Document:

Exhibit 4.8  

EXECUTION COPY  

$200,000,000

MSW Energy Holdings LLC

MSW Energy Finance Co., Inc.

81/2% Senior Secured Notes due 2010

PURCHASE AGREEMENT  

        June 11, 2003 

CREDIT
SUISSE FIRST BOSTON LLC,

    Eleven Madison Avenue,

    New York, New York 10010-3629 

Dear
Sirs: 

        1.    Introductory.    MSW Energy Holdings LLC, a Delaware limited liability company
("MSW"), and MSW Energy Finance Co., Inc., a Delaware corporation ("MSW Finance" and together
with MSW, the "Company"), propose, subject to the terms and conditions stated herein, to issue and sell to Credit Suisse First Boston LLC
("CSFB" or the "Initial Purchaser") U.S.$200,000,000 principal amount of
their 81/2% Senior Secured Notes due 2010 (the "Notes") to be issued under an indenture, dated as of June 25, 2003 (the
"Indenture"), among the Company, the Guarantor (as defined below) and Wells Fargo Bank Minnesota, National Association, as trustee (the
"Trustee"). The United States Securities Act of 1933, as amended, is herein referred to as the "Securities
Act." 

        The
Company's obligations under the Notes, including the due and punctual payment of interest on the Notes, will be unconditionally guaranteed (the
"Guarantee") by Duke Energy Hudson LLC, a Delaware limited liability company (the "Guarantor"), and,
except as otherwise provided in the Indenture, each of MSW's future domestic subsidiaries. As used herein, the term "Offered Securities" shall include
the Guarantee thereof by the Guarantor, unless the context otherwise requires. As used in this Agreement, the term "subsidiary" has the same meaning as the term "Subsidiary" in the Indenture. The
Offered Securities will be secured by a first priority perfected lien on substantially all of the assets of the Company (the "Collateral," as defined in
more detail in the Security Agreement (as defined below)), including all collateral accounts of the Company (other than the Duke Essex Payment Reserve Account and the Duke Essex Payment Escrow Account
(each as defined in the Deposit Agreement)), including, upon acquisition, a first priority pledge of the membership interests of the Guarantor and all future subsidiaries held directly by the Company
and, upon acquisition, a first priority pledge of MSW's security interest in the membership interests of Duke Energy Erie LLC, a Delaware limited liability company ("Duke
Erie"). The subsidiary Guarantee will be secured by a first priority pledge of all the capital stock held by the Guarantor of Duke/UAE Ref-Fuel LLC, a Delaware
limited liability company ("Duke/UAE"), and all current and future subsidiaries held directly by the Guarantor, except as otherwise provided in the
Indenture. The Collateral securing the Offered Securities will be governed by (a) the Pledge and Security Agreement, dated as of June 25, 2003 (the "Security
Agreement"), among the Company, the Guarantor and Wells Fargo Bank Minnesota, National Association, as collateral agent (the "Collateral
Agent") and (b) the Deposit Agreement, dated as of June 25, 2003 (the "Deposit Agreement"), among the Company, the
Guarantor, the Collateral Agent and Wells Fargo Bank Minnesota, National Association, as depositary agent ("Depositary Agent," and together with the
Security Agreement, the "Collateral Agreements"). 

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        MSW
expects to acquire the Guarantor (the "Acquisition") concurrently with or shortly after the closing of the offering of the Offered
Securities. In the event the Acquisition does not close on the Closing Date (as defined herein), the Company will deposit $198,486,111.11, which represents 97% of the aggregate principal amount of the
Notes plus accrued and unpaid interest on the Notes to, but not including September 30, 2003, into an escrow account (the "Escrow Account") for
the benefit of the holders of the Notes pursuant to an Escrow Agreement (the "Escrow Agreement"), among the Company, the Guarantor, the Trustee, the
Initial Purchaser and Wells Fargo Bank Minnesota, National Association, as escrow agent (the "Escrow Agent"). Pending application of the funds contained
in the Escrow Account for the payment of (a) the Acquisition on the terms described in the Offering Circular (as defined herein) and other costs payable in connection with the Acquisition or
(b) in the event of a Special Mandatory Redemption (as defined in the Indenture), the redemption price in connection therewith, such funds will be invested in short term investments and cash
equivalents. The Escrow Agreement will provide that the Escrow Agent will release the funds from the Escrow Account as directed by the Trustee upon satisfaction of certain conditions and that the
Acquisition will occur immediately after the release of the funds. If the Acquisition has not occurred on or before September 1, 2003, a portion of the funds held in the Escrow Account will be
used to pay the initial
interest payment due on September 1, 2003. If the Acquisition has not occurred on or before September 30, 2003, the funds in the Escrow Account will be released in order to redeem all
and not less than all of the Notes then outstanding at a purchase price equal to 100% of the aggregate principal amount of the Notes plus accrued and unpaid interest on the Notes to, but not
including, September 30, 2003. 

        In
addition, the Initial Purchaser agrees that in the event the Acquisition does not close on the Closing Date, it will deposit $6,000,000, which represents the Initial Purchaser's
discount and commissions relating to the Notes, into an escrow account for the benefit of the Company pursuant to the Escrow Agreement. The Escrow Agreement will provide that the Escrow Agent will
release such funds to the Initial Purchaser upon the closing of the Acquisition. If the Acquisition has not occurred on or prior to September 30, 2003, the funds held in such escrow account
will be released to pay a portion of the redemption price for the Special Mandatory Redemption. 

        The
holders of the Offered Securities will be entitled to the benefits of a Registration Rights Agreement, dated as of June 25, 2003 (the "Registration
Rights Agreement"), among the Company, the Guarantor and the Initial Purchaser, for so long as such Offered Securities constitute "Transfer Restricted
Securities" (as defined in the Registration Rights Agreement"). Pursuant to the Registration Rights Agreement, the Company and the Guarantor will agree to file with the
Securities Exchange Commission (the "Commission") under the circumstances set forth therein, (i) a registration statement under the Securities
Act (the "Exchange Offer Registration Statement") relating to the Notes in a like aggregate principal amount as the Offered Securities originally issued
under the Indenture, identical in all material respects to the Notes and the Guarantee and registered under the Securities Act (the "Exchange Notes" and
the "Exchange Guarantee," and together, the "Exchange Securities") to be offered in exchange for the
Offered Securities (such offer to exchange being referred to as the "Exchange Offer") and (ii) a shelf registration statement pursuant to
Rule 415 under the Securities Act (the "Shelf Registration Statement" and, together with the Exchange Offer Registration Statement, the
"Registration Statements") relating to the resale by certain holders of the Offered Securities and to use their respective commercially reasonable best
efforts to cause such Registration Statements to be declared and remain effective and usable for the periods specified in the Registration Rights Agreement and to consummate the Exchange Offer. The
Offered Securities and the Exchange Securities are referred to collectively as the "Securities." 

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        The
Company and the Guarantor hereby agree with the Initial Purchaser as follows: 

        2.    Representations and Warranties of the Company and the Guarantor.    The Company and the Guarantor represent and
warrant, jointly and severally, to, and agree with, the Initial Purchaser that: 

        (a)   A
preliminary offering circular and an offering circular relating to the Offered Securities to be offered by the Company have been prepared by the Company. Such
preliminary offering circular (the "Preliminary Offering Circular") and offering circular (the "Offering
Circular"), as supplemented as of the date of this Agreement, are hereinafter collectively referred to as the "Offering
Document." The Company has participated in conferences with the officers and other representatives of American Ref-Fuel Company LLC at which time the contents of
the Offering Document and related matters, including the financial statements of American Ref-Fuel Company LLC contained in the Offering Document, were discussed. On the date of this
Agreement, the Offering Document, including the information with respect to American Ref-Fuel and its subsidiaries, does not include any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The preceding sentence does not apply to
statements in or omissions from the Offering Document based upon written information furnished to the Company by CSFB specifically for use therein, it being understood and agreed that the only such
information is that described as such in Section 7(b) hereof. Any information furnished by the Company for delivery to holders and prospective purchasers of the Offered Securities pursuant to
Section 4.03 of the Indenture and in accordance with Rule 144A(d)(4) under the Securities Act (the "Additional Issuer Information") will
not include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made,
not misleading. The preceding sentence does not apply to statements in or omissions from the Offering Document based upon written information furnished to the Company by CSFB specifically for use
therein, it being understood and agreed that the only such information is that described as such in Section 7(b) hereof. 

        (b)   No
order or decree preventing the use of the Offering Document, or any order asserting that the transactions contemplated by this Agreement are subject to the
registration requirements of the Securities Act has been issued and no proceeding for that purpose has commenced or is pending or, to the knowledge of the Company or the Guarantor, is contemplated. 

        (c)   Each
of MSW and MSW Finance has been duly formed or incorporated, as the case may be, and is an existing limited liability company or corporation, as the case may be, in
good standing under the laws of the State of Delaware, with power and authority (corporate or other) to own its properties and conduct its business as described in the Offering Document; and each of
MSW and MSW Finance is duly qualified to do business as a foreign corporation in good standing in all other jurisdictions in which its ownership or lease of property or the conduct of its business
requires such qualification, except where the failure to be so qualified would not individually or in the aggregate have a material adverse effect on the condition (financial or other), business,
properties or results of operations of the Company, the Guarantor and their respective subsidiaries taken as a whole ("Material Adverse Effect"). 

        (d)   The
Guarantor has been duly formed and is an existing limited liability company in good standing under the laws of the State of Delaware, with limited liability company
power and authority to own its properties and conduct its business as described in the Offering Document; and the Guarantor is duly qualified to do business as a foreign corporation in good standing
in all other jurisdictions in which its ownership or lease of property or the conduct of its business requires such qualification, except where the failure to be so qualified would not individually or
in the aggregate have a Material Adverse Effect; all of the membership interests of the Guarantor have been issued in accordance with the applicable provisions of the limited liability company 

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agreement
of the Guarantor and, upon consummation of the Acquisition, the membership interests of the Guarantor, directly or through subsidiaries, will be owned by MSW free from liens, encumbrances
and defects or any preemptive or similar right, other than liens in favor of the Collateral Agent pursuant to the Security Agreement. 

        (e)   This
Agreement has been duly authorized, executed and delivered by the Company and the Guarantor. 

        (f)    The
Company and the Guarantor have all requisite corporate or limited liability company power and authority to enter into the Indenture. The Indenture has been duly and
validly authorized by the Company, will be duly and validly authorized by any Guarantor, and upon its execution and delivery, assuming due authorization, execution and delivery by the Trustee, will
constitute the valid and legally binding obligations of the Company and the Guarantor, enforceable in accordance with its terms, subject to the qualification that the enforceability of the Company's
and the Guarantor's obligations thereunder may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles. The Indenture complies in all material respects with the requirements of the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act"). The Indenture will conform in all material respects to the description thereof in the Offering Document. 

        (g)   The
Company and the Guarantor have all requisite corporate or limited liability company power and authority to enter into the Registration Rights Agreement. The
Registration Rights Agreement has been duly and validly authorized by the Company, will be duly and validly authorized by any Guarantor, and upon its execution and delivery by the Company and the
Guarantor, assuming due authorization, execution and delivery by the Initial Purchaser, will constitute the valid and legally binding obligations of the Company and the Guarantor, enforceable in
accordance with its terms, subject to the qualifications that (i) the enforceability of the Company's and the Guarantor's obligations thereunder may be limited by bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles and (ii) rights to
indemnity and contribution thereunder may be limited by applicable law. The Registration Rights Agreement will conform in all material respects to the description thereof in the Offering Document. 

        (h)   The
Company has all requisite corporate or limited liability power and authority to enter into the Escrow Agreement. In the event the Acquisition does not close on the
Closing Date, the Company will execute the Escrow Agreement. The Escrow Agreement will be duly and validly authorized by the Company, and upon its execution and delivery and, assuming due
authorization, execution and delivery by the Trustee and the Escrow Agent, will constitute the valid and legally binding obligations of the Company, enforceable in accordance with its terms, subject
to the qualification that the enforceability of the Company's obligations thereunder may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and to general equity principles. The Escrow Agreement will conform in all material respects to the description thereof in the Offering
Document. 

        (i)    The
Company and the Guarantor have all requisite corporate or limited liability company power and authority to enter into the Collateral Agreements. The Collateral
Agreements have been duly and validly authorized by the Company and the Guarantor, and upon their execution and delivery and, assuming due authorization, execution and delivery by the Trustee and the
Collateral Agent, will constitute the valid and legally binding obligations of the Company and the Guarantor, enforceable in accordance with their terms, subject to the qualification that the
enforceability of the Company's and the Guarantor's obligations thereunder may be limited by 

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bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles. The
Collateral Agreements will conform in all material respects to the description thereof in the Offering Document. 

        (j)    The
Notes have been duly and validly authorized by the Company and when duly executed by the Company in accordance with the terms of the Indenture and, assuming due
authentication of the Notes by the Trustee, upon delivery to the Initial Purchaser against payment therefor in accordance with the terms hereof, will have been validly issued and delivered, and will
constitute valid and legally binding obligations of the Company entitled to the benefits of the Indenture, enforceable against the Company in accordance with their terms, subject to the qualification
that the enforceability of the Company's obligations thereunder may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity principles. The Notes will conform in all material respects to the description thereof in the Offering Document. 

        (k)   The
Exchange Notes have been duly and validly authorized by the Company and if and when duly issued and authenticated in accordance with the terms of the Indenture and
delivered in accordance with the Registration Rights Agreement, will constitute valid and legally binding obligations of the Company entitled to the benefits of the Indenture, enforceable against the
Company in accordance with their terms, subject to the qualification that the enforceability of the Company's obligations thereunder may be limited by bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles. 

