely to prevent or materially delay or impair the Buyers’ ability
to consummate the transactions contemplated by this Agreement.

 

(c)                                  On
or prior to the date hereof, the Buyers executed a settlement agreement with
the IURC staff and the Indiana Office of Utility Consumer Counselor concerning
both CPCN authority and ratemaking treatment regarding the Wheatland Facility,
a copy of which is attached hereto as Exhibit E (the “Indiana
Settlement Agreement”).

 

6.4.                            Availability of Funds. 
Each Buyer has access to, and at the Closing will have available,
sufficient funds to enable it to pay its portion of the Purchase Price on the
terms and conditions of this Agreement. 
The Buyers’ obligations hereunder are not subject to any conditions
regarding the Buyers’ ability to obtain financing for the consummation of the
transactions contemplated hereby.

 

6.5.                            Litigation.  There
are no claims, actions, proceedings or investigations pending or, to the Buyers’
Knowledge, threatened against or relating to either Buyer before any
Governmental Entity, which question,
challenge the validity of, or are reasonably likely to have the effect of
preventing, delaying, making illegal or otherwise interfering with, this
Agreement or the Ancillary Agreements, the transactions contemplated herein or
therein or any action taken or proposed to be taken by the Buyers pursuant
hereto or thereto or in connection with the transactions contemplated herein or
therein.

 

6.6.                            No Knowledge of Certain Conditions.  To the Buyers’ Knowledge, and assuming the
accuracy of the Seller Parties’ representations and warranties in this
Agreement, the parties’ compliance with their obligations under this Agreement,
and the making or obtaining, as applicable, of the Buyers Required Regulatory
Approvals, the Sellers Required Regulatory Approvals and any other third party
consents contemplated herein, no condition or circumstance exists as of the
date of this Agreement that will excuse the Buyers from their timely
performance of their obligations under this Agreement.

 

6.7.         Due Diligence Investigation and Other
Acknowledgements.

 

(a)                                  Each
of the Buyers acknowledges and agrees that it has conducted and is relying
exclusively upon the Seller Parties’ representations and warranties in this
Agreement and any Ancillary Agreement and its own inspections and investigation
in order to satisfy itself as to the condition and suitability of the business,
Inventories, assets, real and personal properties, Liabilities, results of
operations, condition (financial or otherwise) and prospects of the Wheatland
Facility and of the Acquired Assets.

 

(b)                                 Each
of the Buyers acknowledges and agrees that, except as provided in this
Agreement and any Ancillary Agreement, the Seller Parties make no
representations or warranties (express, implied, at common law, statutory or
otherwise) with respect to the accuracy or completeness of the Information
Memorandum or the Due Diligence Materials now, previously or hereafter made
available to the Buyers in connection with this Agreement (including any
description of the Wheatland Facility, revenue, price and expense assumptions,
electricity demand forecasts or environmental information), or of any other
information

 

34

 

furnished to the Buyers
or the Buyers’ Representatives by the Seller Parties or the Seller Parties’
Representatives.

 

6.8.                            Disclaimer of Other Representations and Warranties.  EXCEPT
FOR THOSE REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH IN THIS ARTICLE VI
OR THE ANCILLARY AGREEMENTS, THE BUYERS MAKE NO REPRESENTATIONS OR WARRANTIES
OF ANY KIND OR NATURE, EXPRESS OR IMPLIED.

 

ARTICLE VII

COVENANTS OF THE PARTIES

 

7.1.                            Conduct of Business.

 

(a)                                  Except
as specifically contemplated in this Agreement, except as described in Schedule 7.1(a),
except as required as a result of any change in Law, except with respect to the
Excluded Assets, and except as necessitated by Good Utility Practices in
circumstances where time does not permit the Seller Parties to obtain the prior
written consent of the Buyers (in which case the Seller Parties shall notify
the Buyers promptly after any such circumstance), during the period from the
date of this Agreement to the Closing Date, each of the Sellers shall, and AESC
shall cause each Seller to, operate its respective business in the usual,
regular and ordinary course consistent with Good Utility Practice and shall use
Commercially Reasonable Efforts to preserve intact its respective business and
the goodwill and relationships with customers, suppliers, Governmental
Entities, local communities and others having dealings with it.  Without limiting the generality of the
foregoing, and, except as specifically contemplated in this Agreement, except as
described in Schedule 7.1(a), except as required as a result of any
change in Law, except with respect to the Excluded Assets, and except as
necessitated by Good Utility Practices in circumstances where time does not
permit the Seller Parties to obtain the prior written consent of the Buyers (in
which case the Seller Parties shall notify the Buyers promptly after any such
circumstance), prior to the Closing Date, without the prior written consent of
the Buyers, which will not be unreasonably withheld or delayed, the Sellers
shall not, and AESC shall not permit the Sellers to, directly or indirectly:

 

(i)                                     amend
their respective certificates of formation or limited liability company
agreements;

 

(ii)                                  (A) issue
any new limited liability company interests in the Sellers; (B) grant any
stock option, warrant or other right to purchase limited liability company
interests in the Sellers; or (C) issue any security convertible into
limited liability company interests in the Sellers;

 

(iii)                               (A) except
for Permitted Encumbrances, create, incur, assume or suffer to exist any Indebtedness
secured by, or any Encumbrances on, the Acquired Assets; or (B) assume,
guarantee, endorse or otherwise become liable or responsible (whether directly
or indirectly, contingently or otherwise) for the obligations of any Person;

 

(iv)                              make
any material change in the levels of Inventory customarily maintained by the
Sellers, other than consistent with Good Utility Practice;

 

35

 

(v)                                 sell,
lease (as lessor), transfer or otherwise dispose of, any asset, other than
assets used, consumed or replaced in the ordinary course of business consistent
with past practice and Good Utility Practice;

 

(vi)                              terminate,
extend, request or grant a waiver under, or otherwise amend, in any material
respect, any Material Contract or Lease, or enter into any contract, agreement,
commitment or arrangement which, had it been in effect as of the date hereof,
would have constituted a Material Contract;

 

(vii)                           execute,
enter into, terminate or otherwise amend, in any material respect, (A) any
of the Permits or Environmental Permits, other than routine renewals or (B) any
other agreement, order, decree or judgment relating to any current or new
Permits or Environmental Permits;

 

(viii)                        enter into
any power sales commitments other than those on customary terms and market
pricing and that have terms that expire on or before November 20, 2005 or
such other date that the parties mutually agree to be the date on which the
Closing is expected to occur;

 

(ix)                                permit
the Seller Parties or their Affiliates to (A) amend or cancel any
liability or casualty insurance policies related to the Acquired Assets or (B) fail
to maintain, by self insurance or with financially responsible insurance
companies, insurance in such amounts and against such risks and losses as was
in place as of the date of this Agreement and as is consistent with Good
Utility Practice for the Acquired Assets;

 

(x)                                   enter
into any commitment or contract not addressed in clauses (i) through (ix) above
that will be delivered or performed after the Closing, in an amount greater
than $100,000;

 

(xi)                                acquire
(including by merger, consolidation or acquisition of stock or assets) any
Person or any division thereof or material portion of the assets thereof;

 

(xii)                             liquidate,
dissolve or wind up either of the Sellers or commence a voluntary bankruptcy or
similar proceeding in respect of either of the Sellers or appoint a custodian,
receiver, liquidator or similar official or make an assignment for the benefit
of creditors or admit in writing of its inability to pay its debts;

 

(xiii)                          make
less than 100% of its Maintenance Expenditures, unless the projects associated
with such expenditures are duly completed at a price below the cost indicated
on Schedule 7.1(a)(xiii), or fail to make any capital expenditures
required in accordance with Good Utility Practice;

 

(xiv)                         enter
into any agreement or arrangement with any Affiliates other than such
agreements and arrangements as are entered into in the ordinary course of
business and which have been negotiated on an arm’s-length basis and are no
less favorable to the Sellers than the Sellers would have obtained from an
unaffiliated third party, and provided that the Sellers shall have notified the
Buyers in writing prior to entering into

 

36

 

any such Affiliate
transactions and, further, that the termination date of any such agreement or
arrangement shall be not later than the Closing Date;

 

(xv)                            take
any action that alters the regulatory status of the Sellers, the Site or the
Wheatland Facility;

 

(xvi)                         sell,
lease, dispose of, transfer or otherwise convey Emission Allowances issued with
respect to the Wheatland Facility, including the transfer of Emission
Allowances to other accounts maintained by the Sellers or their Affiliates,
except to the extent that such transfers do not result in a breach of the
provisions of this Agreement with respect to the Emission Allowances to be
transferred to the Buyers; provided that, in any event, if the Closing occurs
prior to November 30, 2005, the Sellers shall transfer to the Buyers, in
addition to the Emission Allowances to be transferred to the Buyers as set
forth in Section 2.1(b)(viii), additional Emission Allowances sufficient
for the Wheatland Facility to comply with the Indiana NOx Budget Program for NOx
emissions occurring in 2005 up to and including the Closing Date; provided
further, that if the Closing occurs on or after November 30, 2005, the
Sellers shall not be obligated to transfer Emissions Allowances with a vintage
year of 2005 to the Buyers to the extent necessary for the Sellers to comply
with the Indiana NOx Budget Program with respect to the emissions from the
Wheatland Facility; or

 

(xvii)                      enter into
any written or oral contract, agreement, commitment or arrangement with respect
to any of the transactions set forth in the foregoing paragraphs (i) through
(xvi).

 

(b)                                 Except
as specifically contemplated in this Agreement, except as described in Schedule 7.1(b),
except as required as a result of any change in Law, except with respect to the
Excluded Assets, and except as necessitated by Good Utility Practices in
circumstances where time does not permit the Seller Parties to obtain the prior
written consent of the Buyers (in which case the Seller Parties shall notify
the Buyers promptly after any such circumstance), during the period from the
date of this Agreement to the Closing Date, AESC shall, with respect to the
Sellers and the Wheatland Facility only, operate its business in the usual,
regular and ordinary course consistent with Good Utility Practice and shall,
with respect to the Sellers and the Wheatland Facility only, use Commercially
Reasonable Efforts to preserve intact its respective business and the goodwill
and relationships with customers, suppliers, Governmental Entities, local
communities and others having dealings with it. 
Without limiting the generality of the foregoing, and, except as
specifically contemplated in this Agreement, except as described in Schedule 7.1(b),
except as required as a result of any change in Law, except with respect to the
Excluded Assets, and except as necessitated by Good Utility Practices in
circumstances where time does not permit the Seller Parties to obtain the prior
written consent of the Buyers (in which case the Seller Parties shall notify
the Buyers promptly after any such circumstance), prior to the Closing Date,
without the prior written consent of the Buyers, which will not be unreasonably
withheld or delayed, AESC shall not, and shall not permit the Sellers or any of
their Affiliates to, directly or indirectly:

 

(i)                                     make
any change in the compensation payable or to become payable to any of the
Sellers’ Employees (other than normal recurring adjustments of salaries and

 

37

 

wages payable to the
Sellers’ Employees, which adjustments are in the ordinary course of business
consistent with past practice);

 

(ii)                                  enter
into or amend any employment, severance, change in control, retention,
consulting, termination or other compensation-related agreement or arrangement
with or with respect to, or make any loan or advance to, any of the Sellers’
Employees, except for loans permitted under any 401(k) plan sponsored by any
ERISA Affiliate in which the Sellers’ Employees participate;

 

(iii)                               (A) pay
or make any accrual or arrangement for payment of any pension, profit-sharing,
retirement allowance or other employee benefit pursuant to any existing plan,
agreement, policy or arrangement to any of the Sellers’ Employees, except to
the extent AESC or the Sellers are obligated to do so on the date hereof, (B) adopt
or pay, grant, issue, accelerate or accrue salary or other payments or benefits
pursuant to any pension, profit-sharing, bonus, extra compensation, incentive,
deferred compensation, stock purchase, stock option, stock appreciation right,
group insurance, termination, severance pay, retention, retirement or other
employee benefit plan, agreement or arrangement, or any employment or
consulting agreement with or for the benefit of any of the Sellers’ Employees,
except to the extent AESC or the Sellers are obligated to do so on the date
hereof, or (C) amend in any material respect any existing employee benefit
plan, agreement or arrangement in a manner inconsistent with the foregoing,
except as required by applicable Law;

 

(iv)                              hire
any new employee to provide services in connection with the businesses of the
Sellers with an annual salary in excess of $50,000 or terminate the employment
of any such employee other than for cause, or engage any additional consultants
or independent contractors or enter into or extend the term of any consulting
or independent contractor relationship;

 

(v)                                 encumber,
mortgage, pledge, lease, transfer or otherwise dispose of the AESC Transferred
Assets;

 

(vi)                              take
any action which alters the regulatory status of the Sellers;

 

(vii)                           (A) change
any financial or Tax accounting methods, policies or practices of either Seller
or with respect to any of the Acquired Assets, except as required under GAAP, (B) make,
revoke or amend any Tax election of either Seller or with respect to any of the
Acquired Assets, (C) file any amended Tax Return of either Seller or with
respect to any of the Acquired Assets, (D) enter into any closing
agreement affecting any material Tax liability or refund of either Seller or
with respect to any of the Acquired Assets, (E) settle or compromise any
material Tax liability or refund of either Seller or with respect to any of the
Acquired Assets, or (F) extend or waive the application of any statute of
limitations regarding the assessment or collection of any Tax of either Seller
or with respect to any of the Acquired Assets;

 

(viii)                        terminate,
extend, request or grant a waiver under, or otherwise amend, in any material
respect, any Material Contract or Lease, or enter into any contract,

 

38

 

agreement, commitment or
arrangement which, had it been in effect as of the date hereof, would have
constituted a Material Contract; or

 

(ix)                                enter
into any written or oral contract, agreement, commitment or arrangement with
respect to any of the transactions set forth in the foregoing paragraphs (i) through
(viii).

 

7.2.                            Access to Information.

 

(a)                                  Between
the date of this Agreement and the Closing Date, the Seller Parties will,
during ordinary business hours and upon reasonable notice, (i) give the
Buyers and the Buyers’ Representatives reasonable access to all books, records,
personnel, plants, offices and other facilities and properties of the Seller Parties
(limited, in the case of AESC, to the extent they pertain to the Sellers or
otherwise relate directly to this Agreement, the Ancillary Agreements and the
transactions contemplated hereby and thereby), (ii) permit the Buyers and
the Buyers’ Representatives to make such reasonable inspections thereof as the
Buyers may reasonably request, (iii) furnish the Buyers and the Buyers’
Representatives with such financial and operating data and other information
regarding the Wheatland Facility as the Buyers may from time to time reasonably
request; provided, however, that the Seller Parties will not be required
to create special reports or perform any studies, and (iv) furnish the
Buyers a copy of each material report, schedule or other document filed or
received by it with or from the SEC, FERC or any other Governmental Entity with
respect to the Wheatland Facility; provided, however, that (A) any
such investigation shall be conducted in such manner as not to unduly interfere
with the operation of the Seller Parties’ respective businesses and operations,
(B) none of the Seller Parties shall be required to take any action which
would constitute a waiver of the attorney-client privilege, and (C) none
of the Seller Parties need supply the Buyers with any information which such
Person is under a legal obligation not to supply.  Notwithstanding anything in this Section 7.2
to the contrary, (x) the Seller Parties will only furnish copies of or provide
such access to Transferring Employee Records and any other personnel, medical
and benefits records to the extent allowed by Law, and (y) the Buyers shall not
have the right to perform or conduct any environmental sampling or testing at,
in, on or underneath any property or facility or real estate owned by any of
the Seller Parties.

