Document:

Exhibit 10.1

CASELLA WASTE
SYSTEMS, INC.

2006 STOCK
INCENTIVE PLAN

1.   Purpose

The purpose of this 2006 Stock Incentive Plan (the “Plan”)
of Casella Waste Systems, Inc., a Delaware corporation
(the “Company”), is to advance the interests of the Company’s stockholders by
enhancing the Company’s ability to attract, retain and motivate persons who are
expected to make important contributions to the Company and by providing such
persons with equity ownership opportunities and performance-based incentives
that are intended to align their interests with those of the Company’s
stockholders. Except where the context otherwise requires, the term “Company”
shall include any of the Company’s present or future parent or subsidiary
corporations as defined in Sections 424(e) or (f) of the
Internal Revenue Code of 1986, as amended, and any regulations promulgated
thereunder (the “Code”) and any other business venture (including, without
limitation, joint venture or limited liability company) in which the Company has
a controlling interest, as determined by the Board of Directors of the Company
(the “Board”).

2.   Eligibility

All of the Company’s employees, officers, directors,
consultants and advisors are eligible to receive options, stock appreciation
rights, restricted stock, restricted stock units and other stock-based awards
(each, an “Award”) under the Plan. Each person who receives an Award under the
Plan is deemed a “Participant.”

3.   Administration
and Delegation

(a)           Administration by Board of Directors.   The Plan will be
administered by the Board. The Board shall have authority to grant Awards and
to adopt, amend and repeal such administrative rules, guidelines and practices
relating to the Plan as it shall deem advisable. The Board may construe and
interpret the terms of the Plan and any Award agreements entered into under the
Plan. The Board may correct any defect, supply any omission or reconcile any
inconsistency in the Plan or any Award in the manner and to the extent it shall
deem expedient to carry the Plan into effect and it shall be the sole and final
judge of such expediency. All decisions by the Board shall be made in the Board’s
sole discretion and shall be final and binding on all persons having or
claiming any interest in the Plan or in any Award. No director or person acting
pursuant to the authority delegated by the Board shall be liable for any action
or determination relating to or under the Plan made in good faith.

(b)           Appointment of Committees.   To the extent permitted by
applicable law, the Board may delegate any or all of its powers under the Plan
to one or more committees or subcommittees of the Board (a “Committee”). All
references in the Plan to the “Board” shall mean the Board or a Committee of
the Board to the extent that the Board’s powers or authority under the Plan
have been delegated to such Committee. During such time as the Class A
Common Stock, $0.01 par value per share, of the Company (the “Common Stock”) is
registered under the Securities Exchange Act of 1934 (the “Exchange Act”), the
Board shall appoint one such Committee of not less than two members, each
member of which shall be an “outside director” within the meaning of Section 162(m) of
the Code and a “non-employee director” as defined in Rule 16b-3
promulgated under the Exchange Act. Grants of Awards intended to comply with Section 162(m) shall
be made only by such Committee.

(c)           Delegation to Officers.   To the extent permitted by
applicable law, the Board may delegate to one or more officers of the Company
the power to grant Awards to employees or officers of the Company or any of its
present or future subsidiary corporations and to exercise such other powers
under the Plan as the 

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Board may determine, provided that the Board shall fix
the terms of the Awards to be granted by such officers (including the exercise
price of such Awards, which may include a formula by which the exercise price
will be determined) and the maximum number of shares subject to Awards that the
officers may grant; provided further, however, that no officer shall be
authorized to grant Awards to any “executive officer” of the Company (as
defined by Rule 3b-7 under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”)) or to any “officer” of the Company (as defined by
Rule 16a-1 under the Exchange Act).