        (l)    The
Guarantee has been duly and validly authorized by the Guarantor and when duly executed and delivered by the Guarantor in accordance with the terms of the Indenture
and upon the due execution, authentication and delivery of the Notes in accordance with the Indenture and the issuance of the Notes in the sale to the Initial Purchaser contemplated by this Agreement,
will constitute a valid and legally binding obligation of the Guarantor, enforceable against the Guarantor in accordance with its terms, subject to the qualification that the enforceability of the
Guarantor's obligations thereunder may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles. The Guarantee will conform in all material respects to the description thereof in the Offering Document. 

        (m)  The
Exchange Guarantee has been duly and validly authorized by the Guarantor and if and when duly executed and delivered by the Guarantor in accordance with the terms of
the Indenture and upon the due execution and authentication of the Exchange Notes in accordance with the Indenture and the issuance and delivery of the Exchange Notes contemplated by the Registration
Rights Agreement, will constitute a valid and legally binding obligation of the Guarantor, entitled to the benefits of the Indenture, enforceable against the Guarantor in accordance with its terms,
subject to the qualification that the enforceability of the Guarantor's obligations thereunder may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar
laws of general applicability relating to or affecting creditors' rights and to general equity principles. 

        (n)   The
execution, delivery and performance of this Agreement, the Indenture, the Registration Rights Agreement, the Escrow Agreement (in the event the Acquisition does not
close on the Closing Date), the Collateral Agreements and the issuance and sale of the Offered Securities and compliance with the terms and provisions thereof do not and will not result in a breach or
violation of any of the terms and provisions of, or constitute a default under, (i) any statute, any rule, regulation or order of any governmental agency or body or any court, domestic 

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or
foreign, having jurisdiction over the Company, the Guarantor or their respective subsidiaries or their properties, or (ii) any agreement or instrument to which the Company, the Guarantor or
their respective subsidiaries are a party or by which the Company, the Guarantor or their respective subsidiaries are bound or to which any of the properties of the Company, the Guarantor or their
respective subsidiaries is subject, except as would not individually or in the aggregate have a Material Adverse Effect and except to the extent that any foreclosure on the Collateral by the
Collateral Agent would violate the right of first refusal set forth in the limited liability company agreement of Duke/UAE Ref-Fuel LLC, or (iii) the charter or by-laws
of the Company, the Guarantor or their respective subsidiaries. 

        (o)   Except
as disclosed in the Offering Document, there are no contracts, agreements or understandings between the Company, the Guarantor and any person that would give rise
to a valid claim against the Company, the Guarantor or the Initial Purchaser for a brokerage commission, finder's fee or other like payment. 

        (p)   No
consent, approval, authorization or order of, or filing with, any governmental agency or body or any court is required for the consummation of the transactions
contemplated by this Agreement, the Indenture, the Registration Rights Agreement, the Escrow Agreement (in the event the Acquisition does not close on the Closing Date) or the Collateral Agreements or
in connection with the issuance or sale of the Offered Securities by the Company and the Guarantor, except (A) such as may be required under state securities laws, (B) the filing of the
applicable Registration Statements with the Commission and the receipt of the order of the Commission declaring the Exchange Offer Registration Statement or the Shelf Registration Statement effective,
(C) any required filings to perfect the security interest in the Collateral or (D) any consent, approval, authorization, filing, notification or other action that either has been or
prior to the Closing Date will be obtained or made or which, if not made, would not individually or in the aggregate have a Material Adverse Effect. 

        (q)   The
Company, the Guarantor and their respective subsidiaries possess adequate certificates, authorities or permits issued by appropriate governmental agencies or bodies
necessary to conduct the business now operated by them and have not received any notice of proceedings relating to the revocation or modification of any such certificate, authority or permit that, if
determined adversely to the Company, the Guarantor and their respective subsidiaries, would individually or in the aggregate have a Material Adverse Effect. 

        (r)   No
labor dispute with the employees of the Company, the Guarantor or their respective subsidiaries exists or, to the knowledge of the Company or the Guarantor is
imminent that could reasonably be expected to have a Material Adverse Effect. 

        (s)   The
Company, the Guarantor and their respective subsidiaries own, possess or can acquire on reasonable terms, adequate trademarks, trade names and other rights to
inventions, know-how, patents, copyrights, confidential information and other intellectual property (collectively, "intellectual property
rights") necessary to conduct the business now operated by them, or presently employed by them, and have not received any notice of infringement of or conflict with asserted
rights of others with respect to any intellectual property rights that, if determined adversely to the Company, the Guarantor or their respective subsidiaries would individually or in the aggregate
have a Material Adverse Effect. 

        (t)    Except
as disclosed in the Offering Document, none of the Company, the Guarantor or their respective subsidiaries is in violation of any statute, any rule, regulation,
decision or order of any governmental agency or body or any court, domestic or foreign, relating to the use, disposal or release of hazardous or toxic substances or relating to the protection or
restoration of the environment or human exposure to hazardous or toxic substances (collectively, "environmental laws"), owns or operates any real
property contaminated with any substance that is subject to any 

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environmental
laws, is liable for any off-site disposal or contamination pursuant to any environmental laws, or is subject to any claim relating to any environmental laws, which violation,
contamination, liability or claim would individually or in the aggregate have a Material Adverse Effect; and the Company is not aware of any pending investigation which could reasonably be expected to
lead to such a claim. 

        (u)   Except
as disclosed in the Offering Document, there are no pending actions, suits or proceedings against or affecting the Company, the Guarantor or their respective
subsidiaries or their respective properties that, if determined adversely to the Company, the Guarantor or their respective subsidiaries, would individually or in the aggregate have a Material Adverse
Effect, or would materially and adversely affect the ability of the Company, the Guarantor or their respective subsidiaries to perform their obligations under this Agreement, the Indenture, the
Registration Rights Agreement, the Escrow Agreement (in the event the Acquisition does not close on the Closing Date) or the Collateral Agreements or which are otherwise material in the context of the
sale of the Offered Securities; and no such actions, suits or proceedings are threatened or, to the Company's knowledge, contemplated. 

        (v)   The
financial statements of Duke/UAE included in the Offering Document present fairly in all material respects the financial position of Duke/UAE as of the dates shown
and its results of operations and cash flows for the periods shown, and, except as otherwise disclosed in the Offering Document, such financial statements have been prepared in conformity with the
generally accepted accounting principles in the United States applied on a consistent basis; the financial statements of American Ref-Fuel Company LLC, a Delaware limited liability company
("ARC"), included in the Offering Document present fairly in all material respects the financial position of ARC as of the dates shown and its results
of operations and cash flows for the periods shown, and, except as otherwise disclosed in the Offering Document, such financial statements have been prepared in conformity with the generally accepted
accounting principles in the United States applied on a consistent basis; and the assumptions used in preparing the pro forma financial statements included in the Offering Document provide a
reasonable basis for presenting the significant effects directly attributable to the transactions or events described therein, the related pro forma adjustments give appropriate effect to those
assumptions, and the pro forma columns therein reflect the proper application of those adjustments to the corresponding historical financial statement amounts. 

        (w)  Except
as disclosed in the Offering Document, since the date of the latest audited financial statements included in the Offering Document there has been no material
adverse change, nor any development or event involving a prospective material adverse change, in the condition (financial or other), business, properties or results of operations of the Company, the
Guarantor and their respective subsidiaries taken as a whole, and, except as disclosed in or contemplated by the Offering Document,
there has been no dividend or distribution of any kind declared, paid or made by the Company, the Guarantor and their respective subsidiaries on any class of their capital stock. 

        (x)   None
of the Company or the Guarantor is an open-end investment company, unit investment trust or face-amount certificate company that is or is
required to be registered under Section 8 of the United States Investment Company Act of 1940 (the "Investment Company Act"); and none of the
Company or the Guarantor is and, after giving effect to the offering and sale of the Offered Securities and the application of the proceeds thereof as described in the Offering Document, will be an
"investment company" as defined in the Investment Company Act. 

        (y)   No
securities of the same class (within the meaning of Rule 144A(d)(3) under the Securities Act) as the Offered Securities are listed on any national securities
exchange registered 

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under
Section 6 of the United States Securities Exchange Act of 1934 ("Exchange Act") or quoted in a U.S. automated inter-dealer quotation
system. 

        (z)   Assuming
the accuracy of the Initial Purchaser's representations and warranties in Section 4 hereof and its compliance with its agreements in Section 4
hereof, the offer and sale of the Offered Securities in the manner contemplated by this Agreement will be exempt from the registration requirements of the Securities Act by reason of
Section 4(2) thereof and Regulation S ("Regulation S") thereunder; and except in connection with the registration contemplated by
the Registration Rights Agreement, it is not necessary to qualify an indenture in respect of the Offered Securities under the Trust Indenture Act. 

        (aa) The
Company and its subsidiaries have good and indefeasible title in fee simple to all real property and good and defensible title to all personal property owned by
them, in each case free and clear of all liens, encumbrances and defects except such as are described in, or permitted by, the Offering Document or such as do not materially adversely affect the value
of such property and do not interfere with the use made and proposed to be made of such property by the Company and its subsidiaries. 

        (bb) The
Company and the Guarantor will own, and on the Closing Date will continue to own, the Collateral (as defined in the Collateral Agreements) free and clear of all
Liens (other than Permitted Liens (as defined in the Indenture)), and no financing statements or similar documents in respect of any property or assets of the Company or any Guarantor will be on file
in favor of any person other than those in respect of the Collateral Agreements. 

        (cc) On
the Closing Date, the Security Agreement will be effective to create, in favor of the Collateral Agent for the benefit of the holders of the Notes as security for
the Notes, a valid and enforceable security interest in the Collateral (as defined in the Security Agreement). Each of the Company and
the Guarantor is a "registered organization" (as defined in Article 9 of the applicable Uniform Commercial Code) under the law of the state in which it is identified in the Indenture, as being
organized, and on the Closing Date all security interests granted under the Security Agreement will be duly perfected to the extent such security interests may be perfected by filing upon the filing
of the UCC financing statements. With respect to any of the Collateral constituting "certificated securities" on the Closing Date all such certificated securities will be delivered to the Collateral
Agent for the benefit of the holders of the Notes duly endorsed by an effective endorsement in blank, and upon such delivery the Collateral Agent will acquire its interest therein free of any adverse
claims. 

        (dd) None
of the Company, the Guarantor or any of their subsidiaries is, or after giving effect to the offer and sale of the Offered Securities will be, (i) subject
to regulation as a "holding company" or a "subsidiary company" of a holding company or a "public-utility company" under the Public Utility Holding Company Act of 1935, as amended, and the rules and
regulations thereunder ("PUHCA"), or (ii) subject to any state law or regulation respecting the rates or the financial or organizational
regulation of electric utilities, other than as contemplated by 18 C.F.R. Section 292.602(c). 

        (ee) All
of the power generation projects in which the Company has an indirect ownership interest (the "ARC operating
facilities") meet the requirements under the Public Utility Regulatory Policies Act of 1978, as amended ("PURPA"), and the
regulations of the Federal Energy Regulatory Commission ("FERC") promulgated thereunder, to be a "qualifying cogeneration facility" and/or a "qualifying
small power production facility." 

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        (ff)  Each
of the ARC operating facilities listed on Schedule A hereto have validly-issued orders from the FERC, not subject to any pending challenge or proceeding,
authorizing these facilities to engage in wholesale sales of electricity, ancillary services and, to the extent permitted under its market-based rate tariff, other products and services at
market-based rates, under Section 205 of the Federal Power Act ("FPA"). With respect to each ARC operating facility listed on Schedule A,
FERC has not imposed any rate caps or mitigation measures other than rate caps and mitigation measures generally applicable to similarly situated marketers or generators selling electricity, ancillary
services or other products at wholesale in the geographic market where such ARC operating facility conducts its business. 

        (gg) All
of the ARC operating facilities are Eligible Facilities within the meaning of Section 32 of PUHCA, and each such facility has received a determination from
FERC, not subject to any pending challenge, that it is an Exempt Wholesale Generator, within the meaning of Section 32 of PUHCA. 

        (hh) The
Initial Purchaser is not, nor will be, solely as a result of entering into this Agreement or performing the transactions contemplated thereby, subject to
regulation (i) as a "public-utility company" or "holding company" or as an "affiliate" of either under PUHCA, (ii) as an "electric utility" under PURPA, (iii) as a "public
utility" under the FPA or (iv) by any state as to the rates, organization or financing of electric utilities (together, PUHCA, PURPA, the FPA and the laws referred to in (iv) above are
the "Energy Laws"). 

        (ii)   None
of the Company, the Guarantor, any of their affiliates or any person acting on its or their behalf (i) has, within the six-month period prior to
the date hereof, offered or sold in the United States or to any U.S. person (as such terms are defined in Regulation S) the Offered Securities or any security of the same class or series as the
Offered Securities or (ii) has offered or will offer or sell the Offered Securities (A) in the United States by means of any form of general solicitation or general advertising within
the meaning of Rule 502(c) under the Securities Act or (B) with respect to any such securities sold in reliance on Rule 903 of Regulation S under the Securities Act, by
means of any directed selling efforts within the meaning of Rule 902(c) of Regulation S. The Company, the Guarantor, their affiliates and any person acting on its or their behalf have
complied and will comply with the offering restrictions requirement of Regulation S. Neither the Company, nor the Guarantor has entered and will enter into any contractual arrangement with
respect to the distribution of the Offered Securities except for this Agreement. 

        (jj)   The
proceeds to the Company from the offering of the Offered Securities will not be used to purchase or carry any security in violation of Regulation T, U and X
of the Board of Governors of the Federal Reserve System. 

        (kk) There
is no "substantial U.S. market interest" as defined in Rule 902(n) of Regulation S in the Company's and the Guarantor's debt securities. 