 

(b)                                 Until
the Closing Date, all information furnished to or obtained by the Buyers and
the Buyers’ Representatives pursuant to this Section 7.2 or the Ancillary
Agreements shall be subject to the provisions of the Confidentiality
Agreement.  At the Closing, the Seller
Parties shall execute a confidentiality and non-use agreement (the “Sellers
Confidentiality Agreement”) on substantially similar terms to the
Confidentiality Agreement which shall require the Seller Parties to maintain
the confidentiality of all information related to the Acquired Assets and the
Assumed Liabilities for a period of five years from the Closing Date.  Promptly following the date hereof, the
Seller Parties shall request, if they have not previously done so, the return
or destruction of all non-public information provided by the Seller Parties or
their Affiliates or the Seller Parties’ Representatives prior to the date
hereof to other potential purchasers of the Acquired Assets in connection with
a confidentiality agreement executed in connection with such a potential sale
of the Acquired Assets.

 

39

 

 

(c)                                  For
a period of seven years after the Closing Date, each of the parties hereto
shall have reasonable access to all of the books and records of the other
parties (limited, in the case of AESC, to the extent they pertain to the
Sellers or the Acquired Assets and, in the case of the Buyers, to the extent
they pertain to the Acquired Assets, or, in either case, to the extent otherwise
related to this Agreement, the Ancillary Agreements and the transactions
contemplated hereby and thereby), including all Transferring Employee Records,
to the extent that such access may reasonably be required by such party.  Such access shall be afforded by the party or
parties in possession of such books and records upon receipt of reasonable
advance notice and during normal business hours.  The party or parties exercising this right of
access shall be solely responsible for any costs or expenses incurred by it or
them pursuant to this Section 7.2(c). 
If the party or parties in possession of such books and records shall
desire to dispose of any such books and records upon or prior to the expiration
of such seven-year period, such party or parties shall, prior to such
disposition, give the other party or parties a reasonable opportunity, at such
other party’s or parties’ expense, to segregate and remove such books and
records as such other party or parties may select.

 

(d)                                 AESC
agrees not to release any Person (other than the Buyers) from any
confidentiality agreement now existing with respect to the Sellers or the
transactions contemplated hereby, or waive or amend any provision thereof.  From and after the Closing, AESC shall assign
to the Buyers (or, if assignment is not permitted, enforce for the benefit of
the Buyers) any such existing confidentiality agreements with other potential
purchasers in connection with a potential sale of, or other transaction
relating to, the Sellers; provided,  however, that AESC will not
be obligated to assign any existing confidentiality agreement if such
confidentiality agreement contemplates, in addition to a transaction relating
to the Sellers, the consummation of other potential transactions with AESC or
any of its Affiliates and instead AESC will enforce such confidentiality
agreement for the benefit of the Buyers to the extent it relates to a potential
sale of, or other transaction relating to, the Sellers or the Acquired Assets.

 

7.3.                            Expenses.  Except as
set forth in Section 7.9 and as otherwise specifically provided herein,
whether or not the transactions contemplated hereby are consummated, all costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be borne by the party incurring such costs and
expenses, except that (i) the fee payable in connection with the filing
required by the HSR Act shall be shared one-half by the Seller Parties and
one-half by the Buyers and (ii) the premium for the Title Policy, including
the costs of any endorsements, and the cost of the Survey shall be paid solely
by the Seller Parties.

 

7.4.                            Further Assurances. 
Subject to the terms and conditions of this Agreement, each of the
parties hereto will use Commercially Reasonable Efforts to take, or cause to be
taken, all action, and to do, or cause to be done, all things necessary, proper
or advisable under applicable Laws to consummate and make effective the sale of
the Acquired Assets pursuant to this Agreement, including, without limitation,
using Commercially Reasonable Efforts to ensure satisfaction of the conditions
precedent to each party’s obligations hereunder.  None of the parties hereto will, without
prior written consent of the other parties, except as contemplated by this Agreement,
take or fail to take any action, which would reasonably be expected to prevent
or materially impede, interfere with or delay the transactions contemplated by
this Agreement.  From time to time after
the date hereof, without further consideration, each party shall, at its own
expense, execute and deliver such and take such further actions as may
reasonably be requested

 

40

 

by the other party in
order to consummate the transactions contemplated by this Agreement in
accordance with the terms hereof.

 

7.5.                            Public Statements. 
Prior to the Closing, the parties shall consult with each other prior to
issuing any public announcement, statement or other disclosure with respect to
this Agreement or the Ancillary Agreements or the transactions contemplated
hereby or thereby and shall not issue any such public announcement, statement
or other disclosure prior to such consultation, except as may be required by
Law or by any securities exchange and except that the parties may make public
announcements, statements or other disclosures with respect to this Agreement
and the transactions contemplated hereby to the extent and under the
circumstances in which the parties are expressly permitted by the
Confidentiality Agreement to make disclosures.

 

7.6.                            Consents and Approvals; Other Obligations.

 

(a)                                  The
Seller Parties and the Buyers shall cooperate and consult with each other and
keep each other informed of the status and (i) prepare and file all
necessary documentation and (ii) effect all necessary applications,
notices, petitions and filings and execute all agreements and documents, in
each case, to obtain as promptly as practicable all necessary consents,
approvals and authorizations of all Persons (other than any Governmental
Entity) necessary or advisable to consummate the transactions contemplated by
this Agreement or required by the terms of any note, bond, mortgage, indenture,
deed of trust, license, franchise, permit, concession, contract, lease or other
instrument to which any of the Seller Parties or the Buyers are a party or by
which any of them is bound.

 

(b)                                 As
promptly as practicable after the date hereof, the Seller Parties or their
Affiliates and the Buyers (or the ultimate parent entity of the Buyers, if necessary)
shall each file or cause to be filed with the Federal Trade Commission and the
United States Department of Justice any notifications required to be filed
under the HSR Act and the rules and regulations promulgated thereunder
with respect to the transactions contemplated hereby.  The parties shall consult with each other as
to the appropriate time of filing such notifications and shall use Commercially
Reasonable Efforts to make such filings at the agreed upon time, to respond
promptly to, and consult with each other with respect to, any requests for
additional information made by either of such agencies, and to cause the
waiting periods under the HSR Act to terminate or expire at the earliest
possible date after the date of filing.

 

(c)                                  The
Seller Parties and the Buyers shall cooperate with each other and promptly
prepare and file notifications with, and request Tax clearances from, state and
local taxing authorities in jurisdictions in which a portion of the Purchase
Price may be required to be withheld pursuant to such state and local Tax Law.

 

(d)                                 The
Seller Parties, at their sole expense, will use all Commercially Reasonable
Efforts to cause the transactions contemplated by this Agreement to be
permitted, as of the Closing, under the Existing Debt Documents.  In addition, the Seller Parties, at their sole
expense, will timely seek, and will use all Commercially Reasonable Efforts to
obtain, the release of Allegheny Energy, Inc. or its Affiliates from the
guarantees and other security obligations with respect to the Wheatland
Facility set forth on Schedule 7.6(d) (the “Support

 

41

 

Obligations”).  The Buyers will use Commercially Reasonable
Efforts to arrange for the Seller Parties and their Affiliates to be released,
as of the Closing, from their obligations under the Support Obligations,
including by providing any substitute guarantee or other security in like
amount, if necessary.  If the Buyers and
the Seller Parties are not successful in obtaining such releases of the Support
Obligations prior to the Closing, then the Buyers shall indemnify and hold the
Seller Parties and their Affiliates harmless from any claims made against the
Seller Parties or their Affiliates with respect to the Wheatland Facility that
are attributable to the period on or after the Closing Date or are otherwise in
respect of Assumed Liabilities.

 

7.7.                            Regulatory Approvals.

 

(a)                                  The
Seller Parties and the Buyers shall cooperate and consult with each other and
keep each other informed of the status and (i) prepare and file all
necessary documentation and (ii) effect all necessary applications,
notices, petitions and filings and execute all agreements and documents, in
each case, to obtain as promptly as practicable all necessary consents,
approvals and authorizations of all Governmental Entities (including, without
limitation, the Sellers Required Regulatory Approvals and the Buyers Required
Regulatory Approvals) or required by the terms of any note, bond, mortgage,
indenture, deed of trust, license, franchise, permit, concession, contract,
lease or other instrument to which any of the Seller Parties or the Buyers are
a party or by which any of them is bound. 
The parties hereto have exchanged, and agreed to, drafts of the joint
application to be filed with the FERC under section 203 of the Federal
Power Act related to this Agreement and the transactions contemplated hereby, and of the application to be filed by the
Buyers with the FERC under section 205 of the Federal Power Act related to this
Agreement and the transactions contemplated hereby, and such agreed
drafts will be filed with the FERC on or about May 6, 2005.  Each of the Seller Parties and the Buyers
shall have the right to review in advance all characterizations of the information
relating to the transactions contemplated by this Agreement which appear in any
filing made in connection with the transactions contemplated hereby.

 

(b)                                 The
Buyers have retained and will use, at their expense, a qualified economist to
prepare any analyses necessary to support such application.

 

(c)                                  The
Buyers will use Commercially Reasonable Efforts to obtain SEC approval pursuant
to the Holding Company Act in parallel with all required FERC and state
regulatory approvals.

 

7.8.                            Fees and Commissions. 
The Seller Parties and the Buyers each represent and warrant to the
other that except for Banc of America Securities LLC, which is acting for and
at the expense of the Seller Parties, no broker, finder or other Person is
entitled to any brokerage fees, commissions or finder’s fees in connection with
the transactions contemplated hereby. 
The Seller Parties shall be solely responsible for paying all fees or
commissions of Banc of America Securities LLC.

 

7.9.                            Tax Matters.

 

(a)                                  Notwithstanding
any other provision of this Agreement, all applicable sales, transfer, use,
stamp, conveyance, value added, recording, excise, and other similar Taxes,

 

42

 

if any, together with all recording or filing fees,
notarial fees and other similar costs of Closing, that may be imposed upon, or
payable, collectible or incurred in connection with the transfer of the
Acquired Assets to the Buyers or otherwise as a result of the transfer of the
Acquired Assets (“Transfer Taxes”) shall be borne solely by the
Buyers.  The Buyers, at their own
expense, will file, to the extent required by applicable Law, all necessary Tax
Returns and other documentation with respect to all such Transfer Taxes, and if
required by applicable Law, the Seller Parties will join in the execution of
any such Tax Returns or other documentation.

 

(b)                                 With
respect to Taxes to be prorated in accordance with Section 3.4, the Buyers
shall prepare and timely file all Tax Returns required to be filed after the
Closing with respect to the Acquired Assets, if any, and shall duly and timely
pay all such Taxes shown to be due on such Tax Returns.  The Buyers’ preparation of any such Tax
Returns that are material shall be subject to the Seller Parties’ approval,
which shall not be unreasonably withheld, conditioned or delayed.  The Buyers shall make such Tax Returns
available for the Seller Parties’ review and approval not later than 15
Business Days prior to the due date for filing such Tax Return and shall make
such changes as are reasonably requested by the Seller Parties.  Within 10 Business Days after the Buyers’
payment of such Taxes, the Seller Parties shall pay to the Buyers, or the
Buyers shall pay to the Seller Parties, as appropriate, the difference between (i) the
Seller Parties’ proportionate share of the amount shown as due on such Tax
Return determined in accordance with Section 3.4 and (ii) the amount
paid by the Seller Parties at the Closing Date pursuant to Section 4.3(l).

 

(c)                                  Each
of the Buyers and the Seller Parties shall provide the other with such
assistance as may reasonably be requested in connection with the preparation of
any Tax Return, any audit or other examination by any taxing authority, or any
judicial or administrative proceedings relating to Liability for Taxes, and
each will retain and provide the requesting parties with any records or
information that may be relevant to such return, audit, or examination,
proceedings or determination.  Any
information obtained pursuant to this Section 7.9(c) or pursuant to
any other Section hereof providing for the sharing of information or
review of any Tax Return or other schedule relating to Taxes shall be kept
confidential by the parties hereto.

 

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

 

(e)                                  Any
payment by the Buyers or the Seller Parties to the other pursuant to this Section 7.9
shall be treated for all purposes by both parties as an adjustment to the
Purchase Price, to the maximum extent permitted by Law.

 

(f)                                    In
the event that the Buyers and the Seller Parties disagree as to the amount or
calculation of any payment to be made under this Agreement relating to Taxes,
or the interpretation or application of any provision under this Agreement
relating to Taxes, the parties shall attempt in good faith to resolve such
dispute.  If such dispute is not resolved
within 60 days following the commencement of the dispute, the Buyers and the
Sellers shall jointly retain the Independent Accounting Firm to resolve the
dispute; provided, however, that neither party shall be entitled to
dispute any individual Tax item that involves an amount of less than
$25,000.  The

 

43

 

Independent Accounting Firm shall act as an arbitrator
to resolve all points of disagreement and its decision shall be final and
binding upon all parties involved. 
Following the decision of the Independent Accounting Firm, the Buyers
and the Seller Parties shall each take or cause to be taken any action
necessary to implement the decision of the Independent Accounting Firm.  The fees and expenses relating to the
Independent Accounting Firm shall be borne fifty percent (50%) by the Buyers
and fifty percent (50%) by the Seller Parties.

 

7.10.                     Employees.

 

(a)                                  Not
later than 15 days prior to the Closing Date, the Buyers will offer employment
to each of the Sellers’ Employees that is actively employed with any of the
Seller Parties or their Affiliates immediately prior to the Closing Date, on
such terms and conditions as the Buyers may determine in their sole
discretion.  Each such offer of
employment shall be made contingent upon the Sellers’ Employees passing the Buyers’
standard screening procedures, which include drug screening and background
checks.  The Seller Parties shall
cooperate with the Buyers’ reasonable requests for access to the Sellers’
Employees for purposes of making employment offers.  Each of the Sellers’ Employees who passes the
Buyers’ standard screening procedures, accepts the Buyers’ offer of employment
and actually commences work with the Buyers or their Affiliates shall be a “Buyers’
Employee” for purposes of this Agreement upon the later of the Closing Date
or the commencement of such Sellers’ Employee’s active employment with the
Buyers.  Except as required by Law,
neither the Buyers nor their Affiliates shall be required to continue the employment
of any Buyers’ Employee for any period of time, each such employee shall be an
at-will employee, and the employment of any Buyers’ Employee may be terminated
in the Buyers’ sole discretion at any time in accordance with applicable Law.

