Document:

Exhibit 10.1

 

EXECUTION COPY

 

 

 

 

PURCHASE AND SALE AGREEMENT

 

 

by and between

 

 

ORION POWER HOLDINGS, INC.,

 

as Seller,

 

RELIANT ENERGY, INC.

 

as Guarantor,

 

and

 

ASTORIA GENERATING COMPANY ACQUISITIONS,
L.L.C.

 

as Buyer

 

 

dated as of September 30, 2005

 

 

 

 

TABLE OF CONTENTS

 

	
  ARTICLE I

  DEFINITIONS AND CONSTRUCTION

  	
   

  
	
   

  	
   

  
	
  Section 1.01

  	
  Definitions and Construction

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE II

  PURCHASE AND SALE AND CLOSING

  	
   

  
	
   

  	
   

  
	
  Section 2.01

  	
  Purchase and Sale

  	
   

  
	
  Section 2.02

  	
  Purchase Price

  	
   

  
	
  Section 2.03

  	
  Closing

  	
   

  
	
  Section 2.04

  	
  Closing Deliveries by Seller to Buyer

  	
   

  
	
  Section 2.05

  	
  Closing Deliveries by Buyer

  	
   

  
	
  Section 2.06

  	
  Post-Closing Adjustment

  	
   

  
	
  Section 2.07

  	
  Allocation of Purchase Price

  	
   

  
	
  Section 2.08

  	
  Calculation of Estimated Purchase Price

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE III

  REPRESENTATIONS AND WARRANTIES REGARDING THE SELLER ENTITIES

  	
   

  
	
   

  	
   

  
	
  Section 3.01

  	
  Organization and Qualification

  	
   

  
	
  Section 3.02

  	
  Authority

  	
   

  
	
  Section 3.03

  	
  No Conflicts; Consents and Approvals

  	
   

  
	
  Section 3.04

  	
  Capitalization

  	
   

  
	
  Section 3.05

  	
  Legal Proceedings

  	
   

  
	
  Section 3.06

  	
  Brokers

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV

  REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANIES

  	
   

  
	
   

  	
   

  
	
  Section 4.01

  	
  Organization and Qualification

  	
   

  
	
  Section 4.02

  	
  No Conflicts; Consents and Approvals

  	
   

  
	
  Section 4.03

  	
  Capitalization; Subsidiaries

  	
   

  
	
  Section 4.04

  	
  Financial Statements

  	
   

  
	
  Section 4.05

  	
  Absence of Undisclosed Liabilities; Certain
  Developments

  	
   

  
	
  Section 4.06

  	
  Litigation

  	
   

  
	
  Section 4.07

  	
  Compliance with Laws

  	
   

  
	
  Section 4.08

  	
  Contracts

  	
   

  
	
  Section 4.09

  	
  Taxes

  	
   

  
	
  Section 4.10

  	
  Employee Benefit Plans; ERISA

  	
   

  
	
  Section 4.11

  	
  Labor and Employment

  	
   

  
	
  Section 4.12

  	
  Environmental Matters

  	
   

  
	
  Section 4.13

  	
  Intellectual Property

  	
   

  
	
  Section 4.14

  	
  PUHCA; Regulation as Utility

  	
   

  
	
  Section 4.15

  	
  Real Property

  	
   

  
	
  Section 4.16

  	
  Insurance

  	
   

  

 

i

 

	
  Section 4.17

  	
  Affiliate Transactions

  	
   

  
	
  Section 4.18

  	
  Permits

  	
   

  
	
  Section 4.19

  	
  Sufficiency of Assets

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE V

  REPRESENTATIONS AND WARRANTIES OF BUYER

  	
   

  
	
   

  	
   

  
	
  Section 5.01

  	
  Organization and Qualification

  	
   

  
	
  Section 5.02

  	
  Authority

  	
   

  
	
  Section 5.03

  	
  No Conflicts; Consents and Approvals

  	
   

  
	
  Section 5.04

  	
  Legal Proceedings

  	
   

  
	
  Section 5.05

  	
  Compliance with Laws and Orders

  	
   

  
	
  Section 5.06

  	
  Brokers

  	
   

  
	
  Section 5.07

  	
  Acquisition as Investment

  	
   

  
	
  Section 5.08

  	
  Financial Resources

  	
   

  
	
  Section 5.09

  	
  No Knowledge of Seller’s Breach

  	
   

  
	
  Section 5.10

  	
  Opportunity for Independent Investigation

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  VI

  COVENANTS

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 6.01

  	
  Access of Buyer

  	
   

  
	
  Section 6.02

  	
  Conduct of Business Pending the Closing

  	
   

  
	
  Section 6.03

  	
  Resignation of Members, Managers, Officers
  and Directors

  	
   

  
	
  Section 6.04

  	
  Use of Certain Names

  	
   

  
	
  Section 6.05

  	
  Support Obligations

  	
   

  
	
  Section 6.06

  	
  Excluded Assets

  	
   

  
	
  Section 6.07

  	
  Termination of Certain Services, Contracts,
  Receivables and Payables

  	
   

  
	
  Section 6.08

  	
  Payment of Indebtedness

  	
   

  
	
  Section 6.09

  	
  Insurance

  	
   

  
	
  Section 6.10

  	
  Tax Matters

  	
   

  
	
  Section 6.11

  	
  Certain Restrictions

  	
   

  
	
  Section 6.12

  	
  No Solicitation

  	
   

  
	
  Section 6.13

  	
  Confidentiality

  	
   

  
	
  Section 6.14

  	
  Employee and Benefit Matters

  	
   

  
	
  Section 6.15

  	
  Public Announcements

  	
   

  
	
  Section 6.16

  	
  Expenses and Fees

  	
   

  
	
  Section 6.17

  	
  Agreement to Cooperate

  	
   

  
	
  Section 6.18

  	
  Directors’ and Officers’ Indemnification

  	
   

  
	
  Section 6.19

  	
  Further Assurances

  	
   

  
	
  Section 6.20

  	
  Non-Solicitation

  	
   

  
	
  Section 6.21

  	
  Hedging and Energy Management Services

  	
   

  
	
  Section 6.22

  	
  Subsequent Financials Statements

  	
   

  
	
  Section 6.23

  	
  Funding Commitments

  	
   

  
	
  Section 6.24

  	
  Title Defects

  	
   

  
	
  Section 6.25

  	
  Work-Around

  	
   

  

 

ii

 

	
  ARTICLE VII

  CONDITIONS TO THE CLOSING

  	
   

  
	
   

  	
   

  
	
  Section 7.01

  	
  Conditions to the Obligations of Each Party

  	
   

  
	
  Section 7.02

  	
  Conditions to the Obligations of Buyer

  	
   

  
	
  Section 7.03

  	
  Conditions to the Obligations of Seller

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  TERMINATION

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 8.01

  	
  Termination

  	
   

  
	
  Section 8.02

  	
  Effect of Termination

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX

  INDEMNIFICATION

  	
   

  
	
   

  	
   

  
	
  Section 9.01

  	
  Survival

  	
   

  
	
  Section 9.02

  	
  Indemnification

  	
   

  
	
  Section 9.03

  	
  Waiver of Other Representations

  	
   

  
	
  Section 9.04

  	
  Waiver of Remedies; Certain Limitations

  	
   

  
	
  Section 9.05

  	
  Procedures for Indemnification

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE X

  MISCELLANEOUS

  	
   

  
	
   

  	
   

  
	
  Section 10.01

  	
  Notices

  	
   

  
	
  Section 10.02

  	
  Headings

  	
   

  
	
  Section 10.03

  	
  Assignment

  	
   

  
	
  Section 10.04

  	
  Governing Law

  	
   

  
	
  Section 10.05

  	
  Arbitration

  	
   

  
	
  Section 10.06

  	
  Counterparts

  	
   

  
	
  Section 10.07

  	
  Amendments; Extensions

  	
   

  
	
  Section 10.08

  	
  Entire Agreement

  	
   

  
	
  Section 10.09

  	
  Severability

  	
   

  
	
  Section 10.10

  	
  Guarantor Guaranty

  	
   

  

 

iii

 

	
  APPENDICES

  
	
   

  	
   

  	
   

  
	
  Appendix I

  	
  –

  	
  Construction; Definitions

  
	
   

  	
   

  	
   

  
	
  EXHIBITS

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit A

  	
  –

  	
  Forms of
  Assignment of Partnership Interest

  
	
  Exhibit B

  	
  –

  	
  Form of
  Assignment and Assumption Agreement

  
	
  Exhibit C

  	
  -

  	
  Form of Confidentiality
  Agreement Assignment

  
	
   

  	
   

  	
   

  
	
  SCHEDULES

  	
   

  
	
   

  	
   

  	
   

  
	 
	
  Schedule 2.02(b)

  	
   

  	
  Target Working Capital Amount

  	 

	 
	
  Schedule 2.04(c)

  	
   

  	
  Assigned Contracts

  	 

	 
	
  Schedule 3.03(b)

  	
   

  	
  Seller Consents

  	 

	 
	
  Schedule 3.03(c)

  	
   

  	
  Seller Governmental Approvals

  	 

	 
	
  Schedule 3.04

  	
   

  	
  Capitalization

  	 

	 
	
  Schedule 4.02(b)

  	
   

  	
  Company Consents

  	 

	 
	
  Schedule 4.03

  	
   

  	
  Capitalization

  	 

	 
	
  Schedule 4.04(a)

  	
   

  	
  OPNY LP Financial Statements

  	 

	 
	
  Schedule 4.04(b)

  	
   

  	
  Companies Financial Statements

  	 

	 
	
  Schedule 4.04(c)

  	
   

  	
  June 30 Balance Sheets

  	 

	 
	
  Schedule 4.05(a)

  	
   

  	
  Certain Company Liabilities

  	 

	 
	
  Schedule 4.05(b)

  	
   

  	
  Certain Developments

  	 

	 
	
  Schedule 4.06

  	
   

  	
  Litigation

  	 

	 
	
  Schedule 4.07

  	
   

  	
  Compliance with Laws

  	 

	 
	
  Schedule 4.08

  	
   

  	
  Material Contracts

  	 

	 
	
  Schedule 4.08(c)

  	
   

  	
  ConEd Indemnity Claims

  	 

	 
	
  Schedule 4.09

  	
   

  	
  Taxes

  	 

	 
	
  Schedule 4.10(a)

  	
   

  	
  Employee Benefit Plans

  	 

	 
	
  Schedule 4.10(c)

  	
   

  	
  Employee Benefit Matters

  	 

	 
	
  Schedule 4.10(d)

  	
   

  	
  Company Plan Trigger Events

  	 

	 
	
  Schedule 4.12

  	
   

  	
  Environmental Matters

  	 

	 
	
  Schedule 4.13(a)

  	
   

  	
  Intellectual Property

  	 

	 
	
  Schedule 4.16

  	
   

  	
  Insurance Policies

  	 

	 
	
  Schedule 4.17

  	
   

  	
  Affiliate Transactions

  	 

	 
	
  Schedule 4.18

  	
   

  	
  Permits

  	 

	 
	
  Schedule 4.19(a)

  	
   

  	
  Sufficiency of Assets

  	 

	 
	
  Schedule 4.19(b)

  	
   

  	
  Emissions Allowances

  	 

	 
	
  Schedule 5.03(c)

  	
   

  	
  Buyer Governmental Approvals

  	 

	 
	
  Schedule 6.02

  	
   

  	
  Certain Permitted Actions

  	 

	 
	
  Schedule 6.02(a)(iii)

  	
   

  	
  Certain Interim Period Expenditures

  	 

	 
	
  Schedule 6.02(b)(iv)

  	
   

  	
  Permitted Capital Expenditures

  	 

	 
	
  Schedule 6.05(a)

  	
   

  	
  Support Obligations

  	 

	 
	
  Schedule 6.06

  	
   

  	
  Excluded Assets

  	 

	 
	
  Schedule 6.07

  	
   

  	
  Terminated Contracts

  	 

	 
	
  Schedule 6.09

  	
   

  	
  Scheduled Insurance Policies

  	 

							

 

iv

 

	
  Schedule 6.14(c)

  	
   

  	
  Affiliate Employees

  
	
  Schedule 6.14(i)

  	
   

  	
  Certain Retirees

  
	
  Schedule 7.01(c)

  	
   

  	
  Third Party Consents

  
	
  Schedule I-1

  	
   

  	
  Seller’s Knowledge Persons

  
	
  Schedule I-2

  	
   

  	
  Buyer’s Knowledge Persons

  
	
  Schedule I-3

  	
   

  	
  Spare Parts

  

 

v

 

PURCHASE AND SALE AGREEMENT

 

This Purchase
and Sale Agreement (this “Agreement”)
dated as of September 30, 2005 (the “Execution Date”) is made and entered into by
and between Orion Power Holdings, Inc., a Delaware corporation (“Seller”), Reliant
Energy, Inc., a Delaware corporation (“Guarantor”), and Astoria Generating Company
Acquisitions, L.L.C., a Delaware limited liability company (“Buyer”).

 

RECITALS

 

Seller desires
to sell to Buyer, and Buyer desires to purchase from Seller, 100% of the equity
interests in Astoria Generating Company, L.P., a Delaware limited partnership
(“Astoria LP”),
and Orion Power Operating Services Astoria, Inc., a Delaware corporation (“OPOS”), which are
indirect subsidiaries of Seller and own and operate three power plants in New
York City, on the terms and subject to the conditions set forth herein.

 

Astoria LP is
owned by Orion Power New York, L.P., a Delaware limited partnership (“OPNY LP”), and Orion
Power New York GP, Inc., a Delaware corporation (“OPNY GP”).  OPNY LP is owned by Orion Power New York LP,
LLC, a Delaware limited liability company (“OPNY LLC”), and OPNY GP.  OPNY LLC and OPNY GP are owned by Orion Power
Capital, LLC, a Delaware limited liability company (“Orion Power Capital”).  Orion Power Capital is owned by Seller.

 

OPOS is owned by
Orion Power Operating Services, Inc., a Delaware corporation (“OPOS Parent”).  OPOS Parent is owned by Seller.

 

STATEMENT OF AGREEMENT

 

Now, therefore,
in consideration of the premises and the mutual representations, warranties, covenants
and agreements in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the Parties agree as follows:

 

ARTICLE I

DEFINITIONS AND CONSTRUCTION

 

Section 1.01                                                        Definitions and Construction. 
Capitalized terms used in this Agreement and rules of construction to
apply to this Agreement are set forth in Appendix I.

 

ARTICLE II

PURCHASE AND SALE AND CLOSING

 

Section 2.01                                                        Purchase and Sale. 
On the terms and subject to the conditions set forth in this Agreement,
Buyer agrees to purchase from Seller, and Seller agrees to sell or cause to be
sold to Buyer, the following equity interests (the “Company Interests”):  (i) 100% of the general and limited
partnership interests in Astoria LP, and (ii) 100% of the capital stock of OPOS
(Astoria LP and OPOS, collectively, the “Companies”).

 

1

 

Section 2.02                                                        Purchase Price.

 

(a)                                  The purchase price to be paid by
Buyer to Seller for the Company Interests is $975,000,000 (the “Base Purchase Price”),
as adjusted pursuant to Section 2.02(b).

 

(b)                                 If the Working Capital Adjustment
Amount is negative, then the Base Purchase Price shall be decreased by the
absolute value of the Working Capital Adjustment Amount.  If the Working Capital Adjustment Amount is
positive, then the Base Purchase Price shall be increased by the Working
Capital Adjustment Amount.

 

(c)                                  If the Capital Expenditures
actually paid by the Companies in accordance with Section 6.02(a)(iii) during
the Interim Period is less than $15,000,000, the Base Purchase Price shall be
decreased by an amount equal to 50% of such deficiency.

 

Section 2.03                                                        Closing. 
Subject to satisfaction or waiver of the conditions to the Closing set
forth herein, unless the Parties mutually agree otherwise in writing, the
closing of the transactions contemplated by this Agreement (the “Closing”) shall take
place at the offices of Vinson & Elkins L.L.P., 1001 Fannin, Houston, Texas
77002 at 10:00 A.M. local time, on the seventh Business Day after the
conditions to the Closing set forth in Article VII (other than actions to
be taken or items to be delivered at the Closing) have been satisfied or waived
by the applicable Party or Parties if such satisfaction or waiver occurs prior
to March 1, 2006, or on the fifth Business Day after the conditions to the
Closing set forth in Article VII (other than actions to be taken or items
to be delivered at the Closing) have been satisfied or waived by the applicable
Party or Parties if such satisfaction or waiver occurs on or after March 1,
2006; provided, however, that the Closing shall not take place prior to January
31, 2006.  All actions listed in Section
2.04 or Section 2.05 that occur on the Closing Date shall be deemed to occur
simultaneously at the Closing.  Subject
to the provisions of Article VIII, failure to consummate the purchase and sale
provided for in this Agreement on the date determined pursuant to this Section
2.03 will not result in the termination of this Agreement and will not relieve
any Party of any obligation under this Agreement.

 

Section 2.04                                                        Closing Deliveries by Seller to
Buyer.  At the Closing, Seller shall deliver, or
shall cause to be delivered, to Buyer the following:

 

(a)                                  Assignments of Partnership
Interests of Astoria LP in the forms attached hereto as Exhibit A,
providing for the assignment of all partnership interests of Astoria LP;

 

(b)                                 stock certificates for all shares
of common stock of OPOS, with valid stock powers executed in blank;

 

(c)                                  subject to receipt of the
applicable Seller Consents, an executed counterpart of the Assignment and
Assumption Agreement substantially in the form attached as Exhibit B
(the “Assignment and
Assumption Agreement”), which shall effect the assignment to
Buyer or the Companies of Contracts set forth on Schedule 2.04(c) (the “Assigned Contracts”),
as applicable, and the assumption by Buyer or the Companies of all obligations
arising under such Assigned Contracts, together with the applicable Seller
Consents;

 

2

 

(d)                                 an executed counterpart of the
Transition Services Agreement, in the form reasonably satisfactory to the
Parties (the “Transition
Services Agreement”).  The
Parties agree that Seller will provide the transition services reasonably
requested by Buyer; provided that, (i) such services shall not extend beyond
six months after the Closing Date, (ii) such services shall be provided at
Seller’s cost which shall be reimbursed by Buyer, (iii) Seller shall not be
required to perform any services that it cannot perform under applicable Law,
(iv) Seller shall be indemnified by Buyer against any and all risks associated
with providing such services (other than losses attributable to Seller’s gross
negligence or willful misconduct), and (v) Seller shall indemnify Buyer against
any and all losses suffered by Buyer attributable to Seller’s gross negligence
or willful misconduct;

 

(e)                                  the certificate described in
Section 7.02(g);

 

(f)                                    a duly executed affidavit of
non-foreign status by the Guarantor and the Seller described in Section 1445 of
the Code and the regulations thereunder;

 

(g)                                 to the extent assignable without
consent of the counterparty, an executed assignment by Guarantor, on behalf of
itself and its subsidiaries, of its rights as they relate to the Companies and
their business, under each of the confidentiality agreements executed by or on
behalf of the Guarantor and/or its subsidiaries in connection with the proposed
sale of the Companies, in the form attached as Exhibit C; and

 

(h)                                 subject to obtaining approval
from the applicable insurers, certificates of insurance for the Scheduled
Insurance Policies showing that Buyer and the Companies are the named insureds
and Seller is an additional insured under the Scheduled Insurance Policies,
together with consents of the applicable insurers consenting to designating
Buyer and the Companies as named insureds and Seller as an additional insured.

 

Section 2.05                                                        Closing Deliveries by Buyer. 
At the Closing, Buyer shall deliver the following:

 

(a)                                  to Seller, a wire transfer of
immediately available funds (to such account as Seller shall have notified
Buyer of at least two Business Days prior to the Closing Date) in an amount
equal to the Estimated Purchase Price as determined in accordance with Section
2.08;

 

(b)                                 to Seller, an executed
counterpart of the Assignment and Assumption Agreement;

 

(c)                                  to Seller, the certificate
described in Section 7.03(c); and

 

(d)                                 to the Escrow Agent, the Escrow
Amount, if any.

 

Section 2.06                                                        Post-Closing Adjustment.

 

(a)                                  As soon as practicable after the
Closing, but no later than 90 days after the Closing Date, Seller shall
determine the actual adjustment to the Base Purchase Price pursuant to Section
2.02(b) and Section 2.02(c) as of the Closing Date.  Seller and Buyer shall cooperate and provide
each other access to their respective books and records (and those of the
Companies) as are reasonably requested in connection with the matters addressed
in this Section 2.06. Seller

 

3

 

shall provide Buyer with
written notice of such determinations within such 90 days, along with
reasonable supporting information (the “Seller’s Post-Closing Estimate”).

 

(b)                                 If Buyer objects to any
determinations set forth in Seller’s Post-Closing Estimate, then it shall
provide Seller written notice thereof within 20 Business Days after receiving
Seller’s Post-Closing Estimate.  If the
Parties are unable to agree on the disputed amounts as of the Closing Date
within 150 days after the Closing Date or such longer time as may be agreed by
the Parties, the Parties shall refer such dispute to an internationally
recognized accounting firm that is not the principal accounting firm of either
Buyer or Seller, mutually acceptable to Buyer and Seller, which firm shall make
a final and binding determination as to all such matters in dispute (and only
such matters) on a timely basis and promptly shall notify the Parties in
writing of its resolution.  Such firm
shall not have the power to modify or amend any term or provision of this
Agreement. Each Party shall bear and pay one-half of the fees and other costs
charged by such accounting firm.

 

(c)                                  If the Base Purchase Price
adjusted using such actual values (as agreed or determined by the
above-referenced accounting firm) (the “Final Purchase Price”) is greater than the
Estimated Purchase Price, then Buyer shall, or shall cause one of the Companies
to, pay Seller within 10 Business Days after such actual values are agreed or
determined, by wire transfer of immediately available funds, the difference
between the Final Purchase Price and the Estimated Purchase Price plus interest
thereon at the Interest Rate from the Closing Date through and including the
date of such payment.  If the Final
Purchase Price is less than the Estimated Purchase Price, then Seller shall pay
Buyer within 10 Business Days after such actual values are agreed or
determined, by wire transfer of immediately available funds, the difference
between the Estimated Purchase Price and the Final Purchase Price plus interest
thereon at the Interest Rate from the Closing Date through and including the
date of such payment.  In each case, the
recipient Party shall designate the account to which such payment is to be made
at least two Business Days prior to the date such payment is due.

 

Section 2.07                                                        Allocation of Purchase Price. 
Buyer shall provide Seller an allocation of the Base Purchase Price
(plus any assumed liabilities that are treated as consideration for federal
income tax purposes) among the assets of Astoria LP and to the stock of OPOS,
in accordance with applicable Treasury Regulations within 30 days after the Closing Date (the “Base Purchase Price Allocation”).  Not later than 30 days after the
determination of the Final Purchase Price, Buyer shall notify Seller regarding
the allocation of any adjustments resulting from such determination, with such
adjustments to be made in a manner consistent with the Base Purchase Price
Allocation and in accordance with applicable Treasury Regulations (as adjusted,
the “Final Purchase
Price Allocation”). 
Seller must inform Buyer of any objections related to the Final Purchase
Price Allocation in writing within 10 days after receipt thereof.  Buyer and Seller shall work in good faith to
resolve any disagreements regarding the Final Purchase Price Allocation within
30 days after receipt of Seller’s written objections.  If the Parties fail to agree within such
30-day period upon the Final Purchase Price Allocation, such dispute shall be
resolved by an independent accounting firm mutually acceptable to Buyer and
Seller, and the decision of such independent accounting firm shall be final and
binding on the Parties.  The fees and
expenses of such accounting firm shall be borne equally by Seller and
Buyer.  Seller and Buyer shall each
prepare and timely file IRS Form 8594 “Asset Acquisition Statement Under
Section 1060” and any other statements or forms prescribed under federal,
state, local or foreign

 

4

 

Tax Law (including any
exhibits thereto) to report the Final Purchase Price Allocation.  The Parties agree that they shall not, and
shall not permit their Affiliates (including the Companies) to, take a position
on any Tax Return or for any Tax purpose that is inconsistent with the Final
Purchase Price Allocation; provided,
however, that neither Seller nor
Buyer shall be obligated to litigate any challenge to the Final Purchase Price
Allocation by any Governmental Authority. 
The Parties agree to provide each other promptly with any information
required to complete such Tax forms or statements as are required under
applicable law to report the Final Purchase Price Allocation.

 

Section 2.08                                                        Calculation of Estimated Purchase
Price.  Not less than 10 Business Days prior to the
Closing Date, the Seller shall deliver to Buyer its good faith calculation of
the Base Purchase Price, with estimated adjustments pursuant to Section 2.02(b)
and Section 2.02(c) (the “Preliminary
Purchase Price”) and shall deliver to Buyer a schedule showing
its calculation of the Preliminary Purchase Price (including the estimated
adjustments to the Base Purchase Price pursuant to Section 2.02(b) and Section
2.02(c)).  During the five (5) Business
Day period after delivery of Seller’s calculation of the Preliminary Purchase
Price, Seller shall provide Buyer and its Representatives with such information
and access to such personnel of the Seller Entities, the Guarantor and the
Companies as Buyer may reasonably request in order to calculate the Preliminary
Purchase Price.  If in good faith Buyer
disagrees with Seller’s calculation of the Preliminary Purchase Price, it shall
deliver to Seller a written notice of disagreement (a “Notice of Disagreement”)
and its good faith calculation, based on the information available to it, of
the Preliminary Purchase Price.  If Buyer
delivers a Notice of Disagreement on or prior to the fifth Business Day after
delivery of Seller’s calculation of the Preliminary Purchase Price, the Parties
shall negotiate in good faith during the three (3) Business Day period
following delivery of the Notice of Disagreement as to the calculation of the
Preliminary Purchase Price.  If the
Parties agree in writing to such calculation during such three Business Day
period, the “Estimated
Purchase Price” for purposes of this Agreement shall be the
Preliminary Purchase Price as agreed to by the Parties.  If the Parties do not agree in writing to
such calculation prior to the expiration of such three Business Day period, the
Closing shall nonetheless occur and the “Estimated Purchase Price” for purposes
of this Agreement shall be the average of Seller’s calculation of the
Preliminary Purchase Price and Buyer’s calculation of the Preliminary Purchase
Price.  In the event that Buyer does not
deliver a Notice of Disagreement prior to the expiration of the five Business
Day period referred to above, the “Estimated Purchase Price” for purposes of
this Agreement shall be Seller’s calculation of the Preliminary Purchase Price.  If the Estimated Purchase Price is the
average of Seller’s calculation of the Preliminary Purchase Price and Buyer’s
calculation of the Preliminary Purchase Price, at the Closing, Buyer shall
deposit with an escrow agent reasonably satisfactory to Buyer and Seller (the “Escrow Agent”) an
amount equal to the difference between the Seller’s calculation and such
average (the “Escrow
Amount”), and such amount shall be held and released in
accordance with the terms of the Escrow Agreement (the “Escrow Agreement”),
which will be in form and substance reasonably satisfactory to Buyer, Seller
and the Escrow Agent.  The Parties agree
that the Escrow Agreement shall contemplate that (a) in the event that
Estimated Purchase Price exceeds the Final Purchase Price, the parties shall
cause the Escrow Amount (together with interest thereon and without otherwise
limiting the obligations of Seller under Section 2.06) to be paid to the Buyer
and (b) in the event that the Final Purchase Price exceeds the Estimated
Purchase Price (the “Excess
Amount”), the parties shall cause the Escrow Amount (together
with interest thereon earned in accordance with the Escrow Agreement and in
partial satisfaction of

 

5

 

Buyer’s obligations under
Section 2.06 to the extent that the Excess Amount exceeds the Escrow Amount
(i.e., the Buyer shall also be responsible to pay the amount by which the
Excess Amount exceeds the Escrow Amount)) to be paid to Seller; provided
that in the case of clause (b), in the event that the Escrow Amount exceeds the
Excess Amount, a portion of the Escrow Amount (together with interest on such
portion earned in accordance with the Escrow Agreement) equal to the Excess
Amount shall be paid to Seller in full satisfaction of Buyer’s obligations
under Section 2.06 and the remaining portion of the Escrow Amount (together
with interest thereon earned in accordance with the Escrow Agreement) shall be
paid to Buyer.  Nothing in this Section
2.08 shall be deemed to prevent application of Section 2.06 with respect to the
post-Closing adjustment.