        (b)   The
market-related and customer-related data and estimates included in the Offering Document are based on or derived from sources that the Company believes to be
reliable. 

        3.    Purchase, Sale and Delivery of Offered Securities.    On the basis of the representations, warranties and
agreements herein contained, but subject to the terms and conditions herein set forth, the Company and the Guarantor agree to sell to the Initial Purchaser, and the Initial Purchaser agrees to
purchase from the Company and the Guarantor, at a purchase price of 97% of the principal amount thereof plus accrued interest from June 25, 2003 to the Closing Date, the principal amount of the
Securities set forth opposite its name in Schedule B hereto. The Initial Purchaser agrees that in the event the Acquisition does not close on the Closing Date, it will deposit $6,000,000, which
represents the Initial Purchaser's discount and commissions relating to the Notes, into an escrow account for the benefit of the Company pursuant to the Escrow Agreement. 

9

 

        The
Company and the Guarantor will deliver against payment of the purchase price the Offered Securities to be offered and sold by the Initial Purchaser in reliance on Regulation S
(the "Regulation S Securities") in the form of one or more temporary global Securities in registered form without interest coupons (the
"Regulation S Temporary Global Securities"), which will be deposited with the Trustee as custodian for The Depository Trust Company
("DTC") for the respective accounts of the DTC participants for Morgan Guaranty Trust Company of New York, Brussels office, as operator of the Euroclear
System ("Euroclear"), and Clearstream Banking, société anonyme ("Clearstream,
Luxembourg") and registered in the name of Cede & Co., as nominee for DTC. The Company and the Guarantor will deliver against payment of the purchase price the Offered
Securities to be purchased by the Initial Purchaser hereunder and to be offered and sold by the Initial Purchaser in reliance on Rule 144A under the Securities Act (the
"144A Securities") in the form of one permanent global security in definitive form without interest coupons (the "Restricted
Global Securities") deposited with the Trustee as custodian for DTC and registered in the name of Cede & Co., as nominee for DTC. The Regulation S Global
Securities and the Restricted Global Securities shall be assigned separate CUSIP numbers. The Restricted Global Securities shall include the legend regarding restrictions on transfer set forth under
"Transfer Restrictions" in the Offering Document. Until the termination of the restricted period (as defined in Regulation S) with respect to the offering of the Offered Securities, interests
in the Regulation S Temporary Global Securities may only be held by the DTC participants for Euroclear and Clearstream, Luxembourg. Interests in any permanent global Securities will be held
only in book-entry form through Euroclear, Clearstream, Luxembourg or DTC, as the case may be, except in the limited circumstances described in the Offering Document. 

        Payment
for the Regulation S Securities and the 144A Securities shall be made by the Initial Purchaser in Federal (same day) funds by wire transfer to an account at a bank
designated in writing by MSW
Energy Holdings LLC at a closing to be held at the office of Bingham McCutchen LLP, 399 Park Avenue, New York, New York 10022 at 10:00 A.M. (New York time), on June 25, 2003 or at such
other time and place not later than seven full business days thereafter as CSFB and the Company determine, such time being herein referred to as the "Closing
Date," against delivery to the Trustee as custodian for DTC of (i) the Regulation S Temporary Global Securities representing all of the Regulation S
Securities for the respective accounts of the DTC participants for Euroclear and Clearstream, Luxembourg and (ii) the Restricted Global Securities representing all of the 144A Securities. The
Regulation S Temporary Global Securities and the Restricted Global Securities will be made available for checking at the above office of Bingham McCutchen LLP at least 24 hours prior to
the Closing Date. 

        4.    Representations by the Initial Purchaser; Resale by the Initial Purchaser.    

        (a)   The
Initial Purchaser represents and warrants to the Company and the Guarantor that it is an "accredited investor" within the meaning of Regulation D under the
Securities Act. 

        (b)   The
Initial Purchaser acknowledges that the Offered Securities have not been registered under the Securities Act and may not be offered or sold within the United States
or to, or for the account or benefit of, U.S. persons except in accordance with Regulation S or pursuant to an exemption from the registration requirements of the Securities Act. The Initial
Purchaser represents and agrees that it has offered and sold the Offered Securities, and will offer and sell the Offered Securities (i) as part of its distribution at any time and
(ii) otherwise until 40 days after the later of the commencement of the offering and the Closing Date, only in accordance with Rule 903 or Rule 144A under the Securities
Act ("Rule 144A"). Accordingly, neither the Initial Purchaser nor its affiliates, nor any persons acting on its or their behalf, have engaged or
will engage in any directed selling efforts with respect to the Offered Securities, and the Initial Purchaser, its affiliates and all persons acting on its or their behalf have complied and will
comply with the offering restrictions requirement of Regulation S. The Initial Purchaser agrees that, at or prior to confirmation of sale of the Offered Securities, other than a sale pursuant
to Rule 144A, 

10

 

the
Initial Purchaser will have sent to each distributor, dealer or person receiving a selling concession, fee or other remuneration that purchases the Offered Securities from it during the restricted
period a confirmation or notice to substantially the following effect: 

"The
Securities covered hereby have not been registered under the U.S. Securities Act of 1933, as amended (the "Securities Act"), and may not be offered or sold within the United States or to, or for
the account or benefit of, U.S. persons (i) as part of their distribution at any time or (ii) otherwise until 40 days after the later of the date of the commencement of the
offering and the closing date, except in either case in accordance with Regulation S (or Rule 144A if available) under the Securities Act. Terms used above have the meanings given to
them by Regulation S." 

Terms
used in this subsection (b) have the meanings given to them by Regulation S. 

        (c)   The
Initial Purchaser agrees that it and each of its affiliates has not entered and will not enter into any contractual arrangement with respect to the distribution of
the Offered Securities except with the prior written consent of the Company. 

        (d)   The
Initial Purchaser agrees that it and each of its affiliates will not offer or sell the Offered Securities in the United States by means of any form of general
solicitation or general advertising within the meaning of Rule 502(c) under the Securities Act, including, but not limited to (i) any advertisement, article, notice or other
communication published in any newspaper, magazine or similar media or broadcast over television or radio, or (ii) any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising. The Initial Purchaser agrees, with respect to resales made in reliance on Rule 144A of any of the Offered Securities, to deliver either with the
confirmation of such resale or otherwise prior to settlement of such resale a notice to the effect that the resale of such Offered Securities has been made in reliance upon the exemption from the
registration requirements of the Securities Act provided by Rule 144A. 

        (e)   The
Initial Purchaser represents and agrees that (i) it has not authorized the Notes to be offered to the public in the United Kingdom, within the meaning of the
Public Offers of Securities Regulations 1995, as amended and (ii) no Offering Document may be passed on to any person in the United Kingdom unless that person is of a kind described in
Article 19 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2001 or is a person to whom the document may otherwise lawfully be issued or passed on. The Offering
Document is only directed at persons having professional experience in matters relating to investments and the offering described in the Offering Document is only available to such persons and only
such persons will be permitted to participate in the offering. Persons who do not have professional experience in matters relating to investments should not rely on the Offering Document. All
applicable provisions of the Financial Services and Markets Act 2000, as amended, must be complied with in respect of anything done in relation to the Notes in, from or otherwise involving the United
Kingdom. 

        5.    Certain Agreements of the Company and the Guarantor.    The Company and the Guarantor agree with the Initial
Purchaser that: 

        (a)   The
Company will advise CSFB promptly of any proposal to amend or supplement the Offering Document and will not effect such amendment or supplementation without CSFB's
consent (which consent will not be unreasonably withheld or delayed). If, at any time prior to the completion of the resale of the Offered Securities by the Initial Purchaser, any event occurs as a
result of which the Offering Document as then amended or supplemented would include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not misleading, 

11

 

the
Company and the Guarantor promptly will notify CSFB of such event and promptly will prepare, at its own expense, an amendment or supplement which will correct such statement or omission or effect
such compliance. Neither CSFB's consent to, nor its delivery to offerees or investors of, any such amendment or supplement shall constitute a waiver of any of the conditions set forth in
Section 6. 

        (b)   The
Company will furnish to CSFB copies of any preliminary offering circular, the Offering Document and all amendments and supplements to such documents, in each case as
soon as available and in such quantities as CSFB reasonably requests, and the Company will furnish to CSFB on the date hereof three copies of the Offering Document signed by a duly authorized officer
of the Company, one of which will include the applicable independent accountants' report therein manually signed by PricewaterhouseCoopers LLP. At any time when the Company is not subject to
Section 13 or 15(d) of the Exchange Act, the Company will promptly furnish or cause to be furnished to CSFB and, upon request of holders and prospective purchasers of the Offered Securities, to
such holders and purchasers, copies of the information required to be delivered to holders and prospective purchasers of the Offered Securities pursuant to Rule 144A(d)(4) under the Securities
Act (or any successor provision thereto) in order to permit compliance with Rule 144A in connection with resales by such holders of the Offered Securities. The Company will pay the expenses of
printing and distributing to the Initial Purchaser all such documents. 

        (c)   The
Company and the Guarantor will arrange for the qualification of the Offered Securities for sale under the laws of such jurisdictions in the United States and Canada
as CSFB designates and will continue such qualifications in effect so long as required for the resale of the Offered Securities by the Initial Purchaser, provided that the Company and the Guarantor
will not be required to qualify as a foreign entity or to take any action that would subject any of them to general consent to service of process in any jurisdiction in which it is not now so subject. 

        (d)   During
the period of five years hereafter, the Company will furnish to CSFB (i) as soon as available, a copy of each report or other document furnished to the
Commission and (ii) from time to time, such other publicly-available information concerning the Company and the Guarantor as CSFB may reasonably request. 

        (e)   During
the period of two years after the Closing Date, the Company will, upon request, furnish to CSFB and any holder of Offered Securities a copy of the restrictions on
transfer applicable to the Offered Securities. 

        (f)    During
the period of two years after the Closing Date, the Company will not, and will not permit any of its affiliates (as defined in Rule 144 under the
Securities Act) to, resell any of the Offered Securities that have been reacquired by any of them if the Offered Securities are "restricted securities." 

        (g)   During
the period of two years after the Closing Date, neither the Company nor the Guarantor will be or become, an open-end investment company, unit
investment trust or face-amount certificate company that is or is required to be registered under Section 8 of the Investment Company Act. 

        (h)   The
Company and the Guarantor will pay all expenses incidental to the performance of its obligations under this Agreement, the Indenture, the Registration Rights
Agreement, the Escrow Agreement (in the event the Acquisition does not close on the Closing Date) and the Collateral Agreements, including (i) the fees and expenses of the Trustee, the Escrow
Agent, the Collateral Agent and their professional advisers; (ii) all expenses in connection with the execution, issue, authentication, packaging and initial delivery of the Offered Securities
and, as applicable, the Exchange Securities, the preparation and printing of this Agreement, the Indenture, the Registration Rights Agreement, the Escrow Agreement (in the event the Acquisition does
not 

12

 

close
on the Closing Date), the Collateral Agreements, the Offered Securities, the Offering Document and amendments and supplements thereto, and any other document relating to the issuance, offer,
sale and delivery of the Offered Securities and as applicable, the Exchange Securities; (iii) the cost of qualifying the Offered Securities for trading in The PortalSM Market
("PORTAL") and any expenses incidental thereto; (iv) for any expenses (including reasonable fees and disbursements of counsel) incurred in
connection with qualification of the Offered Securities or the Exchange Securities for sale under the laws of such jurisdictions in the United States and Canada as CSFB designates and the printing of
memoranda relating thereto; (v) for any fees charged by investment rating agencies for the rating of the Securities or the Exchange Securities; and (vi) for expenses incurred in
distributing preliminary offering circulars and the Offering Document (including any amendments and supplements thereto) to the Initial Purchaser. The Company and the Guarantor will also pay or
reimburse the Initial Purchaser (to the extent incurred by the Initial Purchaser) for half of the expenses of the chartered airplane in connection with attending or hosting meetings with prospective
purchasers of the Offered Securities from the Initial Purchaser. 

        (i)    In
connection with the offering, until CSFB shall have notified the Company of the completion of the resale of the Offered Securities, neither the Company nor any of its
affiliates has or will, either alone or with one or more other persons, bid for or purchase for any account in which it or any of its affiliates has a beneficial interest any Offered Securities or
attempt to induce any person to purchase any Offered Securities; and neither the Company nor any of its affiliates will make bids or purchases for the purpose of creating actual, or apparent, active
trading in, or of raising the price of, the Offered Securities. 

        (j)    For
a period of 90 days after the date of the initial offering of the Offered Securities by the Initial Purchaser, the Company and the Guarantor will not offer,
sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, any United States dollar-denominated debt securities issued or guaranteed by the Company or the Guarantor and having a
maturity of more than one year from the date of issue, except with the consent of CSFB (which consent shall not be unreasonably withheld) and except issuances of Offered Securities pursuant to the
conversion or exchange of convertible or exchangeable securities or the exercise of warrants or options, in each case outstanding on the date hereof, grants of employee stock options pursuant to the
terms of a plan in effect on the date hereof, issuances of Offered Securities pursuant to the exercise of such options or the exercise of any other employee stock options outstanding on the date
hereof or issuances of Offered Securities pursuant to the Company's dividend reinvestment plan. The Company and the Guarantor will not at any time offer, sell, contract to sell, pledge or otherwise
dispose of, directly or indirectly, any securities under circumstances where such offer, sale, pledge, contract or disposition would cause the exemption afforded by Section 4(2) of the
Securities Act or the safe harbor of Regulation S thereunder to cease to be applicable to the offer and sale of the Offered Securities, except with the consent of CSFB (which consent will not
be unreasonably withheld). 