 

(b)                                 With
respect to each Buyers’ Employee, effective as of 12:01 a.m. on the date
such employee becomes a Buyers’ Employee, such Buyers’ Employee shall cease to
participate in the employee welfare benefit plans (as such term is defined in
ERISA) maintained or sponsored by the Sellers or their Affiliates (the “Prior
Welfare Plans”), except as may be required under COBRA, and shall, if
applicable, commence to participate in welfare benefit plans of the Buyers or
their Affiliates (the “Replacement Welfare Plans”).  The Buyers shall use reasonable efforts (i) to
waive all limitations as to pre-existing condition exclusions and waiting
periods with respect to the Buyers’ Employees under the Replacement Welfare
Plans, other than, but only to the extent of, limitations or waiting period
that were in effect with respect to such employee under the Prior Welfare Plans
and that have not been satisfied as of the Closing Date, and (ii) to
provide the Buyers’ Employees with credit for any co-payments and deductibles
paid prior to the Closing Date in satisfying any deductible or out of pocket
requirements under the Replacement Welfare Plan (on a pro rata basis in the
event of a difference in plan years). 
With respect to each Buyers’ Employee (including any beneficiary or the
dependant thereof), the Seller Parties shall retain all liabilities and
obligations arising under any Prior Welfare Plan whether arising on, prior to
or following the Closing Date.

 

(c)                                  Effective
not later than the date a Sellers’ Employee becomes a Buyers’ Employee, the
Seller Parties shall cause such Buyers’ Employee to cease to participate in the
Benefit Plans, except as may be required under COBRA, and the Buyers shall
cause such employee if applicable and to the extent that such employee
satisfies any applicable conditions and requirements, to commence participation
in certain of the employee benefit plans, programs

 

44

 

and fringe benefit plans, programs and fringe benefit
arrangements of the Buyers (“Buyers Benefit Plans”).  The Buyers’ Employees shall be given years of
service credit, solely for purposes of eligibility for vacation allotment and
not for (i) eligibility for any other purpose, (ii) vesting, (iii) benefit
accrual, (iv) service related to benefit level or (v) any other
purpose, for all service with the Sellers under the Buyers Benefit Plans, if
any, in which they become participants to the same extent such employees were
credited with service under comparable Benefit Plans.  Neither the Buyers nor their Affiliates shall
assume any Benefit Plan, including, without limitation, any severance plan,
policy, program, agreement or arrangement of the Seller Parties or any of their
Affiliates, nor, except to the extent otherwise provided in subsection (d) below,
shall there be any transfer of assets or Liabilities of any Benefit Plan to any
Buyers Benefit Plans.  No provision of
this Agreement shall be construed to limit the authority of the Buyers or their
Affiliates to discontinue, suspend or modify any particular benefit or
compensation plan or program provided to the Buyers’ Employees at any time, or
to terminate employment of any Buyers Employees at any time after the Closing
Date.

 

(d)                                 The
Buyers will, with respect to any 401(k) plan of the Seller Parties or their
ERISA Affiliate in which any of the Sellers’ Employees participates, take all
necessary action to cause the trustee of any defined contribution plan of the Buyers
or any of the Buyers’ ERISA Affiliates in which a Sellers’ Employee becomes a
participant to, if elected by the Sellers’ Employee, accept a direct “rollover”
of the employee’s “eligible rollover distribution,” as such terms are defined
in Code section 401(a)(31), in cash, but solely to the extent such
distribution is allowable by applicable Law and satisfies the requirements for
such a rollover pursuant to applicable Law.

 

(e)                                  The
Seller Parties or their Affiliates (and not the Buyers or their Affiliates)
shall be responsible for any and all Liabilities attributable to the Sellers’
Employees, including without limitation, any and all Liabilities arising out of
or resulting from any claim by any Sellers’ Employee which arises under any Law
(including, without limitation, any claims for wrongful discharge or
otherwise), or under any policy, agreement, understanding or promise, written
or oral, formal or informal, between the Seller Parties or any of their
Affiliates and the Sellers’ Employee, whether arising out of actions, events or
omissions that occurred (or, in the case of omissions, failed to occur) before,
on or after, the Closing Date), other than Liabilities attributable to any
Buyers’ Employees in respect of the period after the Closing Date (or such
later date as the individual becomes a Buyers’ Employee).  Without limiting the generality of the
preceding sentence, the Seller Parties shall be responsible for satisfying
continuation coverage provisions under section 4980B of the Code and sections
601-608 of ERISA with respect to any Sellers’ Employee (including any Sellers’
Employee that becomes a Buyers’ Employee) and any eligible spouse or dependent
who experiences a “qualifying event,” as defined in Code section 4980B(f)(3),
on or before the Closing Date.  The
Seller Parties shall pay to each Buyers’ Employee on or before the Closing Date
(or such later date as the individual becomes a Buyers’ Employee) all sums such
Buyers’ Employee is due as of such date for any accrued but unpaid salary and
wages, including, without limitation, accrued but unpaid vacation days,
personal days, and expense reimbursements. 
In addition, the Seller Parties shall be solely responsible for any and
all severance payments or benefits arising under any Benefit Plan, or otherwise
with respect to the transactions contemplated by this Agreement, and the Buyers
shall have no Liabilities with respect thereto.

 

45

 

(f)                                    Nothing
contained in this Section 7.10, whether express or implied, is intended to
confer upon any Sellers’ Employee or former employee of any of the Seller
Parties or their Affiliates or any Buyers’ Employee any right or remedy,
including, without limitation, any right as a third-party beneficiary.

 

(g)                                 Effective
as of the Closing Date, the Sellers shall pay to each Buyer’s Employee who was
a participant in the Annual Incentive Plan of any of the Seller Parties the
annual bonus that such employee would have received had such employee remained
employed with any of the Seller Parties until the last day of the plan year,
prorated to reflect a partial plan year ending as of the Closing Date and based
on such other assumptions as the Seller Parties reasonably need to make to
calculate such bonuses.

 

7.11.                     Risk of Loss.

 

(a)                                  From
the date hereof through the Closing Date, all risk of loss or damage to the
Acquired Assets shall be borne by the Seller Parties, except that loss or
damage caused by the acts or omissions of the Buyers or the Buyers’
Representatives will be the responsibility of the Buyers.

 

(b)                                 If,
before the Closing Date, all or any portion of the Acquired Assets is (i) condemned
or taken by eminent domain or is the subject of a pending or, to the Seller
Parties’ Knowledge, contemplated taking which has not been consummated, or (ii) materially
damaged or destroyed by fire or other casualty, then the Seller Parties shall
notify the Buyers promptly in writing of such fact.  If that condemnation, taking, damage, or
destruction results in the failure of any condition in Sections 8.1 or 8.2 to
be met or results in a Material Adverse Effect, then the Buyers may terminate
this Agreement.  Unless the Buyers
terminate this Agreement pursuant to the foregoing sentence, (x) in the case of
a condemnation or taking, the Seller Parties shall assign or pay, as the case
may be, any net proceeds thereof to the Buyers at the Closing, and (y) in the
case of a fire or other casualty, the Seller Parties shall either restore such
damage or assign the insurance proceeds therefor to the Buyers at the Closing.

 

7.12.                     Tax Clearance Certificates. 
The parties hereto shall use Commercially Reasonable Efforts to obtain
from any taxing authority any certificate, permit, license, or other document
necessary to mitigate, reduce or eliminate any Taxes (including additions
thereto or interest and penalties thereon) that otherwise would be imposed with
respect to the transactions contemplated in this Agreement.

 

7.13.                     Non-Use of Allegheny Marks After the Closing.

 

(a)                                  The
Allegheny Marks appear on some of the Acquired Assets, including on signage at
the Wheatland Facility, and on supplies, materials, stationery, brochures,
advertising materials, manuals and similar consumable items.  The Buyers acknowledge and agree that they do
not have and, upon consummation of the transactions contemplated by this Agreement,
will not have, any right, title, interest, license or other right to use the
Allegheny Marks.

 

(b)                                 The
Buyers will (i) within 60 days after the Closing Date, remove the
Allegheny Marks from, or cover or conceal the Allegheny Marks on, the Acquired
Assets,

 

46

 

including signage at the Wheatland Facility, and
provide written verification thereof to the Seller Parties promptly after
completing such removal, (ii) within 14 days after the Closing Date,
return or destroy (with proof of destruction) all other Acquired Assets that
contain any Allegheny Marks that are not removable, and (iii) within 30
days after the Closing Date, submit notifications or amendments with respect to
any Permits or Environmental Permits that use any Allegheny Marks.

 

(c)                                  Each
Buyer agrees never to challenge Allegheny Energy, Inc.’s or its Affiliates’
ownership of the Allegheny Marks or any application for registration thereof or
any registration thereof or any rights of the Seller Parties or their
Affiliates therein as a result, directly or indirectly, of its ownership of the
Acquired Assets.

 

(d)                                 The
Buyers will not will conduct any business or offer any goods or services under
any Allegheny Marks, except as expressly permitted during the transaction
period pursuant to Section 7.13(b) or as permitted pursuant to
Allegheny Energy, Inc.’s written consent.

 

(e)                                  No
Buyer will send, or cause to be sent, any correspondence or other materials to
any Person on any stationery that contains any Allegheny Marks or otherwise
operate Wheatland Facility in any manner that would or might reasonably be
expected to confuse any Person into believing that such Buyer has any right,
title, interest or license to use any Allegheny Marks.

 

7.14.                     Insurance.  The Buyers
acknowledge that, after the Closing, the Acquired Assets shall not be covered
by any insurance policy in respect of fire, liability, worker’s compensation or
otherwise maintained by the Seller Parties or any of their Affiliates.  Accordingly, the parties agree that the
Buyers shall be responsible for procuring insurance in respect of the Acquired
Assets after the Closing Date.

 

7.15.                     No Solicitation.  From
the date hereof through the Closing, none of the Seller Parties, their
Affiliates nor the Sellers’ Representatives (including, without limitation,
investment bankers, attorneys and accountants) shall, directly or indirectly,
enter into, solicit, initiate or continue any discussions or negotiations with,
or encourage or respond to any inquiries or proposals by, or participate in any
negotiations with, or provide any information to, or otherwise cooperate in any
other way with, any Person or group, concerning any sale of all or a portion of
the Acquired Assets, the Sellers or any equity interest therein, or any merger,
consolidation, liquidation, dissolution or similar transaction involving the
Sellers (each such transaction being referred to herein as a “Proposed
Acquisition Transaction”) other than with the Buyers, their Affiliates and
the Buyers’ Representatives.  None of the
Seller Parties shall, directly or indirectly, through any Affiliate, officer,
director, employee, Sellers’ Representative or otherwise, solicit, initiate or
encourage the submission of any proposal or offer from any Person (including,
without limitation, a “person” as defined in Section 13(d)(3) of the
Exchange Act) relating to any Proposed Acquisition Transaction.  The Seller Parties represent that they are
not now engaged in discussions or negotiations with any Person other than the
Buyers with respect to a Proposed Acquisition Transaction.

 

47

 

7.16.                     Notifications.

 

(a)                                  Subject
to the terms and conditions of this Agreement, each of the parties will use
Commercially Reasonable Efforts to (i) promptly notify the other parties
of (A) any representation or warranty made by it contained in this
Agreement that is qualified as to materiality becoming untrue or inaccurate as
so qualified in any respect or any such representation or warranty that is not
so qualified becoming untrue or inaccurate in any material respect, (B) the
failure by it to comply in any material respect with or satisfy in any material
respect any covenant, condition or agreement to be complied with or satisfied
by it under this Agreement, and (C) any change or event which,
individually or in the aggregate, has had a material adverse effect on the
Buyers or a Material Adverse Effect; and (ii) promptly provide the other
party with copies of all filings made by such party or any Affiliates thereof
with any Governmental Entity in connection with this Agreement and the
transactions contemplated hereby.

 

(b)                                 The
Seller Parties will, from time to time prior to the Closing (but no more than
once in any 30-day period), promptly supplement or amend any of the Seller
Parties’ Schedules relating to Article V with respect to any matter that
existed as of the date of this Agreement and should have been set forth or
described in such Schedule.  If the
matters disclosed on such supplemented or amended Schedules would, individually
or in the aggregate, be reasonably likely to have a Material Adverse Effect,
then the Buyers may elect to terminate this Agreement within 15 days after
receipt of the supplemented or amended Schedule, by providing written notice
thereof to the Seller Parties.  If the
Buyers elect to terminate this Agreement pursuant to this Section 7.16(b),
then the Seller Parties will have a 20-day period to cure the event causing the
amended or supplemented Schedule, provided that, if so cured within such 20-day
period, this Agreement shall not be terminated. 
No disclosure by the Seller Parties pursuant to this Section 7.16(b),
however, will be deemed to amend or supplement any of the Seller Parties’
Schedules, to have qualified the representations and warranties contained in
this Agreement or to have reduced or limited in any way the indemnification
obligations of the Seller Parties pursuant to Article IX, unless the
Buyers expressly consent to such supplement in writing.

 

(c)                                  The
Seller Parties will, from time to time prior to the Closing (but no more than
once in any 30-day period), promptly supplement or amend any of the Seller
Parties’ Schedules relating to Article V with respect to any matter
arising after the date of this Agreement, which, if existing as of the date of
this Agreement, would have been required to be set forth or described in such Schedule in
order to make any representation or warranty set forth in this Agreement true
and correct as of such date.  If the
matters disclosed on such supplemented or amended Schedules would, individually
or in the aggregate, be reasonably likely to have a Material Adverse Effect,
then the Buyers may elect to terminate this Agreement, within 15 days after
receipt of the supplemented or amended Schedules, by providing written notice
thereof to the Seller Parties; provided, however, that if the Buyers do
not exercise such right to terminate this Agreement within such 15-day period,
then (i) the Buyers will be deemed to have forever waived any right to
terminate this Agreement based upon such supplement or amendment, except when
considered in the aggregate with subsequent supplements or amendments, (ii) the
Buyers will be deemed to have accepted such supplement or amendment, subject to
(and in no way limiting) the Buyers’ right to receive the indemnity set forth
in the last

 

48

 

sentence of this Section 7.16(c), and (iii) such
supplement or amendment will be deemed to supplement or amend the Sellers’
Schedules, subject to (and in no way limiting) the Buyers’ right to receive the
indemnity set forth in the last sentence of this Section 7.16(c).  If the Buyers elect to terminate this
Agreement pursuant to this Section 7.16(c), then the Seller Parties will
have a 20-day period to cure the event causing the amended or supplemented
Schedule, provided that, if so cured within such 20-day period, this Agreement
shall not be terminated.  In the event
the Closing occurs, the Seller Parties shall indemnify the Buyers for all
Liabilities associated with or arising out of the matters disclosed in any
supplemented or amended Schedules delivered pursuant to this Section 7.16(c) in
accordance with Article IX.