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES REGARDING THE SELLER ENTITIES

 

In order to
induce Buyer to enter into this Agreement and consummate the transactions
contemplated hereby, Seller hereby represents and warrants to Buyer as of each
of the Execution Date and the Closing Date that, except as set forth in
Seller’s Disclosure Schedule:

 

Section 3.01                                                        Organization and Qualification. 
Each of the Seller Entities (other than OPNY LP) is a corporation, duly
formed, validly existing and in good standing under the Laws of Delaware.  OPNY LP is a limited partnership, duly
formed, validly existing and in good standing under the Laws of Delaware.  Each of the Seller Entities is duly qualified
or licensed to do business in each other jurisdiction where the actions
required to be performed by it hereunder make such qualification or licensing
necessary, except in those jurisdictions where the failure to be so qualified
or licensed would not, in the aggregate, reasonably be expected to result in a
material adverse effect on Seller’s ability to perform its obligations
hereunder.

 

Section 3.02                                                        Authority. 
Seller has all requisite corporate power and authority to execute and
deliver this Agreement, to perform its obligations hereunder and to consummate
the transactions contemplated hereby. 
The execution and delivery by Seller of this Agreement, and the
performance by Seller of its obligations hereunder, have been duly and validly
authorized by all necessary corporate action. 
This Agreement has been duly and validly executed and delivered by
Seller and constitutes the legal, valid and binding obligation of Seller
enforceable against Seller in accordance with its terms, except as the same may
be limited by bankruptcy, insolvency, reorganization, arrangement, moratorium
or other similar Laws relating to or affecting the rights of creditors
generally, or by general equitable principles.

 

Section 3.03                                                        No Conflicts; Consents and
Approvals.  The execution and delivery by Seller of this
Agreement do not, and the performance by Seller of its obligations under this
Agreement will not:

 

(a)                                  conflict with or result in a
violation or breach of any of the terms, conditions or provisions of the
Charter Documents of any of the Seller Entities;

 

(b)                                 assuming all consents set forth
on Schedule 3.03(b) (collectively, the “Seller Consents”) have been obtained,
violate or result in a default (or give rise to any right of termination,
cancellation or acceleration) under any material Contract to which any Seller
Entity

 

6

 

is a party, except for any
such violations or defaults (or rights of termination, cancellation or
acceleration) which, individually or in the aggregate, would not reasonably be
expected to result in a material adverse effect on Seller’s ability to perform
its obligations hereunder; and

 

(c)                                  assuming all required filings,
approvals, consents, authorizations and notices set forth on Schedule
3.03(c) (collectively, the “Seller Governmental Approvals”) have been made, obtained
or given, (i) conflict with, violate or breach any material term or provision
of any Law or writ, judgment, order or decree applicable to the Seller Entities
or (ii) require the material consent or approval of any Governmental Authority
under any applicable Law.

 

Section 3.04                                                        Capitalization. 
Seller indirectly owns 100% of the Company Interests.  The capitalization and ownership of Astoria
LP and OPOS are set forth on Schedule 3.04.  Except as set forth on Schedule 3.04,
each owner of the Company Interests as indicated on Schedule 3.04 owns
such Company Interests directly and free and clear of all Liens, restrictions
on transfer or other encumbrances other than those arising pursuant to this
Agreement or applicable securities laws and, in the case of Astoria LP, its
limited partnership agreement (all of which restrictions, in the case of the
limited partnership agreement of Astoria LP, have been irrevocably satisfied or
waived on or prior to the Execution Date to the extent such restrictions
restrict the transactions contemplated by this Agreement).  Without limiting the generality of the
foregoing, none of the Company Interests are subject to any voting trust,
shareholder agreement, voting agreement or similar agreement.

 

Section 3.05                                                        Legal Proceedings. 
None of the Seller Entities has been served with written notice of any
Claim, and to Seller’s Knowledge none is threatened against any of the Seller
Entities, which seeks a writ, judgment, order or decree restraining, enjoining
or otherwise prohibiting or making illegal any of the transactions contemplated
by this Agreement.

 

Section 3.06                                                        Brokers. 
None of the Seller Entities has any liability or obligation to pay fees
or commissions to any broker, finder or agent with respect to the transactions
contemplated by this Agreement for which Buyer or the Companies could become
liable or obligated.

 

ARTICLE IV

REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANIES

 

In order to
induce Buyer to enter into this Agreement and consummate the transactions
contemplated hereby, Seller hereby represents and warrants to Buyer as of each
of the Execution Date and the Closing Date that, except as set forth in
Seller’s Disclosure Schedule:

 

Section 4.01                                                        Organization and Qualification. 
Astoria LP is a limited partnership duly formed and validly existing
under the laws of the State of Delaware, and OPOS is a corporation duly
organized and validly existing under the laws of the State of Delaware.  Each Company has the requisite partnership,
corporate or company power and authority to own, lease and operate its assets
and properties and to carry on its business as it is now being conducted or as
contemplated herein.  Each Company is
qualified to transact business and, where applicable, is in good standing in
each jurisdiction in which the Real Property or the nature of the business
conducted by it makes such qualification necessary, except as would not, in the
aggregate,

 

7

 

reasonably be expected to
have a Material Adverse Effect.  True,
accurate and complete copies of each Company’s Charter Documents, in each case
as amended and in effect on the Execution Date, have previously been delivered
or made available to Buyer.

 

Section 4.02                                                        No Conflicts; Consents and
Approvals.  The execution and delivery by Seller of this
Agreement do not, and the performance by Seller of its obligations under this
Agreement and the consummation of the transactions contemplated hereby will
not:

 

(a)                                  conflict with or result in a
violation or breach of any of the terms, conditions or provisions of the
Charter Documents of either Company;

 

(b)                                 assuming the consents set forth
on Schedule 4.02(b) (the “Company Consents”) have been obtained, be in
violation of or result in a default (or give rise to any notice requirement or
right of termination, cancellation or acceleration) under any Material
Contract; and

 

(c)                                  assuming all the Seller
Governmental Approvals have been made, obtained or given, (i) conflict with or
result in a violation or breach of any material term or provision of any Law or
writ, judgment, order or decree applicable to either Company or any of their
Purchased Assets or (ii) require the material consent or approval of any
Governmental Authority under any applicable Law.

 

Section 4.03                                                        Capitalization; Subsidiaries. 
Except as disclosed on Schedule 4.03, neither Company is a party
to any written or oral agreement, and neither Company has granted or issued, or
agreed to grant or issue, to any Person any option or any right or privilege capable
of becoming an agreement or option, for the purchase, subscription, allotment
or issue of any unissued interests, units or other securities (including
convertible securities, warrants or convertible obligations of any nature) of
either Company.  Neither of the Companies
has subsidiaries or owns equity interests in any Person.

 

Section 4.04                                                        Financial Statements.

 

(a)                                  Attached as Schedule 4.04(a)
are true, correct and complete copies of the following:  the audited consolidated balance sheets at
December 31, 2003 of OPNY LP and its subsidiaries, the unaudited consolidated
balance sheet at December 31, 2004 of OPNY LP and its subsidiaries, the audited
consolidated statements of operations, partners’ capital and comprehensive
income (loss) and cash flows for OPNY LP and its subsidiaries for the year
ending December 31, 2003, and the unaudited consolidated statements of
operations and comprehensive income (loss) for OPNY LP and its subsidiaries for
the year ending December 31, 2004 and the related notes and supplemental
information.  All such financial
statements set forth on Schedule 4.04(a) for the year ending December
31, 2003 fairly present, in all material respects and in accordance with GAAP,
the consolidated financial position, the results of operations and cash flows,
as the case may be, of OPNY LP and its subsidiaries, at the dates and for the
periods indicated.  All such financial
statements set forth on Schedule 4.04(a) for the year ending December
31, 2004 fairly present, in all material respects and in accordance with GAAP,
the consolidated financial position, the results of operations and cash flows,
as the case may be, of OPNY LP and its subsidiaries, at the dates and for the
periods indicated, except for the allocation of corporate support and general
and administrative expenses and the allocation of

 

8

 

goodwill and its related
accounting in accordance with SFAS No. 142, “Goodwill and Other Intangible
Assets,” and except for the absence of footnote disclosure.

 

(b)                                 Attached as Schedule 4.04(b)
are true, correct and complete copies of the following:  the unaudited consolidated balance sheet of
the Companies at December 31, 2004, December 31, 2003 and December 31, 2002,
the unaudited consolidated statements of operations and comprehensive income
(loss) for the Companies for the years ending December 31, 2004, December 31,
2003 and December 31, 2002.  All such
financial statements set forth on Schedule 4.04(b) fairly present, in
all material respects and in accordance with GAAP, the consolidated financial
position and the results of operations, as the case may be, of the Companies,
at the dates and for the periods indicated, except for the allocation of
corporate support and general and administrative expenses and the allocation of
goodwill and its related accounting in accordance with SFAS No. 142, “Goodwill
and Other Intangible Assets,” and except for the absence of footnote
disclosure.

 

(c)                                  Attached as Schedule 4.04(c)
are copies of the following for the Companies: 
the unaudited balance sheet at June 30, 2005 (collectively, the “June 30 Balance Sheets”),
the unaudited balance sheet at June 30, 2004 and the unaudited statements of
operations for the periods January 1, 2005 through June 30, 2005 and January 1,
2004 through June 30, 2004.  All such
financial statements set forth on Schedule 4.04(c) fairly present, in
all material respects and in accordance with GAAP, the financial position and
the results of operations, as the case may be, of the respective Companies, at
the dates and for the periods indicated, except for the allocation of corporate
support and general and administrative expenses and the allocation of goodwill
and its related accounting in accordance with SFAS No. 142, “Goodwill and Other
Intangible Assets,” and except for the absence of footnote disclosure.

 

Section 4.05                                                        Absence of Undisclosed
Liabilities; Certain Developments.

 

(a)                                  Except as recorded in the June 30
Balance Sheets or as disclosed in Schedule 4.05(a), except for
liabilities incurred in the ordinary course of business since June 30, 2005
that have been paid, will be paid prior to the Closing Date or otherwise
included in the computation of Closing Date Working Capital Amount and except
as will be repaid or extinguished on or prior to the Closing Date pursuant to
Section 6.08, the Companies do not have liabilities that would be required to
be recorded on a balance sheet (or footnotes thereto) of the Companies prepared
in accordance with GAAP, other than post-Closing performance obligations under
the Material Contracts and liabilities incurred after the date of this
Agreement with the consent of Buyer.

 

(b)                                 Since June 30, 2005, except as
disclosed in Schedule 4.05(b), there has not occurred (i) any
circumstance, development or event or series of such occurrences that, in the
aggregate, has had or would reasonably be expected to have a Material Adverse
Effect; (ii) any loss or interference with the operation of the Facilities from
fire, explosion, flood or other calamity, whether or not covered by insurance,
or from any labor dispute or action, order or decree of any Governmental
Authority that, in the aggregate, has had or would reasonably be expected to
have a Material Adverse Effect; or (iii) any material change by either Company
in financial accounting principles, practices or methods, except as required by
GAAP or by a Change of Law.

 

9

 

Section 4.06                                                        Litigation. 
Except as disclosed on Schedule 4.06, there is no material
litigation, arbitration or other dispute resolution pending, or, to Seller’s
Knowledge, threatened, against either Company or the Purchased Assets before
(or in the case of threatened material litigation that could come before) any
Governmental Authority or any arbitrator, except for matters of general
applicability relating to the electric industry generally, or specifically to
participants in New York City electric markets, pending before FERC.  Except as disclosed on Schedule 4.06,
neither Company nor any of the Purchased Assets is subject to any judgment,
decree or injunction of any Governmental Authority or any arbitrator that
prohibits the consummation of the transactions contemplated by this Agreement
or that is otherwise binding on the Companies, their business or Facilities
from and after the Closing, other than matters of general applicability or
judgments, decrees or injunctions of Governmental Authorities which would not
reasonably be expected to have, a Material Adverse Effect.  Except as disclosed on Schedule 4.06,
neither Company nor any of the Purchased Assets is subject to any rule or order
of any Governmental Authority or any arbitrator that prohibits the consummation
of the transactions contemplated by this Agreement.

 

Section 4.07                                                        Compliance with Laws. 
Except as disclosed on Schedule 4.07, each Company and the Owned
Real Property are and, since February 19, 2002, have at all times been in
compliance with applicable Law and no Non-Company Affiliate nor either of the
Companies has been given written notice of any violation of any Law, except for
non-compliance or violations that would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.  Except as disclosed on Schedule 4.07,
to Seller’s Knowledge, no investigation or review relating to either Company or
the Owned Real Property by any Governmental Authority is pending or threatened.

 

Section 4.08                                                        Contracts.

 

(a)                                  Excluding the Terminated
Contracts and any Benefit Plans, Schedule 4.08 sets forth a list as
of the date of this Agreement of the following Contracts to which either
Company is a party, by which the Purchased Assets may be bound (collectively,
the “Material Contracts”):

 

(i)                                                             Contracts for the future
purchase, exchange or sale of electric power or ancillary services or fuel;

 

(ii)                                                          Contracts for the future
transmission of electric power or fuel or for the storage of fuel;

 

(iii)                                                       interconnection and/or facilities
joint use Contracts;

 

(iv)                                                      other than Contracts of the
nature addressed by Section 4.08(a)(i) - (ii), Contracts (A) for the sale of
any asset of a Company or (B) that grant a right or option to purchase any
asset of a Company, other than in each case Contracts entered into in the
ordinary course of business consistent with past practices relating to assets
with a value of less than $500,000 individually or $2,000,000 in the aggregate;

 

(v)                                                         other than Contracts of the
nature addressed by Section 4.08(a)(i) - (ii), Contracts for the future
provision of goods or services requiring payments in excess of $1,000,000 for each individual Contract;

 

10

 

(vi)                                                      Contracts under which a Company
has created, incurred, assumed or guaranteed any outstanding indebtedness for
borrowed money, any capitalized lease obligation or any other Indebtedness, or
under which such Company has imposed a security interest or Company Lien on any
of its assets, tangible or intangible;

 

(vii)                                                   outstanding agreements of
guaranty, surety or indemnification, direct or indirect, by a Company, or by
Seller or any Non-Company Affiliate for the benefit of a Company;

 

(viii)                                                Contracts with Seller or any
Non-Company Affiliate relating to the future provision of goods or services;

 

(ix)                                                        employment and consulting
Contracts providing annual compensation in excess of $150,000 or providing
severance benefits in excess of $150,000;

 

(x)                                                           any collective bargaining
agreement;

 

(xi)                                                        any settlement, conciliation or
similar Contract, the performance of which will involve payment after the
execution of this Agreement of consideration in excess of $1,000,000;

 

(xii)                                                     any Contract under which a
Company has advanced or loaned any amount to any of its directors, officers,
and employees outside the ordinary course of business;

 

(xiii)                                                  outstanding futures, swap,
collar, put, call, floor, cap, option or other Contracts that are intended to
benefit from or reduce or eliminate the risk of fluctuations in the price of
commodities, including electric power, fuel or securities;

 

(xiv)                                                 Contracts that purport to limit a
Company’s freedom to compete in any line of business or in any geographic area;

 

(xv)                                                    partnership, joint venture or
limited liability company agreements;

 

(xvi)                                                 Contracts conveying, granting,
leasing or assigning an interest in real property to a Company (including the Leases);

 

(xvii)                                              Contracts with Consolidated
Edison for the purchase or sale of the Companies or any business, division, or
operation of the Companies or any of Facilities or Real Property pursuant to
which indemnification rights remain in favor of or against the Companies or any
Non-Company Affiliates;

 

(xviii)                                           Contracts which require payment
or increased obligations by or on behalf of the Companies or to any employees
of the Companies as a result of the transactions contemplated by this
Agreement; and

 

(xix)                                                   Contracts for leases of personal
property involving annual payments in excess of $1,000,000.

 

11

 

(b)                                 Seller has provided Buyer with,
or access to, true and complete copies of all Material Contracts and all
Assigned Contracts.

 

(c)                                  Neither Company, and, to Seller’s
Knowledge, no counterparty, is in default in the performance or observance of
any term or provision of, and no event has occurred which, with lapse of time
or action by a third party, would result in such a default under any Contract
to which either Company is a party or by which either of them is bound or to
which any of the Purchased Assets is subject, other than as would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.  To Seller’s Knowledge,
all Assigned Contracts and all other Material Contracts (and Contracts entered
into after the Execution Date that would be Material Contracts if entered into
prior to the Execution Date) are in full force and effect.  Except as set forth on Schedule 4.08(c), to
Seller’s Knowledge, no claims for indemnification are pending by or against the
Companies or any Non-Company Affiliate under the ConEd Agreement.

 

Section 4.09                                                        Taxes. 
Except as set forth on Schedule 4.09:

 

(a)                                  The Companies have duly filed
with the appropriate Taxing Authorities all Tax Returns required to be filed by
them, and such Tax Returns are accurate and complete in all material respects; provided, however,
that nothing in this representation shall be construed as a representation or
warranty by the Seller as to the Tax basis of the assets of the Companies or
the amount or availability of any net operating losses, capital losses, Tax
credits or other Tax attributes of the Companies.  The Companies have duly paid in full any and
all Taxes that are due and payable (whether or not such Taxes are shown on or
required to be shown on a Tax Return).

 

(b)                                 There are no liens for Taxes upon
any property or asset of either Company, except for liens for Taxes not yet
due.

 

(c)                                  There are not pending or, to
Seller’s Knowledge, threatened in writing any Tax audits or examinations of the
Companies and no written notices of deficiency, proposed deficiency or
assessment from any Taxing Authority with respect to Taxes of either Company
have been received by the Companies or any Non-Company Affiliate.  All material deficiencies asserted or
assessments made for Taxes due by the Companies with respect to any completed
and settled examinations or any concluded litigation have been fully paid.

 

(d)                                 There are no outstanding
agreements extending or waiving the statutory period of limitations applicable
to any claim for, or the period for the collection or assessment or
reassessment of, Taxes due from the Companies for any taxable period and no
request for any such waiver or extension is currently pending.

 

(e)                                  Neither Company is a party to any
agreement relating to the sharing, allocation or indemnification of Taxes, or
any similar agreement, contract or arrangement, (collectively, “Tax Sharing Agreements”)
or has any liability for Taxes of any Person (other than members of the Seller
Group) under Treasury Regulation § 1.1502-6, Treasury Regulation § 1.1502-78 or
similar provision of state, local or foreign Law, as a transferee or successor,
by contract, or otherwise.

 

12

 

(f)                                    The Companies have each withheld
and paid all Taxes required to have been withheld and paid in connection with
any amounts paid or owing to any employee, independent contractor, creditor,
stockholder, or other third party, except for any failure to withhold and make
such payments which would not, in the aggregate, reasonably be expected to have
a Material Adverse Effect.

 

(g)                                 OPOS has not constituted a
“distributing corporation” or a “controlled corporation” (within the meaning of
Section 355(a)(1)(A) of the Code) in a distribution of shares purported or
intended to be governed by Section 355 or Section 361 of the Code.

 

(h)                                 Astoria LP has been treated as a
partnership for federal, state, and local income tax purposes since its
formation.

 

(i)                                     Astoria LP has no outstanding
liability for and is not subject to payment of the New York City Utility Tax,
has received no demand, notice or claim from any Governmental Authority for
payment of such Tax, and has received no notification or assertion by any
Governmental Authority that it is or may be liable for the payment of such Tax.

 

Section 4.10                                                        Employee Benefit Plans; ERISA.

 

(a)                                  Schedule 4.10(a) sets forth a true, correct and
complete list, as of the Execution Date, of (i) the Company Plans and (ii) all
Seller Plans sponsored, maintained or contributed to by a Company, and such
list identifies each such plan as either a Company Plan or Seller Plan.  On or before the Execution Date, Seller has
made available to Buyer true and complete copies of each of the following with
respect to the Company Plans, to the extent applicable:  the most recent annual report
(Form 5500) filed with the Employee Benefits Security Administration, the
plan document (including any amendments thereto), the trust agreement, the most
recent summary plan description if required by ERISA, the most recent actuarial
report or valuation that is required to be prepared under applicable Laws, and
the most recent determination letter or opinion letter issued by the IRS with
respect to any Company Plan intended to be qualified under Section 401(a) of
the Code.  Neither Company contributes
to, or has an obligation to contribute to, or has any liability or potential
liability with respect to a multiemployer plan (within the meaning of
Section 3(37) of ERISA). No Company Plan is a multiple employer plan
within the meaning of Section 413(c) of the Code or a multiple employer welfare
arrangement as defined in Section 3(40) of ERISA. On or before the
Execution Date, Seller has also made available to Buyer copies of the Severance
Plan.

 

(b)                                 With respect to any Seller Plan
that is an “employee benefit plan,” within the meaning of Section 3(3) of
ERISA, (i) no withdrawal liability, within the meaning of Section 4201 of
ERISA, has been incurred by Seller or by any trade or business, whether or not
incorporated, that together with Seller would be a “single employer” within the
meaning of Section 4001(b) of ERISA (a “Commonly Controlled Entity”), which
withdrawal liability has not been satisfied in full, (ii) no liability to the
Pension Benefit Guaranty Corporation (the “PBGC”) has been incurred by Seller or by any
Commonly Controlled Entity, which liability has not been satisfied (other than
with respect to the payment of premiums that are not past due), (iii) no
accumulated funding deficiency, whether or not waived, within the meaning of
Section 302 of ERISA or Section 412 of the Code currently exists, and (iv) all
contributions (including

 

13

 

installments) to such plan
required of Seller or any Commonly Controlled Entity prior to the Execution
Date by Section 302 of ERISA and Section 412 of the Code have been made.

 

(c)                                  Except as otherwise set forth in Schedule
4.10(c):

 

(i)                                                             With respect to each Company
Plan, the Companies and their Affiliates have substantially performed all
material obligations, whether arising by operation of Law or by Contract,
required to be performed by them, and no event has occurred and, to the
Knowledge of Seller, there exists no condition or set of circumstances in
connection with which the Companies could be subject to any material liability
for failure to operate and administer such Company Plan in accordance with its
terms, the terms of any applicable collective bargaining agreement or any
applicable Laws;

 

(ii)                                                          Each Company Plan intended to be
qualified under Section 401(a) of the Code (A) substantially satisfies in form
the requirements of such Section except to the extent amendments are not
required by applicable Laws to be made until a date after the Closing Date, (B)
has received a favorable determination letter from the IRS regarding such
qualified status and has been submitted to the IRS for a determination or
opinion letter that takes the GUST amendments into account within the
applicable remedial amendment period specified by Section 401(b) of the Code,
and (C) has not been operated in a way that would materially adversely affect
its qualified status;

 

(iii)                                                       As to any Company Plan subject to
Title IV of ERISA or Section 412 of the Code, there has been no event or
condition which presents the material risk of termination of the Company Plan,
no accumulated funding deficiency, whether or not waived, within the meaning of
Section 302 of ERISA or Section 412 of the Code currently exists, no reportable
event within the meaning of Section 4043 of ERISA has occurred, no notice of
intent to terminate the Company Plan has been given under Section 4041 of
ERISA, no proceeding has been instituted under Section 4042 of ERISA to
terminate the Company Plan, and no material liability to the PBGC has been
incurred (other than with respect to the payment of premiums that are not past
due);

 

(iv)                                                      There are no material actions,
suits, or claims pending (other than routine claims for benefits) with respect
to any Company Plan or its assets, and, to the Knowledge of Seller, there is no
matter pending (other than routine qualification determination filings) with
respect to any Company Plan before any Governmental Authority;

 

(v)                                                         There have been no material
non-exempt “prohibited transactions” (as defined in Section 406 of ERISA or
Section 4975 of the Code) with respect to each Company Plan, and no “fiduciary”
(as defined in Section 3(21) of ERISA) has any material liability for breach of
fiduciary duty or any other failure to act or comply in connection with the
administration or investment of the assets of any Company Plan;

 

(vi)                                                      With respect to each Company
Plan, (A) all material contributions (including all material employer
contributions and employee salary reduction

 

14

 

contributions) that are due have been made within the time periods
prescribed by ERISA and the Code, and all contributions for any period ending
on or before the Closing Date that are not yet due have been (or will be) made
or properly accrued and (B) as of June 30, 2005, there are no material unfunded
liabilities that are not accurately reflected on the June 30 Balance Sheets;
and

 

(vii)                                                   No Company Plan provides health,
life insurance or other welfare benefits to retirees or other terminated
employees of the Company other than as required by COBRA.

 

(d)                                 Except as set forth on Schedule
4.10(d), the execution and performance of the transactions contemplated by
this Agreement will not (either alone or upon the occurrence of any additional
subsequent event) constitute an event under any Company Plan that will or may
result in any payments of money or other property, acceleration of benefits or
payments, forgiveness of indebtedness, vesting, distribution, increase in
benefits or obligation to fund benefits with respect to any employee or former
employee of the Company or under any Company Plan.

 

Section 4.11                                                        Labor and Employment.

 

(a)                                  Except for the Collective
Bargaining Contract, neither Company is a party to, or is bound by, the terms
of any collective bargaining agreement or any other Contract with any labor
union or representative of employees. 
Seller has provided Buyer with, or access to, a true and complete copy
of the Collective Bargaining Contract. 
To Seller’s Knowledge, there are no organizational or decertification
efforts underway or threatened involving any of the employees of either
Company.

 

(b)                                 Except as disclosed on Schedule 4.06,
with respect to either Company, since February 19, 2002:  (i) there has not been any filed
representation petition or written demand for recognition by any labor
organization or group of employees; (ii) no labor strike, work stoppage,
slowdown, or other material labor dispute has occurred or is underway or, to
Seller’s Knowledge, threatened; (iii) there has not been, and there is not
currently pending, any material union grievance, and (iv) there is no workers’
compensation liability, experience or matter that, individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect.

 

(c)                                  With respect to this transaction, any notice
required under any law or collective bargaining agreement has been given, and
all bargaining obligations with any employee representative have been, or prior
to the Closing will be, satisfied. 
Within the past three years, neither Company has implemented any plant
closing or layoff of employees that could implicate the Worker Adjustment and
Retraining Notification Act of 1988, as amended, or any similar foreign, state
or local law, regulation or ordinance (jointly, the “WARN Act”), and no
such action will be implemented without advance notification to Buyer.

 

Section 4.12                                                        Environmental Matters. 
Except as disclosed on Schedule 4.12:  (a) except as would not reasonably be
expected to have a Material Adverse Effect, each Company and Facility is, and
since February 19, 2002, at all times has been in compliance with all applicable
Environmental Laws, which compliance includes obtaining and complying with all

 

15

 

Permits required under
Environmental Laws for the ownership and operation of the Facilities as they
are currently being operated, (b) neither Company has received any written
notice, demand or request for information from any Governmental Authority or
other Person indicating that it or any of the Facilities currently is, or may
be, in violation of any Environmental Law, (c) except as would not reasonably
be expected to have a Material Adverse Effect, there are no civil, criminal or
administrative actions, suits, demands, claims, hearings, investigations or
proceedings pending or, to Seller’s Knowledge, threatened against either
Company relating to any violation, or alleged violation, of, or liability
under, any Environmental Law, (d) to Seller’s Knowledge, neither Company has
disposed of, released or transported, or arranged for the disposal, release, or
transportation of, any Hazardous Substance in violation of any applicable
Environmental Law, or so as to give rise to any liability under Environmental
Law and none of the Facilities is contaminated with any Hazardous Substance so
as to give rise to any material liabilities under any Environmental Law, (e)
neither Company is subject to any liabilities or expenditures (fixed or
contingent) relating to any suit, settlement, court order, administrative
order, regulatory requirement, judgment or claim asserted or arising under any
Environmental Law, (f) except as would not reasonably be expected to have a
Material Adverse Effect, neither Company has assumed in writing or undertaken
by operation of law any liability of any other Person relating to Environmental
Law, and (g) Seller has provided to Buyer copies of all material environmental
reports, audits and assessments prepared since February 19, 2002, and any other
material environmental documents (in each instance, relevant to the Companies
or the Facilities), to the extent the forgoing are in the possession, custody,
or reasonable control of the Seller or the Companies.  Notwithstanding any other provision of this
Agreement to the contrary, this section contains the sole and exclusive representations
and warranties of Seller with regard to environmental matters.