        (k)   In
the event the Acquisition closes on the Closing Date, the Company will cause the Guarantor to become a party to this Agreement by causing the Guarantor to execute and
deliver a signature page to this Agreement to the Initial Purchaser on the closing of the Acquisition; it being acknowledged and agreed that all representations and warranties made by or with respect
to the Guarantor and all covenants of the Guarantor shall not be effective unless and until the Guarantor executes and delivers a signature page to this Agreement. 

        (l)    In
the event the Acquisition does not close on the Closing Date, the Company will deposit an amount equal to $198,486,111.11, which represents 97% of the aggregate
principal amount of the Notes plus accrued and unpaid interest on the Notes to, but not including September 30, 2003 into the Escrow Account and will comply with the terms of the Escrow
Agreement. 

13

  

        (m)  For
so long as any of the Offered Securities are outstanding and if, in the reasonable judgment of the Initial Purchaser or Latham & Watkins LLP, the Initial
Purchaser or any of its affiliates (as defined in the rules and regulations under the Securities Act) are required to deliver a prospectus (any such prospectus, a "Market
Making Prospectus") in connection with sales of the Offered Securities, to (i) provide the Initial Purchaser and its affiliates, without charge, as many copies of the
Market Making Prospectus as they may reasonably request, (ii) periodically amend the Offering Document and the Exchange Offer Registration Statement so that the information contained therein
complies with the requirements of Section 10(a) of the Securities Act, (iii) amend the Exchange Offer Registration Statement or amend or supplement the Market Making Prospectus when
necessary to reflect any material changes in the information provided therein and promptly file such amendment or supplement with the Commission, (iv) provide the Initial Purchaser and their
affiliates with copies of each amendment or supplement so filed and such other documents, including opinions of counsel and "comfort" letters, as they may reasonably request and (v) indemnify
the Initial Purchaser and their affiliates with respect to the Market Making Prospectus and, if applicable, contribute to any amount paid or payable by the Initial Purchasers and their affiliates in a
manner substantially identical to that specified in Section 7 hereof (with appropriate modifications). The Company and the Guarantor consent to the use, subject to the provisions of the
Securities Act and the state securities or Blue Sky laws of the jurisdictions in which the Offered Securities are offered by the Initial Purchasers, of each Market Making Prospectus. 

        (n)   The
Company and the Guarantor will do and perform all things required or necessary to be done and performed under this Agreement by them prior to the Closing Date, and
to satisfy all conditions precedent (to the extent within their control) to the Initial Purchaser's obligations hereunder to purchase the Offered Securities. 

        6.    Conditions of the Obligations of the Initial Purchaser.    The obligations of the Initial Purchaser to purchase
and pay for the Offered Securities will be subject to the accuracy of the representations and warranties on the part of the Company and the Guarantor herein, to the accuracy of the statements of
officers of the Company and the Guarantor made pursuant to the provisions hereof, to the performance by the Company and the Guarantor of their obligations hereunder and to the following additional
conditions precedent: 

        (a)   The
Initial Purchaser shall have received a letter, dated the date of this Agreement, of PricewaterhouseCoopers LLP
("PWC") in form and substance satisfactory to the Initial Purchaser concerning certain of the financial information set forth in the Offering Document. 

        (b)   Subsequent
to the execution and delivery of this Agreement, there shall not have occurred (i) any change, or any development or event involving a prospective
change, in the condition (financial or other), business, properties or results of operations of the Company, the Guarantor and their respective subsidiaries taken as one enterprise or ARC and its
subsidiaries taken as one enterprise, which, in the judgment of the Initial Purchaser, is material and adverse and makes it impractical or inadvisable to proceed with completion of the offering or the
sale of and payment for the Offered Securities; (ii) any downgrading in the rating of any debt securities of the Company or ARC by any "nationally recognized statistical rating organization"
(as defined for purposes of Rule 436(g) under the Securities Act), or any public announcement that any such organization has under surveillance or review its rating of any debt securities of
the Company or ARC (other than an announcement with positive implications of a possible upgrading, and no implication of a possible downgrading, of such rating) or any announcement that the Company or
ARC has been placed on negative outlook; (iii) any change in U.S. or international financial, political or economic conditions or currency exchange rates or exchange controls as would, in the
judgment of the Initial Purchaser, be likely to prejudice materially the success of the proposed issue, sale or distribution of the Offered Securities, whether in the primary market or in respect of 

14

 

dealings
in the secondary market; (iv) any material suspension or material limitation of trading in securities generally on the New York Stock Exchange, or any setting of minimum prices for
trading on such exchange, or any suspension of trading of any securities of the Company on any exchange or in the over-the-counter market; (v) any banking moratorium
declared by U.S. Federal or New York authorities; (vi) any major disruption of settlements of securities or clearance services in the United States; or (vii) any attack on, outbreak or
escalation of hostilities or act of terrorism involving the United States, any declaration of war by Congress or any other national or international calamity or emergency if, in the judgment of the
Initial Purchaser, the effect of any such attack, outbreak, escalation, act, declaration, calamity or emergency makes it impractical or inadvisable to proceed with completion of the offering or sale
of and payment for the Offered Securities. 

        (c)   The
Initial Purchaser shall have received an opinion, dated the Closing Date, of Bingham McCutchen LLP, counsel for the Company and the Guarantor, in a form reasonably
acceptable to Latham & Watkins LLP and the Initial Purchaser. 

        (d)   The
Initial Purchaser shall have received from Latham & Watkins LLP, counsel for the Initial Purchaser, such opinions, dated the Closing Date, with respect to the
formation or incorporation of the Company and the Guarantor, as the case may be, the validity of the Offered Securities, the Offering Circular, the exemption from registration for the offer and sale
of the Offered Securities by the Company and the Guarantor to the Initial Purchaser and the resales by the Initial Purchaser as contemplated hereby and other related matters as CSFB may require, and
the Company and the Guarantor shall have furnished to such counsel such documents as they may request for the purpose of enabling them to pass upon such matters. 

        (e)   The
Initial Purchaser shall have received a certificate, dated the Closing Date, of the President or any Vice President and a principal financial or accounting officer
of the Company and the Guarantor in which such officers shall state that to the best of their knowledge after reasonable investigation,
(A) the representations and warranties of the Company and the Guarantor in this Agreement are true and correct in all material respects (without giving duplicative effect to any materiality
qualifiers), that the Company and the Guarantor have complied with all agreements and satisfied all conditions on its part to be performed or satisfied hereunder at or prior to the Closing Date and
(B) subsequent to the dates of the most recent financial statements in the Offering Document there has been no material adverse change, nor any development or event involving a prospective
material adverse change, in the condition (financial or other), business, properties or results of operations of the Company, the Guarantor and their subsidiaries taken as a whole except as set forth
in or contemplated by the Offering Document or as described in such certificate. 

        (f)    The
Initial Purchaser shall have received a certificate, dated the Closing Date, of the President or any Vice President and a principal financial or accounting officer
of the Company certifying that the Credit Agreement, dated as of April 30, 2001, among ARC, American Ref-Fuel Company of Hempstead, American Ref-Fuel Company of Essex
County, American Ref-Fuel Company of Niagara L.P., American Ref-Fuel Company of Southeastern Connecticut, the banks and other financial institutions party thereto, Citibank,
N.A., as administrative agent and collateral agent for the secured parties, and Fleet National Bank, has been refinanced, restated or replaced. 

        (g)   In
the event the Acquisition closes on the Closing Date, the Initial Purchaser shall have received an executed signature page to this Agreement from the Guarantor on the
Closing Date. 

        (h)   In
the event the Acquisition closes on the Closing Date, the Initial Purchaser shall have received an executed copy of the Subordination Agreement, dated the Closing
Date, between Duke Capital Corporation, a Delaware corporation, and Wells Fargo Bank Minnesota, National Association, as agent. 

15

 

        (i)    In
the event the Acquisition does not close on the Closing Date, the Initial Purchaser shall have received a certificate, dated the Closing Date, of the President or any
Vice President and a principal financial or accounting officer of the Company certifying that the Company has deposited an amount equal to $198,486,111.11, which represents 97% of the aggregate
principal amount of the Notes plus accrued and unpaid interest on the Notes to, but not including, September 30, 2003, into the Escrow Account. 

        (j)    The
Initial Purchaser shall have received a letter, dated the Closing Date, of PWC that meets the requirements of subsection (a) of this Section, except that the
specified date referred to in such subsection will be a date not more than three days prior to the Closing Date for the purposes of this subsection. 

        (k)   The
Collateral Agent shall have received (with a copy for the Initial Purchaser) at the Closing Date: 

          (i)  appropriately
completed copies, which have been duly authorized for filing by the appropriate Person, of Uniform Commercial Code financing statements naming the Company
and each Guarantor as a debtor and the Collateral Agent as the secured party, or other similar instruments or documents to be filed under the UCC of all jurisdictions as may be necessary or, in the
reasonable opinion of the Collateral Agent and its counsel, desirable to perfect the security interests of the Collateral Agent pursuant to the Collateral Agreements; 

         (ii)  appropriately
completed copies, which have been duly authorized for filing by the appropriate Person, of Uniform Commercial Code Form UCC-3 termination
statements, if any, necessary to release all Liens of any Person in any Collateral described in the Collateral Agreements previously granted by any Person, other than Permitted Liens; and 

        (iii)  certified
copies of Uniform Commercial Code Requests for Information or Copies (Form UCC-11), or a similar search report certified by a party acceptable to
the Collateral Agent, dated a date reasonably near to the Closing Date, listing all effective financing statements which name the Company or any Guarantor (under its present name and any previous
names) as the debtor, together with copies of such financing statements (none of which shall cover any Collateral described in the Collateral Agreements (other than such financing statements that
evidence Permitted Liens). 

        (l)    As
of the Closing Date, the representations and warranties contained in the Collateral Agreements will be true and correct in all respects. 

        The
Company and the Guarantor will furnish the Initial Purchaser with such conformed copies of such opinions, certificates, letters and documents as the Initial Purchaser reasonably
requests. CSFB may in its sole discretion waive on behalf of the Initial Purchaser compliance with any conditions to the obligations of the Initial Purchaser hereunder. 

        7.    Indemnification and Contribution.    

        (a)   The
Company and the Guarantor will indemnify and hold harmless the Initial Purchaser, its partners, directors and officers and each person, if any, who controls the
Initial Purchaser within the meaning of Section 15 of the Securities Act, against any losses, claims, damages or liabilities, joint or several, to which the Initial Purchaser may become
subject, under the Securities Act or the Exchange Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in the Offering Document, or any amendment or supplement thereto, or any related preliminary offering circular or the Additional
Issuer Information, or arise out of or are based upon the omission or alleged omission to state therein a material fact necessary in order to make the statements therein, in the light of the
circumstances 

16

 

under
which they were made, not misleading, including any losses, claims, damages or liabilities arising out of or based upon the Company's failure to perform its obligations under Section 5(a)
of this Agreement, and will reimburse the Initial Purchaser for any legal or other expenses reasonably incurred by the Initial Purchaser in connection with investigating or defending any such loss,
claim, damage, liability or action as such expenses are incurred; provided, however, that neither the Company, nor the Guarantor will be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement in or omission or alleged omission from any of such documents in reliance upon and in
conformity with written information furnished to the Company or the Guarantor by the Initial Purchaser specifically for use therein, it being understood and agreed that the only such information
consists of the information described as such in subsection (b) below. 

        (b)   The
Initial Purchaser will indemnify and hold harmless the Company and the Guarantor, and their respective directors and officers and each person, if any, who controls
the Company and the Guarantor within the meaning of Section 15 of the Securities Act, against any losses, claims, damages or liabilities to which the Company and the Guarantor may become
subject, under the Securities Act or the Exchange Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in the Offering Document, or any amendment or supplement thereto, or any related preliminary offering circular, or arise out of or
are based upon the omission or the alleged omission to state therein a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made,
not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity
with written information furnished to the Company and the Guarantor by the Initial Purchaser specifically for use therein, and will reimburse any legal or other expenses reasonably incurred by the
Company and the Guarantor in connection with investigating or defending any such loss, claim, damage, liability or action as such expenses are incurred, it being understood and agreed that the only
such information furnished by the Initial Purchaser consists of the following information in the Offering Document: under the caption "Plan of Distribution" paragraphs 3, 4, 6, 9, 10, 11, 12, 13 and
14; provided, however, that the Initial Purchaser shall not be liable for any losses, claims, damages or liabilities arising out of or based upon the Company's failure to perform its obligations under
Section 5(a) of this Agreement. 

        (c)   Promptly
after receipt by an indemnified party under this Section of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof
is to be made against the indemnifying party under subsection (a) or (b) above, notify the indemnifying party of the commencement thereof; but the failure to notify the indemnifying
party shall not relieve it from any liability that it may have under subsection (a) or (b) above except to the extent that it has been materially prejudiced by such failure; and provided
further that the failure to notify the indemnifying party shall not relieve it from any liability that it may have to an indemnified party otherwise than under subsection (a) or
(b) above. In case any such action is brought against any indemnified party and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified
party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and after notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party will not be liable to such indemnified party under this Section for any legal or other expenses subsequently incurred by such indemnified party in
connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any
pending or threatened action in respect of 

17

 

which
any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party unless such settlement includes (i) an unconditional release
of such indemnified party from all liability on any claims that are the subject matter of such action and (ii) does not include a statement as to or an admission of fault, culpability or
failure to act by or on behalf of any indemnified party. 