 

(d)                                 The
Buyers will, from time to time prior to the Closing (but no more than once in
any 30-day period), promptly supplement or amend any of the Buyers’ Schedules
relating to Article VI with respect to any matter that existed as of the
date of this Agreement and should have been set forth or described in such
Schedule.  If the matters disclosed on
such supplemented or amended Schedule would, individually or in the
aggregate, be reasonably likely to prevent, materially delay or impair the
Buyers’ ability to consummate the transactions contemplated by this Agreement,
then the Seller Parties may elect to terminate this Agreement within 15 days
after receipt of the supplemented or amended Schedule, by providing written
notice thereof to the Buyers.  If the
Seller Parties elect to terminate this Agreement pursuant to this Section 7.16(d),
then the Buyers will have a 20 day period to cure the event causing the amended
or supplemented Schedule, provided that, if so cured within such 20-day period,
this Agreement shall not be terminated. 
No disclosure by the Buyers pursuant to this Section 7.16(d),
however, will be deemed to amend or supplement any of the Buyers’ Schedules, to
have qualified the representations and warranties contained in this Agreement
or to have reduced or limited in any way the indemnification obligations of the
Buyers pursuant to Article IX, unless the Seller Parties expressly consent
to such supplement in writing.

 

(e)                                  The
Buyers will, from time to time prior to the Closing (but no more than once in
any 30-day period), promptly supplement or amend any of the Buyers’ Schedules relating
to Article VI with respect to any matter arising after the date of this
Agreement, which, if existing as of the date of this Agreement, would have been
required to be set forth or described in such Schedule in order to make
any representation or warranty set forth in this Agreement true and correct as
of such date.  If the matters disclosed
on such supplemented or amended Schedule would, individually or in the
aggregate, be reasonably likely to prevent, materially delay or impair the
Buyers’ ability to consummate the transactions contemplated by this Agreement,
then the Seller Parties may elect to terminate this Agreement, within 15 days
after receipt of the supplemented or amended Schedule, by providing written
notice thereof to the Buyers; provided, however, that if the Seller
Parties do not exercise such right to terminate this Agreement within such 15-day
period, then (i) the Seller Parties will be deemed to have forever waived
any right to terminate this Agreement based upon such supplement or amendment,
except when considered in the aggregate with subsequent supplements or
amendments, (ii) the Seller Parties will be deemed to have accepted such
supplement or amendment, and (iii) such supplement or amendment will be
deemed to supplement or amend the Buyers’ Schedules.  If the Seller Parties elect to terminate this
Agreement pursuant to this Section 7.16(e), then the Buyers will have a 20-day
period to cure the event causing the amended or supplemented Schedule, provided
that, if so cured within such 20-day period, this Agreement shall not be
terminated.

 

49

 

(f)                                    Together
with any supplement or amendment to the Schedules pursuant to this Section 7.16,
the party delivering such supplement or amendment shall also deliver
supplementary material, and any other explanatory material with respect to such
amendment or supplement as reasonably requested by any other party, to the
other parties (the “Reviewing Parties”). 
Notwithstanding any other provision in this Agreement, and regardless of
whether the conditions to the Closing in Article VIII have been satisfied
or waived, in no event shall the Closing occur during the 15-day review period
granted to the Reviewing Parties as provided in this Section 7.16 without
the written consent of the Reviewing Parties.

 

7.17.                     Notice of Allocation of Acquired Assets.  The Buyers shall deliver to the Seller
Parties, no later than four Business Days prior to the expected Closing Date, a
written notice indicating the respective ownership percentage of each of PSI
Energy and CG&E with respect to the Acquired Assets and Assumed Liabilities
as of the Closing.  The parties hereto
agree to use Commercially Reasonable Efforts to prepare the Ancillary
Agreements to reflect the ownership percentages contained in such notice.

 

7.18.                     Post-Closing Start-Up.

 

(a)                                  In
the event that the Buyers conduct a start-up (other than a Sellers-Initiated
Start-Up) of the Wheatland Facility (a “Buyers-Initiated Start-Up”)
within three months after the Closing Date, the Buyers shall give the Seller
Parties written notice at least three days, or such shorter period as may be
reasonably be required under the circumstances, prior to the planned date of
the first Buyers-Initiated Start-Up, and the Buyers shall allow up to two
individuals who are Seller Parties’ Representatives to attend the first
Buyers-Initiated Start-Up in order to observe the operation of the Wheatland
Facility.  The Seller Parties shall
solely be observers of the Buyers-Initiated Start-Up and shall have no
authority with respect to the operational parameters of any Buyers-Initiated
Start-Up.  The Buyers shall be solely
responsible for all costs related to any Buyers-Initiated Start-Up.

 

(b)                                 Within
30 days after the Closing Date, the Seller Parties may deliver a written notice
to the Buyers requesting that the Buyers initiate one start-up of the Wheatland
Facility (a “Sellers-Initiated Start-Up”).  In the event such a notice is delivered, the
Buyers shall use Commercially Reasonable Efforts to conduct such
Sellers-Initiated Start-Up within 30 days of the delivery of such notice to the
Buyers, subject to reasonable delay for weather conditions, fuel availability
and other reasonable factors that might delay such Sellers-Initiated Start-Up.  The Buyers shall allow up to two individuals
who are Seller Parties’ Representatives to attend the Sellers-Initiated
Start-Up in order to observe the operation of the Wheatland Facility.  The Seller Parties shall solely be observers
of the Sellers-Initiated Start-Up and shall have no authority with respect to
the operational parameters of the Sellers-Initiated Start-Up.  The Seller Parties shall pay to the Buyers
the difference between the market price of the electricity sold during the
Sellers-Initiated Start-Up and the price of the natural gas used to generate
such electricity, also known as the spark spread.

 

(c)                                  Notwithstanding
Sections 7.18(a) and (b), in no event shall the Buyers be obligated to (i) conduct
a Sellers-Initiated Start-Up if the Buyers have already conducted a
Buyers-Initiated Start-Up in compliance with Section 7.18(a) or (ii) allow
the Seller Parties’

 

50

 

Representatives to observe more than one start-up of
the Wheatland Facility, regardless of whether such observed start-up was a
Buyers-Initiated Start-Up or a Sellers-Initiated Start-Up.

 

(d)                                 For
the avoidance of doubt, the occurrence of a Buyers-Initiated Start-Up or a
Sellers-Initiated Start-Up shall in no way limit or modify (i) the representations
and warranties of the Seller Parties, including those contained in Section 5.19(b),
(ii) the indemnification obligations of the Seller Partiers pursuant to Article IX
or (iii) the survival periods of any of the provisions of this Agreement
as set forth in Section 11.3.

 

7.19.                     Waiver of Indiana Responsible Transfer Property Law.  The Sellers shall comply with the provisions
of section 2(b) of the Indiana Responsible Transfer Property Law
(Ind. Code § 13-25-3), to the extent applicable, in connection with the
conveyance of the Owned Real Property to the Buyers; provided, however,
that each of the Buyers hereby (a) waives the 30 day advance delivery
requirement set forth in section 13-25-3-2(a) of the Indiana
Responsible Transfer Property Law, and (b) acknowledges its awareness of
the purpose and intent of the disclosure document referred to therein

 

7.20.                     Certain Transmission Matters.  On or prior to the Closing Date, the Seller
Parties shall, and shall cause their Affiliates to, take all necessary actions
required to delist all of the units at the Wheatland Facility as capacity
resources for PJM.  From and after the
Closing Date, the Seller Parties shall not, and shall cause their Affiliates
not to, use any of the units at the Wheatland Facility for any capacity
obligations of the Seller Parties or their Affiliates.  No later than May 31, 2006, the Seller
Parties shall, and shall cause their Affiliates to, cease utilizing any of the
units at the Wheatland Facility as a source for the purposes of transmission
service or transmission service reservations. 
If any of the Seller Parties or any of their Affiliates have an existing
transmission service reservation from the Wheatland Facility on June 1,
2006, such Seller Parties shall, or shall cause their Affiliates to, either
terminate such transmission service reservation or, if reasonably acceptable to
both the Seller Parties and the Buyers, assign such transmission service
agreement to the Buyers.

 

ARTICLE VIII

CONDITIONS

 

8.1.                            Conditions to Each Party’s Obligations to Effect the Transaction.  The respective obligations of each party to
effect the sale and purchase of the Acquired Assets shall be subject to the
fulfillment at or prior to the Closing Date of the following conditions, except
as may be waived in writing pursuant to Section 11.2 by the joint action
of the parties hereto:

 

(a)                                  The
waiting period under the HSR Act applicable to the consummation of the sale of
the Acquired Assets contemplated hereby shall have expired or been terminated;

 

(b)                                 No
preliminary or permanent injunction or other order or decree by any federal or
state court which prevents the consummation of the sale of the Acquired Assets
contemplated hereby shall have been issued and remain in effect (each party
agreeing to use Commercially Reasonable Efforts to have any such injunction,
order or decree lifted); and no Law shall have been enacted by any Governmental
Entity which prohibits the consummation of the sale of the Acquired Assets;

 

51

 

(c)                                  All
consents and approvals for the consummation of the sale of the Acquired Assets
required under the terms of any note, bond, mortgage, indenture, contract,
Permit or other agreement to which the Seller Parties or the Buyers, or any of
their Subsidiaries, are a party shall have been obtained, other than those
which if not obtained, would not, individually or in the aggregate, be
reasonably likely to have a Material Adverse Effect; and

 

(d)                                 Subject
to Section 11.16, the Sellers Required Regulatory Approvals and the Buyers
Required Regulatory Approvals shall have been obtained by a Final Order.

 

8.2.                            Conditions to Obligation of the Buyers.  The obligation of the Buyers to effect the
purchase of the Acquired Assets contemplated by this Agreement shall be subject
to the fulfillment at or prior to the Closing Date of the following additional
conditions, except as may be waived by the Buyers in writing pursuant to Section 11.2:

 

(a)                                  There
shall not have occurred since the date of this Agreement and be continuing a
Material Adverse Effect or any events or conditions which are reasonably likely
to have a Material Adverse Effect;

 

(b)                                 The
Seller Parties shall have performed and complied with in all material respects
the covenants and agreements contained in this Agreement that are required to
be performed and complied with by the Seller Parties on or prior to the Closing
Date;

 

(c)                                  Each
of the representations and warranties of the Seller Parties set forth in this
Agreement that are not qualified by materiality or Material Adverse Effect
shall be true and correct in all material respects as of the date of this
Agreement and as of the Closing Date, with the same effect as though such
representations and warranties had been made on and as of the Closing Date, except
that such representations and warranties that are made as of a specific date
need only be true and correct as of such date;

 

(d)                                 Each
of the representations and warranties of the Seller Parties that are qualified
by materiality or Material Adverse Effect shall be true and correct as of the
date of this Agreement and as of the Closing Date, with the same effect as
though such representations and warranties had been made on and as of the
Closing Date, except that such representations and warranties that are made as
of a specific date need only be true and correct as of such date;

 

(e)                                  Each
of the Buyers shall have received a certificate from an authorized officer of
each of the Seller Parties, dated the Closing Date, to the effect that the
conditions set forth in Sections 8.2(a), 8.2(b), 8.2(c) and 8.2(d) have
been satisfied;

 

(f)                                    The
Seller Parties shall have complied with the delivery requirements of Section 4.3;

 

(g)                                 All
Permits and material Environmental Permits shall have been transferred to the
Buyers or, if such Permits and Environmental Permits are not transferable,
shall have been modified or reissued to the Buyers, except to the extent that
applicable Laws (including, without limitation, applicable Environmental Laws)
would allow the Buyers to lawfully own and operate the Wheatland Facility and
the Site after the Closing Date in the manner in which they are currently
operated without such conditions having been satisfied;

 

52

 

(h)           Subject
to Section 11.16, the Final Orders of any Governmental Entity having
authority over the transactions contemplated by this Agreement shall have been
received, and such Final Orders shall not impose terms or conditions which
would, individually or in the aggregate, be reasonably likely to have a
Material Adverse Effect or a material adverse effect on the business, assets,
operations or conditions of either of the Buyers, in the context of the
transaction contemplated hereby and as determined by the board of directors of
either of the Buyers based on the advice of the Buyers’ Representatives; and

 

(i)            The
Seller Parties shall have delivered evidence, reasonably satisfactory in form
and substance to the Buyers, of the full and irrevocable release of all
Encumbrances on the Acquired Assets arising under or relating to the Existing
Debt Documents.

 

8.3.         Conditions to Obligation of the Seller Parties.  The obligation of the Seller Parties to
effect the sale of the Acquired Assets contemplated by this Agreement shall be
subject to the fulfillment at or prior to the Closing Date of the following
additional conditions, except as may be waived by the Seller Parties in writing
pursuant to Section 11.2:

 

(a)           The
Buyers shall have performed and complied with in all material respects the
covenants and agreements contained in this Agreement that are required to be
performed and complied with by the Buyers on or prior to the Closing Date;

 

(b)           Each
of the representations and warranties of the Buyers set forth in this Agreement
that are not qualified by materiality shall be true and correct in all material
respects as of the date of this Agreement and as of the Closing Date, with the
same effect as though such representations and warranties had been made on and
as of the Closing Date, except that such representations and warranties that
are made as of a specific date need only be true and correct as of such date;

 

(c)           Each
of the representations and warranties of the Buyers that are qualified by
materiality shall be true and correct as of the date of this Agreement and as
of the Closing Date, with the same effect as though such representations and
warranties had been made on and as of the Closing Date, except that such
representations and warranties that are made as of a specific date need only be
true and correct as of such date;

 

(d)           The
Seller Parties shall have received a certificate from an authorized officer of
each of the Buyers, dated the Closing Date, to the effect that the conditions
set forth in Sections 8.3(a), 8.3(b) and 8.3(c) have been satisfied;

 

(e)           The
Buyers shall have complied with the delivery requirements of Section 4.4;
and

 

(f)            Subject
to Section 11.16, the Final Orders of any Governmental Entity having
authority over the transactions contemplated by this Agreement shall have been
received, and such Final Orders shall not impose terms or conditions which
would, individually or in the aggregate, be reasonably likely to have a
material adverse effect on the business, assets, operations or conditions of
any of the Seller Parties, in the context of the transactions contemplated
hereby and as determined by the board of directors of AESC based on the advice
of the Seller Parties’ Representatives.