 

Section 4.13                                                        Intellectual Property. 
Except as would not reasonably be expected to have a Material Adverse
Effect, (a) except for the Seller Marks and except as set forth on Schedule
4.13(a), each Company owns, or otherwise has the right to use, all patents,
patent rights (including patent applications and licenses), know-how, trade
secrets, trademarks (including trademark applications), trademark rights, trade
names, trade name rights, service marks, service mark rights, copyrights and
other proprietary intellectual property rights (collectively, “Intellectual Property”)
used in the conduct of such Company’s business as it is currently conducted,
(b) except as set forth on Schedule 4.13(a) and as otherwise set forth
in this Agreement, the Company’s ownership of, or rights to use, the
Intellectual Property used in the conduct of such Company’s business as it is
currently conducted shall not expire as a result of the transactions
contemplated by this Agreement, (c) the use of Intellectual Property by each
Company does not infringe on or otherwise violate the rights of any third
party, and is in accordance with the applicable license pursuant to which such
Company acquired the right to use such Intellectual Property, (d) to Seller’s
Knowledge, no third party is challenging, infringing on or otherwise violating
any right of either Company with respect to such Company’s Intellectual
Property, and (e) neither Company has granted or been granted, or is obligated
to grant, any license, sub-license, or assignment of any Intellectual Property.

 

Section 4.14                                                        PUHCA; Regulation as Utility.

 

(a)                                  Neither Company is (i) subject to
regulation as a “public-utility company,” a “holding company,” or a “subsidiary
company” or “affiliate” of a “public-utility company,” or a

 

16

 

“holding company” within the
meaning of the Public Utility Holding Company Act of 1935, as amended, or (ii)
currently regulated pursuant to any state law or regulation with respect to the
rates charged for sales of electricity, but Astoria LP is subject to state law
or regulation with respect to the financial and organizational regulation of
electric utilities.  OPOS is not subject
to regulation as a “public utility” within the meaning of the FPA.  Astoria LP is subject to regulation as a
“public utility” within the meaning of the FPA, but is not subject to
cost-of-service regulation with regard to its rates for sales of wholesale
power.

 

(b)                                 Astoria LP meets the requirements
for, and has been determined by FERC to be, an “Exempt Wholesale Generator”
within the meaning of the Public Utility Holding Company Act of 1935, as
amended.

 

(c)                                  Astoria LP has on file with FERC
effective rate schedules in compliance with the FPA.  Such rate schedules are in full force and
effect.

 

Section 4.15                                                        Real Property. 
Seller has delivered or otherwise made available to Buyer true, correct
and complete copies of the Title Commitments and all existing title policies,
title reports and surveys for the Facilities in the possession of the
Companies.

 

Section 4.16                                                        Insurance. 
Schedule 4.16 identifies each of the insurance policies carried
by Seller or any of its Affiliates which cover risks associated with or arising
out of the business, property or assets of the Companies (including general
liability policies and property and casualty policies) during the last five (5)
years (the “Insurance
Policies”).  Seller and
its Affiliates have paid all premiums or other amounts due and owing to the
insurers in respect of the Insurance Policies and is not otherwise in default
under any such Insurance Policy.

 

Section 4.17                                                        Affiliate Transactions. 
Schedule 4.17 sets forth (a) each Contract between either or both
of the Companies, on the one hand, and any Non-Company Affiliate, on the other
hand, (b) each Contract with a third-party to which a Non-Company Affiliate is
party that is material to the business of the Companies, and (c) the material
services provided to either of the Companies by one or more Non-Company Affiliates.

 

Section 4.18                                                        Permits. 
Schedule 4.18 sets forth a complete and accurate list of all
material Permits held by the Companies and the Facilities.  All such Permits are held by one of the
Companies and, to Seller’s Knowledge, are in full force and effect, and except
as shown on Schedule 4.07, neither the Seller nor of its Affiliates
(including, without limitation, the Companies) has received any notice of
violation or proposed revocation or termination relating to any such Permit
from any Governmental Authority.  Except
as disclosed on Schedule 4.07, neither Company, nor any of the
Facilities, is in violation of the terms of any covenants, conditions,
restrictions or easements or of any Permits, except for violations which,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect.

 

Section 4.19                                                        Sufficiency of Assets. 
Except as disclosed on Schedule 4.19(a), except for the services
to be provided to Buyer and the Companies under the Transition Services
Agreement and except for assets consumed in the ordinary course of business,
the assets available for use by the Companies immediately after Closing will
include all of the assets (whether tangible or intangible) used by the
Companies to conduct the business of the

 

17

 

Companies as conducted as of
each of June 30, 2005 and the date hereof, except as would not reasonably be
expected to have a Material Adverse Effect. 
Except as would not reasonably be expected to have a Material Adverse
Effect, the Companies have good title to, or valid license or right to use,
free and clear of all Liens (other than Liens that will be discharged prior to
Closing), all of the tangible personal property described in the preceding
sentence.  As of the Closing, the
Companies shall have available the air emission allowances identified in Schedule
4.19(b) without payment, transfer, reissuance, or consent of any third
party or Governmental Agency.

 

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF BUYER

 

In order to
induce Seller to enter into this Agreement and consummate the transactions
contemplated hereby, Buyer hereby represents and warrants to Seller that:

 

Section 5.01                                                        Organization and Qualification. 
Buyer is a limited liability company duly formed, validly existing and
in good standing under the Laws of the State of Delaware.  Buyer is duly qualified or licensed to do
business in each other jurisdiction where the actions required to be performed
by it hereunder make such qualification or licensing necessary, except in those
jurisdictions where the failure to be so qualified or licensed would not
reasonably be expected to result in a material adverse effect on Buyer’s
ability to perform its obligations hereunder.

 

Section 5.02                                                        Authority. 
Buyer has all requisite limited
liability company power and authority to enter into this Agreement, to perform
its obligations hereunder and to consummate the transactions contemplated
hereby.  The execution and delivery by
Buyer of this Agreement and the performance by Buyer of its obligations
hereunder have been duly and validly authorized by all necessary limited
liability company action on behalf of Buyer. 
This Agreement has been duly and validly executed and delivered by Buyer
and constitutes the legal, valid and binding obligation of Buyer enforceable
against Buyer in accordance with its terms except as the same may be limited by
bankruptcy, insolvency, reorganization, arrangement, moratorium or other
similar Laws relating to or affecting the rights of creditors generally or by
general equitable principles.

 

Section 5.03                                                        No Conflicts; Consents and
Approvals.  The execution and delivery by Buyer of this
Agreement, the performance by Buyer of its obligations hereunder and the
consummation of the transactions contemplated hereby will not:

 

(a)                                  conflict with or result in a
violation or breach of any of the terms, conditions or provisions of its
Charter Documents;

 

(b)                                 be in violation of or result in a
default (or give rise to any right of termination, cancellation or
acceleration) under any material Contract to which Buyer is a party or by which
any of its assets may be bound except for any such violations or defaults (or
rights of termination, cancellation or acceleration) which would not, in the
aggregate, reasonably be expected to result in a material adverse effect on
Buyer’s ability to perform its obligations hereunder; or

 

18

 

(c)                                  assuming all required filings,
approvals, consents, authorizations and notices set forth in Schedule
5.03(c) (collectively, the “Buyer Governmental Approvals”) have been made, obtained
or given, (i) conflict with or result in a violation or breach of any
material term or provision of any Law or writ, judgment, order or decree
applicable to Buyer or any of its assets or (ii) require the material consent
or approval of any Governmental Authority under any applicable Law.

 

Section 5.04                                                        Legal Proceedings. 
Buyer has not been served with written notice of any Claim, and to
Buyer’s Knowledge, none is threatened, against Buyer which seeks a writ,
judgment, order or decree restraining, enjoining or otherwise prohibiting or
making illegal any of the transactions contemplated by this Agreement.

 

Section 5.05                                                        Compliance with Laws and Orders. 
Buyer is not in violation of or in default under any Law or order
applicable to Buyer or its assets the effect of which, in the aggregate, would
reasonably be expected to result in a material adverse effect on Buyer’s
ability to perform its obligations hereunder.

 

Section 5.06                                                        Brokers. 
Buyer does not have any liability or obligation to pay fees or
commissions to any broker, finder or agent with respect to the transactions
contemplated by this Agreement for which Seller could become liable or obligated.

 

Section 5.07                                                        Acquisition as Investment. 
Buyer is acquiring the Company Interests for its own account as an
investment without the present intent to sell, transfer or otherwise distribute
the same to any other Person.  Buyer
acknowledges that the Company Interests are not registered pursuant to the
Securities Act of 1933 (the “1933 Act”) and that none of the Company Interests may be
transferred, except pursuant to an applicable exception under the 1933
Act.  Buyer is an “accredited investor”
as defined under Rule 501 promulgated under the 1933 Act.

 

Section 5.08                                                        Financial Resources. 
Buyer has delivered true, correct and complete copies of (a) the
commitment letter received by Buyer and its affiliates and executed by all
parties thereto (the “Debt
Commitment Letter”) to provide the debt financing for the
transactions contemplated hereby and (b) a true, correct and complete copy of
the commitment letter received by Buyer and its affiliates and executed by all
parties thereto (the “Equity
Commitment Letter” and, together with the Debt Commitment
Letter, the “Commitment
Letters”) to provide equity financing for the transactions
contemplated hereby.  Assuming receipt of
all of the financing contemplated by the Commitment Letters, at Closing, Buyer
shall have sufficient funds to satisfy its obligations required to be performed
at Closing.

 

Section 5.09                                                        No Knowledge of Seller’s Breach. 
Except for breaches of which Buyer informs Seller in accordance with
Section 9.04(e) and except for breaches of which Buyer is informed by Seller in
accordance with Section 6.02(a)(ii), Buyer does not have Knowledge of any
breach by Seller of any of the representations and warranties herein.

 

Section 5.10                                                        Opportunity for Independent
Investigation.  Prior to its execution of this Agreement, Buyer
has conducted to its satisfaction an independent investigation and verification
of the current condition and affairs of the Companies, the Purchased Assets and
the Facilities without reliance on Seller; provided
that such independent investigation and

 

19

 

verification shall not
affect the express representations, warranties, covenants or other obligations
of Seller contained in this Agreement. 
Buyer has had reasonable and sufficient access to documents, other
information and materials as it considers appropriate to make its evaluations.

 

ARTICLE
VI

COVENANTS

 

In order to
induce the other Party to enter into this Agreement and consummate the
transactions contemplated hereby, the Parties hereby covenant and agree as
follows:

 

Section 6.01                                                        Access of Buyer.

 

(a)                                  During the Interim Period, Seller
will provide Buyer and its prospective financing sources and its and their
Representatives with reasonable access during normal business hours (and other
hours as reasonably appropriate to fulfill the intent of this provision) to the
Facilities and the officers and management employees of Seller and its
Affiliates (including the Companies) in such a manner so as not to unreasonably
interfere with the business or operations of Seller or its Affiliates
(including the Companies), such access to include participation by Buyer in
material management meetings and technical meetings,  including those relating to major capital
projects and unit overhauls; provided,
that Seller shall have the right to (i) have a Representative present for any
communication with employees or officers of Seller or its Affiliates and (ii)
impose reasonable restrictions and requirements for safety or operational
purposes.  Buyer shall be entitled, at its
sole cost and expense, to visit the Real Property and to receive such
information as may reasonably be required so that it may prepare and/or review
financial statements after the date hereof. 
Notwithstanding the foregoing, Seller shall not be required to provide
any information or allow any inspection which it reasonably believes it may not
provide to Buyer or allow by reason of applicable Law, which constitutes or
allows access to information protected by attorney/client privilege, or which
Seller or its Affiliates is required to keep confidential or prevent access to
by reason of contract, agreement or understanding with third parties if Seller
has used commercially reasonable efforts to obtain the consent of such third
party to such inspection or disclosure. 
Following the Closing, Seller shall be entitled to retain copies of all
books and records relating to the ownership and/or operation of the Companies
or their respective businesses.

 

(b)                                 Buyer agrees to indemnify, defend
and hold harmless Seller, the Companies, the Non-Company Affiliates and their
Representatives from and against any and all Losses incurred by Seller, the
Companies, the Non-Company Affiliates, their Representatives or any other
Person relating to physical injuries or property damage arising out of the
access rights under this Section 6.01, including any Claims by any of Buyer’s
Representatives for any injuries or Losses while present on the Real Property
unless caused by the gross negligence or willful misconduct of Seller, the Companies
or the Non-Company Affiliates.

 

Section 6.02                                                        Conduct of Business Pending the
Closing.

 

(a)                                  Except as otherwise contemplated
by this Agreement or set forth in Schedule 6.02, during the Interim
Period, Seller will cause the Companies to:

 

20

 

(i)                                                             operate the Facilities and their
business in the ordinary course of business consistent with past practices in
all material respects;

 

(ii)                                                          promptly notify Buyer of any
breach of any representation, warranty, covenant or agreement of Seller made
hereunder or any Material Adverse Effect of which Seller has Knowledge;

 

(iii)                                                       (A) make Capital Expenditures and
continue environmental remediation expenditures substantially in accordance
with the budget attached as Schedule 6.02(a)(iii) (other than the Capital
Expenditures described in clauses (B) and (C) following), (B) subject to NYISO
and ConEd approval, make Capital Expenditures substantially in accordance with
the budget attached as Schedule 6.02(a)(iii) with respect to Capital
Expenditures scheduled for the Unit 30 Outage for November and December of
2005, and (C) at Seller’s election, make Capital Expenditures substantially in
accordance with the budget attached as Schedule 6.02(a)(iii) with respect to
Capital Expenditures scheduled for the Unit 30 Outage for March and April of
2006;

 

(iv)                                                      pay Taxes as they come due and
payable (except for Taxes being contested in good faith by appropriate
proceedings and for which adequate reserves have been provided for in accordance
with GAAP); and

 

(v)                                                         use their commercially reasonable
efforts to (A) preserve their present business operations, organization
(including management) and goodwill with respect to the Facilities, (B)
preserve their present relationship with Persons having business dealings with
respect to the Facilities (including, without limitation, customers and
suppliers) and (C) to the extent allowed by the applicable Governmental
Authority, allow Buyer to participate in material meetings with Governmental
Authorities regarding the Facilities.

 

(b)                                 Except as otherwise contemplated
by this Agreement or set forth in Schedule 6.02 or as consented to by
Buyer in writing, which consent shall not be unreasonably withheld, conditioned
or delayed, and except for matters relating to the Excluded Assets, during the
Interim Period Seller shall not (with respect to the Companies), shall cause
the Non-Company Affiliates not to (with respect to the Companies), and cause
the Companies not to:

 

(i)                                                             other than the Company Liens
referenced in Section 6.08, permit or allow any Lien securing indebtedness for
borrowed money against any of the Purchased Assets;

 

(ii)                                                          amend, modify, enter into, grant
waiver of any material term of, or give any material consent with respect to,
any Material Contract (or Contract entered into after the Execution Date that
would be a Material Contract if entered into prior to the Execution Date);

 

(iii)                                                       except in respect of Capital
Expenditures permitted by Section 6.02(b)(iv), enter into, terminate or amend
any Contract involving total consideration throughout its term in excess of
$1,000,000 (other than Contracts entered into in the

 

21

 

ordinary
course of business consistent with past practices which will be fully performed
prior to the Closing without further liability to the Companies);

 

(iv)                                                      commit to incur Capital Expenditures after
the Closing Date in excess of the applicable amount shown on Schedule
6.02(b)(iv);

 

(v)                                                         other than trade payables incurred in the
ordinary course of business consistent with past practices or accounts payable
pursuant to the Material Contracts (or Contracts entered into after the
Execution Date that would be Material Contracts if entered into prior to the
Execution Date) or the Terminated Contracts, incur, create, assume or otherwise
become liable for Indebtedness or issue any debt securities or assume or
guarantee the obligations of any other Person;

 

(vi)                                                      fail to maintain its partnership or corporate
existence or consolidate with any other Person or acquire all or substantially
all of the assets of any other Person;

 

(vii)                                                   issue or sell any partnership interests or
securities, or rights to acquire or convertible into, partnership interests or
securities, of either Company;

 

(viii)                                                liquidate, dissolve, recapitalize, reorganize
or otherwise wind up its business or operations;

 

(ix)                                                        (A) hire or promote any employee, (B) except
with respect to increases in compensation that, but for the timing of the grant
thereof, are in the ordinary course of business, grant any increase in the
compensation or benefits of any employee, (C) establish any new compensation or
Benefit Plans, (D) amend or modify any Company Plan, (E) amend or modify any
Seller Plan insofar as any such amendment or modification relates solely to
Affiliate Employees or former employees, officers or directors of the
Companies, or (F) enter into or modify any employment, consulting, termination,
retention, change of control or severance agreement; provided, that nothing above shall restrict normal periodic
increases, promotions, hiring or changes effected in the ordinary course of
business consistent with past practices, changes required pursuant to applicable
Laws, or changes required pursuant to Contracts in effect as of the Execution
Date (including the Collective Bargaining Contract), except for promotions,
hirings or changes relating to employees not covered by a Collective Bargaining
Contract, in which case Seller shall consult with Buyer prior to any such
promotions, hirings or changes;

 

(x)                                                           enter into, modify or terminate any labor or
collective bargaining agreement of either Company or, through negotiations or
otherwise, make any material commitment or incur any material liability to any
labor organizations, except that either Company may reasonably bargain and
negotiate matters in good faith, as contemplated by the Collective Bargaining
Contract and applicable Laws;

 

(xi)                                                        implement any layoff of employees that could
implicate the WARN Act;

 

22

 

(xii)                                                     enter into any Contract under which either
Company advances or loans any amount to any of its directors, officers, and
employees outside the ordinary course of business

 

(xiii)                                                  enter into any settlement, conciliation or
similar agreement, the performance of which will involve payment after the
execution of this Agreement of consideration in excess of $1,000,000;

 

(xiv)                                                 except in the ordinary course of business,
acquire any material properties or assets or sell, assign, license, transfer,
convey, lease or otherwise dispose of any of the material Purchased Assets;

 

(xv)                                                    enter into or agree to enter into any merger
or consolidation with, any corporation or other entity, and not engage in any
new business or invest in, make a loan, advance or capital contribution to, or
otherwise acquire the securities of any other Person;

 

(xvi)                                                 make any material change in its accounting
principles, methods or policies, except as otherwise required by GAAP or make
any material change in its risk management policies or internal controls that
are less restrictive than those in effect on the Execution Date;

 

(xvii)                                              enter into any Contract that restrains,
restricts, limits or impedes the ability of a Facility to conduct any business
or line of business in any geographic area;

 

(xviii)                                           except in the ordinary course of business,
terminate, amend, restate, supplement or waive any rights under any (A)
Assigned Contract, (B) any Material Contract (or Contract entered into after
the Execution Date that would be a Material Contract if entered into prior to
the Execution Date) or (C) any Permit;

 

(xix)                                                   enter into, modify or renew any material
Contracts with respect to the sale of energy that will be performed after the
Closing except that would not require the payment, individually or in the
aggregate, of amounts in excess of $1,000,000;

 

(xx)                                                      purchase any securities of any Person, except
for short-term investments or cash equivalents made in the ordinary course of
business consistent with past practices;

 

(xxi)                                                   cancel, settle or compromise debts having a
value in excess of $1,000,000 or waive claims or rights having a value in
excess of $1,000,000;

 

(xxii)                                                enter into a fuel purchase, storage,
transportation, option, swap or other arrangement with a term over one year;

 

(xxiii)                                             enter into an energy or capacity purchase,
sale, exchange, option, swap, or other arrangement, or transmission arrangement
with a term over one year or that would require credit support in an amount
greater than $1,000,000;

 

(xxiv)                                            enter into any speculative energy or fuel
transactions;

 

23

 

(xxv)                                               seek to lower any reference price or bid or
cap price for energy or capacity that Astoria LP sells into the markets
administered by the NYISO;

 

(xxvi)                                            make or revoke any material election with
respect to Taxes or fail to pay any Taxes of the Companies as they become due
and payable (except for Taxes being contested in good faith by appropriate
proceedings and for which adequate reserves have been provided for in
accordance with GAAP);

 

(xxvii)                                         amend or modify its Charter Documents; or

 

(xxviii)                                      agree or commit to do any of the foregoing.

 

Notwithstanding the
foregoing, Seller may permit the Companies to take commercially reasonable
actions with respect to emergency situations and to comply with applicable Law
so long as Seller shall promptly inform Buyer of such emergency actions.

 

Section
6.03                                                        Resignation of Members, Managers, Officers
and Directors.  At Closing, Seller shall cause the
resignation of all officers and directors or similar persons nominated or
appointed by Seller or its Affiliates to any board or operating, management or
other committee established under either Company’s Charter Documents.

 

Section
6.04                                                        Use of Certain Names. 
Within 120 days following the Closing, Buyer shall cause the Companies
to cease using the words “Reliant”, “Orion” and any word or expression similar
thereto or constituting an abbreviation or extension thereof (the “Seller Marks”),
including eliminating the Seller Marks from each Company’s property and
Purchased Assets and disposing of any unused stationery and literature of the
Companies bearing the Seller Marks; and thereafter, Buyer shall not, and shall
cause the Companies and their Affiliates not to, use the Seller Marks or any
logos, trademarks, trade names, or other registered Intellectual Property
belonging to Seller or any Non-Company Affiliate, and Buyer acknowledges that
it, its Affiliates and the Companies have no rights whatsoever to use such
Intellectual Property, except as provided in the Transition Services Agreement.

 

Without limiting the
foregoing:

 

(a)                                  Within 30 days after the Closing Date, Buyer
shall cause each Company to change its name to a name that does not contain any
of the Seller Marks.

 

(b)                                 Within 30 days after the Closing Date, Buyer
shall provide evidence to Seller, in a format that is acceptable to Seller,
that Buyer has provided notice to all applicable Governmental Authorities and
all counterparties to the Material Contracts (and Contracts entered into after
the Execution Date that would be Material Contracts if entered into prior to
the Execution Date) regarding the sale of the Companies and the Purchased
Assets to Buyer and the new addresses for notice purposes.

 

Section
6.05                                                        Support Obligations.

 

(a)                                  Buyer recognizes that Seller and the
Non-Company Affiliates have provided credit support to the Companies with
respect to the Facilities pursuant to certain credit support

 

24

 

obligations set forth on Schedule
6.05(a) and any other credit support entered into in compliance with
Section 6.02(b) (collectively, the “Support Obligations”), such Support
Obligations (excluding non-dollar denominated guaranties) not to exceed
$25,000,000 in the aggregate at any one time. 
During the Interim Period, Seller and the Non-Company Affiliates agree
not to enter into any additional non-dollar denominated Support Obligations
without the prior consent of Buyer. 
Prior to the Closing, Buyer shall use commercially reasonable efforts to
effect the full and unconditional release of Seller and the Non-Company
Affiliates from all Support Obligations by:

 

(i)                                                             furnishing letters of credit containing terms
and conditions that are substantially identical to the terms and conditions of
existing letters of credit and from lending institutions that are either
Investment Grade Persons or have a Credit Rating commensurate with or better
than that of lending institutions for existing letters of credit;

 

(ii)                                                          instituting escrow arrangements with terms
equal to or more favorable to the counterparty than the terms of existing
escrow arrangements; and

 

(iii)                                                       posting surety or performance bonds issued by
an Investment Grade Person or another Person having a net worth or a Credit
Rating at least equal to those of the issuer of existing surety or performance
bonds, and which replacement surety or performance bond contains terms and
conditions that are substantially identical to the terms and conditions of
existing surety or performance bonds.

 

(b)                                 Buyer and Seller shall use commercially
reasonable efforts to cause the beneficiary or beneficiaries of the Support
Obligations to terminate and redeliver to Seller or the Non-Company Affiliates,
as applicable, prior to the Closing, each original copy of each original
guaranty, letter of credit or other instrument constituting or evidencing such
Support Obligations as well as to redeliver to Seller or the Non-Company Affiliate,
as applicable, any cash collateral in respect of the Support Obligations and,
as to any Support Obligations terminated after the Closing, promptly to
redeliver such originals or cash to Seller or the Non-Company Affiliates, as
applicable, and in each case, to take such other actions as may be required to
terminate such Support Obligations.

 

(c)                                  If Buyer is not successful in obtaining the
complete and unconditional release of Seller and the Non-Company Affiliates
from the Support Obligations prior to the Closing, then Buyer shall indemnify,
defend and hold harmless Seller and the Non-Company Affiliates from and against
any and all Losses incurred by any such indemnified Persons in connection with
the Support Obligations.  Buyer shall,
for so long as any Support Obligation remains outstanding, not, and shall cause
the Companies not to, effect any amendments or modifications or any other
changes to the Contracts to which any of such Support Obligations relate, or
otherwise take any action that would effect any change to such Contracts,
guaranties or letters of credit, without Seller’s prior written consent.  Notwithstanding anything in this Agreement to
the contrary, during the Interim Period, Buyer shall have the right to contact
and have discussions with each beneficiary of a Support Obligation in order to
satisfy its obligations under this Section 6.05; provided, that (i) Buyer shall give Seller prior notice
before making any such contact, (ii) Seller shall have the right to have one of
its Representatives present on the telephone line or in person, as applicable,
during any such contact or discussion, (iii) Buyer shall only contact and hold

 

25

 

discussions with such
beneficiaries through Representatives of Buyer previously approved by Seller,
and (iv) Buyer shall cause such Representatives to comply with all procedures
and protocols regarding such contacts and discussions that may be established
by Seller.  Notwithstanding the
foregoing, in no event shall this Section 6.05(c) entitle Seller to receive any
confidential information of Buyer.

 

(d)                                 Prior to the Release Date, Buyer agrees not
to assign, sell, transfer or convey all or any portion of the Company Interests
and shall cause the Companies not to assign, sell, transfer or convey all or
any substantial portion of the Purchased Assets, in a single transaction or
series of related transactions, in each case without the assignment to the
transferee of the rights of Buyer under this Agreement and the assumption in
writing by the transferee (which assumption shall be enforceable by Seller) of
the obligations of Buyer under this Agreement (including the obligations of
Buyer pursuant to Section 6.05(c)); provided that, for the avoidance of
doubt, the sale of equity interests of Buyer (whether accomplished by merger or
otherwise) shall not be deemed a sale, transfer, conveyance or assignment for
purposes of this Section 6.05.  Any
assignment, sale, transfer or conveyance in contravention of the preceding
sentence shall be null and void ab initio. 
Buyer agrees to provide Seller with a copy of such assignment and
assumption agreement prior to execution and prior to the assignment, sale,
transfer or conveyance and a copy of the executed assignment and assumption
agreement which shall be in the same form with such changes as Seller may
reasonably request.  Upon such an
assignment, sale, transfer or conveyance pursuant to which the transferee
assumes all of Buyer’s rights and obligations under this Agreement, Buyer shall
have no further rights or obligations under this Agreement (except for
obligations relating to breaches by Buyer occurring prior to the date of the
assignment, sale, transfer or conveyance). 
The “Release Date”
shall be the later of the date on which all of the Support Obligations have
been fully and unconditionally released and the date on which Seller has no
more obligations owing to Buyer under this Agreement.

 

Section
6.06                                                        Excluded Assets. 
Notwithstanding anything in this Agreement to the contrary, Buyer
acknowledges and agrees that Seller will, prior to the Closing Date, cause the
Companies to distribute, transfer or assign to Seller and the Non-Company
Affiliates those assets described on Schedule 6.06 (the “Excluded Assets”).  With respect to Excluded Assets that
constitute claims or refunds, Buyer agrees to deliver to the applicable
counterparty or party against whom the claim is asserted written instructions,
in a form reasonably acceptable to Seller, directing such third party to pay to
Seller any and all proceeds relating to such Excluded Asset.  In the event Buyer or the Companies receive
any such proceeds following the Closing, Buyer will cause such proceeds to be
wire transferred in immediately available funds promptly following receipt by
Buyer or the Companies to the account designated in writing by Seller.  At the request and direction of Seller, Buyer
agrees to cause the Companies to join or initiate an action to recover the
Excluded Assets; provided that
(a) Seller shall be responsible for the out-of-pocket costs and expenses of the
Companies with respect to any such action, (b) Seller shall have the right to
select the legal counsel with respect to such action, and (c) if Buyer or the
Companies desire to have additional legal counsel with respect to such action,
they may do so at their sole cost and expense. 
Without limiting the foregoing, Buyer shall and shall cause the
Companies to cooperate reasonably with Seller following the Closing with
respect to the recovery by Seller of the Excluded Assets.  Seller shall be liable for any Taxes incurred
by the Companies as a result of the removal of Excluded Assets from the
Companies.