        (d)   If
the indemnification provided for in this Section is unavailable or insufficient to hold harmless an indemnified party under subsection (a) or (b) above,
then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages or liabilities referred to in subsection (a) or
(b) above (i) in such proportion as is appropriate to reflect the relative benefits received by the Company and the Guarantor on the one hand and the Initial Purchaser on the other from
the offering of the Offered Securities or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only
the relative benefits referred to in clause (i) above but also the relative fault of the Company and the Guarantor on the one hand and the Initial Purchaser on the other in connection with the
statements or omissions which resulted in such losses, claims, damages or liabilities as well as any other relevant equitable considerations. The relative benefits received by the Company and the
Guarantor on the one hand and the Initial Purchaser on the other shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the
Company and the Guarantor bear to the total discounts, fees and commissions received by the Initial Purchaser from the Company and the Guarantor under this Agreement. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information
supplied by the Company, any Guarantor or the Initial Purchaser and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or
omission. The amount paid by an indemnified party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this subsection (d) shall be deemed to include
any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any action or claim which is the subject of this subsection (d). Notwithstanding
the provisions of this subsection (d), the Initial
Purchaser shall not be required to contribute any amount in excess of the amount by which the total discounts, fees and commissions received by the Initial Purchaser exceeds the amount of any damages
which the Initial Purchaser has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. 

        (e)   The
obligations of the Company and the Guarantor under this Section shall be in addition to any liability which the Company and the Guarantor may otherwise have and
shall extend, upon the same terms and conditions, to each person, if any, who controls the Initial Purchaser within the meaning of the Securities Act or the Exchange Act; and the obligations of the
Initial Purchaser under this Section shall be in addition to any liability which the Initial Purchaser may otherwise have and shall extend, upon the same terms and conditions, to each person, if any,
who controls the Company or any of the Guarantor within the meaning of the Securities Act or the Exchange Act. 

        8.    Survival of Certain Representations and Obligations.    The respective indemnities, agreements, representations,
warranties and other statements of the Company, the Guarantor or their respective officers and of the Initial Purchaser set forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation, or statement as to the results thereof, made by or on behalf of the Initial Purchaser, the Company, the Guarantor or any of their respective representatives,
officers or directors or any controlling person, and will survive delivery of and payment for the Offered Securities. If for any reason the purchase of the Offered Securities by the Initial Purchaser
is not consummated, the Company and the Guarantor shall remain responsible for the expenses to be paid or 

18

 

reimbursed
by it pursuant to Section 5 and the respective obligations of the Company, the Guarantor and the Initial Purchaser pursuant to Section 7 shall remain in effect. If the
purchase of the Offered Securities by the Initial Purchaser is not consummated for any reason other than solely because of the occurrence of any event specified in clause (iii), (iv), (v),
(vi) or (vii) of Section 6(b), the Company and the Guarantor will reimburse the Initial Purchaser for all out-of-pocket expenses (including fees and
disbursements of counsel) reasonably incurred by it in connection with the offering of the Offered Securities. 

        9.    Notices.    All communications hereunder will be in writing and, if sent to the Initial Purchaser will be
mailed, delivered or telegraphed and confirmed to the Initial Purchaser at Eleven Madison Avenue, New York, New York 10010-3629, Attention: Transactions Advisory Group, or, if sent to the
Company or the Guarantor, will be mailed, delivered or telegraphed and confirmed as follows: MSW Energy Holdings LLC, c/o Michael Miller, Managing Director, AIG Highstar Capital, L.P., 175 Water
Street, 26th Floor, New York, New York 10038 and c/o Daniel Clare, Vice President, DLJ Merchant Banking Partners, Eleven Madison Avenue, New York, New York 10010-3629. 

        10.    Successors.    This Agreement will inure to the benefit of and be binding upon the parties hereto and their
respective successors and the controlling persons referred to in Section 7, and no other person will have any right or obligation hereunder, except that holders of Offered Securities shall be
entitled to
enforce the agreements for their benefit contained in the second and third sentences of Section 5(b) hereof against the Company as if such holders were parties thereto. 

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

        12.    Applicable Law.    This Agreement shall
be governed by, and construed in accordance with, the laws of the State of New York without regard to principles of conflicts of laws.

        The
Company and the Guarantor hereby submit to the non-exclusive jurisdiction of the Federal and state courts in the Borough of Manhattan in The City of New York in any suit
or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. 

19

 

        If
the foregoing is in accordance with the Initial Purchaser's understanding of our agreement, kindly sign and return to us one of the counterparts hereof, whereupon it will become a
binding agreement among the Company, the Guarantor and the Initial Purchaser in accordance with its terms. 

	 	 	Very truly yours,
	

 	
 	
MSW ENERGY HOLDINGS LLC
	

 	
 	

BY:	
 	

HIGHSTAR RENEWABLE FUELS LLC, AS A MEMBER
	

 	
 	

By	
 	

/s/  MICHAEL J. MILLER      
 Name: Michael J. Miller

Title:
	

 	
 	
BY:	
 	

MSW ACQUISITION CORP., AS A MEMBER
	

 	
 	

By	
 	

/s/  OHSANG KWON      
 Name: OhSang Kwon

Title:
	

 	
 	
MSW ENERGY FINANCE CO., INC.
	

 	
 	

By	
 	

/s/  MICHAEL J. MILLER      
 Name: Michael J. Miller

Title: President
	

 	
 	
MSW ENERGY HUDSON LLC
	

 	
 	
BY:	
 	

MSW ENERGY HOLDINGS LLC
	

 	
 	

By	
 	

/s/  MICHAEL J. MILLER      
 Name: Michael J. Miller

Title: Chief Executive Officer

	The foregoing Purchase Agreement is hereby confirmed and accepted as of the date first above written.	 	 
	
CREDIT SUISSE FIRST BOSTON LLC	
 	

 
	

By	
 	

/s/  JOHN CAVALIER      
 Name: John Cavalier

Title: Managing Director	
 	

 

20

SCHEDULE A  

Essex
Facility 

Niagara
Facility 

Delaware
Valley Facility 

SCHEDULE B  

	Initial Purchaser
 
	 	Principal Amount of Offered Securities

	Credit Suisse First Boston LLC	 	$	200,000,000
	 	 	

	 	Total	 	$	200,000,000QuickLinks
 -- Click here to rapidly navigate through this document

EXHIBIT 10.1  

AMENDED AND RESTATED

CAPITAL CONTRIBUTION AGREEMENT  

 between  

 HIGHSTAR RENEWABLE FUELS LLC  

 and  

 MSW ACQUISITION LLC  

 Dated as of June 24, 2003  

 Acquisition from Duke Energy Global Markets, Inc.

of a 50% outstanding membership interest in Duke/UAE Ref-Fuel LLC  

 
  
 

    TABLE OF CONTENTS    
    

	 
	 	 
	 	Page

	ARTICLE 1	 	1
	1.1	 	Delivery of Letters of Credit	 	1
	

ARTICLE 2	
 	

2
	2.1	 	Actions on the Additional Capital Contribution Date	 	2
	2.2	 	Failure to Deliver the Additional Capital Contributions	 	3
	2.3	 	Actions on the Initial Closing Date	 	3
	2.4	 	Purchase Price Adjustment Additional Capital Contributions	 	3
	

ARTICLE 3	
 	

3
	3.1	 	Legal Existence and Ownership	 	3
	3.2	 	Compliance with Law	 	3
	3.3	 	Power and Authorization; Enforceable Obligations	 	3
	3.4	 	Governmental Actions and Other Consents and Approvals	 	4
	3.5	 	No Legal Bar	 	4
	3.6	 	No Proceeding or Litigation	 	4
	3.7	 	Investment Company Act	 	4
	3.8	 	Public Utility Status	 	4
	3.9	 	Brokers and Finders	 	4
	

ARTICLE 4	
 	

5
	4.1	 	Legal Existence and Ownership	 	5
	4.2	 	Compliance with Law	 	5
	4.3	 	Power and Authorization; Enforceable Obligations	 	5
	4.4	 	Governmental Actions and Other Consents and Approvals	 	5
	4.5	 	No Legal Bar	 	6
	4.6	 	No Proceeding or Litigation	 	6
	4.7	 	Investment Company Act	 	6
	4.8	 	Public Utility Status	 	6
	4.9	 	Brokers and Finders	 	6
	

ARTICLE 5	
 	

6
	5.1	 	Obligations of the Company under the Purchase Agreement and the EPA	 	6
	5.2	 	Indemnification Procedure	 	7
	

ARTICLE 6	
 	

7
	Miscellaneous Provisions	 	7
	6.1	 	Notices	 	7
	6.2	 	Entire Agreement	 	8
	6.3	 	Survival	 	8
	6.4	 	Modifications and Waivers	 	8
	6.5	 	Separable Provisions	 	8
	6.6	 	Counterparts	 	9
	6.7	 	Governing Law	 	9
	6.8	 	Dispute Resolution	 	9
	6.9	 	Further Assurances	 	9
	6.10	 	Successors and Assigns	 	9
	6.11	 	No Recourse	 	9
	6.12	 	Third Party Beneficiaries	 	9
	6.13	 	Performance by Affiliates	 	9
	 	 	 	 	 

i

 

	6.14	 	Termination	 	9
	6.15	 	Existing Contribution Agreement Superceded	 	9
	
EXHIBITS	
 	

 
	

A-1	
 	

Existing LLC Agreement	
 	

 
	

A-2	
 	

Form of Amended and Restated LLC Agreement	
 	

 
	

B-1	
 	

Highstar Liquidated Damages Letter of Credit	
 	

 
	

B-2	
 	

Highstar Liquidated Damages Letter of Credit	
 	

 
	

B-3	
 	

MSW Liquidated Damages Letter of Credit	
 	

 
	

C-1	
 	

Highstar Backup Liquidated Damages Letter of Credit	
 	

 
	

C-2	
 	

Highstar Backup Liquidated Damages Letter of Credit	
 	

 
	

C-3	
 	

MSW Backup Liquidated Damages Letter of Credit	
 	

 
	

D-1	
 	

Existing Escrow Agreement	
 	

 
	

D-2	
 	

Form of Amended and Restated Escrow Agreement	
 	

 
	

E-1	
 	

First Joint Written Direction	
 	

 
	

E-2	
 	

Second Joint Written Direction	
 	

 
	
SCHEDULES	
 	

 
	

A	
 	

Rules of Usage and Definitions	
 	

 

ii

  

 
 

AMENDED AND RESTATED
  CAPITAL CONTRIBUTION AGREEMENT    
    

        THIS AMENDED AND RESTATED CAPITAL CONTRIBUTION AGREEMENT (this "Contribution Agreement"), dated as of
June 24, 2003, is entered into by and between HIGHSTAR RENEWABLE FUELS LLC, a Delaware limited liability company ("Highstar"), and MSW
ACQUISITION LLC, a Delaware limited liability company (formerly known as MSW Acquisition Corp.) ("MSW", and together with Highstar, the
"Sponsors"). The rules of usage set forth in Schedule A hereto shall apply to this Contribution
Agreement. Capitalized terms used but not defined herein shall have the respective meanings as set forth on Schedule A hereto. 

W I T N E S S E T H: 

        WHEREAS,
pursuant to that certain Limited Liability Company Agreement of MSW ENERGY HOLDINGS LLC, a Delaware limited liability company (the
"Company"), dated as of March 19, 2003 (the "Existing LLC Agreement"), as of the date hereof each
of the Sponsors own a fifty percent (50%) outstanding membership interest in the Company. A copy of the Existing LLC Agreement is attached hereto as  Exhibit A-1; 

        WHEREAS,
Duke Energy Global Markets, Inc., a Nevada corporation ("Duke"), indirectly owns a fifty percent (50%) outstanding
membership interest (the "Duke Interest") in Duke/UAE Ref-Fuel LLC, a Delaware limited liability company
("Duke/UAE"); 

        WHEREAS,
the Sponsors have formed the Company for the purpose of purchasing the Duke Interest from Duke; 

        WHEREAS,
Duke and the Company have entered into that certain Equity Purchase Agreement, dated as of March 19, 2003 (the "EPA"),
pursuant to which Duke has agreed to sell (or cause to be sold), and the Company has agreed to purchase, the Duke Interest (the purchase and sale of the Duke Interest under the EPA being referred to
herein as the "Duke Acquisition"); and 

        WHEREAS,
the Sponsors desire to cause the Company to consummate the Duke Acquisition and have agreed to make contributions of capital to the Company and take other actions in furtherance
thereof, on the terms and conditions set forth herein; 

        WHEREAS,
on March 19, 2003, the Sponsors executed and delivered the Capital Contribution Agreement (the "Existing Contribution
Agreement"); 

        WHEREAS,
the Sponsors desire to amend and restate the Existing Contribution Agreement on the terms set forth herein. 

        NOW,
THEREFORE, in consideration of the mutual agreements herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and
in reliance upon the representations and warranties of each party set forth herein, the parties hereto agree as follows: 

 
 

ARTICLE 1    
    
    Sponsor Actions    
    

        1.1    Delivery of Letters of Credit.    As of March 19, 2003, (i) Highstar
delivered (1) the Highstar Liquidated Damages Letters of Credit to Duke, and (2) the Highstar Backup Liquidated Damages Letters of Credit to the Escrow Agent to be held in accordance
with the terms of the Escrow Agreement, and (ii) MSW delivered (1) the MSW Liquidated Damages Letter of Credit to Duke, and (2) the MSW Backup Liquidated Damages Letter of Credit
to the Escrow Agent to be held in accordance with the terms of the Escrow Agreement. Each of the Highstar Backup Liquidated 

1

 

Damages
Letters of Credit and the MSW Backup Liquidated Damages Letter of Credit was issued by a commercial bank that has a rating accorded to such bank's U.S. dollar denominated long term senior debt
obligations by Standard & Poor's Rating Services, Inc. or by Moody's Investor Services, Inc. of at least BBB or Baa2, respectively. 