 

53

 

ARTICLE IX

INDEMNIFICATION

 

9.1.                            Indemnification.

 

(a)                                  From
and after the Closing Date, subject to the limitations set forth in this Section 9.1(a),
and provided that the Buyers Indemnified Party makes a written claim for
indemnification against the Seller Parties pursuant to Section 11.4 within
the survival period set forth in Section 11.3, the Seller Parties shall,
jointly and severally, indemnify, defend and hold harmless each of the Buyers
and their Affiliates, and their respective directors, officers, employees,
shareholders and agents (each, a “Buyers Indemnified Party”) from and
against any and all claims, demands or suits (by any Person), losses,
Liabilities, damages, obligations, payments, costs and expenses (including,
without limitation, the costs and expenses of any and all actions, suits,
proceedings, assessments, judgments, settlements and compromises relating
thereto and reasonable attorneys’ fees and reasonable disbursements in
connection therewith) (each, an “Indemnifiable Loss”) asserted against
or suffered by the Buyers Indemnified Parties relating to, resulting from or
arising out of (i) any breach by any of the Seller Parties of any of the
representations and warranties of the Seller Parties contained in this
Agreement, or any inaccurate statement in the certificate delivered pursuant to
Section 8.2(e), (ii) any breach by any of the Seller Parties of any
covenant or agreement of the Seller Parties contained in this Agreement, (iii) any
Excluded Liabilities, (iv) any failure of the Seller Parties to comply
with applicable bulk sales Laws or (v) the matters disclosed on any
supplemented or amended Schedules provided by the Seller Parties pursuant to Section 7.16(c).  Notwithstanding the foregoing, (A) the
Seller Parties shall have no Liability under Sections 9.1(a)(i) or
9.1(a)(v) for Indemnifiable Losses (other than Indemnifiable Losses
pursuant to Section 7.8), unless and until the aggregate Indemnifiable
Losses incurred by the Buyers Indemnified Parties exceed $750,000 in which case
the Seller Parties shall be jointly and severally liable for all losses in
excess of $750,000, (B) in no event shall the Seller Parties’ aggregate
Liability under Sections 9.1(a)(i) and 9.1(a)(v) exceed $50,000,000
in the aggregate; (C) in no event shall the Seller Parties’ aggregate
Liability under Section 9.1(a)(ii) exceed the amount of the Purchase
Price; and (D) for purposes of calculating the amount of Indemnifiable
Losses, all references to materiality or similar qualifiers or Material Adverse
Effect shall be disregarded.

 

(b)                                 From
and after the Closing Date, subject to the limitations set forth in this Section 9.1(b),
and provided that the Sellers Indemnified Party makes a written claim for
indemnification against the Buyers pursuant to Section 11.4 within the
survival period set forth in Section 11.3, the Buyers shall, jointly and
severally, indemnify, defend and hold harmless each of the Seller Parties and
their Affiliates, and their respective directors, officers, employees,
shareholders and agents (each, a “Sellers Indemnified Party”) from and
against all Indemnifiable Losses asserted against or suffered by the Sellers
Indemnified Parties relating to, resulting from or arising out of (i) any
breach by either of the Buyers of any of the representations and warranties of
the Buyers contained in this Agreement, or any inaccurate statement in the
certificate delivered pursuant to Section 8.3(d), (ii) any breach by
either of the Buyers of any covenant or agreement of the Buyers contained in
this Agreement, or (iii) the Assumed Liabilities.  Notwithstanding the foregoing, (A) the
Buyers shall have no Liability under Section 9.1(b)(i) for
Indemnifiable Losses (other than Indemnifiable Losses pursuant to Section 7.8),
unless and until the aggregate Indemnifiable Losses incurred by the Sellers
Indemnified Parties

 

54

 

exceed $750,000 in which case the Buyers shall be jointly and severally
liable for all losses in excess of $750,000; (B) in no event shall the
Buyers’ aggregate Liability under Section 9.1(b)(i) exceed
$50,000,000; (C) in no event shall the Buyers’ aggregate Liability under Section 9.1(b)(ii) exceed
the amount of the Purchase Price; and (D) for purposes of calculating the
amount of Indemnifiable Losses, all references to materiality, material adverse
effect or similar qualifiers shall be disregarded.

 

(c)                                  Any
Person entitled to receive indemnification under this Agreement (an “Indemnitee”)
having a claim under these indemnification provisions shall make a good faith
effort to recover all Indemnifiable Losses from insurers of such Indemnitee
under applicable insurance policies so as to reduce the amount of any
Indemnifiable Loss hereunder; provided that in no event shall an Indemnitee be
required to initiate litigation or arbitration against an insurance provider
before receiving payment for any Indemnifiable Loss pursuant to this Article IX.  The amount of Indemnifiable Loss will be (i) reduced
to the extent that Indemnitee receives any insurance proceeds with respect to
an Indemnifiable Loss and (ii) reduced or increased to take into account
any net Tax benefit or burden recognized by the Indemnitee arising from the
recognition of the Indemnifiable Loss and any payment actually received with
respect to an Indemnifiable Loss.

 

(d)                                 The
expiration, termination or extinguishment of any representation, warranty,
covenant or agreement pursuant to Section 11.3 shall not affect the
parties’ obligations under this Section 9.1 if the Indemnitee provided the
Person required to provide indemnification under this Agreement (the “Indemnifying
Party”) with proper notice of the claim or event for which indemnification
is sought prior to such expiration, termination or extinguishment.

 

(e)                                  Following
the Closing and except with respect to intentional breaches of this Agreement,
willful misconduct or fraud, the remedies set forth in this Article IX
will be the sole and exclusive remedies for any and all claims, damages,
complaints, demands, causes of action, investigations, hearings, actions, suits
or other proceedings in connection with, arising from or relating to this
Agreement and the Ancillary Agreements and the transactions contemplated hereby
and thereby and are in lieu of any and all other rights and remedies which the Seller
Parties or the Buyers may have under this Agreement or otherwise for relief
(monetary or otherwise) with respect to any breach of or failure to perform
under this Agreement and the Ancillary Agreements or otherwise with respect to
the transactions contemplated hereby and thereby, including with respect to the
Assumed Liabilities or Excluded Liabilities. 
Each party waives any provision of Law to the extent that it would limit
or restrict the agreements contained in this Article IX.  Nothing herein shall prevent either party
from terminating this Agreement in accordance with Article X.

 

(f)                                    Any
indemnity payment under this Agreement shall be treated as an adjustment to the
Purchase Price for Tax purposes, to the maximum extent permitted by applicable
Law.

 

9.2.                            Defense of Claims.

 

(a)                                  If
any Indemnitee receives notice of the assertion of any claim or of the
commencement of any claim, action, or proceeding made or brought by any Person
who is not a

 

55

 

party to this Agreement or an Affiliate of a party to this Agreement (a
“Third Party Claim”) with respect to which indemnification is to be
sought from the Indemnifying Party, the Indemnitee will give the Indemnifying
Party reasonably prompt written notice thereof, but in any event not later than
15 days after the Indemnitee’s receipt of written notice of such Third Party
Claim.  Such notice shall describe the
nature of the Third Party Claim in reasonable detail and shall indicate the
estimated amount, if practicable, of the Indemnifiable Loss that has been or
may be sustained by the Indemnitee.  The
Indemnifying Party will have the right to participate in or, by giving written
notice to the Indemnitee, to elect to assume the defense of any Third Party
Claim at the Indemnifying Party’s own expense and by the Indemnifying Party’s
own counsel (reasonably acceptable to the Indemnitee), and the Indemnitee will
cooperate in good faith in such defense at such Indemnitee’s own expense.

 

(b)                                 If
within 10 days after an Indemnitee provides written notice to the Indemnifying
Party of any Third Party Claim the Indemnitee receives written notice from the
Indemnifying Party that the Indemnifying Party has elected to assume the
defense of such Third Party Claim as provided in the last sentence of Section 9.2(a),
the Indemnifying Party will not be liable for any legal expenses subsequently
incurred by the Indemnitee in connection with the defense thereof; provided,
however, that if at any time the Indemnifying Party fails to take reasonable
steps necessary to defend diligently such Third Party Claim within 10 days
after receiving notice from the Indemnitee that the Indemnitee believes the
Indemnifying Party has failed to take such steps, the Indemnitee may assume its
own defense, and the Indemnifying Party will be liable for all reasonable
expenses thereof; provided further, that if, under applicable standards
of professional conduct, a conflict with respect to any significant issue
between any Indemnitee and the Indemnifying Party exists in respect of such
Third Party Claim, the Indemnifying Party shall pay reasonable fees and
expenses of one additional counsel as may be required to be retained in order
to resolve such conflict.  The Indemnifying
Party shall be liable for the fees and expenses of counsel employed by the
Indemnitee for any period during which the Indemnifying Party has not assumed
the defense of any such Third Party Claim (other than during any period in
which the Indemnitee has failed to give notice of the Third Party Claim as
provided above).  If the Indemnifying
Party assumes such defense, the Indemnitee shall have the right to participate
in the defense thereof and to employ counsel, at its own expense, separate from
the counsel employed by the Indemnifying Party, it being understood that the
Indemnifying Party shall control such defense. 
If the Indemnifying Party chooses to defend or bring any Third Party
Claim, the Indemnitee shall agree to any settlement, compromise or discharge of
such Third Party Claim that the Indemnifying Party may recommend and that, by
its terms, discharges the Indemnitee and its Affiliates from the full amount of
Liability in connection with such Third Party Claim; provided, however,
that, without the consent of the Indemnitee, the Indemnifying Party shall not
consent to, and the Indemnitee shall not be required to agree to, the entry of
any judgment or entry into any settlement that (i) provides for injunctive
or other non-monetary relief affecting the Indemnitee or any of its Affiliates
or (ii) does not include as an unconditional term thereof the giving of a
release from all Liability with respect to such claim by each claimant or
plaintiff to each Indemnitee that is the subject of such Third Party Claim.

 

(c)                                  Any
claim by an Indemnitee on account of an Indemnifiable Loss which does not
result from a Third Party Claim (a “Direct Claim”) will be asserted by
giving the Indemnifying Party reasonably prompt written notice thereof, stating
the nature of such claim in reasonable detail and indicating the estimated
amount, if practicable, and the Indemnifying Party

 

56

 

will have a period of 30 days within which to respond to such Direct
Claim.  If the Indemnifying Party does
not respond within such 30-day period, the Indemnifying Party will be deemed to
have accepted such claim.  If the
Indemnifying Party rejects such claim, the Indemnitee will be free to seek
enforcement of its rights to indemnification under this Agreement.

 

(d)                                 If
the amount of any Indemnifiable Loss, at any time subsequent to the making of
an indemnity payment in respect thereof, is reduced by recovery, settlement or
otherwise under or pursuant to any insurance coverage, or pursuant to any
claim, recovery, settlement or payment by or against any other Person, the
amount of such reduction, less any costs, expenses or premiums incurred in
connection therewith will promptly be repaid by the Indemnitee to the
Indemnifying Party, but in any event not later than 30 days after receipt of such
reduction by the Indemnitee.  Upon making
any indemnity payment, the Indemnifying Party will, to the extent of such
indemnity payment, be subrogated to, and the Indemnitee shall provide the
Indemnifying Party a written assignment of, all rights of the Indemnitee
against any third party (including any insurer) in respect of the Indemnifiable
Loss to which the indemnity payment relates; provided, however, that (i) the
Indemnifying Party will then be in compliance with its obligations under this
Agreement in respect of such Indemnifiable Loss and (ii) until the
Indemnitee recovers full payment of its Indemnifiable Loss, any and all claims
of the Indemnifying Party against any such third party on account of said
indemnity payment is hereby made expressly subordinated and subject in right of
payment to the Indemnitee’s rights against such third party.  Without limiting the generality or effect of
any other provision hereof, each such Indemnitee and the Indemnifying Party
will duly execute upon request all instruments reasonably necessary to evidence
and perfect the above-described subrogation and subordination rights, and
otherwise cooperate in the prosecution of such claims at the direction of the
Indemnifying Party.  Nothing in this Section 9.2(d) shall
be construed to require any party hereto to obtain or maintain any insurance
coverage.

 

(e)                                  A
failure to give timely notice as provided in this Section 9.2 will not
affect the rights or obligations of any party hereunder except if, and only to
the extent that, as a result of such failure, the party which was entitled to
receive such notice was actually prejudiced as a result of such failure.

 

ARTICLE X

TERMINATION AND ABANDONMENT

 

10.1.                     Termination.

 

(a)                                  This
Agreement may be terminated at any time prior to the Closing Date by mutual
written consent of the Seller Parties and the Buyers.

 

(b)                                 This
Agreement may be terminated by the Seller Parties or the Buyers if the Closing
contemplated hereby shall have not occurred on or before December 31, 2005
(the “Termination Date”); provided, however, that the right to
terminate this Agreement under this Section 10.1(b) will not be
available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure of the Closing to
occur on or before such date.

 

57

 

(c)                                  This
Agreement may be terminated by the Seller Parties or the Buyers if (i) one
or more courts of competent jurisdiction shall have issued an order, judgment
or decree permanently restraining, enjoining or otherwise prohibiting the
Closing, and such order, judgment or decree shall have become final and
nonappealable or (ii) any Law shall have been enacted by any Governmental
Entity which prohibits the consummation of the Closing.

 

(d)                                 This
Agreement may be terminated by the Buyers if there shall have been a material
breach of any representation or warranty, or a material breach of any covenant
or agreement of the Seller Parties hereunder, which breach would, individually
or in the aggregate, be reasonably likely to have a Material Adverse Effect and
such breach has not been cured by the Seller Parties within 30 Business Days
after the Seller Parties have Knowledge of such breach.

 

(e)                                  This
Agreement may be terminated by the Seller Parties if there shall have been a
material breach of any representation or warranty, or a material breach of any
covenant or agreement of the Buyers hereunder, which breach would prevent,
materially delay or materially impair the Buyers’ ability to consummate the
transactions contemplated by this Agreement and such breach has not been cured
by the Buyers within 30 Business Days after the Buyers have Knowledge of such
breach.

 

(f)                                    This
Agreement may be terminated by the Buyers as contemplated in Section 7.11(b).

 

(g)                                 This
Agreement may be terminated by the Seller Parties or the Buyers in accordance
with the provisions of Section 7.16.

 

10.2.                     Procedure and Effect of Termination.  In the event of termination of this Agreement
and abandonment of the transactions contemplated hereby by either the Seller
Parties or the Buyers pursuant to Section 10.1, written notice thereof
shall forthwith be given by the terminating party to the other parties and this
Agreement shall terminate and the transactions contemplated hereby shall be
abandoned, without further action by any of the parties hereto.  If this Agreement is terminated as provided
herein:

 

(a)                                  None
of the parties hereto nor any of their respective trustees, directors,
officers, Affiliates, as the case may be, shall have any Liability or further
obligation to the other parties or any of their respective trustees, directors,
officers or Affiliates, as the case may be, pursuant to this Agreement, except (i) that
nothing herein shall relieve any party from Liability for any material breach
of any representation, warranty, covenant, or agreement of such party contained
in this Agreement and (ii) that Sections 7.2(b), 7.3, 7.8, 10.2, 11.1,
11.2, 11.4 through 11.6, and 11.8 through 11.10 and 11.12 through 11.15 shall
survive such termination; and

 

(b)                                 All
filings, applications and other submissions made pursuant to this Agreement, to
the extent practicable, shall be withdrawn from the Governmental Entity or
other Person to which they were made.