4.   Stock
Available for Awards

(a)           Number of Shares.   Subject to adjustment under Section 10,
Awards may be made under the Plan for up to such number of shares of Common
Stock as is equal to the sum of: (i) 1,275,000 shares of Common Stock (of
which 275,000 shares are reserved for issuance to non-employee directors
pursuant to Section 6 below), plus (ii) such additional number of
shares of Common Stock as is equal to the aggregate number of shares subject to
Awards granted under the Company’s 1993 Incentive Stock Option Plan, 1994
Nonstatutory Stock Option Plan, 1996 Stock Option Plan, and 1997 Stock
Inventive Plan which are not actually issued because such awards expire or
otherwise result in shares not being issued. For purposes of counting the
number of shares available for the grant of Awards under the Plan, (i) shares
of Common Stock covered by independent SARs shall be counted against the number
of shares available for the grant of Awards under the Plan; provided, however,
that independent SARs that may be settled in cash only shall not be so counted;
(ii) if any Award (A) expires or is terminated, surrendered or
canceled without having been fully exercised or is forfeited in whole or in
part (including as the result of shares of Common Stock subject to such Award
being repurchased by the Company at the original issuance price pursuant to a
contractual repurchase right) or (B) results in any Common Stock not being
issued (including as a result of an independent SAR that was settleable either
in cash or in stock actually being settled in cash), the unused Common Stock
covered by such Award shall again be available for the grant of Awards under
the Plan; provided, however, in the case of Incentive Stock Options (as
hereinafter defined), the foregoing shall be subject to any limitations under
the Code; and (iii) shares of Common Stock tendered to the Company by a
Participant to (A) purchase shares of Common Stock upon the exercise of an
Award or (B) satisfy tax withholding obligations (including shares
retained from the Award creating the tax obligation) shall not be added back to
the number of shares available for the future grant of Awards under the Plan. Shares
issued under the Plan may consist in whole or in part of authorized but
unissued shares or treasury shares.

(b)           Sub-limits.   Subject to adjustment under Section 10,
the maximum number of shares of Common Stock with respect to which Awards may
be granted to any Participant under the Plan shall be 200,000
per fiscal year. For purposes of the foregoing limit, the combination of an
Option in tandem with a SAR (as each is hereafter defined) shall be treated as
a single Award. The per-Participant limit described in this Section 4(b) shall
be construed and applied consistently with Section 162(m) of the Code
or any successor provision thereto, and the regulations thereunder (“Section 162(m)”).

(c)           Substitute Awards.   In connection with a merger or
consolidation of an entity with the Company or the acquisition by the Company
of property or stock of an entity, the Board may grant Awards in substitution
for any options or other stock or stock-based awards granted by such entity or
an affiliate thereof. Substitute Awards may be granted on such terms as the
Board deems appropriate in the circumstances, notwithstanding any limitations
on Awards contained in the Plan. Substitute
Awards shall not count against the overall share limit set forth in Section 4(a),
except as may be required by reason of Section 422 and related provisions
of the Code.

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5.   Stock
Options

(a)           General.   The Board may grant options to purchase
Common Stock (each, an “Option”) and determine the number of shares of Common
Stock to be covered by each Option, the exercise price of each Option and the
conditions and limitations applicable to the exercise of each Option, including
conditions relating to applicable federal or state securities laws, as it
considers necessary or advisable. An Option that is not intended to be an
Incentive Stock Option (as hereinafter defined) shall be designated a “Nonstatutory
Stock Option.”

(b)           Incentive Stock Options.   An
Option that the Board intends to be an “incentive stock option” as defined in Section 422
of the Code (an “Incentive Stock Option”) shall only be granted to employees of
the Company, any of the Company’s present or future parent or subsidiary
corporations as defined in Sections 424(e) or (f) of the Code, and
any other entities the employees of which are eligible to receive Incentive
Stock Options under the Code, and shall be subject to and shall be construed
consistently with the requirements of Section 422 of the Code. The Company
shall have no liability to a Participant, or any other party, if an Option (or
any part thereof) that is intended to be an Incentive Stock Option is not an
Incentive Stock Option or for any action taken by the Board, including without
limitation the conversion of an Incentive Stock Option to a Nonstatutory Stock
Option.

(c)           Exercise Price.   The
Board shall establish the exercise price of each Option and specify such
exercise price in the applicable option agreement; provided, however, that the
exercise price shall be not less than 100% of the Fair Market Value (as defined
below) on the date the Option is granted.

(d)           Duration of Options.   Each
Option shall be exercisable at such times and subject to such terms and
conditions as the Board may specify in the applicable option agreement,
provided, however, that no Option will be granted for a term in excess of 10
years.

(e)           No Reload Rights.   No
Option granted under the Plan shall contain any provision entitling the
optionee to the automatic grant of additional Options in connection with any
exercise of the original Option.

(f)            Exercise of Option.   Options
may be exercised by delivery to the Company of a written notice of exercise
signed by the proper person or by any other form of notice (including
electronic notice) approved by the Board, together with payment in full as
specified in Section 5(g) for the number of shares for which the
Option is exercised. Shares of Common Stock subject to the Option will be
delivered by the Company following exercise either as soon as practicable or,
subject to such conditions as the Board shall specify, on a deferred basis
(with the Company’s obligation to be evidenced by an instrument providing for
future delivery of the deferred shares at the time or times specified by the
Board).