 
 

ARTICLE 2    
    
    Closing Actions; Post-Closing Actions    
    

        2.1    Actions on the Additional Capital Contribution Date.    

        (a)   On
the Additional Capital Contribution Date, each of the Sponsors shall execute and deliver (1) an Amended and Restated LLC Agreement of the Company (the
"Amended and Restated LLC Agreement") in substantially the form attached hereto as  Exhibit A-2, with such changes as shall be mutually
agreed upon by the Sponsors (including changes thereto to reflect and give effect
to the use of the Highstar Backup Equity Contribution Guaranty by Highstar), and (2) an Amended and Restated Escrow Agreement (the "Amended and Restated Escrow
Agreement") in substantially the form attached hereto as Exhibit D-2, with such changes as shall be mutually
agreed upon by the Sponsors (including changes thereto to reflect and give effect to the use of the Highstar Backup Equity Contribution Guaranty by Highstar). The execution and delivery of the Amended
and Restated LLC Agreement on the Additional Capital Contribution Date shall be deemed to have occurred immediately prior to the execution and delivery of the Amended and Restated Escrow Agreement on
the Additional Capital Contribution Date. 

        (b)   No
later than 5:00 p.m (New York time) on the Additional Capital Contribution Date, Highstar shall (1) deposit the Highstar Additional Capital Contribution Amount
by wire transfer of immediately available funds to the escrow account maintained by the Escrow Agent, and (2) deliver the First Joint Written Direction executed by Highstar and the Highstar
Backup Equity Contribution Security to the Escrow Agent. Highstar shall be responsible for all fees and other costs associated with providing the Highstar Backup Equity Contribution Security. The
Highstar Additional Capital Contribution Amount and the Highstar Backup Equity Contribution Security shall be held by the Escrow Agent in accordance with the terms of the Escrow Agreement. 

        (c)   No
later than 5:00 p.m (New York time) on the Additional Capital Contribution Date, MSW shall (1) deposit the MSW Additional Capital Contribution Amount by wire
transfer of immediately available funds to the escrow account maintained by the Escrow Agent, and (2) deliver the First Joint Written Direction executed by MSW and the MSW Backup Equity
Contribution Letter of Credit to the Escrow Agent. MSW shall be responsible for all fees and other costs associated with providing the MSW Backup Equity Contribution Letter of Credit. The MSW
Additional Capital Contribution Amount and the MSW Backup Equity Contribution Letter of Credit shall be held by the Escrow Agent in accordance with the terms of the Escrow Agreement. 

        2.2    Failure to Deliver the Additional Capital Contributions.    If a Sponsor (the
"Non-Delivering Sponsor") does not deposit the funds and deliver the items described in Section 2.1(b) or (c) above, as
applicable, when and as required by such applicable section, the Non-Delivering Sponsor shall be deemed to have transferred its entire Membership Interest and Ownership Percentage to the
Sponsor that has deposited the funds and delivered the items described in Section 2.1(b) or (c) above, as applicable (the "Delivering
Sponsor"), and the Non-Delivering Sponsor shall immediately thereafter automatically be deemed to have withdrawn as, and cease to be, a Member of the Company
without any further action on the part of any Person. The Non-Delivering Sponsor shall promptly execute and deliver such additional instruments as may be reasonably requested by the
Delivering Sponsor to evidence such assignment of its Membership Interest and Ownership Percentage and its withdrawal as a Member of the Company. 

2

 

        2.3    Actions on the Initial Closing Date.    Upon the satisfaction (or joint waiver by both
of the Sponsors) of all conditions precedent to the Company's obligation to proceed with the Initial Closing under Section 6.1 of the EPA and Duke is otherwise prepared to close the Duke
Acquisition and so long as (1) each of the Sponsors has executed and delivered the Amended and Restated LLC Agreement and the Amended and Restated Escrow Agreement and the Escrow Agent has
countersigned the Amended and Restated Escrow Agreement, and (2) the funds and items described in Sections 2.1(b) and (c) above have been deposited with or delivered to the Escrow Agent,
each of the Sponsors shall execute and deliver the Second Joint Written Direction to the Escrow Agent directing the Escrow Agent to distribute the Highstar Remaining Additional Capital Contribution
Amount and the MSW Remaining Additional Capital Contribution Amount in accordance with the Second Joint Written Direction, and deliver the Highstar Backup Equity Contribution Security and the MSW
Backup Equity Contribution Letter of Credit to the L/C Issuer to consummate the Duke Acquisition in accordance with the EPA. Upon delivery of such items by the Escrow Agent, Highstar shall be deemed
to have made a capital contribution to the Company in an amount equal to the Highstar Additional Capital Contribution Amount and MSW shall be deemed to have made a capital contribution to the Company
in an amount equal to the MSW Additional Capital Contribution Amount. 

        2.4    Purchase Price Adjustment Additional Capital Contributions.    If the Adjustment Amount
is owing from the Company to Duke pursuant to the terms of the EPA, Highstar shall deposit the Highstar Purchase Price Adjustment Amount and MSW shall deposit the MSW Purchase Price Adjustment Amount
by wire transfer of immediately available funds to the Company's account no later than 5:00 p.m. (New York time) on the day that is one (1) day prior to the day that the Company is
required to pay the Adjustment Amount to Duke under the EPA. Upon delivery of the Highstar Purchase Price Adjustment Amount to the Company, Highstar shall be deemed to have made a capital contribution
to the Company in an amount equal to the Highstar Purchase Price Adjustment Amount. Upon delivery of the MSW Purchase Price Adjustment Amount to the Company, MSW shall be deemed to have made a capital
contribution to the Company in an amount equal to the MSW Purchase Price Adjustment Amount. 

 
 

ARTICLE 3    
    
    Representations and Warranties of Highstar    
    

        Highstar represents and warrants to MSW as of March 19, 2003, as of the date hereof, as of the Additional Capital Contribution Date and as of the Initial
Closing Date that: 

        3.1    Legal Existence and Ownership.    Highstar is a limited liability company duly
organized, validly existing and in good standing under the laws of the State of Delaware. 

        3.2    Compliance with Law.    To Highstar's knowledge, Highstar is in compliance with all
Applicable Laws, except where such non-compliance would not reasonably be expected to have a material adverse effect on the business, operations or financial condition of Highstar. 

        3.3    Power and Authorization; Enforceable Obligations.    Highstar has full power and
authority to conduct its business as now conducted and as proposed to be conducted by it, to execute, deliver and perform this Contribution Agreement and the LLC Agreement, and to take all action as
may be necessary to complete the transactions contemplated hereunder and thereunder. Highstar has taken all necessary limited liability company and legal action to authorize the execution, delivery
and performance of this Contribution Agreement and the LLC Agreement. No consent or authorization of, filing with, or other act by or in respect of any other Person is required in connection with the
execution, delivery or performance by Highstar or the validity or enforceability as to Highstar of this Contribution Agreement or the LLC Agreement. This Contribution Agreement and the LLC Agreement
have been duly executed and delivered by Highstar and constitute legal, valid and binding obligations of Highstar, enforceable against 

3

 

Highstar
in accordance with their terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors
generally and by general principles of equity. 

        3.4    Governmental Actions and Other Consents and Approvals.    No Governmental Actions are
required in connection with (i) the participation by Highstar in the transactions contemplated by this Contribution Agreement or the LLC Agreement, (ii) the validity and enforceability
of this Contribution Agreement or the LLC Agreement, and (iii) the consummation of the transactions contemplated by this Contribution Agreement or the LLC Agreement (other than any Governmental
Actions, consents or approvals under any regulatory law peculiarly applicable to the Company). All such Governmental
Actions have been duly obtained or made, are in full force and effect and are Final. The information set forth in each application and other written materials submitted by Highstar to the applicable
Governmental Authority in connection with each Governmental Action was accurate and complete in all material respects at the time submitted; to the extent that any such information has since become
inaccurate or incomplete, required supplemental information has been submitted by Highstar to the applicable Governmental Authority in connection therewith as required for correcting and completing
such information in all material respects to the extent such further submission is required in order to maintain compliance with or the effectiveness of such Governmental Action. True, correct and
complete copies of all such Governmental Actions have been delivered to MSW. 

        3.5    No Legal Bar.    The execution, delivery and performance by Highstar of this
Contribution Agreement and the LLC Agreement (i) will not violate any Applicable Law (other than immaterial violations of Applicable Law that may result from performance of this Contribution
Agreement or the LLC Agreement), (ii) will not violate any Contractual Obligation of Highstar (other than immaterial violations of any such Contractual Obligations that may result from
performance of this Contribution Agreement or the LLC Agreement), and (iii) will not violate the constitutive documents of Highstar. 

        3.6    No Proceeding or Litigation.    No action, litigation, proceeding or investigation of
or before any arbitrator or Governmental Authority is pending or, to the knowledge of Highstar, threatened against or affecting Highstar or against or affecting any of its properties, rights, revenues
or assets, which would reasonably be expected to have a material adverse effect on the business, operations or financial condition of Highstar. No action, litigation, proceeding or investigation
before any Governmental Authority is pending (or, to Highstar's knowledge, is threatened) against Highstar or with respect to this Contribution Agreement or the LLC Agreement or the transactions
contemplated hereby or thereby, and no order, judgment or decree has been issued (or, to Highstar's knowledge, is proposed to be issued) by any Governmental Authority to set aside, restrain, enjoin or
prevent Highstar from consummating of any of the transactions contemplated hereby or thereby. 

        3.7    Investment Company Act.    Highstar is not an "investment company" or a company
"controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. 

        3.8    Public Utility Status.    Highstar is not regulated as a "holding company", or a
"subsidiary company" of a "holding company" or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company" (other than as a "holding company" exempt from the provisions
of PUHCA pursuant to Section 3 thereof or otherwise), as such quoted terms are defined in PUHCA. 

        3.9    Brokers and Finders.    No broker, finder, agent or similar intermediary, other than
CSFB, has acted for or on behalf of Highstar or any of its affiliates in connection with this Contribution Agreement or the LLC Agreement or the transactions contemplated hereby or thereby, and no 

4

 

broker,
finder, agent or similar intermediary, other than CSFB, is entitled to any fee or commission in connection herewith or therewith based on any agreement, arrangement or understanding with, or
action taken by, Highstar or any of its affiliates. 

 
 

ARTICLE 4    
    
    Representations and Warranties of MSW    
    

        MSW represents and warrants to Highstar as of March 19, 2003, as of the date hereof, as of the Additonal Capital Contribution Date and as of the Initial
Closing Date that: 

        4.1    Legal Existence and Ownership.    As of March 19, 2003, MSW was a corporation
duly organized, validly existing and in good standing under the laws of the State of Delaware. As of the date hereof, as of the Additional Capital Contribution Date and as of the Initial Closing Date,
MSW is and will be a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware. 

        4.2    Compliance with Law.    To MSW's knowledge, MSW is in compliance with all Applicable
Laws, except where such non-compliance would not reasonably be expected to have a material adverse effect on the business, operations or financial condition of MSW. 

        4.3    Power and Authorization; Enforceable Obligations.    MSW has full power and authority
to conduct its business as now conducted and as proposed to be conducted by it, to execute, deliver and perform this Contribution Agreement and the LLC Agreement, and to take all action as may be
necessary to complete the transactions contemplated hereunder and thereunder. MSW has taken all necessary corporate or limited liability company and legal action to authorize the execution, delivery
and performance of this Contribution Agreement and the LLC Agreement. No consent or authorization of, filing with, or other act by or in respect of any other Person is required in connection with the
execution, delivery or performance by MSW or the validity or enforceability as to MSW of this Contribution Agreement or the LLC Agreement. This Contribution Agreement and the LLC Agreement have been
duly executed and delivered by MSW and constitute legal, valid and binding obligations of MSW, enforceable against MSW in accordance with their terms, except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general principles of equity. 

        4.4    Governmental Actions and Other Consents and Approvals.    No Governmental Actions are
required in connection with (i) the participation by MSW in the transactions contemplated by this Contribution Agreement or the LLC Agreement, (ii) the validity and enforceability of
this Contribution Agreement or the LLC Agreement, and (iii) the consummation of the transactions contemplated by this Contribution Agreement or the LLC Agreement (other than any Governmental
Actions, consents or approvals under any regulatory law peculiarly applicable to the Company). All such Governmental Actions have been duly obtained or made, are in full force and effect and are
Final. The information set forth in each application and other written materials submitted by MSW to the applicable Governmental Authority in connection with each Governmental Action was accurate and
complete in all material respects at the time submitted; to the extent that any such information has since become inaccurate or incomplete, required supplemental information has been submitted by MSW
to the applicable Governmental Authority in connection therewith as required for correcting and completing such information in all material respects to the extent such further submission is required
in order to maintain compliance with or the effectiveness of such Governmental Action. True, correct and complete copies of all such Governmental Actions have been delivered to Highstar. 

5

 

        4.5    No Legal Bar.    The execution, delivery and performance by MSW of this Contribution
Agreement and the LLC Agreement (i) will not violate any Applicable Law (other than immaterial violations of Applicable Law that may result from performance of this Contribution Agreement or
the LLC Agreement), (ii) will not violate any Contractual Obligation of MSW (other than immaterial violations of any such Contractual Obligations that may result from performance of this
Contribution Agreement or the LLC Agreement), and (iii) will not violate the constitutive documents of MSW. 

        4.6    No Proceeding or Litigation.    No action, litigation, proceeding or investigation of
or before any arbitrator or Governmental Authority is pending or, to the knowledge of MSW, threatened against or affecting MSW or against or affecting any of its properties, rights, revenues or
assets, which would reasonably be expected to have a material adverse effect on the business, operations or financial condition of MSW. No action, litigation, proceeding or investigation before any
Governmental Authority is pending (or, to MSW's knowledge, is threatened) against MSW or with respect to this Contribution Agreement or the LLC Agreement or the transactions contemplated hereby or
thereby, and no order, judgment or decree has been issued (or, to MSW's knowledge, is proposed to be issued) by any Governmental Authority to set aside, restrain, enjoin or prevent MSW from
consummating of any of the transactions contemplated hereby or thereby. 