 

58

 

ARTICLE XI

MISCELLANEOUS PROVISIONS

 

11.1.                     Amendment and Modification. 
Subject to applicable Law, this Agreement may be amended, modified or
supplemented only by written agreement of the Seller Parties and the Buyers.

 

11.2.                     Waiver of Compliance. 
Except as otherwise provided in this Agreement, any failure of any of
the parties to comply with any obligation, covenant, agreement or condition
herein may be waived by the party entitled to the benefits thereof only by a
written instrument signed by the party expressly granting such waiver, but such
waiver or failure to insist upon strict compliance with such obligation,
covenant, agreement or condition shall not operate as a waiver of, or estoppel
with respect to, any other failure.

 

11.3.                     Survival.

 

(a)                                  The
representations and warranties of the Seller Parties contained herein or in any
certificates or documents delivered pursuant to this Agreement on the Closing
Date shall survive the Closing for a period of 24 months following the Closing
Date; provided, however, that (i) the representations and
warranties set forth in Section 5.10 shall survive for a period of five
years following the Closing Date, (ii) the representations and warranties
set forth in Section 5.19(b) shall survive for a period of three
months following the Closing Date, and (iii) the representations and
warranties set forth in Sections 5.2, 5.3, 5.8, 5.17, 5.19(a), 5.22 and 5.23
shall survive until 90 days after the expiration of the applicable statute of
limitations (giving effect to extensions or waivers thereof; provided,
however, that nothing contained in this Agreement shall be deemed to
require any of the parties to agree to any such extension or waiver).

 

(b)                                 The
representations and warranties of the Buyers contained herein or in any
certificates or documents delivered pursuant to this Agreement on the Closing
Date shall survive the Closing for a period of 24 months following the Closing
Date; provided, however, that the representations and warranties set
forth in Sections 6.2, 6.6, 6.7 and 6.8 shall survive until 90 days after the
expiration of the applicable statute of limitations (giving effect to
extensions or waivers thereof; provided, however, that nothing contained
in this Agreement shall be deemed to require any of the parties to agree to any
such extension or waiver).

 

(c)                                  The
covenants and agreements in Article IX shall survive the Closing and shall
remain in full force and effect for such period as is necessary to resolve any
claim made with respect to any representation, warranty, covenant or agreement
contained herein during the survival period thereof, and the covenants and
agreements of the parties contained in Articles II, III, VII and XI of
this Agreement shall survive the Closing for (i) the time period(s) set
forth in the respective Sections contained in such Articles, or (ii) if no
time period is so specified, until 90 days after the expiration of the
applicable statute of limitations.

 

11.4.                     Notices.  All notices
and other communications hereunder shall be in writing and shall be deemed
given if delivered personally or by facsimile transmission, telexed or mailed
by overnight courier or registered or certified mail (return receipt requested),
postage prepaid, to the

 

59

 

parties at the following address (or at such other
address for a party as shall be specified by like notice; provided that
notices of a change of address shall be effective only upon receipt thereof):

 

(a)                                  If
to the Seller Parties, to:

 

Allegheny Energy
Supply Company, LLC

4350 Northern Pike
– 4 North

Monroeville,
PA  15146-2841

Facsimile:  (412) 856-2789

Attention:  Deputy General Counsel

 

with a copy to:

 

Allegheny Energy, Inc.

800 Cabin Hill
Drive

Greensburg,
PA  15601-1689

Facsimile:  (724) 830-5151

Attention:  President

 

and

 

Gray, Plant,
Mooty, Mooty & Bennett, P.A.

500 IDS Center

80 South Eighth
Street

Minneapolis, MN
55402

Facsimile:  (612) 632-4388

Attention:  Joseph T. Kinning, Esq.

 

(b)                                 If
to PSI Energy, to:

 

PSI Energy, Inc.

1000 East Main
Street

Plainfield,
IN  46168

Facsimile:  (317) 838-2111

Attention:  Kay E. Pashos, President

 

with a copy to:

 

Cinergy Corp.

139 East Fourth
Street

Cincinnati,
OH  45202

Facsimile:  (513) 287-4090

Attention:  Douglas C. Taylor, Vice President, Corporate
Development

 

and

 

60

 

Skadden, Arps,
Slate, Meagher & Flom LLP

1440 New York
Avenue, N.W.

Washington,
DC  20005

Facsimile:  (202) 393-5760

Attention:  Pankaj K. Sinha, Esq.

 

(c)                                  If
to CG&E, to:

 

The Cincinnati Gas &
Electric Company

139 East Fourth
Street

Cincinnati,
OH  45202

Facsimile:  (513) 287-4031

Attention:  Gregory C. Ficke, President

 

with a copy to:

 

Cinergy Corp.

139 East Fourth
Street

Cincinnati,
OH  45202

Facsimile:  (513) 287-4090

Attention:  Douglas C. Taylor, Vice President, Corporate
Development

 

and

 

Skadden, Arps,
Slate, Meagher & Flom LLP

1440 New York
Avenue, N.W.

Washington,
DC  20005

Facsimile:  (202) 393-5760

Attention:  Pankaj K. Sinha, Esq.

 

11.5.                     Assignment; No Third-Party Beneficiaries.  This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns, but neither this
Agreement nor any of the rights, interests or obligations hereunder may be
assigned by any party hereto, including by operation of Law without the prior
written consent of the other party, nor is this Agreement intended to confer
upon any other Person except the parties hereto any rights or remedies
hereunder.  Without limiting the
generality of the foregoing, no provision of this Agreement will create any
third-party beneficiary rights in any employee or former employee of the Seller
Parties or any of their Affiliates (including any beneficiary or dependent
thereof) in respect of continued employment or resumed employment, and no
provision of this Agreement will create any rights in any such Persons in
respect of any benefits that may be provided, directly or indirectly, under any
employee benefit plan or arrangement except as expressly provided for
thereunder.

 

11.6.                     Governing Law.  This Agreement shall be governed
by and construed in accordance with the Laws of the State of Indiana
(regardless of the Laws that might otherwise govern under applicable Indiana
principles of conflicts of law) as to all matters, including,

 

61

 

without limitation, matters of validity, construction,
effect, performance and remedies, except where Indiana Law is preempted by
federal Law, in which event federal Law shall govern.

 

11.7.                     Counterparts.  This
Agreement may be executed and delivered (including via facsimile) in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

 

11.8.                     Interpretation.  The article and
section headings contained in this Agreement are solely for the purpose of
reference, are not part of the agreement of the parties and shall not in any
way affect the meaning or interpretation of this Agreement.

 

11.9.                     Schedules and Exhibits.  All Exhibits and Schedules referred to herein
are intended to be and hereby are specifically made a part of this Agreement.

 

11.10.              Entire Agreement. 
This Agreement, the Confidentiality Agreement and the Ancillary
Agreements including the Exhibits, Schedules, documents, certificates and
instruments referred to herein or therein, embody the entire agreement and
understanding of the parties hereto in respect of the transactions contemplated
by this Agreement.  There are no
restrictions, promises, representations, warranties, covenants or undertakings,
other than those expressly set forth or referred to herein or therein.  This Agreement and the Ancillary Agreements
supersede all prior agreements and understandings, whether written or oral,
between the parties with respect to such transactions other than the
Confidentiality Agreement.

 

11.11.              Bulk Sales or Transfer Laws. 
The Buyers acknowledge that the Seller Parties will not comply with the
provision of any bulk sales or transfer Laws of any jurisdiction in connection
with the transactions contemplated by this Agreement.  The Buyers hereby waive compliance by the
Sellers with the provisions of the bulk sales or transfer Laws of all applicable
jurisdictions.

 

11.12.              Consent to Jurisdiction. 
Each party hereby irrevocably submits to the exclusive jurisdiction of
the federal or state courts located in the State of Indiana in any action, suit
or proceeding arising out of or relating to this Agreement or the Ancillary
Agreements or any of the transactions contemplated hereby or thereby, provided,
however, that such consent to jurisdiction is solely for the purpose
referred to in this Section and shall not be deemed to be a general
submission to the jurisdiction of said courts or in the State of Indiana other
than for such purpose.  Each party hereby
irrevocably waives, to the fullest extent permitted by Law, any objection that
it may now or hereafter have to the laying of the venue of any such action,
suit or proceeding brought in such a court and any claim that any such action,
suit or proceeding brought in such a court has been brought in an inconvenient
forum.

 

11.13.              Waiver of Jury Trial. 
THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY AND ALL RIGHT TO
TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE ANCILLARY AGREEMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY.

 

11.14.              Waiver of Consequential, Etc. Damages.  NOTWITHSTANDING ANYTHING TO THE
CONTRARY IN THIS AGREEMENT, EXCEPT TO THE EXTENT RESULTING FROM ANY THIRD PARTY
CLAIM OR FROM FRAUD OR WILLFUL MISCONDUCT, THE BUYERS SHALL NOT BE LIABLE

 

62

 

TO THE SELLER PARTIES, NOR
SHALL THE SELLER PARTIES BE LIABLE TO THE BUYERS, FOR ANY EXEMPLARY, PUNITIVE,
SPECIAL, INDIRECT, CONSEQUENTIAL, REMOTE OR SPECULATIVE DAMAGES (INCLUDING,
WITHOUT LIMITATION, ANY DAMAGES ON ACCOUNT OF LOST PROFITS OR OPPORTUNITIES) RESULTING
FROM OR ARISING OUT OF THIS AGREEMENT OR THE ANCILLARY AGREEMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

 

11.15.              Specific Performance.  The
parties hereto agree that irreparable damage would occur in the event any of
the provisions of this Agreement were not to be performed in accordance with
the terms hereof and that prior to the Closing, the parties will be entitled to
specific performance of the terms hereof in addition to any other remedies at
law or in equity.

 

11.16.              Change of Structure. 
Notwithstanding anything in this Agreement to the contrary, (a) if,
with respect to Buyers Required Regulatory Approvals, all required IURC
approvals with respect to PSI Energy have not been obtained by November 20,
2005, and all required FERC and SEC approvals have been obtained by November 30,
2005, then, subject to the satisfaction of the other conditions contained in Article VIII,
CG&E alone will acquire the Wheatland Facility pursuant to this Agreement
and all references in this Agreement to “Buyers” shall be deemed to refer to
CG&E only (and not PSI Energy) and PSI Energy shall have no further rights
or obligations under this Agreement, or (b) if, with respect to Buyers
Required Regulatory Approvals, all required IURC approvals and FERC Approvals
have been obtained, but all required SEC approvals under the Holding Company
Act for CG&E have not been obtained by November 30, 2005, then,
subject to the satisfaction of the other conditions contained in Article VIII,
PSI Energy alone will acquire the Wheatland Facility pursuant to this Agreement
and all references in this Agreement to “Buyers” shall be deemed to refer to
PSI Energy only (and not CG&E) and CG&E shall have no further rights or
obligations under this Agreement. 
Notwithstanding the foregoing, the Seller Parties acknowledge that,
prior to November 20, 2005, the Buyers shall have sole discretion to
allocate the ownership of the Acquired Assets and the Assumed Liabilities
between the Buyers (including by allocating 100% of the Acquired Assets and
Assumed Liabilities to one Buyer) provided the Buyer Required Regulatory
Approvals necessary for Closing the transaction with the selected allocation
have been received by November 20, 2005. 
In the event the Buyers determine, and give written notice pursuant to Section 7.17,
that either PSI Energy or CG&E shall acquire 100% of the Acquired Assets
and Assumed Liabilities, all references in this Agreement to “Buyers” shall be
deemed to refer to the one applicable Buyer (and not the other Buyer) and the
other Buyer shall have no further rights or obligations under this
Agreement.  The parties hereto agree to
use their Commercially Reasonable Efforts to amend this Agreement and the
Ancillary Agreements if necessary to reflect any revised transaction structure
discussed in this Section 11.16.

 

11.17.              Certain Approvals. 
The parties hereto agree that in the event FERC approval under section 203
of the Federal Power Act, in form and substance sufficient to satisfy the
requirements of Section 8.2(h), is received on or before December 20,
2005, and FERC approval under section 205 of the Federal Power Act is not
received by the Buyers on or before December 29, 2005, then FERC approval
under section 205 of the Federal Power Act shall no longer be deemed to be
a Buyers Required Regulatory Approval (and thus shall no longer be deemed to
constitute a condition to the Closing) and, subject to the satisfaction of the
other conditions contained in Article VIII, the Closing shall occur on December 30,
2005; provided that, in no

 

63

 

event shall the Closing occur if, prior to December 30,
2005, the FERC has issued an adverse order with respect to the filing made by
the Buyers under section 205 of the Federal Power Act.

 

[Remainder of this page is
blank. Signature page follows.]

 

64

 

IN WITNESS WHEREOF, the Seller Parties and the Buyers
have caused this Agreement to be signed by their respective duly authorized
officers as of the date first above written.

 

	
  BUYERS:

  	
  SELLER PARTIES:

  
	
   

  	
   

  
	
  PSI
  ENERGY, INC.

  	
  ALLEGHENY
  ENERGY SUPPLY

  COMPANY, LLC

  
	
   

  	
   

  
	
  By:

  	
  /s/
  Kay Pashos

  	
   

  	
   

  
	
   

  	
  Name:
  Kay Pashos

  	
  By:

  	
  /s/John
  P. Campbell

  	
   

  
	
   

  	
  Title:
  President

  	
   

  	
  Name:
  John P. Campbell

  
	
   

  	
   

  	
   

  	
  Title:  Vice President

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  THE
  CINCINNATI GAS & ELECTRIC

  COMPANY

  	
  ALLEGHENY
  ENERGY SUPPLY

  WHEATLAND GENERATING FACILITY, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/
  Gregory C. Ficke

  	
   

  	
  By:

  	
  /s/
  John P. Campbell

  	
   

  
	
   

  	
  Name:
  Gregory C. Ficke

  	
   

  	
  Name:
  John P. Campbell

  
	
   

  	
  Title:
  President

  	
   

  	
  Title:
  Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  LAKE
  ACQUISITION COMPANY, L.L.C.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  John P. Campbell

  	
   

  
	
   

  	
   

  	
  Name:
  John P. Campbell

  
	
   

  	
   

  	
  Title:
  Vice President

  
								

 

 

EXHIBIT A

 

ASSIGNMENT AND ASSUMPTION AGREEMENT

 

This
ASSIGNMENT AND ASSUMPTION AGREEMENT (this “Agreement”) is made effective
as of the      day of             ,
2005, by and among PSI Energy, Inc., an Indiana corporation (“PSI
Energy”), and The Cincinnati Gas & Electric Company, an Ohio
corporation (“CG&E” and, together with PSI Energy, collectively, the
“Buyers”), and Allegheny Energy Supply Wheatland Generating Facility,
LLC, a Delaware limited liability company and a wholly owned subsidiary of AESC
(“Wheatland LLC”), Lake Acquisition Company, L.L.C., a Delaware limited
liability company and a wholly owned subsidiary of AESC (“Lake LLC”),
and Allegheny Energy Supply Company, LLC, a Delaware limited liability company
(“AESC” and, together with Wheatland LLC and Lake LLC, the “Seller Parties”).