 

26

 

Section
6.07                                                        Termination of Certain Services, Contracts,
Receivables and Payables.

 

(a)                                  Notwithstanding anything in this Agreement to
the contrary, during the Interim Period, (i) Seller shall take such actions as
may be necessary to terminate or sever as to the Companies (with appropriate
mutual releases) upon the Closing any services jointly shared or used by any of
the Companies and Seller or a Non-Company Affiliate, joint Tax services, joint
legal services and joint banking services (to include the severance of any
centralized clearance accounts) and each Contract listed on Schedule 6.07
(the “Terminated
Contracts”), (ii) the Companies shall be entitled to transfer
cash to Seller and the Non-Company Affiliates, and (iii) Seller shall be
entitled to take such actions as may be necessary to settle (through offsets
and/or cash transactions) immediately prior to the Closing such Intercompany
Payables and Intercompany Receivables as Seller, in its sole discretion, elects
to settle.  Notwithstanding clause (i)
foregoing, no such termination shall affect obligations of Seller and the
Non-Company Affiliates under the Transition Services Agreement or this
Agreement.  Except for the RES Payable,
all Intercompany Receivables and Intercompany Payables outstanding as of the
Closing shall be deemed to be cancelled immediately prior to the Closing, and
the Companies shall have no continuing liabilities with respect to such
payables or otherwise with respect to the terminated services, Terminated
Contracts and cash transfers contemplated by this Section 6.07.

 

(b)                                 Promptly following the Closing, Buyer shall
take such actions as may be necessary to become a “Replacement Shipper” as such
term is defined in the FERC Gas Tariff of Iroquois Gas Transmission System,
L.P. (“Iroquois”),
including the submission of such data as Iroquois may require and the execution
of a “Blanket Gas Transportation Contract for Firm Reserved Service” as such
term is defined in the Iroquois FERC Gas Tariff; and Seller shall cause
submission of a notice to Iroquois of its election to release capacity under
Contract Nos. R-2130-02 and R-2130-03 pursuant to Section 28.6 of the Iroquois
FERC Gas Tariff (collectively, the “Iroquois Contract”), which such notice shall
specify the following information: (i) the designation of Buyer or an Affiliate
of Buyer as the Prearranged Replacement Shipper; (ii) the term of the releases
being the Closing Date through the remaining term of each contract; (iii) the
quantities of firm daily capacity to be released being the entire Maximum
Equivalent Quantity set forth in each contract; (iv) the rate that Buyer has
agreed to pay being Monthly Demand Rate and the Daily Commodity Rate set forth
in Schedule 3 to each contract; and (v) such other information required
pursuant to Section 28.6(c) of the Iroquois FERC Gas Tariff, and Buyer shall agree
to participate as such Prearranged Replacement Shipper.

 

Section
6.08                                                        Payment of Indebtedness. 
Notwithstanding anything in this Agreement to the contrary, prior to or
at the Closing, Seller shall (a) cause any and all Indebtedness of the
Companies referred to in (i) and (ii) of the definition of Indebtedness
(including intercompany Indebtedness) to be paid in full, (b) cause any and all
Liens (other than Permitted Encumbrances) securing any such Indebtedness on the
Purchased Assets (collectively, the “Company Liens”) to be released, and (c) cause
any and all agreements relating to the Company Liens or the Indebtedness
secured thereby to be terminated as to the Companies, such that Buyer shall
take title to the Companies and the Purchased Assets free of all such
Indebtedness and Company Liens. 
Furthermore, Seller shall cause the Companies to be released from all
guarantees of third-party obligations and all obligations of all Non-Company
Affiliates and provide such evidence as the Title Insurer may reasonably
request to show that the Liens issued to Bank of America reflected on the Title
Commitments have been released.  At the

 

27

 

Closing, Seller shall
deliver to Buyer copies of all pay-off letters and releases for all Company
Liens and the guarantees referenced in this Section 6.08.

 

Section 6.09                                                        Insurance.

 

(a)                                  With respect to the insurance policies listed
on Schedule 6.09 (the “Scheduled Insurance Policies”), Seller shall use
commercially reasonable efforts to cause Buyer (or, at Buyer’s direction, the
Companies) to be listed at Closing as a “Named Insured” under each such policy
and for the Non-Company Affiliate which is currently the “Named Insured” under
such policy to be listed as an “Additional Insured”.

 

(b)                                 With respect to Insurance Policies that are “occurrence-based”
policies, Seller covenants and agrees that 
(i) the Companies will, with respect to the Purchased Assets and their
business, be provided full coverage under the Insurance Policies not assigned
to Buyer or the Companies (excluding the Scheduled Insurance Policies to the
extent not assigned to Buyer or the Companies at Closing, the “Retained Policies”)
after the Closing (subject only to deductibles, self-insured retentions and
policy limits of such Retained Policies), with respect to occurrences on and
prior to the Closing Date, regardless of whether claims are brought prior to or
after the Closing; and (ii) after Closing, the Companies will have the right to
bring claims (whenever brought) under the Retained Policies for all occurrences
that relate to actions, events, conditions and/or operations of the Purchased
Assets and the business of the Companies on and prior to the Closing Date
within the scope of the Retained Policies. 
Buyer and the Companies will be responsible for satisfying any
deductibles, self-insured portions, retentions and other retained amounts on
insurance coverage with respect to losses arising under claims made by Buyer or
the Companies under the Retained Policies; provided that Seller shall be
responsible for any such deductibles, self-insured portions, retentions and
other retained amounts on insurance coverage with respect to any such losses
arising under the Retained Policies to the extent relating to liabilities for
which Seller and the other Non-Company Affiliates are responsible or pursuant
to this Agreement.

 

(c)                                  With respect to the Excess Liability
Policies, Seller covenants and agrees to use its commercially reasonable
efforts such that (i) the Non-Company Affiliates shall, for a period of two
years after Closing, provide the Companies the ability to file claims under
such policies for occurrences on and prior to the Closing Date (the “Sunset Coverage”);
(ii) the Companies will, with respect to the Purchased Assets and their
business, be provided with the benefit of the Sunset Coverage for two years
after the Closing (subject only to deductibles, self-insured retentions and
policy limits of the Sunset Coverage); and (iii) the applicable Non-Company
Affiliates will administer claims on behalf of the Companies under the Sunset
Coverage unless the insurers allow the Companies to administer such
claims.  Seller will be responsible for
any and all premiums associated with the Sunset Coverage.  Buyer and the Companies will be responsible
for satisfying any deductibles, self-insured portions, retentions and other
retained amounts on insurance coverage with respect to losses arising under
claims made by Buyer or the Companies under the Sunset Coverage; provided
that Seller shall be responsible for any such deductibles, self-insured
portions, retentions and other retained amounts on insurance coverage with
respect to any such losses arising under the Sunset Coverage to the extent
relating to

 

28

 

liabilities for which Seller
and the other Non-Company Affiliates are responsible or pursuant to this
Agreement.

 

(d)                                 Except as otherwise set forth in this Section
6.09, Buyer and the Companies shall be responsible for all cost and expenses
incurred by Seller in maintaining and administering claims under the Retained
Policies and the Sunset Coverage; provided that Seller shall be responsible for
such costs and expenses to the extent relating to liabilities for which Seller
and the other Non-Company Affiliates are responsible pursuant to this
Agreement.  Buyer agrees to provide, and
to cause the Companies to provide, such cooperation as Seller may reasonably
request in connection with the matters covered by this Section 6.09.

 

Section 6.10                                                        Tax Matters.

 

(a)                                  Consolidated Tax Returns. 
Seller shall cause to be included in the consolidated federal income Tax
Returns (and the state income Tax Returns of any state that permits
consolidated, combined or unitary income Tax Returns, if any) of the affiliated
group of corporations that includes Seller and OPOS all items of income, gain,
loss, deduction and credit or other items (“Tax Items”) of OPOS through the Closing
Date, shall cause such Tax Returns to be timely filed with the appropriate
Taxing Authorities and shall be responsible for the timely payment (and
entitled to any refund, except to the extent such refund is attributable to the
carryback of losses or other Tax items arising after the Closing Date) of all
Taxes due with respect to the periods covered by such Tax Returns.  To the extent permitted by Law or
administrative practice, (i) the Tax year of OPOS that includes the Closing
Date shall be treated as closing on the Closing Date and (ii) all transactions
occurring on the Closing Date but after the Closing shall have occurred shall
be reported on Buyer’s consolidated United States federal income Tax Return to
the extent permitted by Treasury Regulation Section 1.1502-76(b)(1)(ii)(B) and
shall be similarly reported on other Tax Returns of Buyer or its
Affiliates.  Without the prior written
consent of Seller, Buyer shall not, and shall not permit any of its Affiliates
(including OPOS) to, carry back any Tax Item of OPOS into a consolidated,
combined or unitary income Tax Return filed by Seller or any of its Affiliates
for a taxable period (or portion thereof) ending on or before the Closing Date.

 

(b)                                 Partnership Tax Returns. 
Seller shall prepare or cause to be prepared all federal Tax Returns
(Forms 1065) and all similar state Tax Returns required to be filed by or with
respect to Astoria LP to report to the partners of Astoria LP partnership Tax
Items for Tax periods ending on or before the Closing Date.

 

(c)                                  Cooperation. Buyer and Seller shall cooperate fully, and shall cause their
respective Affiliates, including OPOS and Astoria LP, to cooperate fully, as
and to the extent reasonably requested by either Party, in connection with the
filing of Tax Returns pursuant to this Section 6.10 and any audit, litigation
or other proceeding (each a “Tax Proceeding”) with respect to such Tax Returns.  Such cooperation shall include the retention
and (upon a Party’s request) the provision of records and information which are
reasonably relevant to any such Tax Proceeding and making employees available
on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder.

 

29

 

(d)                                 Transfer Taxes. 
Seller shall file all Tax Returns required to be filed to report Transfer
Taxes imposed on or with respect to the transactions contemplated by this
Agreement, shall be solely liable for and shall pay all such Transfer Taxes,
and shall indemnify, defend and hold harmless Buyer from and against any and
all liability for the payment of such Transfer Taxes and the filing of such Tax
Returns.

 

(e)                                  Obligations Under Tax Sharing Agreement.  From
and after the Closing, the Companies shall have no liability for Tax payments
pursuant to any Tax Sharing Agreements (including the Tax Allocation Agreement)
between the Companies and the Seller Group.

 

(f)                                    Tax Indemnities. 
Seller shall indemnify Buyer, the Companies, and their Affiliates and
hold them harmless from and against any loss, claim, liability, expense, or
other damages attributable to (i) all Taxes (or the non-payment thereof) of the
Companies for all taxable periods ending on or before the Closing Date and the
portion through the end of the Closing Date for any taxable period that
includes (but does not end on) the Closing Date (“Pre-Closing Tax Periods”), (ii) all
Income Taxes of any member of an Affiliated Group of which any Company is or
was a member on or prior to the Closing Date including pursuant to Treasury
Regulation §1.1502-6 or any analogous or similar state, local, or foreign law
or regulations, (iii) all Taxes attributable to the assets or operations
of the Companies for periods (or partial periods) on or before the Closing
Date, and (iv) any and all Taxes of any Person (other than the Companies)
imposed on the Companies as a transferee or successor, by contract (including
pursuant to a Tax Sharing Agreement) or pursuant to any law, rule, or
regulation, which Taxes relate to an event or transaction occurring before
Closing; provided, however, that Seller shall not be
obligated to indemnify Buyer for any such Taxes to the extent such Taxes were
included as a liability in the computation of Closing Date Working Capital
Amount and such liability for Taxes exceed the liability for such Taxes
included in the June 30 Balance Sheets.

 

(g)                                 Straddle Period Taxes.  In
the case of any taxable period that includes (but does not end on) the Closing
Date (a “Straddle Period”),
the amount of any Income Taxes of the Companies for the Pre-Closing Tax Period
shall be determined based on an interim closing of the books as of the close of
business on the Closing Date (and for such purpose, the taxable period of any
partnership or other pass-through entity in which the Companies hold a
beneficial interest shall be deemed to terminate at such time) and the amount
of Taxes (other than Income Taxes) of the Companies for a Straddle Period that
relate to the Pre-Closing Tax Period shall be deemed to be the amount of such
Tax for the entire taxable period multiplied by a fraction the numerator of which
is the number of days in the taxable period ending on the Closing Date and the
denominator of which is the number of days in such Straddle Period.

 

(h)                                 Resolution of Disputes. 
Seller and Buyer agree to work in good faith to resolve any disputes
related to the amount of Tax Items and Taxes attributable to periods prior to
and after the Closing.  Failing such
agreement, the Parties shall refer the matter to an independent accounting firm
of nationally recognized standing, mutually acceptable to both Seller and Buyer
(the “Independent
Accountant”), and the determination of the Independent
Accountant with respect to such matter shall be final and binding.  The fees and expenses of the Independent
Accountant shall be borne equally by Seller and Buyer.

 

30

 

Section
6.11                                                        Certain Restrictions. 
During the Interim Period, Buyer agrees that except as may be agreed in
writing by Seller or as may be expressly permitted pursuant to this Agreement,
it shall not, and shall not permit any of its subsidiaries or Affiliates to,
acquire, develop or construct any electric generation or transmission facility,
enter into any Contract with respect thereto, or otherwise obtain control over
any electric generation or transmission facility, in each case located within
the control area operated by the New York Independent System Operator or take
any action with any Governmental Authority relating to the foregoing, or agree,
in writing or otherwise, to do any of the foregoing, in each case which could
reasonably be expected to materially delay the consummation of the transactions
contemplated hereby or result in the failure to satisfy any condition to
consummation of the transactions contemplated hereby.

 

Section
6.12                                                        No Solicitation.  During
the Interim Period, except as permitted by this Agreement with Buyer and its
Affiliates and Representatives, Seller shall not and shall cause its Affiliates
and officers, directors and employees not to, and Seller shall direct and use
its commercially reasonable efforts to cause its and its Affiliates’ other
Representatives not to, directly or indirectly, initiate, solicit or negotiate,
enter into an agreement with respect to, or provide nonpublic or confidential
information to facilitate, any proposal or offer with respect to any
acquisition, reorganization, exchange, consolidation or similar transaction
involving either Company, or any purchase of any voting or other securities or
partnership interest of either Company, or any material assets or businesses of
the Companies, in a single transaction or a series of related transactions, or
any combination of the foregoing.

 

Section
6.13                                                        Confidentiality.

 

(a)                                  All nonpublic information provided to, or
obtained by, Buyer or its Representatives from Seller or its Representatives in
connection with the transactions contemplated hereby shall be “Information” for
purposes of the letter dated February 13, 2004 between Madison Dearborn Capital
Partners IV, L.P. and Guarantor (the “Confidentiality Agreement”), the terms of
which shall continue in force until the Closing; provided, that Buyer may disclose such information as may be
necessary in connection with seeking Buyer Governmental Approvals and to obtain
financing for the transactions contemplated hereby (as long as the financing
recipient has executed a confidentiality undertaking at least as restrictive as
the Confidentiality Agreement); provided
further, that the obligations of Buyer and its Affiliates under the
Confidentiality Agreement shall terminate as of the Closing Date.

 

(b)                                 From and after the Closing, Seller shall, and
shall cause each of the Non-Company Affiliates to, treat and hold as
confidential any information concerning the business and affairs (including
know-how and trade secrets) of the Companies (the “Confidential Information”),
except (i) as expressly permitted hereunder, (ii) to the extent such
information comes into the public domain after the Closing through no fault of
a Non-Company Affiliate or any Person to whom the Seller released or disclosed
such information, or (iii) to the extent such information was or becomes
available to a Non-Company Affiliate after the Closing Date on a
non-confidential basis from a source other than one of the Companies or Buyer,
refrain from using any of the Confidential Information, and deliver promptly to
Buyer or destroy, at the request and option of Buyer, all tangible embodiments
of the Confidential Information which are in a Non-Company Affiliate’s
possession or under a Non-Company Affiliate’s control, and Seller shall certify
such delivery or destruction in a written certificate given by an officer of
Seller.

 

31

 

Seller acknowledges and
agrees, and shall cause each of the other Non-Company Affiliates to acknowledge
and agree, that the Confidential Information is the property of the Companies;
provided that Seller may retain one copy of the Confidential Information that
it shall treat as confidential pursuant to the terms of this Section 6.13(b).  In the event that any Non-Company Affiliate
is requested or required (by oral question or request for information or
documents in any legal proceeding, interrogatory, subpoena, civil investigative
demand, or similar process) to disclose any Confidential Information, Seller
shall notify Buyer promptly of the request or requirement so that Buyer may
seek an appropriate protective order or waive compliance with the provisions of
this Section 6.13(b).  If, in the
absence of a protective order or the receipt of a waiver hereunder, the
Non-Company Affiliate is, on the advice of counsel, compelled to disclose any
Confidential Information to any Governmental Authority or else stand liable for
contempt, such Non-Company Affiliate may disclose such Confidential Information
to the tribunal; provided that Seller shall use its commercially
reasonable efforts to obtain, at the expense and request of Buyer or the
Companies, an order or other assurance that confidential treatment shall be
accorded to such portion of the Confidential Information required to be
disclosed as Buyer or the Companies shall designate.

 

Section
6.14                                                        Employee and Benefit Matters.

 

(a)                                  Except as set forth in the Transition
Services Agreement (to the extent applicable), on or before the Closing, Seller
shall take all actions necessary, if any, to cause (i) the Companies to cease
to be adopting or participating employers under all Seller Plans and (ii)
Seller and the Non-Company Affiliates to cease to be sponsors or adopting or
participating employers under all Company Plans (and, if Seller or a
Non-Company Affiliate is a sponsor of a Company Plan, Seller shall cause OPOS
to assume such sponsorship).  Seller and
the Non-Company Affiliates shall not, from and after the Closing, have any
responsibility or liability with respect to the Company Plans; provided, that, with respect to the
Retirement Plan, Seller shall timely file or cause the appropriate Non-Company
Affiliate to timely file (to the extent the following forms have not been filed
prior to the Closing) (A) the annual report on Form 5500 for 2004 with the
Employee Benefits Security Administration and (B) PBGC Form 1 or PBGC Form 1-EZ
(as applicable) for 2005 with the PBGC. 
Buyer shall cooperate, and Buyer shall cause its Affiliates to
cooperate, with Seller with respect to the filings described in the preceding
sentence, and Buyer shall provide to Seller such information as Seller may
reasonably request in respect of such filings.

 

(b)                                 Buyer acknowledges and agrees that (i)
certain employees of the Companies are represented by the Utility Workers Union
of America, AFL-CIO and its Local Union No. 1-2 (the “Union”) pursuant to
the terms of the Collective Bargaining Contract, (ii) OPOS will continue to
recognize the Union as the exclusive bargaining representative of the employees
whose employment is covered by the Collective Bargaining Contract, (iii) the
Collective Bargaining Contract will continue to be effective until it expires
by its own terms or is renegotiated, and (iv) OPOS will continue to be bound by
the terms, conditions and provisions of the Collective Bargaining
Contract.  Buyer further acknowledges
that, subject to the terms of the Collective Bargaining Contract and applicable
Law, the employees covered by the Collective Bargaining Contract will continue
to be employed by the Companies following the Closing.

 

32

 

(c)                                  Within 45 days after the Execution Date, but
effective as of the Closing Date, Buyer or an Affiliate of Buyer shall offer
employment (which shall be contingent on the occurrence of the Closing) to each
individual listed on Schedule 6.14(c) (each, an “Affiliate Employee”).  Each such offer of employment shall be
consistent with the provisions of this Section 6.14 and shall remain open for a
period of at least 10 days.  For a period
of at least one year beginning on the Closing Date and subject to the remaining
paragraphs of this Section 6.14 and an individual’s continued employment with a
Company or an Affiliate of a Company, Buyer shall cause each Continuing
Employee to be provided with base salary and wages, bonus opportunity
(including annual incentive compensation but excluding any equity based
arrangements) and health, welfare and 401(k) benefits on a basis substantially
similar in the aggregate to the compensation and health, welfare and 401(k)
benefits provided to such Continuing Employee by Seller and its Affiliates
(including the Companies) immediately prior to the Closing; provided, that with respect to Continuing
Employees whose employment is covered by the Collective Bargaining Contract,
Buyer shall cause the compensation and benefits provided to such employees from
and after the Closing Date to also be consistent with the terms of the
Collective Bargaining Contract.

 

(d)                                 To the extent consistent with the Collective
Bargaining Contract, as applicable, Buyer shall cause, or shall cause the
Companies to cause, each Continuing Employee and his or her eligible dependents
(including all such Continuing Employee’s dependents covered immediately prior
to the Closing Date by a Company Plan or a Seller Plan that is a group health
plan) to be offered coverage under a group health plan maintained by Buyer or
an Affiliate of Buyer that (i) provides medical and dental benefits to the
Continuing Employee and such eligible dependents effective immediately upon the
Closing Date or such other time as set forth in the Transition Services
Agreement and (ii) credits such Continuing Employee, for the year during which
such coverage under such group health plan begins, with any deductibles and
co-payments already incurred during such year under a Company Plan or a Seller
Plan that is a group health plan.

 

(e)                                  Buyer shall cause, or shall cause the
Companies to cause, the employee benefit plans and programs maintained after
the Closing Date for the benefit of the Continuing Employees to recognize each
Continuing Employee’s years of service and level of seniority prior to the
Closing Date with Seller, the Companies and their Affiliates (including service
and seniority with any other employer that was recognized by Seller, the
Companies or their Affiliates for purposes of any applicable Company Plan or
Seller Plan) for purposes of terms of compensation and benefits under such
plans and programs.  Buyer shall cause, or
shall cause the Companies to cause, each employee welfare benefit plan or
program sponsored by Buyer or one of its Affiliates that a Continuing Employee
may be eligible to participate in on or after the Closing Date to waive any
preexisting condition exclusion with respect to participation and coverage
requirements applicable to such Continuing Employee to the same extent such
preexisting condition exclusion was not applicable under the Company Plan or
Seller Plan immediately prior to the Closing Date.

 

(f)                                    Buyer agrees that it assumes all obligations
to provide any required notice under the WARN Act or other applicable Laws,
and, except as otherwise provided herein, to pay all severance payments,
damages for wrongful dismissal and related costs, with respect to the
termination of any employee of the Companies that occurs on or after the
Closing Date.

 

33

 

(g)                                 As soon as practicable following the Closing
Date, Seller shall cause to be transferred from the trustee of the Seller
Savings Plans to the trustee of a defined contribution plan maintained by Buyer
(the “Buyer Savings Plan”)
an amount in cash equal to the aggregate account balances of the Company
Participants under the Seller Savings Plans determined as of the transfer date;
provided, that to the extent any
Company Participant owes any amount to a Seller Savings Plan pursuant to the
terms of a loan (provided such loan is not in default) from such plan to such
Company Participant, an in-kind transfer of such loan shall be made in lieu of
the transfer of cash.  From and after the
date of such transfer, Buyer shall cause the Buyer Savings Plan to assume the
obligations of the Seller Savings Plans with respect to benefits accrued by the
Company Participants under the Seller Savings Plans, and the Seller Savings
Plans shall cease to be responsible therefor. 
The Companies shall be responsible for, and shall contribute to each
Seller Savings Plan as soon as practicable after the Closing Date and prior to
the transfer described in this paragraph, all unpaid (A) pre-tax and after-tax
contributions to such Seller Savings Plan attributable to withholdings from the
compensation of employees of the Companies with respect to periods ending on or
before the Closing Date and (B) employer matching contributions due with
respect to pre-tax and after-tax contributions to such Seller Savings Plan by
employees of the Companies for periods ending on or before the Closing
Date.  For purposes of determining the
amount of such employer matching contributions under each Seller Savings Plan,
the Closing Date shall be deemed to be the last day of a payroll period.  Buyer and Seller shall cooperate in making
all appropriate arrangements and filings, if any, in connection with the
transfer described in this paragraph. 
Further, Buyer and Seller shall cooperate and take such actions as are
necessary to permit the continuation of loan repayments by Continuing Employees
to the Seller Savings Plans by payroll deductions during the period beginning
on the Closing Date and ending on the date of the transfer described in this
paragraph.  Seller represents, covenants
and agrees with respect to each Seller Savings Plan, and Buyer represents,
covenants and agrees with respect to the Buyer Savings Plan, that, as of the
date of the transfer described in this paragraph, such plan will satisfy the
requirements of Sections 401(a), (k), and (m) of the Code and will have
received, or shall timely file for, a favorable determination letter from the
IRS regarding such qualified status and covering amendments required to have
been adopted prior to the expiration of the applicable remedial amendment
period.

 

(h)                                 Claims of Continuing Employees and their
eligible beneficiaries and dependents for medical, dental, prescription drug,
life insurance, and/or other welfare benefits (“Welfare Benefits”) (other than
disability benefits) and/or workers compensation benefits that are incurred on
or before the Closing Date shall be the sole responsibility of Seller, whether
pursuant to a Seller Plan, a Company Plan or otherwise.  Claims of Continuing Employees and their
eligible beneficiaries and dependents for Welfare Benefits (other than
disability benefits) and/or workers compensation benefits that are incurred
after the Closing Date shall be the sole responsibility of Buyer and the
Companies.  For purposes of the preceding
provisions of this paragraph, a medical/dental claim shall be considered
incurred on the date when the medical/dental services are rendered or
medical/dental supplies are provided, and not when the condition arose or when
the course of treatment began, and a claim for workers’ compensation benefits
shall be considered incurred when the injury occurred.  Seller and Buyer hereby agree that any
employee of the Companies or any Affiliate Employee who (i) as of the day
immediately preceding the Closing Date is receiving or entitled to receive
short-term disability benefits under a Seller Plan and who subsequently becomes
eligible to receive long-term disability benefits, or (ii) as of the

 

34

 

day immediately preceding
the Closing Date is receiving or entitled to receive long-term disability
benefits, shall become eligible or continue to be eligible, as applicable, to
receive long-term disability benefits under a Seller Plan that is a long-term
disability plan unless and until such employee is no longer disabled (subject
to the terms of such Seller Plan). 
Claims of Continuing Employees and their eligible beneficiaries and
dependents for short-term or long-term disability benefits that arise from
disabling events that occur on or after the Closing Date shall be the sole
responsibility of Buyer and the Companies.

 

(i)                                     With respect to all employees who terminated
from employment with a Company prior to the Closing Date and who are listed on Schedule
6.14(i) (which schedule shall be updated no later than 30 days following
the Closing Date to reflect an inclusive list of such former employees) and who
have been, or are eligible to be, provided with post-retirement medical,
dental, life insurance and/or other welfare benefit coverage as of the Closing
Date under a Seller Plan or Company Plan, the Companies shall assume and/or
retain any and all liability with respect to the provision of such coverages to
such terminated employees and their eligible dependents and beneficiaries on
and after the Closing Date.  In addition,
the Companies shall extend post-retirement medical, dental, disability, life
insurance and/or other welfare benefit coverages to all Continuing Employees
(and their eligible dependents and beneficiaries) who are, or who are hereafter
found to be or have been, eligible for such coverages; provided, however,
that nothing contained herein shall be construed as limiting or restricting
Buyer’s or a Company’s ability to amend, modify or terminate such
post-retirement medical, dental, disability, life insurance and/or other
welfare benefit coverages after the Closing Date.  Neither Seller nor any of the Non-Company Affiliates
shall have any liability on or after the Closing Date with respect to the
provision of post-retirement medical, dental, disability, life insurance and/or
other welfare benefit coverages for those persons described in the preceding
sentences of this paragraph.