(g)           Payment Upon Exercise.   Common
Stock purchased upon the exercise of an Option granted under the Plan shall be
paid for as follows:

(1)           in cash or by check, payable to the
order of the Company;

(2)           except as may otherwise be provided
in the applicable option agreement, by (i) delivery of an irrevocable and
unconditional undertaking by a creditworthy broker to deliver promptly to the
Company sufficient funds to pay the exercise price and any required tax
withholding or (ii) delivery by the Participant to the Company of a copy
of irrevocable and unconditional instructions to a creditworthy broker to
deliver promptly to the Company cash or a check sufficient to pay the exercise
price and any required tax withholding;

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(3)           to the extent provided for in the
applicable option agreement or approved by the Board, in its sole discretion,
by delivery (either by actual delivery or attestation) of shares of Common
Stock owned by the Participant valued at their fair market value as determined
by (or in a manner approved by) the Board (“Fair Market Value”), provided
(i) such method of payment is then permitted under applicable law,
(ii) such Common Stock, if acquired directly from the Company, was owned
by the Participant for such minimum period of time, if any, as may be
established by the Board in its discretion and (iii) such Common Stock is
not subject to any repurchase, forfeiture, unfulfilled vesting or other similar
requirements;

(4)           to the extent permitted by applicable
law and provided for in the applicable option agreement or approved by the
Board, in its sole discretion, by (i) delivery of a promissory note of the
Participant to the Company on terms determined by the Board, or
(ii) payment of such other lawful consideration as the Board may
determine; or

(5)           by any combination of the above
permitted forms of payment.

(h)           Limitation on Repricing.   Unless
such action is approved by the Company’s stockholders:  (i) no outstanding Option granted under
the Plan may be amended to provide an exercise price per share that is lower
than the then-current exercise price per share of such outstanding Option
(other than adjustments pursuant to Section 10) and (ii) the Board
may not cancel any outstanding option (whether or not granted under the Plan)
and grant in substitution therefor new Awards under the Plan covering the same
or a different number of shares of Common Stock and having an exercise price
per share lower than the then-current exercise price per share of the cancelled
option.

6.                                      Director
Options.

(a)           Initial Grant.   Upon
the commencement of service on the Board by any individual who is not then an
employee of the Company or any subsidiary of the Company, the Company shall
grant to such person a Nonstatutory Stock Option to purchase 7,500 shares of
Common Stock (subject to adjustment under Section 10).

(b)           Annual Grant.   On
the date of each annual meeting of stockholders of the Company, the Company
shall grant to each member of the Board of Directors of the Company who is both
serving as a director of the Company immediately prior to and immediately
following such annual meeting and who is not then an employee of the Company or
any of its subsidiaries, a Nonstatutory Stock Option to purchase 7,500 shares
of Common Stock (subject to adjustment under Section 10); provided,
however, that a director shall not be eligible to receive an option grant under
this Section 6(b) until such director has served on the Board for at
least twelve months.

(c)           Terms of Director Options.   Options
granted under this Section 6 shall (i) have an exercise price equal
to the closing sale price (for the primary trading session) of the Common Stock
on The Nasdaq Stock Market or the national securities exchange on which the
Common Stock is then traded on the trading date immediately prior to the date
of grant (and if the Common Stock is not then traded on The Nasdaq Stock Market
or a national securities exchange, the Fair Market Value of the Common Stock on
such date), (ii) vest in three equal annual installments beginning on the
first anniversary of the date of grant provided that the individual has
continued to serve on the Board until at least the Annual Meeting of
Stockholders immediately preceding such vesting date provided that no
additional vesting shall take place after the Participant ceases to serve as a
director and further provided that the Board may provide for accelerated
vesting in the case of death, disability, attainment of mandatory retirement
age or retirement following at least 10 years of service, (iii) expire on
the earlier of 10 years from the date of grant or 90 days following cessation
of service on the Board and (iv) contain such other terms and conditions
as the Board shall determine.

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7.                                      Stock
Appreciation Rights.

(a)           General.   The
Board may grant Awards consisting of a Stock Appreciation Right (“SAR”)
entitling the holder, upon exercise, to receive an amount in Common Stock or
cash or a combination thereof (such form to be determined by the Board)
determined by reference to appreciation, from and after the date of grant, in
the fair market value of a share of Common Stock. The date as of which such
appreciation or other measure is determined shall be the exercise date.

(b)           Grants.   Stock
Appreciation Rights may be granted in tandem with, or independently of, Options
granted under the Plan.