        4.7    Investment Company Act.    MSW is not an "investment company" or a company "controlled"
by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. 

        4.8    Public Utility Status.    MSW is not regulated as a "holding company", or a "subsidiary
company" of a "holding company" or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company" (other than as a "holding company" exempt from the provisions of PUHCA
pursuant to Section 3 thereof or otherwise), as such quoted terms are defined in PUHCA. 

        4.9    Brokers and Finders.    No broker, finder, agent or similar intermediary, other than
CSFB, has acted for or on behalf of MSW or any of its affiliates in connection with this Contribution Agreement or the LLC Agreement or the transactions contemplated hereby or thereby, and no broker,
finder, agent or similar intermediary, other than CSFB, is entitled to any fee or commission in connection herewith or therewith based on any agreement, arrangement or understanding with, or action
taken by, MSW or any of its affiliates. 

 
 

ARTICLE 5    
    
    Sponsor Covenants    
    

        5.1    Obligations of the Company under the Purchase Agreement and the EPA.    Each of the
Sponsors shall take all actions within its control to cause the Company to perform all of its obligations under the Purchase Agreement that are required to be performed by it on and prior to the Note
Closing Date. Each of the Sponsors shall take all actions within its control to cause the Company to perform all of its obligations under the EPA that are required to be performed by it on and prior
to the Initial Closing Date. If Highstar has failed to deposit the Highstar Additional Capital Contribution Amount, and the Highstar Backup Equity Contribution Security in accordance with
Section 2.1(b) hereof, has failed to execute and deliver the Second Joint Written Direction in accordance with Section 2.3 hereof, or otherwise caused a breach by the Company of any of
its obligations under the EPA (including any payment obligations thereunder), Highstar shall be solely liable for all Damages under the EPA arising out of, resulting from or incurred in connection
with such breach, MSW shall be entitled to receive from escrow the Highstar Backup Liquidated Damages Letters of Credit and the MSW Backup Liquidated Damages Letter of Credit in accordance with the
Escrow Agreement, and Highstar shall promptly reimburse MSW for the amount equal to the product of (i) the aggregate amount owing by 

6

 

the
Company under the Note Documents multiplied by (ii) MSW's Ownership Percentage without giving effect to Section 2.2. In addition, Highstar shall indemnify MSW and its affiliates from
any and all Damages incurred by MSW or its affiliates as a result of (a) a breach described in the preceding sentence, (b) any payment by the Company under the Tax Indemnity Agreement
dated March 19, 2003 (the "Tax Indemnity Agreement") in favor of American Ref-Fuel Company of Delaware Valley, L.P. that was caused
by the actions of Highstar and its affiliates (for the avoidance of doubt, the ownership of Highstar's interest in the Company by any entity that is not a corporation for federal income tax purposes
shall be considered an action by Highstar), or (c) any required payment by the Company under Section 11.1(b)(ii) of the EPA resulting from the actions of Highstar or its
affiliates. If MSW has failed to deposit the MSW Additional Capital Contribution Amount and the MSW Backup Equity Contribution Letter of Credit in accordance with Section 2.1(c) hereof, has
failed to execute and deliver the Second Joint Written Direction in accordance with Section 2.3 hereof, or otherwise caused a breach by the Company of any of its obligations under the EPA
(including any payment obligations thereunder), MSW shall be solely liable for all Damages under the EPA arising out of, resulting from or incurred in connection with such breach, Highstar shall be
entitled to receive from escrow the MSW Backup Liquidated Damages Letter of Credit and the Highstar Backup Liquidated Damages Letters of Credit in accordance with the Escrow Agreement, and MSW shall
promptly reimburse Highstar for the amount equal to the product of (i) the aggregate amount owing by the Company under the Note Documents multiplied by (ii) Highstar's Ownership
Percentage without giving effect to Section 2.2. In addition, MSW shall indemnify Highstar and its affiliates from any and all Damages incurred by Highstar as a result of (a) a breach
described in the preceding sentence, (b) any payment under the Tax Indemnity Agreement that was caused by the actions of MSW and its affiliates (for the avoidance of doubt, the ownership of
MSW's interest in the Company by any entity that is not a corporation for federal income tax purposes shall be considered an action by MSW), or (c) any required payment by the Company under
Section 11.1(b)(ii) of the EPA resulting from the actions of MSW or its affiliates. 

        5.2    Indemnification Procedure.    Any Person seeking to be indemnified or held harmless
(the "Indemnified Party") under this Contribution Agreement shall give notice to the party responsible for providing the indemnity (the
"Indemnifying Party") as soon as reasonably practicable after the Indemnified Party becomes aware of any claim, action or proceeding that may give rise
to an indemnification obligation hereunder. The Indemnifying Party shall have the right to assume the defense of any such claim, action or proceeding. Any Indemnified Party shall have the right to
employ separate counsel with respect to any such claim, action or proceeding, but the Indemnifying Party shall maintain control of the defense,
and the fees and expenses of such separate counsel shall be borne by the Person so employing such separate counsel. The Indemnifying Party shall not be liable for any settlement, compromise, consent
to the entry of judgment in or termination of any claim, action or proceeding effected without the Indemnifying Party's written consent (which consent shall not be unreasonably withheld, delayed or
conditioned). The Indemnifying Party will not, without the Indemnified Party's written consent (which consent shall not be unreasonably withheld, delayed or conditioned) settle, compromise, consent to
the entry of any judgment in or otherwise seek to terminate any claim, action or proceeding in respect of which indemnity may be sought hereunder unless such settlement, compromise, consent or
termination includes an unconditional release of the Indemnified Party from any liabilities arising out of such claim, action or proceeding. 

 
 

ARTICLE 6    
    
    Miscellaneous Provisions    
    

        6.1    Notices.    All notices or other communications required or permitted by this
Contribution Agreement shall be in writing and shall be deemed to have been duly given upon receipt if delivered in 

7

 

person,
by facsimile transmission, by Federal Express or other reputable overnight courier, or mailed by certified or registered mail, return receipt requested, postage pre-paid, and
addressed as follows: 

if
to Highstar: 

Highstar
Renewable Fuels LLC

c/o AIG Global Investment Group, Inc.

175 Water Street

New York, New York 10038

Attention: Christopher H. Lee

Facsimile: (212) 458-2222 

with
a copy to: 

Highstar
Renewable Fuels LLC

c/o AIG Global Investment Group, Inc.

175 Water Street

New York, New York 10038

Attention: Marc C. Baliotti

Facsimile: (212) 458-2222 

if
to MSW: 

MSW
Acquisition LLC

c/o DLJ Merchant Banking III, Inc.

Eleven Madison Avenue

New York, New York 10010-3629

Attention: Ari Benacerraf

Facsimile: (646) 935-7190 

        or
to such other address or facsimile number as may be specified by a party hereto pursuant to notice given by such party in accordance with the provisions of this Section 6.1. 

        6.2    Entire Agreement.    This Contribution Agreement contains the entire agreement and
understanding of the parties with respect to the subject matter hereof and supersedes all prior agreements and understandings of the parties relating to the subject matter hereof. 

        6.3    Survival.    None of the representations and warranties made in this Contribution
Agreement and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the consummation of the transactions contemplated by this Contribution
Agreement. 

        6.4    Modifications and Waivers.    No amendment or other modification of any provision of
this Contribution Agreement shall be valid or binding unless it is in writing and signed by each of the parties hereto. No waiver of any provision of this Contribution Agreement shall be valid or
binding unless it is in writing and signed by the party waiving compliance with such provision. No delay on the part of any party in exercising any right, power or privilege hereunder shall operate as
a waiver thereof, nor shall any waiver of any partial exercise of any such right, power or privilege preclude any further exercise thereof or the exercise of any other such right, power or privilege.
No waiver of any breach, term or condition of this Contribution Agreement by any party shall constitute a subsequent waiver of the same or any other breach, term or condition. 

        6.5    Separable Provisions.    If any provision of this Contribution Agreement shall be held
invalid or unenforceable by a court of competent jurisdiction, the remainder nevertheless shall remain in full force and effect. 

8

 

        6.6    Counterparts.    This Contribution Agreement may be executed simultaneously 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. 

        6.7    Governing Law.    This Contribution Agreement shall be governed by and construed in
accordance with the law of the State of New York without regard to its principles of conflicts of laws. 

        6.8    Dispute Resolution.    Any dispute, controversy or Claim arising out of or relating to
this Contribution Agreement shall be considered a dispute under the Amended and Restated LLC Agreement and shall be resolved in accordance with the dispute resolution provisions of the Amended and
Restated LLC Agreement. 

        6.9    Further Assurances.    Each of the parties shall execute such agreements, instruments
and other documents and take such further actions as may be reasonably required or desirable to carry out the provisions and the transactions contemplated by this Contribution Agreement, including but
not limited to the execution of such further instruments of assignment, transfer, conveyance, endorsement, direction or authorization, and cooperating in obtaining any third party consents and
approvals necessary in order to accomplish and give full force and effect to the transactions contemplated hereby. 

        6.10    Successors and Assigns.    Each and all of the covenants, terms, provisions and
agreements herein contained shall be binding upon and inure to the benefit of the parties hereto and, to the extent permitted by this Contribution Agreement, their respective successors and assigns.
No Sponsor may assign its rights or obligations under this Contribution Agreement except with the consent of the other Sponsor; provided that either Sponsor may assign its rights under this
Contribution Agreement to any entity that is the assignee of such Sponsor's membership interests in the Company in accordance with the LLC Agreement. Any purported assignment not in compliance with
the immediately preceding sentence shall be void and not given effect. 

        6.11    No Recourse.    No past, present or future director, officer, employee, member,
manager, shareholder, affiliate, incorporator or partner, as such of any Sponsor shall have any liability for any obligations of such Sponsor under this Contribution Agreement or for any claim based
on, in respect of or by reason of such obligations or their creation. 

        6.12    Third Party Beneficiaries.    The provisions of this Contribution Agreement shall only
be for the benefit of, and enforceable by, the parties hereto and shall not inure to the benefit of or be enforceable by any third party. 

        6.13    Performance by Affiliates.    Any obligation of any party hereto owed to any other
party hereto under this Contribution Agreement, which obligation is performed, satisfied or fulfilled by an affiliate of such party, shall be deemed to have been performed, satisfied or fulfilled by
such party. 

        6.14    Termination.    This Contribution Agreement and the obligations of the Sponsors
hereunder, shall automatically terminate upon the occurrence of the Special Mandatory Redemption, the Non-Delivering Sponsor Cessation, the termination of the EPA or the payment of the
Adjustment Amount by Duke or the Company, as applicable; provided, however, that the obligations contained in Sections 2.2, 5.1 and 5.2 hereof and this
Article 6 and all of the definitions set forth herein shall survive such termination. 

        6.15    Existing Contribution Agreement Superceded.    This Contribution Agreement shall, as
of the date hereof, amend and restate the Existing Contribution Agreement in its entirety and the rights and obligations of the parties evidenced by the Existing Contribution Agreement shall be
evidenced by this Contribution Agreement. 

[Signature
Page Follows] 

9

 

        IN
WITNESS WHEREOF, the parties hereto have caused this Contribution Agreement to be executed by their respective duly authorized representative as of the date first above written. 

	 	 	HIGHSTAR RENEWABLE FUELS LLC
	

 	
 	

 	

 	

 
	

 	
 	

By:	

/s/  MICHAEL J. MILLER      

	 	 	 	Name:	Michael J. Miller
	 	 	 	Title:	President
	

 	
 	

 	

 	

 
	

 	
 	
MSW ACQUISITION LLC
	

 	
 	

 	

 	

 
	

 	
 	

By:	

/s/  OHSANG KWON      

	 	 	 	Name:	OhSang Kwon
	 	 	 	Title:	Secretary

10

  

 
 

SCHEDULE A    
    
    RULES OF USAGE AND DEFINITIONS    
    

        1.    Rules of Usage.    

        (a)   All
terms defined in this Schedule A and this Contribution Agreement shall have the defined meanings when used in
any certificate or other document made or delivered pursuant hereto. The meanings below are equally applicable to both the singular and plural forms of the terms defined. 

        (b)   As
used herein and in any certificate or other document made or delivered pursuant hereto, accounting terms not defined in this  Schedule A and this Contribution Agreement, and accounting terms
partly defined in this  Schedule A and this Contribution Agreement to the extent not defined, shall have the respective meanings given to them under GAAP. 

        (c)   The
word "hereof," "herein" and "hereunder" and words of similar import when used in this Contribution Agreement shall refer to this Contribution Agreement as a whole
and not to any particular provision of this Contribution Agreement, and section, Schedule and Exhibit references are to this Contribution Agreement unless otherwise specified. 

        (d)   References
to agreements defined herein shall include such agreements as they may be amended, supplemented or otherwise modified from time to time. 

        (e)   Terms
defined in this Contribution Agreement by reference to any other agreement, document or instrument shall have the meanings assigned to them in such agreement,
document or instrument whether or not such agreement, document or instrument is then in effect. 

        (f)    The
words "include" and "including" and words of similar import when used in this Contribution Agreement shall be deemed to be followed by the words "without
limitation." 

        (g)   References
to statutes or regulations are to be construed as including all statutory or regulatory provisions consolidating, amending or replacing the statute or
regulation referred to. 

        (h)   Reference
to consents that will not be unreasonably withheld shall not be unreasonably withheld or delayed. 

        (i)    The
words "sole and absolute discretion" when used in the Contribution Agreement shall mean that the Person entitled to use its "sole and absolute discretion" shall not
be obligated to act reasonably or in accordance with any covenant of good faith or fair dealing or similar standard, whether express or implied. 

        2.    Definitions.    

        "Act" shall have the meaning set forth in the LLC Agreement. 