 

(j)                                     Except to the extent required by applicable
Law, Seller shall not pay Continuing Employees (other than Affiliate Employees
who are Continuing Employees, who will be paid by Seller their accrued and
unused vacation as of the Closing Date) their accrued and unused vacation, and
a Company, Buyer or an Affiliate of Buyer, as applicable, shall provide,
without duplication of benefits, all such Continuing Employees with vacation
time rather than cash in lieu of vacation time for all accrued and unused
vacation through the Closing Date to the extent the liability for such accrued
but unused vacation is reflected in the Closing Date Working Capital Amount.

 

(k)                                  As soon as practicable following the Closing
Date, Seller shall cause to be transferred from the trustee of the master trust
that holds the assets of the Retirement Plan as of the Closing Date to the
trustee of a trust established or maintained by Buyer or a Company to hold the
assets of the Retirement Plan after the Closing Date an amount equal to the
Retirement Plan’s share of the assets of the master trust as determined as of
the transfer date in accordance with such master trust, the Code, ERISA, and
the Retirement Plan by the Reliant Energy, Inc. Benefits Committee (the “Benefits Committee”)
(which determination shall be based on the books and records maintained by the
trustee of the master trust).  Such
transfer shall be made in cash or in-kind as agreed to by the Benefits
Committee and Buyer or the Companies. 
Buyer and Seller shall cooperate in making all appropriate arrangements
and filings, if any, in connection with the transfer described in this
paragraph.  In addition,
(i) effective as of the Closing Date,

 

35

 

Seller shall cause the Benefits
Committee to cease to be the plan administrator and to otherwise administer any
aspect of the Retirement Plan as of the Closing Date, and (ii) on the Closing
Date, Buyer shall cause one of the Companies to appoint a new plan
administrator for the Retirement Plan effective as of such date.

 

(l)                                     If, within the one-year period beginning on
the Closing Date, (i) a Continuing Employee (other than a Continuing Employee
whose employment is covered by the Collective Bargaining Contract) voluntarily
terminates his or her employment with Buyer and its Affiliates within 30 days
after the date upon which he or she is notified that the principal place of his
or her employment is changing to a location that is 25 miles or more from the
location of such employee’s principal place of employment immediately prior to
the Closing Date, or (ii) the employment of a Continuing Employee (other than a
Continuing Employee whose employment is covered by the Collective Bargaining
Contract) is terminated by Buyer or an Affiliate of Buyer for a reason other
than cause (as that term is defined in the Severance Plan, but based on the
terms of such plan as in effect on the Execution Date), then, in any such case,
Buyer shall provide such Continuing Employee with severance benefits at least
equal to the severance benefits which such Continuing Employee would have
received under the Severance Plan had the employment of such Continuing
Employee been terminated under circumstances entitling him or her to benefits
under such plan.  Such severance benefits
shall be determined based on the terms of the Severance Plan in effect on the
Execution Date, but Buyer shall take into account such Continuing Employee’s
aggregate service with Buyer and its Affiliates and his or her pre-Closing Date
service recognized pursuant to Section 6.14(e).

 

(m)                               Except as specifically set forth in this
Section 6.14 or in the Transition Services Agreement, Seller agrees to
indemnify and hold harmless Buyer, the Companies and their Affiliates with
respect to all claims and liabilities under any Seller Plan.

 

Section
6.15                                                        Public Announcements. 
Seller and Buyer will consult with each other before issuing, and
provide each other a reasonable opportunity to review and make reasonable
comment upon, any press release or making any public statement with respect to
this Agreement and the transactions contemplated hereby and, except as may be
required by applicable Law or any listing agreement with the NYSE, will not
issue any such press release or make any such public statement prior to such
consultation; provided, that each
of the Parties may issue a press release or make any public statement in
response to specific questions by the press, analysts, investors or those
attending industry conferences or financial analyst conference calls, so long
as any such statements are not inconsistent with or provide more information
than is contained in previous press releases, public disclosures or public
statements made by the other Party, as the case may be; provided further, that each Party may make
disclosures to Persons bound by a confidentiality obligation to the disclosing
Party that covers such disclosed information.

 

Section
6.16                                                        Expenses and Fees. 
Except as expressly provided otherwise herein, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the Party incurring such expenses.

 

36

 

Section
6.17                                                        Agreement to Cooperate.

 

(a)                                  Subject to the terms and conditions of this
Agreement and applicable Law, each Party shall use its commercially reasonable
efforts to fulfill the conditions precedent to the other’s respective
obligations hereunder and to secure all necessary or appropriate waivers,
consents, approvals or authorizations of Governmental Authorities (including by
pursuing all possible appeals) and third-parties required in order to
consummate the transactions contemplated by this Agreement.

 

(b)                                 In addition to and without limitation of the
foregoing, each of Buyer and Seller undertakes and agrees to (i) file (and each
Party agrees to cause any Person that may be deemed to be the ultimate parent
entity or otherwise to control such Party to file, if such filing is required
by Law) as soon as practicable, and in any event prior to 20 Business Days
after the Execution Date, a Notification and Report Form under the HSR Act with
the United States Federal Trade Commission and the Antitrust Division of the
United States Department of Justice, (ii) file as soon as practicable, and in
any event prior to 20 Business Days after the Execution Date, any form or
report required by FERC, (iii) file as soon as practicable any form or report
required by any other Governmental Authority relating to antitrust,
competition, trade or energy regulation matters, and (iv) use commercially
reasonable efforts to receive any clearance or approval required by any
Governmental Authority or applicable Law, in each case, with respect to the
transactions contemplated by this Agreement. 
Each of Buyer and Seller shall (and shall cause any such parent entity
to) (A) respond as promptly as practicable to any inquiries or requests
received from any Governmental Authority for additional information or
documentation, (B) not extend any waiting period under the HSR Act or enter
into any agreement with any Governmental Authority not to consummate the
transactions contemplated by this Agreement, except with the prior consent of
the other Party (which shall not be unreasonably withheld, delayed or
conditioned), and (C) bear 50% of the filing fees made with Governmental
Authorities in connection with the transactions contemplated hereby.  Each Party shall consult and cooperate in the
regulatory review process and (I) promptly notify the other Party of any
written communication to that Party or its Affiliates from any Governmental
Authority and, subject to applicable Law, permit the other Party or its counsel
to review in advance any proposed written communication to any of the
foregoing; (II) not agree to participate, or to permit its Affiliates to
participate, in any substantive meeting or discussion with any Governmental
Authority in respect of any filings, investigation or inquiry concerning this
Agreement or the transactions contemplated hereby unless it consults with the
other Party in advance and, to the extent permitted by such Governmental
Authority, gives the other Party the opportunity to attend and participate
thereat; and (III) subject to applicable Law, furnish the other Party with
copies of all correspondence, filings, and communications (and memoranda
setting forth the substance thereof) between them and their Affiliates and
their respective Representatives on the one hand, and any Governmental
Authority or members of their respective staffs on the other hand, with respect
to this Agreement and the transactions contemplated hereby.  Promptly after the Execution Date, Seller
agrees to cause the Companies to petition the NYISO and ConEd to approve the
bifurcation of work shown on Schedule 6.02(a)(iii) between November and
December of 2005 and March and April of 2006.

 

(c)                                  In addition to and without limiting the
foregoing, each Party shall avoid or eliminate each and every impediment
applicable to such Party under any applicable antitrust, competition, or trade
or energy regulation law (including the Federal Power Act, as amended, and the
FERC’s regulations thereunder, any applicable New York Laws, and the New York
State

 

37

 

Public Service Commission
regulations thereunder; the HSR Act; and, if applicable, the Public Utility
Holding Company Act of 1935, as amended, and the regulations promulgated
thereunder) that may be asserted by any Governmental Authority with respect to
the transactions contemplated hereby so as to enable the Closing to occur no
later than the Termination Date.

 

(d)                                 Seller shall provide reasonable assistance to
Buyer in obtaining (i) on or prior to the 30th day prior to Closing,
Surveys on the Real Property and (ii) on or prior to the Closing Date, the
Title Policies on the Real Property. 
Seller shall deliver to the Title Insurer such affidavits as may be
reasonably necessary to remove the mechanic’s lien and parties in possession
exceptions from the Title Policies.

 

(e)                                  With regard to water intake and discharge
issues at the Facilities, and any related consent orders from Governmental
Authorities, to the extent permitted by applicable Law, Seller shall (A)
promptly notify Buyer of any material written communication from any
Governmental Authority and permit Buyer or its counsel to review in advance any
proposed material written communication to any Governmental Authority, (B) not
agree to participate, or to permit its Affiliates to participate, in any
substantive meeting or discussion with any Governmental Authority unless it
consults with Buyer in advance and gives Buyer the opportunity to attend such
meetings and discussions, and (C) furnish Buyer with copies of all material
correspondence, filings, and communications (and memoranda setting forth the
substance thereof) between them and their Affiliates and their respective
Representatives on the one hand, and any Governmental Authority or members of
their respective staffs on the other hand.

 

Section
6.18                                                        Directors’ and Officers’ Indemnification.

 

(a)                                  The indemnification provisions of each
Company’s Charter Documents as in effect at the Closing shall not be amended,
repealed or otherwise modified for a period of six years from the Closing Date
in any manner that would adversely affect the rights thereunder of individuals
who at the Closing were directors, officers or employees of either Company; provided, that all rights to
indemnification in respect of any action pending or asserted or any claim made
within such period shall continue until the disposition of such action or
resolution of such claim.  From and after
the Closing, Buyer shall assume, be jointly and severally liable for, and
honor, guaranty and stand surety for, and shall cause the Companies to honor,
in accordance with their respective terms, each of the covenants contained in
this Section 6.18, without limit as to time.

 

(b)                                 Buyer shall pay all reasonable expenses,
including reasonable attorneys’ fees, that may be incurred by an indemnified
person in enforcing the indemnity set forth in Section 6.18(a).

 

Section
6.19                                                        Further Assurances. 
Subject to the terms and conditions of this Agreement, at any time or
from time to time after the Closing, at any Party’s request and without further
consideration, the other Party shall execute and deliver to such Party such
other instruments of sale, transfer, conveyance, assignment and confirmation,
provide such materials and information and take such other actions and execute
and deliver such other documents as such Party may reasonably request in order
to consummate the transactions contemplated by this Agreement.  Furthermore, in the event that after the
Closing, Seller or any Non-Company

 

38

 

Affiliate receives any cash
or has title to any other asset primarily related to the operations of the
Companies (other than Excluded Assets and cash or assets to which Seller is
entitled hereunder), Seller shall, and shall cause each such Non-Company
Affiliate, to pay such cash or deliver such other asset to the Companies
promptly, but in any event within five (5) Business Days, after receipt
thereof.

 

Section 6.20                                                        Non-Solicitation.  For
a period of two years from and after the Closing Date, Seller shall not, and
shall cause the Non-Company Affiliates not to, directly or indirectly, cause,
solicit, induce or encourage any Continuing Employees to leave the employment
of the Companies or hire, employ or otherwise engage any such individual
(except pursuant to a general solicitation not targeted at such employees).

 

Section
6.21                                                        Hedging and Energy Management Services.  On
the Execution Date, the Companies have entered into that certain Hedging
Agreement with Morgan Stanley Capital Group Inc. (the “Hedging Agreement”).  On and prior to the Closing Date, Seller
shall not, and shall cause the Non-Company Affiliates and the Companies not to,
amend, modify, waive or terminate any rights or obligations under the Hedging
Agreement or take any action or fail to take any action which could cause the
counterparty to such Hedging Agreement to terminate, suspend or accelerate its
obligations under the Hedging Agreement (other than in connection with the
exercise of the rights of the Non-Company Affiliates and the Companies in the
event of a payment default by the counterparty).

 

Section
6.22                                                        Subsequent Financials Statements.

 

(a)                                  As soon as practicable, (i) but in any event
no later than 30 days after the end of each calendar month, beginning with the
calendar month end immediately preceding the date of this Agreement, Seller
will deliver to Buyer a copy of the consolidated balance sheet, and statement
of operations for the Companies, at and for the year to date periods ending on
the last day of each such month, (ii) but in any event no later than 45 days
after the end of each calendar quarter, beginning with the calendar quarter end
immediately preceding the date of this Agreement, Seller will deliver to Buyer
a copy of the consolidated balance sheet, and statement of operations for the
Companies, at and for the year to date periods ending of the last day of such
calendar quarter, and (iii) but in any event no later than 45 days after the
end of each calendar quarter, beginning with the calendar quarter ending
September 30, Seller will deliver to Buyer a copy of the consolidated cash flow
statement for the Companies.  The
financial statements referred to in this Section 6.22(a) are collectively
referred to as the “Subsequent
Financial Statements”.

 

(b)                                 As soon as practicable, but in any event no
later than 45 days prior to the Closing, Seller shall furnish to Buyer the
audited consolidated balance sheet of the Companies (after elimination of any
Excluded Assets and any liabilities for which Seller and the Non-Company
Affiliates are to remain solely responsible by operation of law or this
Agreement, in each case to the extent permitted by Regulation S-X) as at
December 31, 2004 and December 31, 2003, together with the related audited
consolidated statement of income and consolidated statement of cash flows for
the twelve-month periods ended December 31, 2004 and December 31, 2003.  Not less than 45 days prior to Closing,
Seller shall furnish to Buyer the audited consolidated balance sheet of the
Companies (after elimination of any Excluded Assets and any liabilities for
which

 

39

 

Seller and the Non-Company
Affiliates are to remain solely responsible by operation of law or this
Agreement, in each case to the extent permitted by Regulation S-X) as at
December 31, 2005, together with the related audited consolidated statement of
income and consolidated statement of cash flows for the twelve-month period
ended December 31, 2005; provided, however, that Seller shall not be required
to provide the audited financial statements provided for in this sentence to
Buyer before March 31, 2006 if the Closing has occurred on or prior to such
date and if the Closing occurs prior to such date, Seller shall only be
required to assist Buyer in preparing such financial statement.  The financial statements referred to in this
Section 6.22(b) (other than the financial statement referred to in the
preceding sentence that Seller assists in preparing) are collectively referred
to herein as the “Audited
Financial Statements”.

 

(c)                                  Seller agrees that, when delivered, each of
the Subsequent Financial Statements, and Audited Financial Statements will
fairly present in accordance with GAAP, the financial condition of the
Companies as of the date of presentation and the results of operations for the
periods covered thereby, except in the case of the Subsequent Financial
Statements for the allocation of corporate support and general and
administrative expenses and the allocation of goodwill and its related
accounting in accordance with SFAS No. 142, “Goodwill and Other Intangible
Assets,” and except for the absence of footnote disclosure.  Seller agrees that it shall execute any
management representation letters such that the Audited Financial Statements
will be delivered with unqualified opinions (including to the foregoing effect)
and shall cause the Audited Financial Statements to be addressed to the
Companies.  Seller agrees that it shall
use its commercially reasonable efforts to cause its independent accountants to
provide their written agreement to permit the use of the Audited Financial
Statements (i) in connection with rating agency presentations, bank syndication
meetings, bank books and offerings of securities by Buyer and/or one or more of
the Companies as contemplated by the Commitment Letters, and (ii) subject to such
accounting firm’s normal procedures, in other private or public offerings of
securities as may be reasonably requested by Buyer and/or one or more of the
Companies, together in each case with any comfort letter from Seller’s
independent accountants with respect to such financial statements requested by
Buyer and/or one or more of the Companies.

 

(d)                                 Seller shall, and shall cause the other
Non-Company Affiliates to, use its commercially reasonable efforts to cooperate
with Buyer in connection with Buyer’s financing for the transactions
contemplated hereby and to cause satisfaction of the conditions for receipt of
such financing to be satisfied.  Without
limiting the generality of the foregoing, Seller shall, and shall cause the
other Non-Company Affiliates to, provide information to and permit the
financing sources and their Representatives access to the Purchased Assets and
the business of the Companies, as provided in Section 6.01 hereof, and, upon
the reasonable request of Buyer, participate in meetings with prospective
investors and participate in meetings with rating agencies and any “road shows”,
participate in drafting sessions related to the bank book and offering
materials for the debt financing of Buyer and the Companies contemplated for
the transactions contemplated hereby, use commercially reasonable efforts to
cause the independent accountants that prepared the Audited Financial
Statements to participate in drafting sessions related to any offering
materials for the debt financing contemplated for the transactions contemplated
hereby and make work papers available to Buyer, the agent for the debt
financing and their respective Representatives. 
Out-of-pocket costs incurred by Seller for participation by its external
accountants, outside counsel, and other outside advisors and consultants in the
transactions contemplated in the immediately foregoing sentence shall be paid
by Buyer; 

 

40

 

provided that, for the
avoidance of doubt, the fees of Seller’s independent accountants for
preparation of the Audited Financial Statements shall be borne by Seller.

 

Section
6.23                                                        Funding Commitments. 
Buyer agrees to use reasonable best efforts to obtain the financing
specified in the Debt Commitment Letter on terms no less favorable to Buyer
than those specified therein or other terms reasonably satisfactory to Buyer,
whether with the counterparty to the Debt Commitment Letter or an alternative
financing source.  Buyer shall use reasonable
best efforts to promptly negotiate definitive documentation (“Definitive Financing Documentation”)
for the transactions contemplated by the Commitment Letters and to have such
Definitive Financing Documentation ready for execution at Closing.  Without the prior written approval of Seller,
Buyer agrees not to amend in any respect or waive any right with respect to the
Commitment Letters that could reasonably be expected to materially delay the
consummation of the Closing.

 

Section
6.24                                                        Title Defects.  No
later that 15 days after Buyer has received updated commitments for the
issuance of the Title Policies (the “Updated Title Commitments”), Buyer may
provide a written notice (“Objection
Notice”) to Seller of any Liens, defects or exceptions (other
than Permitted Exceptions) that appear on the Updated Title Commitments, but
did not appear on the Title Commitments. 
If no Objection Notice is given to Seller by the time specified in the
preceding sentence, then Buyer shall be deemed to have accepted all such
defects and exceptions, and all such defects and exceptions shall be deemed to
be Permitted Exceptions hereunder. 
Seller shall have the option to either (i) cure any defect or exception
which is the subject of an Objection Notice, within 60 days after receipt of
the Objection Notice, or (ii) indemnify Buyer against Losses incurred by Buyer
as a result of such defect or exception. 
At Closing, Seller shall indemnify and hold the Title Company harmless
from any exceptions to the Updated Title Commitments created by, through or
under Seller or any of its Affiliates during the period between the issuance of
the Title Commitments and the issuance of the Updated Title Commitments.

 

Section
6.25                                                        Work-Around.  If there are any Assigned
Contracts that require consent of the counterparty thereto for assignment or
that are not by their terms assignable or transferable, Seller shall use
commercially reasonable efforts to obtain, or cause to be obtained, on or prior
to the Closing, any approvals or consents necessary to convey to assign such
Assigned Contracts to the Companies effective as of the Closing.  Buyer shall cooperate with Seller in such
manner as may be reasonably requested in connection therewith, but Buyer shall
not be required to pay any amount to effect such assignment.  In the event any consent or approval to an
assignment contemplated hereby is not obtained on or prior to the Closing Date,
Seller shall continue to use commercially reasonable efforts to obtain any such
approval or consent after the Closing Date until such time as such consent or
approval has been obtained or it shall become reasonably apparent that such
consent or approval is not forthcoming, and Seller shall use commercially
reasonable efforts, in cooperating with Buyer, to provide Buyer with an
appropriate and economically feasible arrangement (a “Work-around”) to
provide that the Companies shall receive the Non-Company Affiliate’s interest
in and to the benefits under any such Contract; provided, that Buyer shall undertake to pay or satisfy the
corresponding liabilities for the enjoyment of such benefit to the extent (a)
Buyer is receiving such interest and benefits and (b) Buyer would have been
responsible therefor if such consent or approval had been

 

41

 

obtained, in which case such
Contract will be treated as an Assumed Contract for all purposes hereunder to
the extent of such Work-around.

 

ARTICLE VII

CONDITIONS TO THE CLOSING

 

Section
7.01                                                        Conditions to the Obligations of Each Party.  The
obligations of the Parties to proceed with the Closing are subject to the
satisfaction on or prior to the Closing Date of all of the following
conditions, any one or more of which may be waived in writing, in whole or in
part, as to a Party by such Party:

 

(a)                                  (i) no judgment, injunction, order or decree
of a court or other Governmental Authority of competent jurisdiction shall be
in effect which has the effect of making the transactions contemplated by this
Agreement illegal or otherwise restraining or prohibiting the consummation of
the transactions contemplated by this Agreement (each Party agreeing to use its
commercially reasonable efforts, including appeals to higher courts, to have
any judgment, injunction, order or decree lifted) and (ii) no material legal
proceedings shall have been instituted against either Seller or Buyer, or any
of the Purchased Assets, seeking to restrain or prohibit the consummation of
the transactions contemplated hereby; provided,
that Seller and Buyer shall use their commercially reasonable efforts to have dismissed,
settle or otherwise resolve such legal proceedings;

 

(b)                                 (i) any waiting period applicable to
consummation of the transactions contemplated by this Agreement under the HSR
Act shall have expired or been terminated, and (ii) all Seller Governmental
Approvals and Buyer Governmental Approvals shall have been filed, made and
obtained, as the case may be, on terms and subject to conditions that would not
reasonably be expected to have a Material Adverse Effect; provided, that a Party whose breach of its
obligations under this Agreement caused a failure to so file, make or obtain
such Seller Governmental Approvals or Buyer Governmental Approvals, as the case
may be, shall be deemed to have waived this condition to the extent of such
failure; and

 

(c)                                  all consents, waivers and approvals listed on
Schedule 7.01(c) shall have been obtained.

 

Section 7.02                                                        Conditions to the Obligations of Buyer.  The
obligation of Buyer to proceed with the Closing is subject to the satisfaction
on or prior to the Closing Date of the following further conditions, any one or
more of which may be waived, in whole or in part, by Buyer:

 

(a)                                  Seller shall have performed in all material
respects all of its obligations (other than its obligations under the first
sentence of Section 6.22(c)) hereunder required to be performed by it at or
prior to the Closing Date, including, without limitation, its obligation to
make the deliveries contemplated by Section 2.04 hereof;

 

(b)                                 the representations and warranties of Seller
contained in this Agreement (without regard to “materiality”, “material adverse
effect”, Material Adverse Effect or similar qualifiers, without regard to any
updates to the Seller’s Disclosure Schedules and without regard to any notice
of any breach of any representation or warranty given on or after the Execution
Date) shall

 

42

 

be true and correct as of
the Closing Date (except to the extent such representations and warranties
expressly relate to an earlier date, in which case as of such earlier date),
except for failures to be true and correct that would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect;

 

(c)                                  Each of the conditions to the counterparties’
obligations in the Debt Commitment Letter shall have been satisfied in full
(other than conditions relating to (i) funding pursuant to the Equity
Commitment Letter or similar undertaking regarding equity funding by Buyer and
its Affiliates, (ii) the delivery of documents at the closing by the borrower,
the Sponsors (as defined in the Debt Commitment Letter) or their Affiliates
pursuant to the financing documents executed in accordance with the Debt
Commitment Letter, (iii) costs, fees, expenses and other compensation
contemplated by the Debt Commitment Letter or related letters payable by the
borrower, the Sponsors (as defined in the Debt Commitment Letter) or their
Affiliates to the lead arrangers, other lenders and administrative agents, and
(iv) a breach in any material respect by the borrower, the Sponsors (as defined
in the Debt Commitment Letter) or their Affiliates under the Debt Commitment
Letter or fee letters; provided that the failure to meet a condition under the
Debt Commitment Letter would not be covered by this clause (iv) unless there
was a corresponding breach that led to the failure of the condition);

 

(d)                                 Seller shall have delivered to Buyer not less
than 45 days prior to Closing the Audited Financial Statements, and there shall
be no changes in the Audited Financial Statements compared to the corresponding
unaudited financial statements described in Section 4.04 that could reasonably
be expected to have, individually or in the aggregate, a Material Adverse
Effect, disregarding any changes solely by virtue of making the adjustments
described in the GAAP exceptions in Section 4.04(a) and the eliminations
described in Section 6.22(b);

 

(e)                                  There shall have been no Material Adverse
Effect since each of June 30, 2005 and the Execution Date;

 

(f)                                    The Hedging Agreement shall remain in full
force and effect and no default shall have arisen under the Hedging Agreement
and no right of termination, amendment or modification of the Hedging Agreement
shall have arisen; and

 

(g)                                 Buyer shall have received a certificate
signed on behalf of Seller by an executive officer of Seller indicating that
the conditions provided in Section 7.02(a) and Section 7.02(b) have been
satisfied.

 

Section 7.03                                                        Conditions to the Obligations of Seller.  The
obligation of Seller to proceed with the Closing is subject to the satisfaction
on or prior to the Closing Date of the following further conditions, any or
more of which may be waived, in whole or in part, by Seller:

 

(a)                                  Buyer shall have performed in all material
respects all of its obligations hereunder required to be performed by it at or
prior to the Closing Date;

 

(b)                                 the representations and warranties of Buyer
contained in this Agreement (i) that are qualified as to “material adverse
effect” shall be true and correct in as of the Closing Date, except to the
extent such representations and warranties expressly relate to an earlier date
(in which case as of such earlier date), and (ii) those not so qualified shall
be true and correct as of

 

43

 

the Closing Date, except to
the extent such representations and warranties expressly relate to an earlier
date (in which case as of such earlier date), except for failures of the
representations and warranties referred to in this clause (ii) to be true and
correct as do not and would not reasonably be expected to have, in the
aggregate, a material adverse effect on Buyer’s ability to perform its
obligations hereunder; and

 

(c)                                  Seller shall have received a certificate
signed on behalf of Buyer by an executive officer of Buyer indicating that the
conditions provided in Section 7.03(a) and Section 7.03(b) have been satisfied.

 

ARTICLE
VIII

TERMINATION

 

Section
8.01                                                        Termination.  This Agreement may be
terminated and the consummation of the transactions contemplated hereby may be
abandoned at any time prior to the Closing only under one of the following
circumstances:

 

(a)                                  by mutual written consent of Seller and
Buyer;

 

(b)                                 by either Seller or Buyer:

 

(i)                                                             if the Closing has not occurred on or before
one year after the Execution Date (such date, as it may be extended under
clause (A) of this paragraph, the “Termination Date”) provided, that (A) each of the Parties shall have the
option, in its sole discretion, to extend the Termination Date for an
additional period of time not to exceed 90 days if all other conditions to
Closing (other than the condition described in the following clause (B)) are
satisfied or capable of then being satisfied and the sole reason (other than
the condition described in the following clause (B)) that the Closing has not
occurred by such date is that the condition set forth in Section 7.01(a) or (b)
has not been satisfied due to the failure to obtain the necessary waivers,
consents, approvals and authorizations under applicable Laws or a judgment, injunction,
order or decree of a court or other Governmental Authority of competent
jurisdiction shall be in effect and Buyer or Seller is still attempting to
obtain such necessary waivers, consents, approvals and authorizations under
applicable Laws, or is contesting (x) the refusal of the relevant Governmental
Authority to give such consents or approvals or (y) the entry of any such
judgment, injunction, order or decree, in court or through other applicable
proceedings; (B) each of the Parties shall have the option, in its sole
discretion, to extend the Termination Date for an additional period of time,
not to exceed 90 days if all other conditions to Closing (other than the
condition described in the preceding clause (A) to the extent applicable) are
satisfied or capable of being satisfied and the sole reason (other than the
condition described in the preceding clause (A) to the extent applicable) that
the Closing has not occurred by such date is that the condition set forth in
Section 7.01(a)(ii) has not been satisfied due to the existence of material
legal proceedings; and (C) the right to terminate this Agreement pursuant to
this Section 8.01(b)(i) shall not be available to any Party whose breach of any
provision of this Agreement has been the cause of, or resulted in, the failure
of the Closing to occur by the Termination Date; or

 

44

 

(ii)                                                          if any court of competent jurisdiction in the
United States or other United States Governmental Authority shall have issued a
final order, decree or ruling or taken any other final action restraining,
enjoining or otherwise prohibiting the consummation of the transactions
contemplated by this Agreement and such order, decree, ruling or other action
is or shall have become final and nonappealable, provided, that the Party seeking to terminate this Agreement
pursuant to this Section 8.01(b)(ii) shall have used commercially reasonable
efforts to prevent the entry of and to remove such order, decree, ruling or
final action;

 

(c)                                  by Buyer if there has been a material breach
by Seller of any representation, warranty, covenant or agreement contained in
this Agreement which (x) would result in a failure of a condition set forth in
Section 7.02(a) or (b) and (y) if curable, cannot be cured prior to the
Termination Date or is not cured within 20 days following written notification
of such breach or longer period as may be reasonably necessary to cure such
breach, but not to exceed 90 days in the aggregate;

 

(d)                                 by Seller if there has been a material breach
by Buyer of any representation, warranty, covenant or agreement contained in
this Agreement which (x) would result in a failure of a condition set forth in
Section 7.03(a) or (b) and (y) if curable cannot be cured prior to the Termination
Date or is not cured within 20 days following written notification of such
breach or longer period as may be reasonably necessary to cure such breach, but
not to exceed 90 days in the aggregate; and

 

(e)                                  by Seller, on or prior to the tenth (10th)
Business Day after the occurrence of a Specified Termination Event.