(1)           Tandem Awards.   When
Stock Appreciation Rights are expressly granted in tandem with Options, (i) the
Stock Appreciation Right will be exercisable only at such time or times, and to
the extent, that the related Option is exercisable (except to the extent
designated by the Board in connection with a Reorganization Event) and will be
exercisable in accordance with the procedure required for exercise of the
related Option; (ii) the Stock Appreciation Right will terminate and no
longer be exercisable upon the termination or exercise of the related Option,
except to the extent designated by the Board in connection with a
Reorganization Event and except that a Stock Appreciation Right granted with
respect to less than the full number of shares covered by an Option will not be
reduced until the number of shares as to which the related Option has been
exercised or has terminated exceeds the number of shares not covered by the
Stock Appreciation Right; (iii) the Option will terminate and no longer be
exercisable upon the exercise of the related Stock Appreciation Right; and (iv) the
Stock Appreciation Right will be transferable only with the related Option.

(2)           Independent SARs.   A
Stock Appreciation Right not expressly granted in tandem with an Option will
become exercisable at such time or times, and on such conditions, as the Board
may specify in the SAR Award.

(c)           Grant Price.   The
grant price or exercise price of an SAR shall not be less than 100% of the Fair
Market Value per share of Common Stock on the date of grant of the SAR.

(d)           Term.   The
term of an SAR shall not be more than 10 years from the date of grant.

(e)           Exercise.   Stock
Appreciation Rights may be exercised by delivery to the Company of a written
notice of exercise signed by the proper person or by any other form of notice
(including electronic notice) approved by the Board, together with any other
documents required by the Board.

8.                                      Restricted
Stock; Restricted Stock Units.

(a)           General.   The
Board may grant Awards entitling recipients to acquire shares of Common Stock (“Restricted
Stock”), subject to the right of the Company to repurchase all or part of such
shares at their issue price or other stated or formula price (or to require
forfeiture of such shares if issued at no cost) from the recipient in the event
that conditions specified by the Board in the applicable Award are not
satisfied prior to the end of the applicable restriction period or periods
established by the Board for such Award. Instead of granting Awards for
Restricted Stock, the Board may grant Awards entitling the recipient to receive
shares of Common Stock to be delivered at the time such shares of Common Stock
vest (“Restricted Stock Units”) (Restricted Stock and Restricted Stock Units
are each referred to herein as a “Restricted Stock Award”).

(b)           Limitations on Vesting.

(1)           Restricted Stock Awards that vest
based on the passage of time alone shall be zero percent vested prior to the
first anniversary of the date of grant, no more than 33-1/3% vested prior
to the second anniversary of the date of grant, and no more than 66-2/3%
vested prior to the third anniversary of the date of grant. Restricted Stock
Awards that vest upon the passage of time and 

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provide for
accelerated vesting based on performance shall not vest prior to the first
anniversary of the date of grant. This subsection (8)(b)(1) shall not
apply to Awards granted pursuant to Section 11(i).

(2)           Notwithstanding any other provision
of this Plan, the Board may, in its discretion, either at the time a Restricted
Stock Award is made or at any time thereafter, waive its right to repurchase
shares of Common Stock (or waive the forfeiture thereof) or remove or modify
any part or all of the restrictions applicable to the Restricted Stock Award,
provided that the Board may only exercise such rights in extraordinary
circumstances which shall include, without limitation, death or disability of
the Participant; estate planning needs of the Participant; a merger, consolidation,
sale, reorganization, recapitalization, or change in control of the Company; or
any other nonrecurring significant event affecting the Company, a Participant
or the Plan.

(c)           Terms and Conditions for
all Restricted Stock Awards.   The Board shall determine the
terms and conditions of a Restricted Stock Award, including the conditions for
vesting and repurchase (or forfeiture) and the issue price, if any.

(d)           Additional
Provisions Relating to Restricted Stock.

(1)           Dividends.   Participants holding shares of Restricted
Stock will be entitled to all ordinary cash dividends paid with respect to such
shares, unless otherwise provided by the Board. If any dividends or
distributions are paid in shares, or consist of a dividend or distribution
to holders of Common Stock other than an ordinary cash dividend, the shares, cash or other property will be subject
to the same restrictions on transferability and forfeitability as the shares of
Restricted Stock with respect to which they were paid.  Each dividend payment will be made no later
than the end of the fiscal year in which the dividends are paid to shareholders
of that class of stock or, if later, the 15th day of the third month following
the date the dividends are paid to shareholders of that class of stock.