 

WHEREAS,
the Seller Parties and the Buyers have entered into an Asset Purchase Agreement
dated as of May 5, 2005 (the “Asset Purchase Agreement”;
capitalized terms used herein but not otherwise defined herein having the
meanings given to such terms in the Asset Purchase Agreement), pursuant to
which, subject to the terms and conditions set forth therein, the Seller
Parties have agreed to assign to the Buyers all of the Seller Parties’ right,
title and interest in and to the Assumed Contracts and the Leases, and the
Buyers have agreed to assume the Assumed Liabilities, in the proportions set
forth on Schedule A.

 

NOW,
THEREFORE, in consideration of the foregoing and the mutual covenants and
agreements set forth herein, the Seller Parties and the Buyers hereby agree as
follows:

 

1.                                       Assignment
of Contracts.  Subject to the terms
and conditions of the Asset Purchase Agreement, the Seller Parties hereby
assign and transfer to the Buyers (in the percentages set forth on Schedule A),
and the Buyers (in the percentages set forth on Schedule A) hereby
take assignment of and assume from the Seller Parties, all of the Seller
Parties’ right, title and interest in and to the Assumed Contracts and any
other agreements or contracts included in the Acquired Assets.  Notwithstanding the foregoing, the Seller
Parties do not assign or transfer any agreement or contract or any claim or
right or any benefit or obligation thereunder or resulting therefrom if an
assignment or transfer thereof, without the consent of a third party thereto,
would constitute a breach or violation thereof or impose any obligation or
liability on the Seller Parties unless and until such a consent has been
obtained.

 

2.                                       Assumption
of Liabilities.  The Buyers (in the
percentages set forth on Schedule A) hereby assume and satisfy, and
agree to pay, perform, fulfill and discharge when due, the Assumed Liabilities.

 

3.                                       Asset
Purchase Agreement.  This Agreement
is being executed and delivered pursuant and subject to the Asset Purchase
Agreement.  Nothing in this Agreement
shall, or shall be deemed to, defeat, limit, alter or impair, enhance or
enlarge

 

 

any right, obligation,
claim or remedy created by the Asset Purchase Agreement.  In the event of any conflict between this
Agreement and the Asset Purchase Agreement, the Asset Purchase Agreement shall
control.

 

4.                                       Successor
and Assigns.  This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns.

 

5.                                       Applicable
Law.  This Agreement shall be
governed by and construed and enforced in accordance with the laws of the State
of Indiana without giving effect to the principles of conflicts of law thereof.

 

6.                                       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.

 

2

 

IN
WITNESS WHEREOF, the undersigned have caused this Agreement to be executed and
delivered as of this          day of                ,
2005.

 

	
   

  	
  PSI ENERGY, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  THE CINCINNATI
  GAS & ELECTRIC

  COMPANY

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  ALLEGHENY ENERGY
  SUPPLY COMPANY,

  LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  ALLEGHENY ENERGY
  SUPPLY WHEATLAND

  GENERATING FACILITY, LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  LAKE ACQUISITION
  COMPANY, L.L.C.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

3

 

SCHEDULE A

 

Allocation of Contracts and Assumed
Liabilities Between the Buyers

 

	
  Buyer

  	
   

  	
  Percent Allocation

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  PSI Energy

  	
   

  	
  [     ]

  	
  %(1)

  
	
   

  	
   

  	
   

  	
   

  
	
  CG&E

  	
   

  	
  [     ]

  	
  %

  

 

(1) To be determined
prior to Closing pursuant to the Asset Purchase Agreement.

 

 

EXHIBIT B

 

BILL OF SALE

 

This
BILL OF SALE (this “Bill of Sale”) is made effective as of the     
day of             ,
2005, by Allegheny Energy Supply Wheatland Generating Facility, LLC, a Delaware
limited liability company (“Wheatland LLC”), Lake Acquisition Company,
L.L.C., a Delaware limited liability company (“Lake LLC”), and Allegheny
Energy Supply Company, LLC, a Delaware limited liability company (“AESC” and,
together with Wheatland LLC and Lake LLC, the “Seller Parties”), to PSI
Energy, Inc., an Indiana Corporation (“PSI Energy”), and The
Cincinnati Gas & Electric Company, an Ohio corporation (“CG&E”
and, together with PSI Energy, the “Buyers”).(1)

 

WHEREAS,
the Seller Parties and the Buyers have entered into an Asset Purchase Agreement
dated as of May 5, 2005 (the “Asset Purchase Agreement”;
capitalized terms used herein but not otherwise defined herein having the
meanings given to such terms in the Asset Purchase Agreement) providing for,
subject to the terms and conditions set forth therein, the sale, assignment,
conveyance, transfer and delivery by the Seller Parties to the Buyers of the
Acquired Assets.

 

NOW,
THEREFORE, in consideration of the foregoing, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the Sellers hereby sell, assign, convey, transfer and deliver (or cause to be
sold, assigned, conveyed, transferred and delivered) to the Buyers (in the
percentages set forth on Schedule A) all of the Seller Parties’
respective rights, title and interests in and to the Acquired Assets other than
the Assumed Contracts, which are being assigned and transferred to the Buyers
pursuant to the Assignment and Assumption Agreement of even date herewith
between the Seller Parties and the Buyers.

 

This
Bill of Sale is being executed and delivered pursuant and subject to the Asset
Purchase Agreement.  Nothing in this Bill
of Sale shall, or shall be deemed to, defeat, limit, alter, impair, enhance or
enlarge any right, obligation, claim or remedy created by the Asset Purchase
Agreement.  In the event of any conflict
between this Bill of Sale and the Asset Purchase Agreement, the Asset Purchase
Agreement shall control.

 

This
Bill of Sale shall be binding upon the Seller Parties and their successors and
permitted assigns and shall inure to the benefit of the Buyers and their
respective successors and permitted assigns.

 

This
Bill of Sale shall be governed by and construed and enforced in accordance with
the laws of the State of Indiana without giving effect to the principles of
conflicts of law thereof.

 

(1) Note that if PSI Energy or CG&E acquires
100% of the Acquired Assets, then this Bill of Sale will be revised to remove
the entity that is not acquiring any of the Acquired Assets.

 

 

This
Bill of Sale 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.

 

IN
WITNESS WHEREOF, the undersigned have caused this Bill of Sale to be executed
and delivered as of this       day of               ,
2005.

 

	
   

  	
  ALLEGHENY ENERGY
  SUPPLY COMPANY,

  LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ALLEGHENY ENERGY
  SUPPLY WHEATLAND GENERATING FACILITY, LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  LAKE ACQUISITION
  COMPANY, L.L.C.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

Acknowledged and accepted
as of this

     day
of              ,
2005.

 

	
  PSI ENERGY, INC.

  
	
   

  
	
  By:

  	
   

  	
   

  
	
  Name:

  
	
  Title:

  
	
   

  
	
   

  
	
  THE CINCINNATI
  GAS & ELECTRIC COMPANY

  
	
   

  
	
  By:

  	
   

  	
   

  
	
  Name:

  
	
  Title:

  

 

2

 

SCHEDULE A

 

Allocation of Assets Between the
Buyers

 

	
  Buyer

  	
   

  	
  Percent Allocation

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  PSI Energy

  	
   

  	
  [     ]

  	
  %(2)

  
	
   

  	
   

  	
   

  	
   

  
	
  CG&E

  	
   

  	
  [     ]

  	
  %

  

 

(2) To be determined
prior to Closing pursuant to the Asset Purchase Agreement.

 

 

EXHIBIT C

 

FORM OF DEEDS

 

This
Instrument Was Prepared By:

 

Gray Plant Mooty

500 IDS Center, 80 South
8th St.

Minneapolis, Minnesota  55402-3796

Attention:  John D. Giudicessi, Esq.

 

After
Recording, Mail To:

 

Cinergy/PSI

1000 East Main Street

Plainfield, Indiana  46168

Attention:  John B. Scheidler, Esq.

 

Send
Subsequent Tax Bills To:

 

Cinergy/PSI

1000 East Main Street

Plainfield, Indiana  46168

Attention:  Tax Department

 

[SUBJECT TO FORMATTING REVISIONS
TO CONFORM

WITH LOCAL RECORDING REQUIREMENTS]

 

SPECIAL WARRANTY DEED

 

THIS
INDENTURE is made as of this [    ]
day of [          ],
2005 from [ALLEGHENY ENERGY SUPPLY WHEATLAND
GENERATING FACILITY, LLC/LAKE ACQUISITION COMPANY, L.L.C.], a Delaware limited liability company
having its principal place of business at 4530 Northern Pike – 4 North,
Monroeville, Pennsylvania 15146-2841 (“Grantor”), to PSI ENERGY, INC.,
an Indiana corporation having its principal place of business at 1000 East Main
Street, Plainfield, Indiana 46168 (“PSI”), and THE CINCINNATI GAS &
ELECTRIC COMPANY, an Ohio corporation having its principal place of business at
139 East Fourth Street, Cincinnati, Ohio 45202 (“CG&E” and
collectively with PSI, “Grantee”), as tenants in common as more
particularly set forth below.   [Grantor is formerly known as West Fork Land
Development Company, LLC, a Delaware limited liability company.]

 

WITNESSETH,
that Grantor, for and in consideration of the sum of Ten Dollars ($10.00) and
other good and valuable consideration in hand paid by Grantee, the receipt
whereof is hereby acknowledged, by these presents does DEMISE, RELEASE, ALIEN
AND CONVEY FOREVER unto (i) PSI and its successors and assigns, an
undivided fifty percent (50%) interest as tenant in common and not as joint
tenant with rights of survivorship and (ii) CG&E and its successors
and assigns, an undivided fifty percent (50%) interest as tenant in common and
not as joint tenant with rights of survivorship, in and to all of that certain
real estate, situated in the County of Knox and State of Indiana, which real
estate is more particularly described on Exhibit A
attached hereto, together with, all and singular, all the estate, right, title,
interest, claim or demand whatsoever of Grantor, either in law or equity, of,
in and to (i) the easements, rights of way, servitudes and other
hereditaments and appurtenances thereunto belonging, or in anyway appertaining,
and the reversion and reversions, remainder and remainders, rents, issues and
profits thereof, (ii) all
buildings, structures, fixtures and other improvements located thereon and (iii) the
streets adjacent thereto (collectively, the “Property”), subject
to the matters set forth in Exhibit B

 

 

attached hereto (the “Permitted
Encumbrances”): TO HAVE AND TO HOLD the Property, unto Grantee, and each of
their respective successors and assigns forever.

 

And
Grantor, for itself, and its successors, does covenant, promise and agree, to
and with Grantee and each of their respective successors and assigns, that,
except for Permitted Encumbrances, it has not done or suffered to be done, anything whereby the
Property is, or may be, in any manner encumbered or charged, except as herein
recited; and that Grantor WILL WARRANT AND DEFEND the title to the Property to
said Grantee and their respective successors and assigns, against the lawful
claims and demands of all persons claiming through or under the said Grantor or its predecessor corporations by merger,
consolidation, change of name, etc., except for the Permitted
Encumbrances.

 

[Signature Page Follows]

 

2

 

IN
WITNESS WHEREOF, Grantor has caused its name to be signed to these presents by
the undersigned authorized signatory as of the day and year first above
written.

 

 

	
   

  	
  Grantor:

  	
  [ALLEGHENY
  ENERGY SUPPLY WHEATLAND GENERATING FACILITY, LLC/LAKE ACQUISITION COMPANY,
  L.L.C.], a Delaware
  limited liability company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
  STATE OF                        

  	
   

  
	
                                               SS

  	
   

  
	
  COUNTY OF                         

  	
   

  
							

 

I, the undersigned, a Notary Public in and for the
County and State Aforesaid, do hereby certify that                                              
 personally known to me to be                          
of [ALLEGHENY ENERGY SUPPLY WHEATLAND
GENERATING FACILITY, LLC/LAKE ACQUISITION COMPANY, L.L.C.], a Delaware limited liability company,
and personally known to me to be the same person whose name is subscribed to
the foregoing instrument, appeared before me this day in person and
acknowledged that he signed and delivered such instrument, in his capacity as                
of such limited liability company, as his free and voluntary act and as the
free and voluntary act and deed of such limited liability company, for the uses
and purposes therein set forth.

 

Given under my hand and official seal this          
day of                ,
2005.

 

	
   

  	
   

  
	
   

  	
  Notary Public

  
	
   

  	
   

  
	
   

  	
  Printed Name:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  My County of
  Residence:

  	
   

  	
   

  	
   

  
	
  My Commission
  Expires:

  	
   

  	
   

  	
   

  

 

 

EXHIBIT A

 

LEGAL DESCRIPTION OF THE PROPERTY

 

[TO BE ADDED FROM
FINAL TITLE COMMITMENT]

 

Tax
Indentification Numbers:  [            ]

 

 

EXHIBIT B

 

PERMITTED
EXCEPTIONS

 

[To Be
Reasonably Agreed Upon by the Parties Prior to Closing]

 

 

EXHIBIT D

 

CERTIFICATION
OF NON-FOREIGN STATUS

 

Section 1445
of the Internal Revenue Code of 1986, as amended, provides that a transferee of
a U.S. real property interest must withhold tax if the transferor is a foreign
person.  For U.S. tax purposes (including
section 1445), the owner of a disregarded entity (which has legal title to
a U.S. real property interest under local law) will be the transferor of the
property and not the disregarded entity. 
To inform the transferee that such withholding of tax is not required upon
the disposition of a U.S. real property interest by Allegheny Energy Supply
Company, LLC, a Delaware limited liability company (“Transferor”), the
undersigned hereby certifies the following on behalf of Transferor:

 

1.         Transferor
is not a foreign corporation, foreign partnership, foreign trust,  or foreign estate (as those terms are defined
in the Internal Revenue Code of 1986, as amended, and the Income Tax
Regulations thereunder);

 

2.         Transferor
is not a disregarded entity as defined in Treasury Regulation §1.1445-2(b)(2)(iii);

 

3.         Transferor’s
U.S. employer identification number is              ;
and

 

4.         Transferor’s
office address is                                  .

 

Transferor
understands that this certification may be disclosed to the Internal Revenue
Service by the transferee and that any false statement contained herein could
be punished by fine, imprisonment, or both.

 

Under
penalties of perjury, I declare that I have examined this certification and to
the best of my knowledge and belief it is true, correct and complete, and I
further declare that I have authority to sign this document on behalf of
Transferor.

 

 

	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
  Dated:                             ,
  2005Exhibit 10.3

 

 

 

GRAMERCY CAPITAL CORP.

 

DIRECTORS’ DEFERRAL PROGRAM

 

 

 

 

TABLE OF CONTENTS

 

	
  1.