 

The Party desiring to
terminate this Agreement pursuant to Section 8.01 (other than pursuant to
Section 8.01(a)) shall give notice of such termination to the other Party.

 

Section
8.02                                                        Effect of Termination.  In
the event of termination of this Agreement by either Seller or Buyer prior to
the Closing pursuant to the provisions of Section 8.01, this Agreement shall
forthwith become void, and there shall be no liability or further obligation on
the part of Buyer or Seller or their respective officers or directors (except
pursuant to Section 6.01(b), Section 6.13, Section 6.16, this Section 8.02,
Section 9.03, Section 9.04(a), Section 9.04(b), Section 9.04(d), Section
9.04(f), Section 10.04 and Section 10.05, all of which shall survive the
termination); provided, that
nothing in this Section 8.02 shall relieve any Party from liability for any
willful breach of this Agreement by such Party prior to termination of this
Agreement.  Notwithstanding anything
herein to the contrary, in the event that this Agreement is terminated by
Seller pursuant to and in accordance with Section 8.01(e), Buyer shall pay to
Seller an aggregate amount of $26,125,000 (the “Break-Up Fee Payment”) and Seller agrees
that the Break-Up Fee Payment shall be the sole and exclusive remedy of Seller,
its Affiliates, and its and their Representatives against the Buyer, its
Affiliates and its their Representatives related to this Agreement and the
transactions contemplated hereby in the event of a termination pursuant to
Section 8.01(e).

 

45

 

ARTICLE IX

INDEMNIFICATION

 

Section
9.01                                                        Survival.  All representations,
warranties, covenants and agreements contained herein, and the right to commence
any Claim with respect thereto, shall terminate upon the first anniversary of
the Closing Date, except that (a) the representations and warranties
contained in the Excluded Sections, Section 5.01 and Section 5.02 shall survive
without limitation as to time, (b) the representations and warranties contained
in Section 4.11 and Section 4.12 shall survive until the 18 month anniversary
of the Closing Date, (c) the representations and warranties contained in
Section 4.09 shall survive until the end of the period of the applicable
statute of limitations (taking into account extensions thereof) and
(d) the covenants and agreements of the Parties contained herein that by
their terms are to be performed on or following the Closing Date (including
covenants and agreements in this Article IX, including Section 9.02(a)(iii),
Section 9.02(a)(iv), and Section 9.02(a)(v)), shall survive the Closing Date
and continue in effect in accordance with their terms; provided, that in the event written notice
of any Claim for indemnification under Section 9.02(a)(i), Section 9.02(a)(ii),
Section 9.02(b)(i), or Section 9.02(b)(ii) shall have been given in accordance
herewith within the applicable survival period setting forth such Claim in
reasonable detail (including, to the extent known, a reasonable specification
of the legal and factual basis for such Claim and the Loss suffered or
incurred), the representations, warranties, covenants and agreements that are
the subject of such indemnification Claim shall survive with respect to that
Claim until such time as the Claim is fully and finally resolved.  Without limiting the generality of the
foregoing, in the event that notice of a Third-Party Claim has been asserted by
an Indemnified Party prior to the expiration of the applicable survival period
and otherwise in accordance with this Agreement, the obligation of the
Indemnifying Party to indemnify with respect to any Losses with respect to the
matter set forth in such Third-Party Claim was made shall survive
notwithstanding termination of the survival period and shall include the
obligation to indemnify for Losses with respect to the matter set forth in such
Third-Party Claim was made that were suffered both before and after expiration
of the applicable survival period and that are otherwise indemnifiable under
this Agreement.

 

Section
9.02                                                        Indemnification.

 

(a)                                  Subject to the provisions of this Article IX,
from and after the Closing, Seller shall indemnify and hold the Buyer
Indemnified Group harmless from and against any and all Losses, whether arising
out of contract, tort, strict liability, other Law or otherwise, incurred or
suffered by any of them to the extent arising out of or resulting from:

 

(i)                                                             any breach as of the Execution Date and/or
Closing Date of a representation or warranty made by Seller herein or in any
certificate delivered pursuant to this Agreement;

 

(ii)                                                          any breach of any covenant or agreement of
Seller herein (other than its obligations under the first sentence of Section
6.22(c) to the extent relating to the Subsequent Financial Statements);

 

46

 

(iii)                                                       the business or operations of any current,
former or future Non-Company Affiliate (including the Seller and the
Guarantor), whenever and wherever conducted (other than to the extent directly
attributable to the business of the Companies conducted at the Facilities);

 

(iv)                                                      the Excluded Assets;

 

(v)                                                         the Seller Environmental Liabilities; and

 

(vi)                                                      if the certificate of insurance described in
Section 2.04(h) is not delivered at or prior to the Closing for the Cleanup
Cost Cap insurance policy issued by C&I Commerce and Industry Insurance
Company, claims that would be recoverable by Buyer under such policy if Buyer
were a named insured under such policy.

 

Notwithstanding anything to
the contrary in this Agreement, Seller shall not be liable for any Losses with
respect to the matters set forth in Section 9.02(a)(i) (other than Losses
arising out of or resulting from a breach of any of the representations and
warranties made in the Excluded Sections) or Section 9.02(a)(ii) unless (x) a
Claim is timely asserted during the survival period specified in Section 9.01,
(y) the Loss with respect to the particular act, circumstance, development,
event, fact, occurrence or omission exceeds $100,000 (aggregating all Losses
arising from substantially identical facts) and (z) the aggregate of all Losses
under Section 9.02(a)(i) and Section 9.02(a)(ii) exceeds, on a cumulative
basis, 1.5% of the Final Purchase Price (and then only to the extent of such
excess); provided, that for
purposes of determining whether such deductible has been attained, all
qualifications as to “material,” “materiality,” “Material Adverse Effect” or
similar exception or qualifier contained in a representation shall be
disregarded.  Notwithstanding anything to
the contrary in this Agreement, (A) the aggregate liability of Seller to the
Buyer Indemnified Group arising under or related to the matters set forth in
Section 9.02(a)(i) (other than Losses arising out of or relating to a breach of
the Excluded Sections) and Section 9.02(a)(ii) (to the extent arising out or
relating to a breach of the Included Covenants), whether based in contract,
tort, strict liability, other Law or otherwise, shall not exceed 50% of the
Final Purchase Price, (B) Seller shall have no liability to the Buyer
Indemnified Group arising under or relating to this Agreement to the extent the
Buyer Indemnified Group has recovered the applicable Losses from Guarantor, and
(C) the limitations on indemnification set forth in this paragraph shall not
apply to the matters set forth in Section 9.02(a)(i) to the extent relating to
the representations and warranties made in the Excluded Sections, the matters
set forth in Section 9.02(a)(ii) (except solely to the extent relating to an
Included Covenant), or the matters set forth in Section 9.02(a)(iii), Section
9.02(a)(iv), Section 9.02(a)(v) or Section 9.02(a)(vi).  Notwithstanding anything herein to the
contrary, the aggregate liability of Seller to the Buyer Indemnified Group
arising under or related to all matters set forth in this Agreement (including
those otherwise subject to clause (A) foregoing), whether based in contract,
tort, strict liability, other Law or otherwise, shall not exceed 100% of the
Final Purchase Price.  Notwithstanding
anything herein to the contrary, Seller’s indemnification obligation under
Section 9.02(a)(vi) shall terminate upon the earlier to occur of (i) the
delivery of the certificate of insurance for such policy described in Section
2.04(h) and Buyer and the Companies being effectively named as the named
insureds under such policy and (ii) the expiration of the term of such policy.

 

47

 

(b)                                 Subject to the provisions of this Article IX,
from and after the Closing, Buyer hereby agrees to indemnify and hold the
Seller Indemnified Group harmless from and against any and all Losses, whether
arising out of contract, tort, strict liability, other Law or otherwise,
actually incurred by any of them to the extent arising out of or resulting
from:

 

(i)                                                             any breach as of the Execution Date or the
Closing Date of a representation or warranty made by Buyer herein;

 

(ii)                                                          any breach of any covenant or agreement of
Buyer herein;

 

(iii)                                                       the status of any of the Non-Company
Affiliates as former partners of Astoria LP, whether attributable to the
ownership or operation of the Purchased Assets and the Companies before or
after the Closing Date, regardless of when the applicable Claims are asserted;

 

(iv)                                                      any of the matters listed on Schedule 4.06
(other than such matters which are also listed on Schedule 6.06),
whether attributable to the ownership or operation of the Purchased Assets and
the Companies before or after the Closing Date, regardless of when the applicable
Claims are asserted;

 

(v)                                                         except to the extent arising out of resulting
from (A) a breach by Seller of the representations and warranties set forth in
Section 4.12, (B) the Seller Environmental Liabilities or (C) indemnification
claims recoverable pursuant to Section 9.02(a)(vi), Environmental Laws or any
environmental conditions to the extent relating to the Purchased Assets or the
Companies, whether attributable to the ownership or operation of the Purchased
Assets and the Companies before or after the Closing Date, regardless of when
the applicable Claims are asserted;

 

(vi)                                                      except to the extent attributable to breaches
of such Contracts by the Seller Indemnified Group before the Closing, any of
the Assigned Contracts or the Iroquois Contract, whether attributable to the
ownership or operation of the Purchased Assets and the Companies before or
after the Closing Date, regardless of when the applicable Claims are asserted;
and

 

(vii)                                                   in the event the Gunderboom Contract is not
assigned to Buyer, any breach by Astoria LP of the Gunderboom Contract,
attributable to the ownership or operation of the Purchased Assets and the
Companies after the Closing Date, regardless of when the applicable Claims are
asserted.

 

Notwithstanding anything to
the contrary in this Agreement, Buyer shall not be liable (A) for any Losses
with respect to the matters set forth in Section 9.02(b)(i) or Section
9.02(b)(ii) unless a Claim is timely asserted during the survival period
specified in Section 9.01 and (B) to the extent that the Losses for which the
Seller Indemnified Party is seeking indemnification is a matter for which
Seller has agreed to be responsible pursuant to this Agreement or for which a
Buyer Indemnified Party is entitled to indemnification under this Agreement.

 

(c)                                  THE PARTIES INTEND AND AGREE
THAT THE INDEMNITY OBLIGATIONS SET FORTH IN THIS SECTION 9.02 ARE INTENDED TO
AND

 

48

 

SHALL
EXTEND TO AND COVER ANY AND ALL LOSSES RESULTING FROM OR CAUSED IN WHOLE OR IN
PART BY ANY ACTIVE, PASSIVE, AFFIRMATIVE, SOLE, CONCURRENT OR OTHER NEGLIGENCE,
STRICT LIABILITY OR OTHER FAULT OF, REGARDLESS OF WHETHER SUCH LOSSES RESULT
FROM OR ARE CAUSED IN WHOLE OR IN PART BY ANY ALLEGED OR ACTUAL NEGLIGENCE OR
OTHER FAULT OF, (I) ANY OF BUYER INDEMNIFIED PARTIES WITH RESPECT TO SECTION
9.02(a), AND (II) ANY OF THE SELLER INDEMNIFIED PARTIES WITH RESPECT TO SECTION
9.02(b).

 

Section 9.03                                                        Waiver of Other Representations.

 

(a)                                  NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO
THE CONTRARY, IT IS THE EXPLICIT INTENT OF EACH PARTY HERETO, AND THE PARTIES
HEREBY AGREE, THAT NO PARTY OR ANY OF ITS AFFILIATES OR REPRESENTATIVES HAS
MADE OR IS MAKING ANY REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR
IMPLIED, WRITTEN OR ORAL, INCLUDING ANY IMPLIED REPRESENTATION OR WARRANTY AS
TO THE CONDITION, MERCHANTABILITY, USAGE, SUITABILITY OR FITNESS FOR ANY
PARTICULAR PURPOSE WITH RESPECT TO THE COMPANY INTERESTS, THE COMPANIES OR ANY
OF THE PURCHASED ASSETS, OR ANY PART THEREOF, EXCEPT THOSE EXPRESS
REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS AGREEMENT.  IN PARTICULAR, AND WITHOUT IN ANY WAY
LIMITING THE FOREGOING, (I) SELLER MAKES NO REPRESENTATION OR WARRANTY REGARDING
ANY ENVIRONMENTAL MATTERS EXCEPT AS EXPRESSLY SET FORTH IN SECTION 4.12, (II)
SELLER MAKES NO REPRESENTATION OR WARRANTY TO BUYER WITH RESPECT TO ANY
FINANCIAL PROJECTIONS OR FORECASTS RELATING TO THE COMPANIES OR THE PURCHASED
ASSETS, AND (III) SELLER MAKES NO REPRESENTATION OR WARRANTY TO BUYER WITH
RESPECT TO INFORMATION PROVIDED TO BUYER IN RESPONSE TO QUESTIONS PRESENTED BY
BUYER OR OTHER INFORMATION PROVIDED TO BUYER RELATING TO THE COMPANIES OR THE
PURCHASED ASSETS; PROVIDED, THAT
THIS SENTENCE SHALL NOT LIMIT THE EXPRESS REPRESENTATIONS, WARRANTIES,
COVENANTS AND AGREEMENTS (INCLUDING INDEMNITIES) CONTAINED IN THIS AGREEMENT.

 

(b)                                 EXCEPT FOR THOSE EXPRESS REPRESENTATIONS,
WARRANTIES, COVENANTS AND AGREEMENTS (INCLUDING INDEMNITIES) CONTAINED IN THIS
AGREEMENT, SELLER’S INTERESTS IN THE COMPANIES ARE BEING TRANSFERRED THROUGH
THE SALE OF THE COMPANY INTERESTS “AS IS, WHERE IS, WITH ALL FAULTS,” AND
SELLER EXPRESSLY DISCLAIMS ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND OR
NATURE, EXPRESS OR IMPLIED, AS TO THE CONDITION, VALUE OR QUALITY OF THE
COMPANIES AND THE PURCHASED ASSETS OR THE PROSPECTS (FINANCIAL OR OTHERWISE),
RISKS AND OTHER INCIDENTS OF THE COMPANIES AND THE PURCHASED ASSETS.

 

(c)                                  BUYER ACKNOWLEDGES THAT IT
HAS INVESTIGATED TO ITS SATISFACTION, THE CONDITION AND SUITABILITY OF THE
PURCHASED ASSETS AND ALL MATTERS AFFECTING THE VALUE OR DESIRABILITY OF

 

49

 

THE
PURCHASED ASSETS, INCLUDING, BUT NOT LIMITED TO, THE OPERATIONAL ASPECTS OF
SUCH PURCHASED ASSETS, POTENTIAL ENVIRONMENTAL HAZARDS ARISING FROM THE
PRESENCE ON OR ABOUT THE PROPERTY OF HAZARDOUS SUBSTANCES, INCLUDING ASBESTOS,
FORMALDEHYDE, RADON GAS, LEAD-BASED PAINT, OTHER LEAD CONTAMINATION, FUEL OR
CHEMICAL STORAGE TANKS, CAVERNS, PIPELINES, ELECTROMAGNETIC FIELDS,
PHOSPHO-GYPSUM OR POLYCHLORINATED BIPHENYLS. EXCEPT AS EXPRESSLY PROVIDED
HEREIN, NEITHER SELLER, NOR ITS AFFILIATES MAKES OR HAS MADE ANY
REPRESENTATIONS OR WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, WRITTEN OR ORAL,
AS TO THE PHYSICAL CONDITION OF THE PURCHASED ASSETS, THE USES OF THE PURCHASED
ASSETS OR ANY LIMITATIONS THEREON, THE INCOME TO BE DERIVED THEREFROM, THE
COSTS OF OPERATION, COMPLIANCE WITH LAW, AND/OR ANY REQUIREMENTS FOR
ALTERATIONS OR IMPROVEMENTS TO COMPLY WITH LAW, INCLUDING ANY REPRESENTATIONS
OR WARRANTIES PERTAINING TO ZONING, ENVIRONMENTAL OR OTHER LAW; THE UTILITIES,
PIPELINES OR OTHER PHYSICAL EQUIPMENT AND FIXTURES ON THE PROPERTY, OR ANY  OTHER ASPECT OF THE ECONOMIC OPERATIONS ON
THE PROPERTY; THE CONDITIONS OF THE SOILS, WATER OR GROUNDWATER OF, OR IN THE
VICINITY OF, THE PROPERTY; THE PRESENCE OR ABSENCE OF ELECTROMAGNETIC FIELDS,
TOXIC MATERIALS OR HAZARDOUS SUBSTANCES ON OR UNDER THE PROPERTY OR IN THE
VICINITY OF SUCH PROPERTY; OR ANY OTHER MATTER BEARING ON THE USE, VALUE OR
CONDITION OF THE PURCHASED ASSETS. 
NOTHING IN THIS SECTION 9.03(C) SHALL BE CONSTRUED TO LIMIT, EITHER
DIRECTLY OR INDIRECTLY, ANY CLAIM BY A MEMBER OF THE BUYER INDEMNIFIED GROUP
FOR BREACH OF, OR INDEMNIFICATION UNDER, THIS AGREEMENT.

 

Section 9.04                                                        Waiver of Remedies; Certain Limitations. 
Notwithstanding anything in this Agreement to the contrary:

 

(a)                                  the Parties hereby agree that, except for
actual fraud, neither Party shall have any liability, and neither Party shall
make any Claim, for any Loss or other matter, under, relating to or arising out
of this Agreement or any other document, agreement, certificate or other matter
delivered pursuant hereto, whether arising out of contract, tort, strict
liability, other Law or otherwise, except as expressly set forth in Section
6.01(b), Section 6.10(f), Section 8.01, Section 8.02, Section 10.05 and this
Article IX.  The Parties agree that
irreparable damage would occur in the event any of the provisions of this Agreement
were not to be performed in accordance with the terms hereof and that the
Parties shall be entitled to specific performance of the terms hereof in
addition to any other remedies at Law or in equity; provided that in no
event shall this specific performance provision be construed to require Buyer
to accept debt financing on terms less favorable to Buyer than those specified
in the Debt Commitment Letter or other terms reasonably satisfactory to Buyer
or to require acceptance by Buyer or its Affiliates of more equity financing
than specified in the Equity Commitment Letter;

 

50

 

(b)                                 NO PARTY SHALL BE LIABLE FOR SPECIAL,
PUNITIVE, EXEMPLARY, INCIDENTAL, CONSEQUENTIAL OR INDIRECT DAMAGES OR LOST
PROFITS, WHETHER BASED ON CONTRACT, TORT, STRICT LIABILITY, OTHER LAW OR
OTHERWISE AND WHETHER OR NOT ARISING FROM THE OTHER PARTY’S SOLE, JOINT OR
CONCURRENT NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT, EXCEPT SUCH DAMAGES
THAT ARE PAYABLE TO A THIRD PARTY WITH RESPECT TO A THIRD PARTY CLAIM FOR WHICH
ANY PERSON IS SEEKING INDEMNIFICATION HEREUNDER;

 

(c)                                  in calculating any amount of Losses
recoverable pursuant to Section 9.02(a) or Section 9.02(b), the amount of such
Losses shall be reduced by (i) any insurance proceeds actually received
relating to such Loss, net of any related deductible and any expenses to obtain
such proceeds, (ii) any recoveries from third parties pursuant to
indemnification (or otherwise) with respect thereto, net of any expenses
incurred by the Indemnified Party in obtaining such third party payment and
(iii) the amount of any net Tax benefit resulting from the incurrence or
payment of such Losses.  The Parties
agree to treat any indemnification payment pursuant to this Article IX as an
adjustment to the Final Purchase Price for all Tax purposes unless otherwise
required by applicable Law;

 

(d)                                 no Representative or Affiliate of Seller
shall have any personal liability to Buyer or any other Person as a result of
the breach of any representation, warranty, covenant, agreement or obligation
of Seller in this Agreement and no Representative or Affiliate of Buyer shall
have any personal liability to Seller or any other Person as a result of the
breach of any representation, warranty, covenant, agreement or obligation of
Buyer in this Agreement;

 

(e)                                  no Person shall be entitled to
indemnification under this Article IX if, the party from whom indemnification
is sought can demonstrate that on the Closing Date, such Person seeking
indemnification had Knowledge of the breach of representation, warranty,
covenant or agreement with respect to which such Person is seeking
indemnification under this Article IX; provided, if such Person seeking
indemnification is informed by the other Party or its Representatives after the
Execution Date of such other Party’s breach that existed on the Execution Date,
the informed Person and its Affiliates shall not be precluded as a result of
this Section 9.04(e) from seeking indemnification under this Article IX for
breach as of the Execution Date.  Buyer
shall promptly notify Seller of any breach of any representation, warranty,
covenant or agreement of Seller or Buyer made hereunder of which Buyer has
Knowledge;

 

(f)                                    each Party shall have a duty to use
commercially reasonable efforts to mitigate any Loss suffered by such Party in
connection with this Agreement in accordance with, and to the extent required
under, applicable Law; provided,
that the failure of a Party to mitigate any Losses shall not relieve an
indemnifying Party of its indemnification obligations hereunder with respect to
such Losses except to the extent such indemnifying Party shall have been
prejudiced by such failure;

 

(g)                                 Seller shall have no liability for any Losses
that represent the cost of repairs, replacements or improvements which enhance
the value of the repaired, replaced or improved

 

51

 

asset above its value on the
Closing Date or which represent the cost of repair or replacement exceeding the
reasonable cost of repair or replacement;

 

(h)                                 except for its contractual rights under this
Agreement, and except for claims for actual fraud, Buyer hereby releases,
waives and discharges forever Seller and the Non-Company Affiliates from all
present and future Claims and from all Losses, present and future, that are or
may be attributable to the matters described in Section 9.02(b), including cost
recovery or contribution actions pursuant to Environmental Law;

 

(i)                                     Seller shall have no liability for any Losses
for any particular matter for which a claim for indemnification has been
asserted to the extent the Losses with respect to such matter are included as a
liability in the computation of Closing Date Working Capital Amount and such
Losses exceed the liability for such matter included in the June 30 Balance
Sheets; and

 

(j)                                     Effective as of the Closing Date, Seller, on
behalf of itself and each Non-Company Affiliate, hereby waives, releases and
discharges the Companies and each of their Affiliates from any and all Losses
of any kind or nature whatsoever (including, without limitation, in respect of
rights of contribution and indemnification), in each case whether absolute or
contingent, liquidated or unliquidated, known or unknown, and whether arising
under any agreement or understanding or otherwise at law or equity, and Seller
shall not seek to recover any amounts in connection therewith or thereunder
from Buyer, the Companies or any of their respective Affiliates; provided,
however, such waiver shall not in any manner restrict, limit, extinguish or
otherwise adversely affect Seller’s rights under this Agreement or the rights
of Seller to be paid the RES Payable to the extent accrued as current liability
in the computation of Closing Date Working Capital Amount.  Without limiting the generality of the
foregoing, Seller acknowledges and agrees that upon and after the Closing,
neither of the Companies shall have any liability or obligation to indemnify,
hold harmless or otherwise pay, reimburse or make Seller or any Non-Company
Affiliate whole for or on account of any indemnification claim by a member of
the Buyer Indemnified Group for any breach of any representation, warranty,
covenant or agreement of Seller contained in this Agreement and neither Seller
nor any Non-Company Affiliate shall have any right of indemnification,
contribution or subrogation against the Companies or Buyer.  Seller shall indemnify and hold each member
of the Buyer Indemnified Group harmless for any Losses suffered by any member
of the Buyer Indemnified Group as a result of any Non-Company Affiliate making
a claim or defense released by Seller hereunder.

 

Section 9.05                                                        Procedures for Indemnification.

 

(a)                                  Whenever a Claim shall arise for
indemnification resulting from or in connection with a Claim by a third party
(a “Third-Party Claim”)
(other than under Section 9.02(b)(iv)), the Person entitled to indemnification
(the “Indemnified Party”)
shall promptly notify the Party from which indemnification is sought (the “Indemnifying Party”)
of such Claim and, when known, the facts constituting the basis of such Claim; provided, that failure to notify the
Indemnifying Party shall not relieve the Indemnifying Party of any liability it
may have to the Indemnified Party, except to the extent that the Indemnifying
Party has been materially prejudiced by such failure.  Following receipt of notice of any such
Third-Party Claim, and unless (i) the assumption of such defense by the
Indemnifying Party would be inappropriate due

 

52

 

to a conflict of interest,
(ii) such Third-Party Claim (or the facts or allegations related to such
Third-Party Claim) involves criminal allegations or seeks equitable or
injunctive relief, (iii) the Indemnifying Party does not have the resources to
satisfy such Third-Party Claim or (iv) such Third-Party Claim, if adversely
determined, could reasonably be expected to materially adversely affect the
business or reputation of the Indemnified Party or its Affiliates, the
Indemnifying Party shall have the option, at its cost and expense, to assume
the defense of such Third-Party Claim and to retain counsel (not reasonably
objected to by the Indemnified Party) to defend any such claim or legal
proceeding, and the Indemnifying Party shall not be liable to the Indemnified
Party for any fees of other counsel or any other expenses (except as expressly
provided to the contrary herein) with respect to the defense of such Claim,
other than reasonable fees and expenses of counsel employed by the Indemnified Party
for any period during which the Indemnifying Party has not assumed the defense
thereof.  The Indemnified Party shall
have the option of joining the defense of such Claim (which shall be at the
sole cost and expense of the Indemnified Party) with counsel not reasonably
objected to by the Indemnifying Party and counsel for each party shall, to the
extent consistent with such counsel’s professional responsibilities, cooperate
with the other party and any counsel designated by that party.  In effecting the settlement or compromise of,
or consenting to the entry of any judgment with respect to, any such
Third-Party Claim with respect to which the Indemnifying Party has assumed the
defense in accordance with this Section 9.05(a), the Indemnifying Party, or the
Indemnified Party, as the case may be, shall act in good faith, shall consult
with the other party and shall enter into only such settlement or compromise or
consent to the entry of any judgment as the other party shall consent, such
consent not to be unreasonably withheld, conditioned or delayed.  An Indemnifying Party shall not be liable for
any settlement, compromise or judgment not made in accordance with the
preceding sentence.

 

(b)                                 Buyer shall promptly and diligently defend,
prosecute or settle the matters described in Section 9.02(b)(iv) (including the
defense of any members of the Seller Indemnified Group that are defendants or
respondents with respect to such matters). 
If Buyer’s counsel shall have advised Buyer in writing, in which case
Buyer shall deliver a copy to the Indemnified Party, or if the Indemnified
Party reasonably believes, that there is a conflict of interest that could make
it inappropriate under applicable standards of professional conduct to have
common counsel, the Indemnified Party may retain its own counsel with respect
to such defense and Buyer shall pay the reasonable attorneys’ fees and expenses
of counsel for such Indemnified Party. 
Buyer shall obtain the prior written consent of the Indemnified Party,
which consent shall not be unreasonably withheld, delayed or conditioned,
before entering into or making (or allowing the Companies to enter into or
make) any settlement or compromise of the matters described in Section
9.02(b)(iv) if (i) such settlement or compromise does not include a full
release of the Indemnified Party, (ii) such settlement or compromise includes
any non-monetary remedy binding on the Indemnified Party or (iii) the
Indemnified Party reasonably believes that Buyer will not have the ability to
satisfy fully its obligations pursuant to Section 9.02(b)(iv) at the time of
such settlement or compromise.