        "Acquisition Debt" means the debt incurred by the Company in connection with the Duke Acquisition. 

        "Additional Capital Contribution Date" means June 24, 2003. 

        "Adjustment Amount" shall have the meaning set forth in the EPA. 

        "Amended and Restated Escrow Agreement" has the meaning set forth in Section 2.1(a). 

        "Amended and Restated LLC Agreement" has the meaning set forth in Section 2.1(a). 

        "Applicable Law" means any statute, law, ordinance, executive order, rule or regulation (including a regulation that has been formally
promulgated in a rule-making proceeding but, pending final adoption, is in proposed or temporary form having the force of law); guideline or notice having the force of law; 

1

 

or
approval, permit, license, franchise, judgment, order, decree, injunction or writ of any Governmental Authority applicable to a specified Person or specified property, as in effect from time to
time. 

        "ARC" means American Ref-Fuel Company LLC, a Delaware limited liability company. 

        "Claim" means any and all claims, lawsuits, demands, causes of action, investigations and other proceedings (whether or not before a
Governmental Authority). 

        "Contractual Obligation" means, as to any Person, any provision of any security by such Person or of any agreement, instrument or
undertaking to which such Person is a party or by which it or any of its properties bound. 

        "CSFB" means Credit Suisse First Boston LLC. 

        "Damages" means all demands, Claims, causes of action, suits, judgments, damages, amounts paid in settlement (with the approval of the
indemnifying party where applicable), penalties, Liabilities, losses or deficiencies, costs and expenses, including reasonable attorney's fees, court costs, expenses of arbitration or mediation, and
other out-of-pocket expenses incurred in investigating or preparing the foregoing. "Damages" does not include incidental, indirect or consequential damages, damages for lost
profits or other special damages or punitive or exemplary damages; provided, however, that in the case of third-party Claims, "Damages" shall be deemed
to include all forms of relief, monetary and otherwise, asserted therein, without any of the foregoing exceptions. 

        "Equity Contribution Agreement" means that certain Equity Contribution Agreement, dated as of April 30, 2001, between Duke Capital
Corporation, United American Energy Corp., Duke/UAE and ARC. 

        "Equity Contribution Letter of Credit" means a letter of credit, meeting the requirements of Section 2.4(a) of the Equity
Contribution Agreement, to be provided to ARC by the Company in an amount equal to Fifty Million Dollars ($50,000,000). 

        "Escrow Agent" means Wachovia Bank, National Association. 

        "Escrow Agreement" means, prior to the Additional Capital Contribution Date, the Existing Escrow Agreement, and on and after the
Additional Capital Contribution Date, the Amended and Restated Escrow Agreement. 

        "Existing Contribution Agreement" has the meaning set forth in the recitals hereto. 

        "Existing Escrow Agreement" means that certain Escrow Agreement, dated as of March 19, 2003, by and among the Sponsors and the
Escrow Agent. A copy of the Escrow Agreement is attached hereto as Exhibit D-1. 

        "Existing LLC Agreement" has the meaning set forth in the recitals hereto. 

        "Final" as to any Governmental Action issued or transferred to any Person, means the status of such Governmental Action as (a) duly
issued in the name of, or validly transferred to, such Person and accepted by such Person, (b) in full force and effect, and (c) not then subject to any pending judicial or
administrative proceedings. If the Applicable Law under which such Governmental Action was issued provides for a fixed period for judicial or administrative appeal or review thereof, such Governmental
Action shall not be deemed "Final" unless such period has expired and no petition for administrative or judicial appeal or review has been filed. 

        "First Joint Written Direction" shall mean a written direction, in substantially the form of  Exhibit E-1 attached hereto, executed by each of the
Sponsors and directing the Escrow Agent to disburse the Highstar Prepaid Note
Interest Amount and the MSW Prepaid Note Interest Amount to the Note Holder Escrow Agent on Note Closing Date. 

2

 

        "GAAP" means United States generally accepted accounting principles. 

        "Governmental Action" means all permits, authorizations, registrations, consents, approvals, waivers, exceptions, variances, claims,
orders, judgments and decrees, licenses, exemptions, publications, filings, notices to and declarations of or with any Governmental Authority. 

        "Governmental Authority" means any Federal, state, local or foreign governmental department, commission, board, bureau, authority, agency,
court, instrumentality or judicial or regulatory body or entity. 

        "Highstar Additional Capital Contribution Amount" means the amount equal to the sum of the Highstar Prepaid Note Interest Amount and the
Highstar Remaining Additional Capital Contribution Amount. 

        "Highstar Backup Equity Contribution Guaranty" means one or more guarantees from each of The Variable Annuity Life Insurance Company and
AIG Annuity Insurance Company (or any other guarantor that is acceptable to the L/C Issuer) to be issued in favor of the L/C Issuer by or on behalf of Highstar with an aggregate maximum liability to
the guarantors thereunder equal to equal to the product of (i) the face amount of the Equity Contribution Letter of Credit multiplied by (ii) Highstar's Ownership Percentage, in form and
substance satisfactory to the L/C Issuer, to enable the Company to obtain the Equity Contribution Letter of Credit, which aggregate amount is expected to be Twenty-Five Million Dollars
($25,000,000). 

        "Highstar Backup Equity Contribution Letter of Credit" means the letter of credit to be provided to the L/C Issuer by or on behalf of
Highstar in an amount equal to the product of (i) the face amount of the Equity Contribution Letter of Credit multiplied by (ii) Highstar's Ownership Percentage, which amount is expected
to be Twenty-Five Million Dollars ($25,000,000), in form and substance satisfactory to the L/C Issuer, to enable the Company to obtain the Equity Contribution Letter of Credit. 

        "Highstar Backup Equity Contribution Security" means the Highstar Backup Equity Contribution Guaranty or the Highstar Backup Equity
Contribution Letter of Credit. 

        "Highstar Backup Liquidated Damages Letters of Credit" means the two (2) letters of credit that were placed in escrow by Highstar
in an aggregate amount equal to Twelve Million Five Hundred Thousand Dollars ($12,500,000). Copies of the Highstar Backup Liquidated Damages Letters of Credit are attached hereto as  Exhibit C-1 and Exhibit C-2. 

        "Highstar Liquidated Damages Letters of Credit" means the two (2) letters of credit that were provided to Duke by Highstar in an
aggregate amount equal to Twelve Million Five Hundred Thousand Dollars ($12,500,000). Copies of the Highstar Liquidated Damages Letters of Credit are attached hereto as  Exhibit B-1 and
Exhibit B-2. 

        "Highstar Prepaid Note Interest Amount" means Two Million Two Hundred Forty-Three Thousand Fifty-Five Dollars and 56/100 Cents
($2,243,055.56). 

        "Highstar Purchase Price Adjustment Amount" means one-half (1/2) of the Purchase Price Adjustment Amount,
provided that the Highstar Purchase Price Adjustment Amount shall not exceed an amount equal to five million dollars ($5,000,000). 

        "Highstar Remaining Additional Capital Contribution Amount" means Seventy-Two Million Seven Hundred Fifty-Six
Thousand Nine Hundred Forty-Four Dollars and 44/100 Cents ($72,756,944.44). 

        "Initial Closing Date" shall have the meaning set forth in the EPA. 

        "Liabilities" means any and all debts, liabilities, commitments and obligations, whether or not fixed, contingent or absolute, matured or
unmatured, liquidated or unliquidated, accrued or unaccrued, 

3

 

known
or unknown, whether or not required by GAAP to be reflected in financial statements or disclosed in the notes thereto. 

        "LLC Agreement" means, prior to the Additional Capital Contribution Date, the Existing LLC Agreement, and on and after the Additional
Capital Contribution Date, the Amended and Restated LLC Agreement. 

        "L/C Issuer" means the issuer of the Equity Contribution Letter of Credit. 

        "Member" shall have the meaning set forth in the LLC Agreement. 

        "Membership Interest" means a Member's entire interest in the Company, including such Member's share of the profits, losses and
distributable cash or distributions of the Company, and the Member's right to vote on, consent to, or otherwise participate in any decision or action of or by the Members granted pursuant to the LLC
Agreement or the Act. 

        "MSW Additional Capital Contribution Amount" means the amount equal to the sum of the MSW Prepaid Note Interest Amount and the MSW
Remaining Additional Capital Contribution Amount. 

        "MSW Backup Equity Contribution Letter of Credit" means the letter of credit to be provided to the L/C Issuer by or on behalf of MSW in an
amount equal to the product of (i) the face amount of the Equity Contribution Letter of Credit multiplied by (ii) MSW's Ownership Percentage, which amount is expected to be
Twenty-Five Million Dollars ($25,000,000), in form and substance satisfactory to the L/C Issuer, to enable the Company to obtain the Equity Contribution Letter of Credit. 

        "MSW Backup Liquidated Damages Letter of Credit" means the letter of credit that was placed in escrow by MSW in an amount equal to Twelve
Million Five Hundred Thousand Dollars ($12,500,000). A copy of the MSW Backup Liquidated Damages Letter of Credit is attached hereto as  Exhibit C-3. 

        "MSW Energy Finance" means MSW Energy Finance Co., Inc. 

        "MSW Liquidated Damages Letter of Credit" means the letter of credit that was provided to Duke by MSW in an amount equal to Twelve Million
Five Hundred Thousand Dollars ($12,500,000). A copy of the MSW Liquidated Damages Letter of Credit is attached hereto as Exhibit B-3. 

        "MSW Prepaid Note Interest Amount" means Two Million Two Hundred Forty-Three Thousand Fifty-Five Dollars and 55/100 Cents
($2,243,055.55). 

        "MSW Purchase Price Adjustment Amount" means one-half (1/2) of the Purchase Price Adjustment Amount, provided
that if the Purchase Price Adjustment Amount exceeds an amount equal to ten million dollars ($10,000,000), the MSW Purchase Price Adjustment Amount shall equal five million dollars
($5,000,000) plus the additional amount in excess of the amount equal to ten million dollars ($10,000,000) that is necessary to pay the
Adjustment Amount to Duke in accordance with the EPA, and the contribution of such additional amount shall not affect the equal voting and management rights of Highstar and MSW in the Company;
provided further that if the contribution of the MSW Purchase Price Adjustment Amount would cause Highstar's ownership percentage to be less than forty and one-tenth percent (40.1%), a
portion of such MSW Purchase Price Adjustment Amount shall be made as a Capital Contribution Loan in accordance with Section 5.2 of the Amended and Restated LLC Agreement to the extent
necessary to maintain Highstar's ownership percentage at forty and one-tenth percent (40.1%) unless Highstar is the Non-Delivering Sponsor. 

        "MSW Remaining Additional Capital Contribution Amount" means Seventy-Two Million Seven Hundred Fifty-Six Thousand
Nine Hundred Forty-Four Dollars and 45/100 Cents ($72,756,944.45). 

        "Non-Delivering Sponsor Cessation" means the cessation of a Sponsor as a Member of the Company pursuant to Section 2.2
hereof. 

        "Note Closing Date" means June 25, 2003. 

4

 

        "Note Documents" means the documents to be executed and delivered under and in accordance with the terms of the Purchase Agreement. 

        "Note Holder Escrow Agent" means Wells Fargo Bank Minnesota, N.A., a national banking association, in its capacity as the "Escrow Agent"
under the Note Holder Escrow Agreement. 

        "Note Holder Escrow Agreement" means the "Escrow Agreement" under and as defined in the Purchase Agreement. 

        "Ownership Percentage" means, prior to the Additional Capital Contribution Date, a Member's percentage interest in the profits, losses and
distributable cash or distributions of the Company, and on and after the Additional Capital Contribution Date, such term as defined in the Amended and Restated LLC Agreement. 

        "Person" means any natural person, corporation, partnership, limited liability company, firm, association, trust, government, governmental
agency or any other entity, whether acting in an individual, fiduciary or other capacity. 

        "PUHCA" means the Public Utility Holding Company Act of 1935, as amended. 

        "Purchase Agreement" means that certain Purchase Agreement, dated as of June 11, 2003, by and among the Company, MSW Energy
Finance, and CSFB, pursuant to which the Company and MSW Energy Finance have agreed to sell and CSFB has agreed to purchase the Senior Secured Notes. 

        "Purchase Price Adjustment Amount" means the amount of the Adjustment Amount (to the extent such amount is owing from the Company to Duke
under and in accordance with the terms of the EPA) that exceeds the funds that are available to the Company to pay such Adjustment Amount to Duke. 

        "Second Joint Written Direction" shall mean a written direction, in substantially the form of  Exhibit E-2 attached hereto, executed by each of the
Sponsors and directing the Escrow Agent to (i) disburse the Highstar
Remaining Additional Capital Contribution Amount and the MSW Remaining Additional Capital Contribution Amount in an amount sufficient to consummate the Duke Acquisition, (ii) deliver the MSW
Backup Equity Contribution Letter of Credit to the L/C Issuer, and (iii) deliver the Highstar Backup Equity Contribution Security to the L/C Issuer. 

        "Senior Secured Notes" means the Two Hundred Million Dollar ($200,000,000) original principal amount 81/2% Senior Secured
Notes Due 2010 to be issued by the Company and MSW Energy Finance. 

        "Special Mandatory Redemption" has the meaning set forth in the Purchase Agreement. 

5

QuickLinks

TABLE OF CONTENTS

AMENDED AND RESTATED CAPITAL CONTRIBUTION AGREEMENT

ARTICLE 1 Sponsor Actions

ARTICLE 2 Closing Actions; Post-Closing Actions

ARTICLE 3 Representations and Warranties of Highstar

ARTICLE 4 Representations and Warranties of MSW

ARTICLE 5 Sponsor Covenants

ARTICLE 6 Miscellaneous Provisions

SCHEDULE A RULES OF USAGE AND DEFINITIONS

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