  	
  Definitions

  	
   

  
	
   

  	
   

  	
   

  
	
  2.

  	
  Grants
  Under the Equity Incentive Plan; Administration of Program

  	
   

  
	
   

  	
   

  	
   

  
	
  3.

  	
  Effective
  Date of Program; Termination of the Program

  	
   

  
	
   

  	
   

  	
   

  
	
  4.

  	
  Eligibility

  	
   

  
	
   

  	
   

  	
   

  
	
  5.

  	
  Cash Fees and Options

  	
   

  
	
   

  	
   

  	
   

  
	
  6.

  	
  Phantom Shares

  	
   

  
	
   

  	
   

  	
   

  
	
  7.

  	
  Dividend Equivalent Rights

  	
   

  
	
   

  	
   

  	
   

  
	
  8.

  	
  Settlement and Withdrawal

  	
   

  
	
   

  	
   

  	
   

  
	
  9.

  	
  Amendment and Modification

  	
   

  
	
   

  	
   

  	
   

  
	
  10.

  	
  Captions

  	
   

  

 

i

 

GRAMERCY CAPITAL CORP.

 

DIRECTORS’ DEFERRAL PROGRAM

 

Gramercy Capital Corp., a
corporation organized under the laws of the State of Maryland, maintains the
Equity Incentive Plan.  Among the forms
of compensation contemplated by the Equity Incentive Plan are awards to Directors.  The Company wishes to align further the
interests of Directors and stockholders and generally increase the
effectiveness of its compensation structure for Directors, by implementing the
Program.  In furtherance thereof, and by
the authority to make grants under the Equity Incentive Plan, the Program is
adopted to implement certain such grants, and to govern the manner in which the
Shares underlying such grants shall be delivered, as set forth herein.  In addition, the Program provides for other
deferrals of certain directors’ fees and Shares received upon the exercise of
certain options in accordance with the terms hereof.

 

1.                                       Definitions.

 

Capitalized terms used
herein without definitions shall have the meanings given to those terms in the
Equity Incentive Plan.  In addition,
whenever used herein, the following terms shall have the meanings set forth
below except as the context requires otherwise:

 

“Account” means a
deferred compensation account established for a Participant in accordance with Section 4.2(d).

 

“Equity Incentive Plan”
means the Gramercy Capital Corp. 2004 Equity Incentive Plan, as amended from
time to time.

 

“Participant” means a
Director of the Company who is credited hereunder with one or more Phantom
Shares or who has otherwise deferred receipt of fees hereunder as permitted by
the Board.

 

“Program” means the
Company’s Directors’ Deferral Program, as set forth herein and as the same may
from time to time be amended.

 

2.                                       Grants Under the Equity Incentive
Plan; Administration of Program.

 

The grants of Phantom
Shares and Dividend Equivalent Rights shall constitute grants under and
governed by the Equity Incentive Plan to Directors.  Thus, the Phantom Shares shall be subject in
all respects to the provisions of the Equity Incentive Plan governing grants to
Directors; provided that the Committee shall not be designated to act
hereunder, and all functions of the Committee shall be fulfilled by the
Board.  Cash payments under the Program
not relating to Phantom Shares or Dividend Equivalent Rights shall also be
governed by the same rules as are established under the Equity Incentive
Plan as to interpretation, beneficiary designation, exculpation (and
indemnification) and all other matters of administration.  Without limiting the generality of the
forgoing, the provisions of Sections 7.4 and 7.5 of the Plan shall be
applicable in respect of the Account, credits thereto and distributions
therefrom.

 

 

3.                                       Effective Date of Program;
Termination of the Program.

 

The effective date of the
Program is                   ,
2005.  The Program shall terminate on,
and no Phantom Shares or Dividend Equivalent Rights shall be granted or other
deferrals made hereunder on or after, the 10-year anniversary of, the effective
date of the Program (and, in the case of Phantom Shares and Dividend Equivalent
Rights, the date of termination or expiration of the Equity Incentive Plan, if
earlier).

 

4.                                       Eligibility.

 

Except as otherwise
determined by the Board, each individual who is a Director of the Company shall
be eligible to participate in the Program.

 

5.                                       Cash Fees and Options.

 

5.1                                 Types of Fees.

 

In consideration of each
Director’s service as a member of the Board, each Director may be eligible from
time to time, under the Company’s director compensation arrangements, to
receive as compensation (i) periodic retainer fees, a portion of which is
payable in cash or Shares, as elected by the Participant (a “Cash Retainer”),
and a portion of which is payable in Shares (an “Equity Retainer”); (ii) in
the case of the chairman of each of the committees of the Board, additional
periodic retainer fees (“Chairmen’s Retainers”); (iii) a fee per Board
meeting attended, to be paid following each meeting (a “Meeting Fee”); and (iv) a
fee per committee meeting attended, to be paid following each meeting (a “Committee
Meeting Fee”).  These amounts are subject
to deferral under the Program, as set forth herein.

 

5.2                                 Election to Defer Cash Fees.

 

(a)                                  The Participant may elect that up to 100%
(in increments of 1%) of the Participant’s Cash Retainer, Chairmen’s Retainer,
Meeting Fee and Committee Meeting Fee (collectively, the “Cash Fees”) shall be
payable as compensation deferred under the Program.  With respect to a Participant’s election to
defer all or a portion of the Cash Fees for a calendar year, such election
shall be made prior to December 1st of the year preceding such calendar
year, except that (i) with respect to 2005, a Participant may make an
election prior to               
    , 2005 with respect to Cash Fees otherwise payable in
2005 for services performed after the date of such election, and (ii) in
the case of a new Participant, the Participant may make an election within 30
days after such Participant first becomes eligible to participate in accordance
with Section 4, with respect to Cash Fees otherwise payable in the
calendar year of the election, for services performed after the effective date
of such election.  All deferrals under
this Section 5.2 shall be fully vested; provided that, before or
concurrently with any deferral, and in the event that there are vesting
conditions applicable in respect of the underlying Cash Fees, the Board may
provide for vesting conditions to be applicable in respect of the corresponding
deferral.

 

(b)                                 The election described in Section 5.2(a) shall
be made in writing substantially in such form as the Board may prescribe from
time to time, within the times

 

2

 

specified herein.  With respect
to a Participant’s election to defer amounts described in Section 5.1,
such election shall, except as otherwise permitted by the Board (taking into
account, without limitation, the application of Section 409A of the Code, as the Board may deem appropriate), be
irrevocable as of the first day of the applicable annual period.  Except as may be permitted by the Board,
elections described in Section 5.2(a) shall continue in effect from
year to year unless revoked prior to the beginning of the applicable year.

 

(c)                                  Unless otherwise elected by the
Participant, Cash Fees deferred under this Section 5.2 of the Program
shall not be paid currently but rather shall be credited to such Participant in
the form of Phantom Shares.  Unless
otherwise determined by the Board, the number of Phantom Shares to be credited
with respect to cash fees deferred pursuant to Section 5.2 (a) above
shall be equal to (i) the amount of cash fees to be paid divided by (ii) the
Fair Market Value of a Share on the date such cash fees otherwise would have
been paid.

 

(d)                                 A Participant may elect, prior to earning
a Cash Fee, to defer such a Cash Fee in the form of a credit to the Participant’s
Account, to be adjusted for accruals of any earnings and losses over time as
set forth below, rather than in the form of Phantom Shares.  Upon such an election, the amount of the
deferred fee shall not be paid currently but rather shall be credited to the
Participant’s Account.  Such credits
shall be made when Cash Fees would otherwise have been paid to the Participant
but for an election pursuant to Section 5.2(a).  A separate subaccount under each Participant’s
Account may in the discretion of the Board be established to record each year’s
deferrals, and the credits and deductions with respect thereto.  With respect to credits under this Section 5.2(d),
earnings and losses shall accrue on the balance in the applicable Participant’s
Account at the rate or rates specified in advance of the effective time of the
applicability of such rate or rates, and from time to time, by the Board.  As determined by the Board, such rate or
rates may be a fixed rate, and may be established by reference to an index or
indices, or may be a return on one or more specific investments or on a
specific investment fund or funds.  If
the Board does not select a rate, the rate shall be equal to the 30-day LIBOR
rate in effect at the beginning of a month plus 2%.  Earnings and losses shall be credited to
Participants’ Accounts as of the end of each calendar month and, with respect
to any particular Participant’s Account, shall continue to be credited thereto
until all amounts are distributed with respect to the Participant’s Account in
accordance with the Program.  Upon
distribution, any accrued earnings shall be credited to the Participant’s
Account and distributed therewith, and any accrued losses shall reduce the
amount of distributions hereunder.

 

(e)                                  Subject to Section 8, the Board may
permit a Participant to elect, one time during each 12-month period, to convert
as of the end of the calendar month of the election, Phantom Shares to Account
credits, and vice-versa, in whole or in part (but, in the case of Phantom
Shares, only in whole Phantom Shares) with credits and liquidation of Phantom
Shares to be effected based on the Phantom Share Value as of the end of such
month, and credits and liquidation of Accounts to be effected based on Account
values as of the end of such month.

 

(f)                                    The establishment and maintenance of, and
credits to and deductions from, the Participant’s Account shall be mere
bookkeeping entries, and shall not vest in the Participant or his beneficiary
any right, title or interest in or to any specific assets of the Company.  A

 

3

 

separate subaccount under each Participant’s Account shall be
established to record each year’s deferrals, and the credits and deductions
with respect thereto.

 

5.3                                 Stock Options.

 

Subject to the provisions
of the Program, and notwithstanding the terms of any applicable Award
Agreement, the Board may permit, on such terms and conditions as it may adopt
(taking into account, without limitation, the application of Section 409A
of the Code, as the Board may deem
appropriate), a Director to be credited with Phantom Shares pursuant to
the Director’s election to defer delivery of shares of Common Stock which
otherwise would be delivered to him or her upon exercise of a previously
unexercised stock option.

 

6.                                       Phantom Shares.

 

6.1                                 Credits of Phantom Shares.

 

Each Director may elect
to receive a credit of Phantom Shares in respect of each portion of an Equity
Retainer that would be payable on any particular date without regard to the
Program.  With respect to a Participant’s
election to defer an Equity Retainer for a calendar year, such election shall
be made prior to December 1st of the year preceding such calendar year,
except that (i) with respect to 2005, a Participant may make an election
prior to             
    , 2005 with respect to the Equity Retainer otherwise
payable in 2005 for services performed after the date of such election, and (ii) in
the case of a new Participant, the Participant may make an election within 30
days after such Participant first becomes eligible to participate in accordance
with Section 4, with respect to the Equity Retainer otherwise payable in
the calendar year of the election, for services performed after the effective
date of such election.

 

6.2                                 Vesting.

 

Phantom Shares deferred
under Section 6.1 shall be fully vested; provided that, before or
concurrently with any grant under Section 6.1, the Board may provide
(consistently with such vesting conditions as may be applicable in respect of
the underlying Cash Fee or Equity Retainer, as applicable) for different
vesting conditions to be applicable to such grant.

 

7.                                       Dividend Equivalent Rights.

 

(a)                                  Except as may otherwise be provided by
the Board at or before the time the applicable Phantom Share is credited,
Directors will receive a Dividend Equivalent Right in respect of any credited
Phantom Shares (whether from deferred Cash Fees or from the Equity Retainer, or
in connection with the exercise of stock options), which right consists of the
right to receive a cash payment in an amount equal to the regular cash dividend
distributions paid on a Share from time to time. Except as provided in Section 7(b),
or as may otherwise be provided by the Board at or before the time the
applicable Phantom Share is paid, payment in respect of a Dividend Equivalent
Right shall be made at the same time as dividends are paid on the Common Stock.

 

4

 

(b)                                 Instead of the form of payment as
contemplated by Section 7(a) above, except as may otherwise may be
provided by the Board, a Participant may elect, in accordance with the rules of
Section 5.2(a), to have Phantom Shares credited, or credits to the Participant’s
Account made, in respect of the Dividend Equivalent Rights referred to in Section 7(a).  Unless otherwise determined by the Board, the
number of Phantom Shares (if any) to be credited with respect to a Dividend
Equivalent Right shall be equal to (i) the amount of the payment in
respect of the Dividend Equivalent Right otherwise to be made divided by (ii) the
Fair Market Value of a Share on the date the corresponding dividend
distribution is made to stockholders of the Company; provided that such Phantom
Share shall vest at such time as the underlying Phantom Share vests.  In the case of a credit to the Account, the
amount of the credit shall be equal to the amount of the applicable cash
dividend (such credit to be made on the date the corresponding dividend
distribution is made to stockholders of the Company); provided that the portion
of the Account relating to such credit, as adjusted for earnings and losses,
shall vest at such time as the underlying Phantom Share vests.

 

8.                                       Settlement and Withdrawal.  

 

Distributions
with respect to vested Phantom Shares will be made in cash (in accordance with
the Plan) or, if elected in accordance with rules provided by the Board
(taking into account, without limitation, the application of Section 409A
of the Code, as the Board may deem appropriate), in Shares (in accordance with
the Plan); provided, however, that (x) Phantom Shares into which Account
credits are converted under Section 5.2(e) (if any) shall always be
distributed in cash and (y) Phantom Shares payable in Shares may not be
converted into Account credits under Section 5.2(e).  Distributions with respect to cash deferrals
from a Participant’s Account will be settled by a cash payment to the
Participant, in an amount equal to the value of the Participant’s Account as of
the last day of the calendar month coincident with or immediately prior to the
date of such distribution, or as of such additional dates as the Board my
designate.  The rules governing the
timing and form of distributions from the Account shall be substantially
similar to those governing distributions in respect of Phantom Shares, as
determined in the discretion of the Board (taking into account, without
limitation, the application of Section 409A of the Code, as the Board may
deem appropriate).

 

9.                                       Amendment and Modification.

 

(a)                                  The Board may amend the Program as it
shall deem advisable, except that no amendment may adversely affect a
Participant with respect to deferred Cash Fees or equity awards previously
credited unless such amendments are required in order to comply with applicable
laws; provided that the Board may not make any amendment to the Program that
would, if such amendment were not approved by the holders of the Common Stock,
cause the Program to fail to comply with any requirement of applicable law or
regulation, unless and until the approval of the holders of such Common Stock
is obtained.

 

(b)                                 The Board may make such changes to the
Program as may be necessary or appropriate to comply with the rules and
regulations of any government authority or to obtain tax benefits applicable to
deferred equity units.

 

5

 

(c)                                  Notwithstanding any election under an
Award Agreement, to the extent any deferral under the Program is determined by
the Board to be ineffective for U.S. federal income tax purposes or otherwise
inconsistent with the U.S. federal tax laws, due to a change in U.S. federal
tax law, such amounts shall be distributed to the Participant as soon as
practicable following such determination.

 

10.                                 Captions.

 

The use of captions in
the Program is for convenience.  The
captions are not intended to provide substantive rights.

 

6

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