 

(c)                                  After the Closing Date, Seller and Buyer
shall grant each other (or their respective designees), and Buyer shall cause
the Companies to grant to Seller (or its designees), access at all reasonable
times to all of the information, books and records relating to the Companies in
its possession, and shall afford such party the right (at such party’s expense)
to take extracts therefrom and to make copies thereof, to the extent reasonably
necessary to implement the

 

53

 

provisions of, or to
investigate or defend any Third-Party Claims; provided
that no such party shall be entitled to make available any information, books
or records, the disclosure of which would cause a waiver of any applicable
privilege or breach of an obligation of confidentiality to a third-party and
either party may make access to such information, books and records conditioned
upon execution and delivery of a confidentiality agreement reasonably
satisfactory to the party requesting disclosure.  Further, after the Closing, Buyer shall cause
the Companies to grant to Seller (or its designees) the access and right to
take extracts and make copies described in the preceding sentence for such
other purposes as may be reasonably requested by Seller.

 

ARTICLE X

MISCELLANEOUS

 

Section 10.01                                                  Notices.  All notices and other
communications hereunder shall be in writing and shall be deemed given if
delivered personally to, or mailed by registered or certified mail (return
receipt requested) if and when received by, or sent via facsimile if and when
received by, the Parties at the following addresses (or at such other address
for a Party as shall be specified by like notice):

 

If
to Seller, to:

 

Orion
Power Holdings, Inc.

1000
Main Street, 12th Floor

Houston,
Texas  77002

Attention:     General
Counsel

Facsimile:     713-537-7465

 

If
to Buyer, to:

 

c/o
Madison Dearborn Capital Partners IV, L.P.

Three
First National Plaza

70
W. Madison

Suite
3800

Chicago,
IL 60602

Attention:     Thomas
S. Souleles and Patrick C. Eilers

Facsimile:     312-895-1001

 

And

 

US
Power Generating Co., LLC

400
Madison Avenue

New
York, NY 10017

Attention:     Jacob
Worenklein

Facsimile:    212-223-8295

 

54

 

And

 

Kirkland
& Ellis LLP

655
15th Street, N.W.

Washington,
D.C. 20005

Attention:     Mitchell
F. Hertz

Facsimile:    202-879-5200

 

Section 10.02                                                  Headings.  The headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.

 

Section 10.03                                                  Assignment.  This Agreement (including the
documents and instruments referred to herein) shall not be assigned, except
that Buyer may (i) assign its rights and obligations under this Agreement in
whole or in part to any one or more direct or indirect Affiliates of Buyer,
(ii) assign its rights in whole or in part to its financing sources as
collateral security, but no such assignment pursuant to (i) or (ii) shall
relieve Buyer of its obligations hereunder, and (iii) assign all of its rights
and obligations pursuant to Section 6.05(d). 
Without limiting the generality of the foregoing, Buyer may, effective
as of the Closing, but without relieving Buyer of its obligations hereunder,
designate the Companies to assume, perform and/or pay any of its liabilities
and obligations required to be assumed, paid or performed by Buyer hereunder at
or after the Closing and any performance or payment by either of the Companies
shall be deemed to satisfy any performance or payment obligations of Buyer
hereunder.  This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.

 

Section 10.04                                                  Governing Law.  THIS
AGREEMENT SHALL BE GOVERNED IN ALL RESPECTS, INCLUDING VALIDITY, INTERPRETATION
AND EFFECT, BY THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO ANY
CONFLICT OF LAWS PRINCIPLES OTHER THAN SECTION 5-1401 OF THE GENERAL
OBLIGATIONS LAW OF THE STATE OF NEW YORK).

 

Section 10.05                                                  Arbitration.

 

(a)                                  EXCEPT AS OTHERWISE EXPRESSLY PROVIDED
HEREIN, ANY DISPUTE OR NEED OF INTERPRETATION ARISING OUT OF THIS AGREEMENT
SHALL BE SETTLED BY BINDING ARBITRATION IN ACCORDANCE WITH THE THEN CURRENT
CENTER FOR PUBLIC RESOURCES RULES FOR NON-ADMINISTERED ARBITRATION IN EFFECT ON
THE DATE OF THIS AGREEMENT (“CPR RULES”) BY THREE ARBITRATORS WHO HAVE NOT PREVIOUSLY
BEEN EMPLOYED BY EITHER PARTY, AND WHO DO NOT HAVE A DIRECT OR INDIRECT
INTEREST IN EITHER PARTY OR THE SUBJECT MATTER OF THE ARBITRATION.  EACH PARTY SHALL SELECT ONE ARBITRATOR AND
THE CENTER FOR PUBLIC RESOURCES SHALL SELECT ONE ARBITRATOR, ALL IN ACCORDANCE
WITH THE “SCREENED” APPOINTMENT PROCEDURES SET FORTH IN THE CPR RULES.  UNLESS BOTH PARTIES AGREE OTHERWISE, ALL
ARBITRATORS SHALL BE SELECTED FROM THE CPR NATIONAL PANEL OF DISTINGUISHED
NEUTRALS.  EITHER PARTY MAY INITIATE
ARBITRATION BY WRITTEN DEMAND TO THE OTHER PARTY AND THE ARBITRATION SHALL BE
CONDUCTED ACCORDING TO THE FOLLOWING: 
(i) EACH PARTY SHALL DIVIDE EQUALLY THE COST OF THE ARBITRATORS AND THE
HEARING AND EACH PARTY SHALL BE RESPONSIBLE FOR ITS OWN EXPENSES

 

55

 

AND THOSE OF ITS COUNSEL AND
REPRESENTATIVES; (ii) EVIDENCE CONCERNING THE FINANCIAL POSITION OF THE
PARTIES, ANY OFFER MADE OR THE DETAILS OF ANY NEGOTIATION PRIOR TO ARBITRATION
AND THE COST TO THE PARTIES OF THEIR REPRESENTATIVES AND COUNSEL SHALL NOT BE
PERMISSIBLE; (iii) THE ARBITRATION SHALL BE GOVERNED BY THE SUBSTANTIVE LAWS OF
NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAW RULES, AND BY THE FEDERAL
ARBITRATION ACT, 9 U.S.C. 1-16 TO THE EXCLUSION OF STATE LAWS INCONSISTENT
THEREWITH, AND JUDGMENT UPON THE AWARD RENDERED BY THE ARBITRATORS MAY BE
ENTERED BY ANY COURT HAVING JURISDICTION THEREOF; (iv) UNLESS THE PARTIES
OTHERWISE AGREE, THE ARBITRATION HEARING SHALL TAKE PLACE IN NEW YORK, NEW
YORK, OR AT SOME OTHER MUTUALLY AGREEABLE LOCATION AND THE HEARING SHALL TAKE
PLACE WITHIN FOUR (4) MONTHS FROM THE DATE OF DEMAND FOR ARBITRATION; (v) THE
PARTIES SHALL BE PERMITTED TO ENGAGE IN DOCUMENT AND DEPOSITION DISCOVERY, THE
EXTENT OF WHICH SHALL BE DETERMINED BY THE ARBITRATORS; (vi) THE PARTIES
EXPRESSLY AGREE THAT THE ARBITRATORS SHALL REACH A DECISION IN COMPLIANCE WITH
APPLICABLE LAW AND THIS AGREEMENT SHALL CONFER NO POWER OR AUTHORITY UPON THE
ARBITRATORS TO RENDER ANY JUDGMENT OR AWARD THAT IS ERRONEOUS IN ITS
APPLICATION OF SUBSTANTIVE LAW AND EXPRESSLY AGREE THAT NO SUCH ERRONEOUS JUDGMENT
OR AWARD SHALL BE ELIGIBLE FOR CONFIRMATION; (vii) THE ARBITRATORS SHALL HAVE
THE AUTHORITY TO DISPOSE OF A MATTER IN SUMMARY FASHION, AND TO GRANT
INJUNCTIVE OR DECLARATORY RELIEF; (viii) THE ARBITRATORS SHALL SET FORTH IN
WRITING AT THE TIME THEY RENDER THEIR AWARD, THE DETAILED FINDINGS OF FACT AND
CONCLUSIONS OF LAW UPON WHICH THEIR AWARD IS BASED; (ix) UNLESS THE PARTIES
OTHERWISE AGREE, THE ARBITRATION HEARINGS SHALL BE CONTINUOUS SUBJECT TO
WEEKENDS, HOLIDAYS, OR OTHER DAYS TO BE MUTUALLY AGREED AND THE TOTAL DAYS OF
HEARING SHALL NOT EXCEED TEN (10) HEARING DAYS PER PARTY; (x) THE ARBITRATORS
ARE NOT EMPOWERED TO AWARD DAMAGES IN EXCESS OF COMPENSATORY DAMAGES, AND EACH
PARTY EXPRESSLY WAIVES AND FOREGOES ANY RIGHT TO PUNITIVE, EXEMPLARY OR SIMILAR
DAMAGES UNLESS A STATUTE REQUIRES THAT COMPENSATORY DAMAGES BE INCREASED IN A
SPECIFIED MANNER; (xi) THE ARBITRATORS SHALL COMPILE A RECORD OF ALL
PROCEEDINGS THAT INCLUDES ALL HEARINGS AND ALL EVIDENCE (INCLUDING, WITHOUT
LIMITATION, EXHIBITS, DEPOSITION TRANSCRIPTS, AND AFFIDAVITS ADMITTED INTO
EVIDENCE) IN THE ARBITRATION PROCEEDING FROM WHICH THE APPEAL IS TAKEN; AND
(xii) THE ARBITRATORS SHALL RENDER THEIR AWARD NO LATER THAN THIRTY (30) DAYS
AFTER THE CONCLUSION OF THE HEARINGS. THE SUBMISSION OF POST-HEARING LEGAL
BRIEFS SHALL BE SUBJECT TO THE DISCRETION OF THE ARBITRATORS, BUT IN NO EVENT
SHALL THE BRIEFS DELAY THE ARBITRATORS’ DECISION IN THIS MATTER.  AN APPEAL MAY BE TAKEN UNDER THE CPR
ARBITRATION APPEAL PROCEDURE FROM ANY FINAL AWARD OF AN ARBITRAL PANEL IN ANY
ARBITRATION ARISING OUT OF OR RELATED TO THIS AGREEMENT THAT IS CONDUCTED IN
ACCORDANCE WITH THE

 

56

 

REQUIREMENTS OF SUCH APPEAL
PROCEDURE.  THE STANDARD OF REVIEW TO BE
APPLIED TO THE ARBITRATORS’ FINDING OF FACT AND CONCLUSIONS OF LAW SHALL BE THE
SAME AS THAT APPLIED BY AN APPELLATE COURT REVIEWING A DECISION OF A TRIAL
COURT SITTING WITHOUT A JURY.  UNLESS
OTHERWISE AGREED BY THE PARTIES AND THE APPEAL TRIBUNAL, THE APPEAL SHALL BE
CONDUCTED AT THE PLACE OF THE ORIGINAL ARBITRATION.  EXCEPT AS SET FORTH IN ARTICLE II AND EXCEPT
FOR CLAIMS FOR INJUNCTIVE OR OTHER EQUITABLE RELIEF, THE PROCEDURES SPECIFIED
IN THIS SECTION 10.05 SHALL BE THE SOLE AND EXCLUSIVE PROCEDURES FOR THE
RESOLUTION OF DISPUTES BETWEEN THE PARTIES ARISING OUT OF OR RELATING TO THIS
AGREEMENT; PROVIDED, THAT A PARTY
MAY FILE A COMPLAINT TO SEEK A PRELIMINARY INJUNCTION OR OTHER PROVISIONAL
JUDICIAL RELIEF, IF IN ITS SOLE JUDGMENT SUCH ACTION IS NECESSARY TO PRESERVE THE
STATUS QUO PENDING APPOINTMENT OF AN ARBITRATOR.  DESPITE SUCH ACTION, THE PARTIES WILL
CONTINUE TO PARTICIPATE IN GOOD FAITH IN THE PROCEDURES SPECIFIED IN THIS
SECTION 10.05.  THE PARTIES AGREE THIS
CONSTITUTES A CONSPICUOUS LEGEND.

 

(b)                                 WITH RESPECT TO ANY ACTION PERMITTED BY THIS
SECTION 10.05, THE PARTIES HEREBY IRREVOCABLY SUBMIT TO THE NON-EXCLUSIVE
JURISDICTION OF ANY STATE OR FEDERAL COURT IN NEW YORK, NEW YORK.

 

Section 10.06                                                  Counterparts.  This
Agreement may be executed in two or more counterparts, and by facsimile and/or
electronic transmission, each of which shall be deemed to be an original, but
all of which shall constitute one and the same agreement.

 

Section 10.07                                                  Amendments; Extensions.

 

(a)                                  This Agreement may not be amended except by
an instrument in writing signed on behalf of each of the Parties.

 

(b)                                 At any time a Party may (i) extend the time
for the performance of any of the obligations or other acts of the other Party,
(ii) waive any inaccuracies in the representations and warranties of the other
Party contained herein or in any document delivered pursuant hereto and (iii)
waive compliance with any of the covenants or agreements of the other Party
contained herein.  Any agreement on the
part of a Party to any such extension or waiver shall be valid only if set
forth in a written instrument signed on behalf of such Party.  The failure or delay of any Party to assert
any of its rights under this Agreement or otherwise shall not constitute a
waiver of those rights.

 

Section 10.08                                                  Entire Agreement.  This
Agreement, the Confidentiality Agreement and the other agreements contemplated
hereby constitute the entire agreement between the Parties with respect to the
subject matter hereof and supersede all prior agreements, understandings and
negotiations, both written and oral, between the Parties with respect to the
subject matter of this Agreement.  No
representation, inducement, promise, understanding, condition or warranty not
set forth herein has been made or relied upon by any Party.  Neither this Agreement nor any provision
hereof is intended to confer upon any person other than the

 

57

 

parties hereto any rights or
remedies hereunder except as expressly provided otherwise in Section 6.01(b), Section
6.05, Section 6.10(d), Section 6.18 and Article IX.

 

Section 10.09                                                  Severability.  If
any term or other provision of this Agreement is invalid, illegal, or incapable
of being enforced by any rule of applicable Law, or public policy (including
any term or provision of Section 10.05), then such term or provision shall be
severed from the remaining terms and provisions of this Agreement (including
the remaining terms and provisions of Section 10.05), and such remaining terms
and provisions shall nevertheless remain in full force and effect.

 

Section 10.10                                                  Guarantor Guaranty.

 

(a)                                  Guarantor is a party to this Agreement solely
for the purposes of this Section 10.10. 
In consideration of the transactions contemplated by this Agreement, the
receipt and sufficiency of which are hereby acknowledged, Guarantor hereby
unconditionally and irrevocably (i) guarantees payment and performance by
Seller of the obligations of Seller under this Agreement, subject to any
defenses of Seller, but without any obligation by any Buyer Indemnified Party
to bring a claim against Seller before or at the same time as proceeding
against Guarantor and (ii) indemnifies each Buyer Indemnified Party for any
Loss arising from any breach of any representation, warranty, covenant or agreement
of Guarantor made hereunder.  Guarantor
hereby waives any and all rights of indemnification, contribution and
subrogation against Buyer and the Companies with respect to any and all Claims.  In no event shall the aggregate liability of
Guarantor arising under or related to this Agreement and the transactions
contemplated hereby, whether based in contract, tort, strict liability, other
Law or otherwise, exceed 100% of the Final Purchase Price.  Capitalized terms used in this Section 10.10
shall have the meanings given to them in Appendix I to this Agreement.  The provisions of Section 9.04(b) and the
remaining Sections of this Article X are incorporated in this Section 10.10, mutatis mutandis, except that notices and
other communications hereunder to Guarantor shall be delivered to:

 

Reliant Energy, Inc.

1000 Main Street, 12th Floor

Houston, Texas 77002

Attention:  General Counsel

Facsimile:  (713) 537-7465

 

(b)                                 As a material inducement to Buyer to enter
into this Agreement and consummate the transactions contemplated hereby,
Guarantor hereby represents and warrants to Buyer that (i) Guarantor is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware has full corporate power and authority to
execute, deliver and perform this Agreement, (ii) the execution, delivery and
performance by Guarantor of this Agreement have been duly authorized by all
requisite corporate action on the part of Guarantor, (iii) this Agreement has
been duly executed and delivered by Guarantor and constitutes the valid and
binding obligation of Guarantor, enforceable against Guarantor in accordance
with its terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, arrangement, moratorium or other similar Laws
relating to creditors’ rights generally, and general equitable principles, (iv)
the execution, delivery and performance by Guarantor of this Agreement and the

 

58

 

consummation of the
transactions contemplated hereby does not and will not (A) violate the
Charter Documents of Guarantor; (B) violate any Law applicable to Guarantor, or
any order of any Governmental Authority having jurisdiction over Guarantor, or
(C) violate or conflict with, or constitute (with due notice or lapse of time
or both) a default under, any Contract by which Guarantor or any of its assets
is bound, and (v) no registration or filing with, or consent or approval of or
other action by, any Governmental Authority or any other Person is or will be
necessary for the valid execution, delivery and performance by Guarantor of its
obligations under this Agreement.

 

59

 

IN WITNESS WHEREOF, the
Parties have caused this Agreement to be duly executed by their respective
authorized officers as of the day and year first above written.

 

	
   

  	
  ORION POWER HOLDINGS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  RELIANT ENERGY, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ASTORIA GENERATING COMPANY

  ACQUISITIONS, L.L.C.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  	
   

  
					

 

SIGNATURE PAGE

PURCHASE AND SALE AGREEMENT

 

 

APPENDIX I

 

SECTION 1 – CONSTRUCTION

 

(a)                                  All Article, Section, Subsection, Schedules
and Exhibit references used in this Agreement are to Articles, Sections,
Subsections, Schedules and Exhibits to this Agreement unless otherwise
specified.  The Exhibits and Schedules
attached to this Agreement constitute a part of this Agreement and are
incorporated herein for all purposes.

 

(b)                                 If a term is defined as one part of speech
(such as a noun), it shall have a corresponding meaning when used as another
part of speech (such as a verb).  Unless
the context of this Agreement clearly requires otherwise, words importing the
masculine gender shall include the feminine and neutral genders and vice versa.
The words “includes” or “including” shall mean “includes without limitation” or
“including without limitation,” the words “hereof,” “hereby,” “herein,” “hereunder”
and similar terms in this Agreement shall refer to this Agreement as a whole
and not any particular Section or Article in which such words appear and any
reference to a Law shall include any amendment thereof or any successor thereto
and any rules and regulations promulgated thereunder.  Currency amounts referenced herein are in
U.S. Dollars.

 

(c)                                  Time is of the essence in this
Agreement.  Whenever this Agreement
refers to a number of days, such number shall refer to calendar days unless
Business Days are specified. Whenever any action must be taken hereunder on or
by a day that is not a Business Day, then such action may be validly taken on
or by the next day that is a Business Day.

 

(d)                               Seller may, at its option, include in the
Schedules items that are not material, and any such inclusion, or any
references to dollar amounts, shall not be deemed to be an acknowledgment or
representation that such items are material or would cause a Material Adverse
Effect, to establish any standard of materiality or to define further the
meaning of such terms for purposes of this Agreement.  Information disclosed in the Schedules shall
constitute a disclosure for all purposes of the Section for which such
disclosure was made and each other section for which such disclosure is readily
apparent.  Seller may, at any time on or
prior to the fifth Business Day prior to Closing, amend the Seller’s Disclosure
Schedules (to the extent qualifying Article III and Article IV of this
Agreement) after the Execution Date with respect to matters of which Seller had
no Knowledge at the Execution Date, and the representations and warranties
shall be deemed to incorporate such amendments for purposes of determining
whether a breach of such representations or warranties existed at the Closing
Date; provided that no such
update to the Seller’s Disclosure Schedules shall be taken into account in
determining satisfaction of the conditions specified in Section 7.02(b) and no
such update shall be taken into account in determining whether a breach of such
representations and warranties existed as of the Execution Date.  For the avoidance of doubt, the reference to
Seller’s Disclosure Schedule in the prefatory paragraph to each of Article III
and Article IV shall not, for purposes of the representations and warranties
made in Article III and Article IV as of the Execution Date, include updates to
the Seller’s Disclosure Schedules made after the Execution Date.

 

(e)                                  Each Party acknowledges that it and its
attorneys have been given an equal opportunity to negotiate the terms and
conditions of this Agreement and that any rule of

 

1

 

construction to the effect that ambiguities are to be resolved against
the drafting Party or any similar rule operating against the drafter of an
agreement shall not be applicable to the construction or interpretation of this
Agreement.

 

(f)                                    Each provision of this Agreement is to be
given independent significance.  No
application of the adjustments to Base Purchase Price pursuant to the
provisions of Article II of this Agreement shall preclude, restrict or
otherwise adversely affect any of the parties’ respective rights to
indemnification under this Agreement, including as may arise from a claim for
breach of express representation or warranty under this Agreement.

 

2

 

SECTION 2 – DEFINITIONS

 

“1933 Act” has the
meaning set forth in Section 5.07.

 

“Agreement” has the
meaning set forth in the introductory paragraph to this Agreement.

 

“Affiliate” means any
Person that directly, or indirectly through one or more intermediaries,
controls, is controlled by or is under common control with the Person
specified. For purposes of this definition, control of a Person means the
power, direct or indirect, to direct or cause the direction of the management
and policies of such Person whether through ownership of voting securities or
ownership interests, by contract or otherwise, and specifically with respect to
a corporation, partnership, trust or limited liability company, shall include
direct or indirect ownership of more than 50% of the voting securities in such
corporation or of the voting interest in a partnership or limited liability
company or of the beneficial interest in a trust.

 

“Affiliate Employee”
has the meaning set forth in Section 6.14(c).

 

“Affiliated Group”
means any affiliated group within the meaning of Code §1504(a) or any similar
group defined under a similar provision of state, local, or foreign law.

 

“Assigned Contracts”
has the meaning set forth in Section 2.04(c).

 

“Assignment and Assumption Agreement”
has the meaning set forth in Section 2.04(c).

 

“Astoria Generating Facility”
means the natural gas/fuel oil-fired electric generating facility located at
18-01 20th Ave Gate (Q135), Astoria, New York 11105.

 

“Astoria LP” has the
meaning set forth in the recitals to this Agreement.

 

“Audited Financial Statements”
has the meaning set forth in Section 6.22(b).

 

“Base Purchase Price”
has the meaning set forth in Section 2.02(a).

 

“Base Purchase Price Allocation”
has the meaning set forth in Section 2.07.

 

“Benefit Plan”
means:  (a) each “employee benefit plan,”
as such term is defined in Section 3(3) of ERISA, (b) each plan that would be
an employee benefit plan if it was subject to ERISA, such as foreign plans and
plans for directors, (c) each stock bonus, stock ownership, stock option, stock
purchase, stock appreciation rights, phantom stock, or other equity plan
(whether qualified or nonqualified), (d) each bonus, deferred compensation or
incentive compensation plan, and any other material employee benefit plan,
program, agreement  or arrangement of any
kind (including, without limitation, any employment, consulting, retention,
change in control or severance plan, policy, arrangement or agreement); provided, that such term shall not include
(1) routine employment policies and procedures, including wage, vacation,
holiday, and sick or other leave policies, (2) workers compensation insurance,
and (3) directors and officers liability insurance.

 

“Benefits Committee”
has the meaning set forth in Section 6.14(k).

 

3

 

“Break-Up Fee Payment”
has the meaning set forth in Section 8.02.

 

“Business Day” means a
day other than Saturday, Sunday or any day on which banks located in the State
of New York and the State of Texas are authorized or obligated to close.

 

“Buyer” has the
meaning set forth in the introductory paragraph to this Agreement.

 

“Buyer Governmental Approvals”
has the meaning set forth in Section 5.03(c).

 

“Buyer Indemnified Group”
means Buyer, the Companies and Buyer’s Affiliates and their respective
officers, directors, employees and agents.

 

“Buyer Savings Plan”
has the meaning set forth in Section 6.14(g).

 

“Capital Expenditures”
means expenditures for capital additions to or replacements of property, plant
and equipment included in the Purchased Assets and other expenditures or
repairs on property, plant and equipment included in the Purchased Assets that
would be capitalized by the Companies in accordance with their normal
capitalization policies.

 

“Change of Law” means
the adoption, implementation, promulgation, or repeal of any Law of or by any
Governmental Authority which occurs subsequent to the Execution Date.

 

“Charter Documents”
means with respect to any Person, the articles of incorporation or organization
and by-laws, the limited partnership agreement, the partnership agreement or
the limited liability company agreement, and/or such other organizational
documents of such Person, including those that are required to be registered or
kept in the place of incorporation, organization or formation of such Person
and which establish the legal personality of such Person.

 

“Claim” means any
demand, claim, suit, charge, complaint, grievance, action, investigation, legal
proceeding (whether at law or in equity) or arbitration.

 

“Closing” has the
meaning set forth in Section 2.03.

 

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

 

“Closing Date Working Capital Amount”
means the current assets of the Companies minus
the current liabilities of the Companies determined as of 11:59 p.m. on the
Closing Date as determined in accordance with GAAP using the same methodology
as was used in preparing the June 30 Balance Sheets; provided that (i) current assets shall not include and
current liabilities shall not be reduced by (A) any Income Tax assets and (B)
any asset related to the sale, lease or other disposition of long-term asset of
the Companies, (C) any cash deposited or escrowed with a third-party that
supports obligations of the Companies, and (D) any spare parts or equipment in
inventory that are not expected to be used within twelve (12) months (which
spare parts or equipment, the parties agree, is reflected as of the Execution
Date, on the attached Schedule I-3; (ii) current liabilities shall not include
liabilities related to Income Taxes, and (iii) the Closing Date Working Capital
Amount shall be determined without regard to Intercompany Receivables

 

4

 

and Intercompany Payables (other than the RES Payable, which shall be
included as a current liability).

 

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

 

“Collective Bargaining Contract”
means that certain Collective Bargaining Contract dated June 25, 2000, and extended
by Memorandum of Understanding effective June 25, 2004, between OPOS and the
Utility Workers Union of America, AFL-CIO and its Local Union No. 1-2, as the
same has been amended from time to time.

 

“Commitment Letters”
has the meaning set forth in Section 5.08.

 

“Commonly Controlled Entity”
has the meaning set forth in Section 4.10(b).

 

“Companies” has the
meaning set forth in Section 2.01.

 

“Company Liens” has
the meaning set forth in Section 6.08.

 

“Company Consents” has
the meaning set forth in Section 4.02(b).

 

“Company Interests”
has the meaning set forth in Section 2.01.

 

“Company Participants”
means the Continuing Employees who have an account balance under a Seller
Savings Plan.

 

“Company Plan” means
each Benefit Plan that is sponsored, maintained or contributed to as of the
date of this Agreement by Seller or any Affiliate of Seller and which Benefit
Plan provides benefits solely with respect to current or former directors,
officers or employees of either or both of the Companies.

 

“ConEd Agreement”
means that certain Generating Plant and Gas Turbine Asset Purchase Agreement
for Astoria Generating Plants, Gowanus Gas Turbines, and Narrows Gas Turbines
by and between Consolidated Edison Company of New York, Inc.  and Astoria Generating Company, L.P., dated
as of March 2, 1999, as the same has been and may be amended, modified,
supplemented or waived from time to time.

 

“Confidential Information”
has the meaning set forth in Section 6.13(b).

 

“Confidentiality Agreement”
has the meaning set forth in Section 6.13(a).

 

“Continuing Employee”
means (a) each individual who is employed by the Companies as of the Closing
(including each such individual who is on a vacation, sick, military,
disability, short-term disability or other approved leave of absence) and (b)
each Affiliate Employee who accepts an offer of employment from Buyer or an
Affiliate of Buyer as provided in Section 6.14(c) and reports to work with
Buyer.

 

5

 

“Contract” means any
written contract, lease, license, evidence of indebtedness, mortgage,
indenture, purchase order, binding bid, letter of credit, security agreement or
other written legally binding arrangement.

 

“CPR Rules” has the
meaning set forth in Section 10.05(a).

 

“Credit Rating” means,
with respect to any Person, each rating given to such Person’s long-term,
unsecured, unsubordinated debt obligations not supported by third party credit
enhancement by Standard & Poor’s or Moody’s, as applicable.

 

“Debt Commitment Letter”
has the meaning set forth in Section 5.08.

 

“Definitive Financing Documentation”
has the meaning set forth in Section 6.23.

 

“Environmental Law”
means any federal, state, local or foreign law (including common law), statute,
ordinance, rule, regulation, code, license, permit, authorization, approval,
consent, order, judgment, decree, injunction, legally enforceable requirement
of or agreement with any Governmental Authority, relating to (a) the
protection, preservation or restoration of the environment (including air,
water vapor, surface water, groundwater, drinking water supply, surface land,
subsurface land, plant and animal life or any other natural resource), or (b)
the exposure to, or the use, storage, recycling, treatment, generation,
transportation, processing, handling, labeling, production, release or disposal
of Hazardous Substances.

 

“Equity Commitment Letter”
has the meaning set forth in Section 5.08.

 

“ERISA” means the
Employee Retirement Income Security Act of 1974, as amended.

 

“Escrow Agent” has the
meaning set forth in Section 2.08.

 

“Escrow Agreement” has
the meaning set forth in Section 2.08.

 

“Escrow Amount” has
the meaning set forth in Section 2.08.

 

“Estimated Purchase Price”
has the meaning set forth in Section 2.08.

 

“Excess Amount” has
the meaning set forth in Section 2.08.

 

“Excess Liability Policies”
means the following insurance policies: (a) Aegis — primary $35MM limit, (b)
Energy Insurance Mutual (EIM) second layer follow-form AEGIS - $65MM limit, and
(c) OIL Casualty INC (OCIL) third layer follow-form AEGIS $50MM limit.

 

“Excluded Assets” has
the meaning set forth in Section 6.06.

 

“Excluded Sections”
means Sections 3.01, 3.02, 3.04, 4.01, 4.03, and 4.17.

 

“Execution Date” has
the meaning set forth in the introductory paragraph to this Agreement.

 

6

 

“Facility” or “Facilities” means one
or more of the Astoria Generating Facility, the Gowanus Gas Turbine Facility
and the Narrows Gas Turbine Facility.

 

“FERC” means the
Federal Energy Regulatory Commission.

 

“Final Purchase Price”
has the meaning set forth in Section 2.06(c).

 

“Final Purchase Price Allocation”
has the meaning set forth in Section 2.07.

 

“GAAP” means generally
accepted accounting principles in the United States of America.

 

“Governmental Authority”
means any court, tribunal, arbitrator, authority, agency, commission, official
or other instrumentality of the United States or any state, county, city or
other political subdivision or similar governing entity, and including any
governmental, quasi-governmental or non-governmental body administering,
regulating or having general oversight over gas, electricity, power or other
markets.

 

“Gowanus Gas Turbine Facility”
means the barge mounted oil fired electric generating facility located at 29th
Street and 2nd Avenue, Brooklyn, New York 11232.

 

“Guarantor” has the
meaning set forth in the introductory paragraph to this Agreement.

 

“Gunderboom Contract”
means that certain Cartridge Filter Technology Development, License and
Assignment Agreement dated April 21, 2003 by and among Guarantor, Seller,
Astoria LP, and Gunderboom, Inc.

 

“Hazardous Substance”
means any substance presently listed, defined, designated or classified as a
pollutant, contaminant, hazardous substance, toxic substance, hazardous waste,
solid waste, or special waste, or that is otherwise regulated, under any
Environmental Law and shall include petroleum.

 

“Hedging Agreement”
has the meaning set forth in Section 6.21.

 

“HSR Act” means the
Hart-Scott-Rodino Antitrust Improvements Act of 1976.

 

“Improvements” means
all buildings and all components of all buildings, structures and other
improvements included within the Real Property.

 

“Included Covenants”
means the covenants and agreements of Seller in Sections 6.01, 6.02 (other than
Section 6.02(a)(iii)), 6.09, 6.12, 6.15, and 6.20.

 

“Income Taxes” means all federal,
state, local, and foreign income Taxes or other Taxes based on or measured by
income, net worth or receipts including, without limitation, any franchise
Taxes measured by or based upon income or receipts.

 

“Indebtedness” means,
for the Companies, (i) any indebtedness of the Companies for borrowed money or
issued in substitution or exchange for indebtedness for borrowed money,

 

7

 

(ii) any indebtedness of the Companies evidenced by any note, bond,
debenture or other debt security, (iii) other than such obligations incurred in
the ordinary course of business, any indebtedness of the Companies for the
deferred purchase price of property or services with respect to which the
Companies are liable, contingently or otherwise, as obligor or otherwise
(including any deferred purchase price, however structured, for the acquisition
of any assets, business or other Person), (iv) any obligations under leases
which are or, in accordance with GAAP should be capitalized with respect to
which the Companies are liable, contingently or otherwise, as obligor,
guarantor or otherwise, or with respect to which obligations the Company
assures a creditor against loss, (v) all obligations, contingent or otherwise,
of the Companies under acceptance, letter of credit or similar facilities or
any other commitment by which the Companies assure a creditor against loss,
(vi) all guarantees by the Companies of obligations and liabilities described
in clauses (i)-(v) foregoing of another Person (including Non-Company
Affiliates) (assuming for such purposes that the obligations and liabilities of
the Companies referred to in clauses (i)-(v) are instead liabilities and
obligations of such third Person) together with, for clauses (i)-(v) of this
definition, all accrued but unpaid interest, redemption premium, pre-payment
penalty or other payment obligation due and owing with respect to any of the
foregoing (determined in each case, as if paid on the Closing Date, or as soon
thereafter as permitted in accordance with the terms governing such
indebtedness).

 

“Indemnified Party”
has the meaning set forth in Section 9.05(a).

 

“Indemnifying Party”
has the meaning set forth in Section 9.05(a).

 

“Independent Accountant”
has the meaning set forth in Section 6.10(h).

 

“Insurance Policies”
has the meaning set forth in Section 4.16.

 

“Intellectual Property”
has the meaning set forth in Section 4.13.

 

“Intercompany Payables”
means the payables of the Companies to the Seller and the Non-Company
Affiliates.

 

“Intercompany Receivables”
means the receivables of the Companies from the Seller and the Non-Company
Affiliates.

 

“Interest Rate” means
the prime per annum rate of interest as published by The Wall Street Journal.

 

“Interim Period” means
the period of time from the Execution Date until the Closing Date or
termination of this Agreement.

 

“Investment Grade”
means an entity having long term, unsecured, unsubordinated debt not supported
by third party credit enhancement that is rated “BBB-” or higher by Standard
& Poor’s, and “Baa3” or higher by Moody’s, and that in either case is not
on negative credit watch.

 

“Iroquois” has the
meaning set forth in Section 6.07(b).

 

“Iroquois Contract”
has the meaning set forth in Section 6.07(b).

 

8

 

“IRS” means the U.S.
Internal Revenue Service.

 

“June 30 Balance Sheets”
has the meaning set forth in Section 4.04(c).

 

“Knowledge” means, in
the case of Seller, the actual knowledge (as opposed to any constructive or
imputed knowledge) after reasonable inquiry of and by the individuals listed on
Schedule I-1, and in the case of Buyer, the actual knowledge (as opposed
to any constructive or imputed knowledge) of the individuals listed on Schedule
I-2, after reasonable inquiry.

 

“Laws” means all laws,
statutes, rules, regulations, ordinances and other pronouncements having the
effect of law of any Governmental Authority.

 

“Leases” means all
leases, subleases, licenses, concessions and other agreements (written or oral)
pursuant to which the Companies, or either of them, holds any Leased Real
Property, including the right to all security deposits and other amounts and
instruments deposited by or on behalf of the Companies, or either of them.

 

“Leased Real Property”
means all leasehold or subleasehold estates and other rights to use or occupy
any land, buildings, structures, improvements, fixtures or other interest in
real property held by the Companies, or any one or more of them.

 

“Lien” means any
mortgage, pledge, assessment, security interest, lien or other similar
encumbrance.

 

“Losses” means any and
all judgments, losses, liabilities, amounts paid in settlement, damages, fines,
penalties, deficiencies, losses and expenses (including interest, court costs,
reasonable fees of attorneys, accountants and other experts or other reasonable
expenses of litigation or other proceedings or of any claim, default or
assessment).

 

“Marketing Period Expiration Date” means the date that is the later of (i) the
20th day after (x) satisfaction or waiver in writing by Buyer of all of Buyer’s
conditions to Closing specified in Section 7.01 and Section 7.02 and (y)
written demand by Seller of performance by Buyer of its obligations at the
Closing and (ii) January 31, 2006.

 

“Material Adverse Effect”
means any change, event, fact, circumstance or effect that is or would
reasonably be expected to be materially adverse to the business, assets or
financial condition of the Companies, taken as a whole, in each case, except
for any such change, event or effect resulting from or arising out of (a)
changes in economic conditions generally or the industry in which the Companies
operate, (b) changes in international, national, regional, state or local
wholesale or retail markets for electric power or fuel or related products
including those due to actions by competitors, (c) changes in general
regulatory or political conditions (other than items addressed in clauses (d)
and (h)), (d) Changes of Laws governing national, regional, state or local
electric transmission or distribution systems, (e) strikes, work stoppages or
other labor disturbances, (f) increases in costs of commodities or supplies,
including fuel, (g) effects of weather or meteorological events, (h) any Change
of Laws (other than Changes of Laws governing electric transmission or
distribution systems), and (i) any actions to be taken pursuant to or in
accordance with this Agreement, except in the case of clauses (d) and (h) for any
such change that disproportionately impacts the operation of the Companies
versus similar power

 

9

 

plants located in New York City; provided that none of clauses (a)
through (i) foregoing shall be deemed to apply as a result of acts of war or
terrorist acts.

 

“Material Contracts”
has the meaning set forth in Section 4.08(a).

 

“Moody’s” means Moody’s
Investors Services, Inc., and its successors.

 

“Narrows Gas Turbine Facility”
means the barge-mounted, natural gas/oil-fired electric generating facility
located at 53rd Street and 1st Avenue, Brooklyn, New York 11232.

 

“Non-Company Affiliates”
means Affiliates of Seller other than the Companies.

 

“Notice of Disagreement”
has the meaning set forth in Section 2.08.

 

“Objection Notice” has
the meaning set forth in Section 6.24.

 

“Off-Site Location”
shall mean any location other than the Facilities, but shall not include any
location to which Hazardous Substances disposed of at any of the Facilities
have migrated.

 

“OPNY GP” has the
meaning set forth in the recitals to this Agreement.

 

“OPNY LLC” has the
meaning set forth in the recitals to this Agreement.

 

“OPNY LP” has the
meaning set forth in the recitals to this Agreement.

 

“OPOS” has the meaning
set forth in the recitals to this Agreement.

 

“OPOS Parent” has the
meaning set forth in the recitals to this Agreement.

 

“Orion Power Capital”
has the meaning set forth in the recitals to this Agreement.

 

“Owned Real Property”
means all land, together with all buildings, structures, improvements and
fixtures located thereon, and all easements and other rights and interests
appurtenant thereto owned by the Companies, or either of them.

 

“Parties” means each
of Buyer and Seller.

 

“PBGC” has the meaning
set forth in Section 4.10(b).

 

“Permits” means all
licenses, permits, authorizations, approvals, registrations, concessions,
franchises and similar consents granted or issued by any Governmental
Authority.

 

“Permitted Encumbrances”
means (a) with respect to the Owned Real Property statutory liens for current
taxes or other governmental charges with respect to the Real Property not yet
due and payable or the amount or validity of which is being contested in good
faith by appropriate proceedings by Seller and for which appropriate reserves
have been established in accordance with GAAP; (b) mechanics, carriers workers,
repairers and similar statutory liens arising or incurred in the ordinary
course of business for amounts which are not delinquent and

 

10

 

which are not, individually or in the aggregate, material to the
business of the Companies; (c) zoning, entitlement, building and other land use
regulations imposed by governmental agencies having jurisdiction over the Real
Property which are not violated in any material respect by the current use and
operation of the Real Property; and (d) covenants, conditions, restrictions,
easements and other similar matters affecting title to the Real Property which
do not materially impair the occupancy or use of the Real Property for the
purposes for which it is currently used in connection with the business of the
Companies.

 

“Person” means any
natural person, corporation, general partnership, limited partnership, limited
liability company, proprietorship, other business organization, trust, union,
association, entity or Governmental Authority.

 

“Preliminary Purchase Price”
has the meaning set forth in Section 2.08.

 

“Pre-Closing Tax Periods”
has the meaning set forth in Section 6.10(f).

 

“Purchased Assets”
means all of the assets of the Companies (including the Real Property),
excluding the Excluded Assets.

 

“Real Property” means
the Owned Real Property and the Leased Real Property.

 

“Regulation S-X” means
Regulation S-X of the Securities Act of 1933, as amended.

 

“Release Date” has the
meaning set forth in Section 6.05(d).

 

“Representatives”
means officers, directors, employees, counsel, accountants, financial advisers
or consultants of either Seller or Buyer, as applicable.

 

“RES Payable” means
amounts due to Reliant Energy Services, Inc. for delivered fuel provided to
Astoria LP which fuel is provided at actual cost and mobile maintenance charges
provided to Astoria LP in the ordinary course of business consistent with past
practices.

 

“Retained Policies”
has the meaning set forth in Section 6.09(b).

 

“Retirement Plan”
means the Astoria Generating Company, LP Retirement Plan, as amended.

 

“Scheduled Insurance Policies”
has the meaning set forth in Section 6.09.

 

“Seller” has the
meaning set forth in the introductory paragraph to this Agreement.

 

“Seller Consents” has
the meaning set forth in Section 3.03(b).

 

“Seller Entities”
means Seller, OPNY LP, OPNY GP and OPOS Parent.

 

“Seller Environmental Liabilities”
shall mean, to the extent not indemnified by Consolidated Edison Company of New
York pursuant to ConEd Agreement, liability arising from the disposal of any
Hazardous Substance, to the extent relating to or arising from the

 

11

 

ownership or operation of the Facilities prior to the Closing Date and
during the period of ownership of Orion Power Holdings, Inc. at any Off-Site
Location.

 

“Seller Governmental Approvals”
has the meaning set forth in Section 3.03(c).

 

“Seller Group” means
the Affiliated Group filing a consolidated federal income tax return of which
Guarantor is the common parent.

 

“Seller Indemnified Group”
means Seller and Seller’s Affiliates and their respective officers, directors,
employees and agents.

 

“Seller Marks” has the
meaning set forth in Section 6.04.

 

“Seller Plan” means
each Benefit Plan (other than the Company Plans) that is sponsored, maintained
or contributed to as of the Closing Date by Seller or by any trade or business,
whether or not incorporated, that together with Seller would be a “single
employer” within the meaning of Section 4001(b) of ERISA.

 

“Seller Savings Plans”
means the Orion Power Holdings, Inc. Savings Plan and the Reliant Energy, Inc.
Savings Plan.

 

“Seller’s Disclosure Schedule”
means the schedules provided pursuant to Article III and Article IV.

 

“Seller’s Post-Closing Estimate”
has the meaning set forth in Section 2.06(a).

 

“Severance Plan” means
the Reliant Energy, Inc. 2003 Involuntary Severance Benefits Plan for Employees
With Annual Base Pay Less Than $150,000 As Amended and Restated Effective June
1, 2004.

 

“Specified Termination Event”
means the occurrence of all of the following events:  (i) all conditions to Buyer’s obligations
under this Agreement have been satisfied in full or waived in writing by Buyer
and (ii) the Marketing Period Expiration Date has occurred.

 

“Standard & Poor’s”
means Standard & Poor’s Ratings Group (a division of McGraw Hill, Inc.),
and its successors.

 

“Straddle Period” has
the meaning set forth in Section 6.10(g).

 

“Subsequent Financial Statements”
has the meaning set forth in Section 6.22(a).

 

“Sunset Coverage” has
the meaning set forth in Section 6.09(c).

 

“Support Obligations”
has the meaning set forth in Section 6.05(a).

 

“Surveys” means
current surveys of each parcel of the Real Property, prepared by a licensed
surveyor, satisfactory to Buyer, and conforming to 1992 ALTA/ACSM Minimum
Detail Requirements for Urban Land Title Surveys, and such standards as the
Title Insurer may require as a condition to the removal of any survey
exceptions from the Title Policy, and certified to

 

12

 

Buyer, Buyer’s lender and the Title Insurer, disclosing the location of
all Improvements, easements, party walls, sidewalks, roadways, utility lines
and such matters shown customarily on such surveys, showing access
affirmatively to public streets and roads, and including Table A Item Nos. 1-4
and 6-14.

 

“Target Working Capital Amount”
means the amount set forth on Schedule 2.02(b).

 

“Tax” or “Taxes” means any
federal, state, local, or foreign income, profits, franchise, withholding, ad
valorem, personal property (tangible and intangible), employment, payroll,
sales and use, social security (or similar), disability, occupation, property,
severance, excise, gross receipts, utility, license, severance, stamp, premium,
windfall profits, environmental (including taxes under Code §59A), customs
duties, capital stock, unemployment, registration, utility, production, value
added, alternative or add-on minimum, estimated, and other taxes imposed by a
Taxing Authority of any kind whatsoever, whether computed on a separate of
consolidated, unitary or combined basis or in any other manner, including any
interest, penalty or addition thereto, whether disputed or not and including
any obligation to indemnify or otherwise assume or succeed to the Tax liability
of any other Person.

 

“Tax Items” has the
meaning set forth in Section 6.10(a).

 

“Tax Proceedings” has
the meaning set forth in Section 6.10(c).

 

“Tax Returns” means
any return, report or similar statement required to be filed with respect to
any Taxes, including any information return, claim for refund, amended return
and declaration of estimated Tax.

 

“Tax Sharing Agreements”
has the meaning set forth in Section 4.09(e).

 

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

 

“Terminated Contracts”
has the meaning set forth in Section 6.07(a).

 

“Termination Date” has
the meaning set forth in Section 8.01(b)(i).

 

“Third Party Claim”
has the meaning set forth in Section 9.05(a).

 

“Title Commitments”
means Title Insurance Commitment No. 3605-00302 issued by Chicago Title
Insurance Company dated July 1, 2005, Title Insurance Commitment No. 3405-00257
issued by Chicago Title Insurance Company dated July 25, 2005 and Title
Insurance Commitment No. 3405-00258 issued by Chicago Title Insurance Company
dated July 25, 2005.

 

“Title Insurer” means
Chicago Title Insurance Company.

 

“Title Policies” means
an ALTA ‘92 Owners (or Loan) or ALTA ‘92 Owner’s (or Loan) with “TIRSA
Leasehold Endorsement”, as the case may be, for each of the parcels of Real
Property, based upon commitments therefore, dated as of the Closing Date,
issued by the Title

 

13

 

Insurer in such amount as Buyer reasonably determines to be the fair
market value (including all improvements thereon) and for each such parcel (a)
insuring title to such parcel of real estate and all recorded easements
benefiting such parcel, subject only to Permitted Encumbrances and the matters
described in the Title Commitments, (b) containing a “New York Standard Owner’s
(or Loan) Endorsement” providing record GAP and mechanic’s lien coverage, (c)
containing a “TIRSA Land Same As Endorsement” insuring that the parcel
described in such Title Policy is the parcel shown on the survey delivered with
respect to such parcel, (d) containing a “TIRSA Access Endorsement insuring
direct and unencumbered access from such parcel to the physically opened public
streets abutting the parcel, (e) if the real estate covered by such policy
consists of more than one record parcel, containing a “TIRSA Contiguity
Endorsement” insuring that all of the record parcels are contiguous to one
another, (f) if appropriate to the transaction, containing a “TIRSA
Non-imputation Endorsement”, (g) contain the applicable “TIRSA Tax Parcel Endorsement”,
and (h) containing such other endorsements as Buyer and Buyer’s financing
sources, if any, may reasonably request, and as are currently available in New
York.

 

“Transfer Taxes” means
all transfer, real property transfer, sales, use, goods and services, value
added, recordation, documentary, stamp duty, excise, and conveyance Taxes and
other similar Taxes, duties, fees or charges, as levied by any Taxing Authority
in connection with the transactions contemplated by this Agreement, including
any real property transfer Taxes imposed by the City of New York or by the
State of New York; provided, however, that for the avoidance of doubt,
the term Transfer Taxes shall not include any Income Taxes.

 

“Transition Services Agreement”
has the meaning set forth in Section 2.04(d).

 

“Union” has the
meaning set forth in Section 6.14(b).

 

“Updated Title Commitments”
has the meaning set forth in Section 6.24.

 

“WARN Act” has the
meaning set forth in Section 4.11(c).

 

“Welfare Benefits” has
the meaning set forth in Section 6.14(h).

 

“Work-around” has the
meaning set forth in Section 6.25.

 

“Working Capital Adjustment Amount”
means the result of the Closing Date Working Capital Amount minus the Target Working Capital Amount.

 

14Exhibit 10.1

 

AMENDMENT NO. 1 dated as of September 30,
2005 (this “Amendment”), to the Credit Agreement dated as of November 1,
2004 (the “Credit Agreement”), among SMURFIT-STONE CONTAINER
CORPORATION, as Guarantor; SMURFIT-STONE CONTAINER ENTERPRISES, INC. and
SMURFIT-STONE CONTAINER CANADA INC., as Borrowers; the LENDERS from time to
time party thereto; DEUTSCHE BANK TRUST COMPANY AMERICAS, as Senior Agent,
Administrative Agent, Collateral Agent, Swingline Lender and Revolving Facility
Facing Agent; DEUTSCHE BANK AG, as Canadian Administrative Agent and Revolving
(Canadian) Facility Facing Agent; and JPMORGAN CHASE BANK, N.A., as Senior
Agent, Deposit Account Agent and Deposit Funded Facility Facing Agent.

 

A.            Pursuant to the Credit Agreement, the Lenders
and the Facing Agents have extended credit to the Borrowers, and have agreed to
extend credit to the Borrowers, in each case pursuant to the terms and subject
to the conditions set forth therein.

 

B.            SSCC and the Borrowers have informed the
Administrative Agent that they seek an amendment of Section 7.14 of the
Credit Agreement as set forth herein.

 

C.            The Required Lenders are willing to agree to
such amendment pursuant to the terms and subject to the conditions set forth
herein.

 

D.            Each capitalized term used and not otherwise
defined herein shall have the meaning assigned to such term in the Credit
Agreement.

 

Accordingly, in consideration of the mutual
agreements herein contained and other good and valuable consideration, the
sufficiency and receipt of which are hereby acknowledged, the parties hereto
agree as follows:

 

SECTION 1. 
Amendment.  Section 7.14
of the Credit Agreement is hereby amended and restated in its entirety to read as
follows:

 

“Consolidated Senior Secured Leverage Ratio.  Permit the Consolidated Senior Secured
Leverage Ratio (a) as of December 31, 2004 or March 31, 2005, to
exceed 3.25 to 1.00, (b) as of June 30, 2005, to exceed 3.00 to 1.00,
(c) as of September 30, 2005, to exceed 3.25 to 1.00 and (d) as
of the last day of any fiscal quarter thereafter, to exceed 3.00 to 1.00.”

 

SECTION 2.  Representations
and Warranties.  SSCC
and each Borrower represent and warrant to each other party hereto that (a) this
Amendment has been duly authorized by all requisite corporate action and duly executed
and delivered by SSCC and each Borrower and constitutes a legal, valid and
binding obligation of SSCC and each Borrower, enforceable against each of them in
accordance with its terms, and (b) after

 

 

giving effect to this Amendment (i) the representations and
warranties set forth in Article IV of the Credit Agreement and in the
other Loan Documents are true and correct in all material respects on and as of
the date hereof with the same effect as though made on and as of such date, except
to the extent such representations and warranties expressly relate to an
earlier date (in which case such representations and warranties were true and
correct in all material respects as of the earlier date), and (ii) no
Default or Event of Default has occurred and is continuing.

 

SECTION 3.           Amendment
Fee.  SSCC and each Borrower agree to
pay on the Amendment Effective Date (as defined below) to the Administrative
Agent, for the account of each Lender that executes and delivers a copy of this
Amendment to the Administrative Agent (or its counsel) at or prior to 5:00 p.m.,
New York City time, on October 5, 2005 (the “Signing Date”), an
amendment fee (the “Amendment Fee”) in an amount equal to 0.05% of the
aggregate principal amount of the Term Loans, Revolving Credit Commitment,
Revolving (Canadian) Credit Commitment or Deposit Funded Commitment of such
Lender outstanding on the Signing Date.  The
Amendment Fee shall be payable on and subject to the occurrence of the Amendment
Effective Date.  The Amendment Fee shall
be payable in immediately available funds and shall not be refundable.

 

SECTION 4.           Effectiveness.  This Amendment shall become effective as of
the date set forth above on the date (such date, the “Amendment Effective
Date”) on which the (a) the Administrative Agent (or its counsel)
shall have received from SSCC, each Borrower and the Required Lenders a
counterpart of this Amendment signed on behalf of such party, and (b) the
Administrative Agent shall have received the Amendment Fee.

 

SECTION 5.           Effect of Amendment.  Except
as expressly set forth herein, this Amendment shall not by implication or
otherwise limit, impair, constitute a waiver of, or otherwise affect, the
rights and remedies of the Lenders, the Facing Agents, the Senior Agents, the Collateral
Agent, the Deposit Account Agent or the Administrative Agent under the Credit
Agreement or any other Loan Document, and shall not alter, modify, amend or in
any way affect any of the terms, conditions, obligations, covenants or
agreements contained in the Credit Agreement or any other Loan Document, all of
which are ratified and affirmed in all respects and shall continue in full
force and effect.  Nothing herein shall
be deemed to entitle SSCC or any Borrower to a consent to, or a waiver,
amendment, modification or other change of, any of the terms, conditions,
obligations, covenants or agreements contained in the Credit Agreement or any
other Loan Document in similar or different circumstances.  This Amendment shall constitute a Loan
Document for all purposes of the Credit Agreement and the other Loan Documents.

 

SECTION 6.           Counterparts.  This
Amendment may be executed in counterparts (and by different parties hereto on
different counterparts), each of which shall constitute an original, but all of
which when taken together shall constitute a single contract.  Delivery of an executed counterpart of a
signature page of this Amendment by facsimile shall be as effective as
delivery of a manually executed counterpart of this Amendment.

 

2

 

SECTION 7.           Application Law.  THIS
AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK, INCLUDING SECTIONS 5-1401 AND 5-1402 OF TITLE 14 OF THE
NEW YORK GENERAL OBLIGATIONS LAW BUT EXCLUDING ALL OTHER CHOICE OF LAW AND
CONFLICTS OF LAWS RULES THEREOF.

 

SECTION 8.           Headings.  Section headings
used herein are for convenience of reference only, are not part of this
Amendment and are not to affect the construction of, or be taken into consideration
in interpreting, this Amendment.

 

[Remainder of this page intentionally
left blank]

 

3

 

IN
WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed by their respective authorized officers as of the day and year first
above written.

 

	
   

  	
  SMURFIT-STONE
  CONTAINER

  CORPORATION,

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  by

  	
   

  
	
   

  	
   

  	
  /s/ Richard P.
  Marra

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Richard P. Marra

  
	
   

  	
   

  	
  Title:

  	
  Assistant
  Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SMURFIT-STONE
  CONTAINER

  ENTERPRISES, INC.,

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  by

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ Richard P.
  Marra

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Richard P. Marra

  
	
   

  	
   

  	
  Title:

  	
  Assistant
  Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SMURFIT-STONE
  CONTAINER

  CANADA INC.,

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  by

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ Richard P.
  Marra

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Richard P. Marra

  
	
   

  	
   

  	
  Title:

  	
  Assistant
  Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  DEUTSCHE BANK
  TRUST

  COMPANY AMERICAS,

  individually and as Administrative

  Agent,

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  by

  	
   

  
	
   

  	
   

  	
  /s/ Omayra
  Laucella

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Omayra Laucella

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  by

  	
   

  
	
   

  	
   

  	
  /s/ Lana Gifas

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Lana Gifas

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  
					

 

 

SIGNATURE PAGE TO

AMENDMENT NO. 1 TO

THE SMURFIT-STONE
CONTAINER CORPORATION

CREDIT AGREEMENT DATED AS
OF

NOVEMBER 1, 2004

 

 

	
   

  	
  Name of Lender: 

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  by

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00091-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00091-of-00352.parquet"}]]