(2)           Stock Certificates.   The
Company may require that any stock certificates issued in respect of shares of
Restricted Stock shall be deposited in escrow by the Participant, together with
a stock power endorsed in blank, with the Company (or its designee). At the
expiration of the applicable restriction periods, the Company (or such
designee) shall deliver the certificates no longer subject to such restrictions
to the Participant or if the Participant has died, to the beneficiary
designated, in a manner determined by the Board, by a Participant to receive
amounts due or exercise rights of the Participant in the event of the
Participant’s death (the “Designated Beneficiary”). In the absence of an
effective designation by a Participant, “Designated Beneficiary” shall mean the
Participant’s estate.

(e)           Additional Provisions
Relating to Restricted Stock Units.

(1)           Settlement.   Upon
the vesting of and/or lapsing of any other restrictions (i.e., settlement) with
respect to each Restricted Stock Unit, the Participant shall be entitled to receive
from the Company one share of Common Stock or an amount of cash equal to the
Fair Market Value of one share of Common Stock, as provided in the applicable
Award agreement. The Board may, in its discretion, provide that settlement of
Restricted Stock Units shall be deferred, on a mandatory basis or at the
election of the Participant.

(2)           Voting Rights.   A
Participant shall have no voting rights with respect to any Restricted Stock
Units.

(3)           Dividend Equivalents.   To
the extent provided by the Board, in its sole discretion, a grant of Restricted
Stock Units may provide Participants with the right to receive an amount equal
to any dividends or other distributions declared and paid on an equal number of
outstanding shares of Common Stock (“Dividend Equivalents”). Dividend
Equivalents may be paid currently or credited to an account for the
Participants, may be settled in cash and/or shares of Common Stock and may be
subject to the same restrictions on transfer and forfeitability as the
Restricted Stock Units with respect to which paid, as determined by the Board
in its sole discretion, subject in each case to such terms and conditions as
the Board shall establish, in each case to be set forth in the applicable Award
agreement.

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9.                                      Other
Stock Unit Awards.

Other Awards of shares of Common Stock, and other
Awards that are valued in whole or in part by reference to, or are otherwise
based on, shares of Common Stock or other property, may be granted hereunder to
Participants (“Other Stock Unit Awards”), including without limitation Awards
entitling recipients to receive shares of Common Stock to be delivered in the
future. Such Other Stock Unit Awards shall also be available as a form of
payment in the settlement of other Awards granted under the Plan or as payment
in lieu of compensation to which a Participant is otherwise entitled. Other
Stock Unit Awards may be paid in shares of Common Stock or cash, as the Board
shall determine. Subject to the provisions of the Plan, the Board shall
determine the terms and conditions of each Other Stock Unit Award, including
any purchase price applicable thereto.

10.                               Adjustments
for Changes in Common Stock and Certain Other Events.

(a)           Changes in Capitalization.   In
the event of any stock split, reverse stock split, stock dividend,
recapitalization, combination of shares, reclassification of shares, spin-off
or other similar change in capitalization or event, or any dividend or
distribution to holders of Common Stock other than an ordinary cash dividend, (i) the
number and class of securities available under this Plan, (ii) the
sub-limits set forth in Section 4(b), (iii) the number and class of
securities and exercise price per share of each outstanding Option and each
Option issuable under Section 6, (iv) the share- and per-share
provisions and the exercise price of each Stock Appreciation Right, (v) the
number of shares subject to and the repurchase price per share subject to each
outstanding Restricted Stock Award and (vi) the share- and
per-share-related provisions and the purchase price, if any, of each
outstanding Other Stock Unit Award, shall be appropriately adjusted by the Company
(or substituted Awards may be made, if applicable) to the extent determined by
the Board. Without limiting the generality of the foregoing, in the event the
Company effects a split of the Common Stock by means of a stock dividend and
the exercise price of and the number of shares subject to such Option are
adjusted as of the date of the distribution of the dividend (rather than as of
the record date for such dividend), then an optionee who exercises an Option
between the record date and the distribution date for such stock dividend shall
be entitled to receive, on the distribution date, the stock dividend with
respect to the shares of Common Stock acquired upon such Option exercise,
notwithstanding the fact that such shares were not outstanding as of the close
of business on the record date for such stock dividend.

(b)           Reorganization Events.

(1)           Definition.   A
“Reorganization Event” shall mean:  (a) any
merger or consolidation of the Company with or into another entity as a result
of which all of the Common Stock of the Company is converted into or exchanged
for the right to receive cash, securities or other property or is cancelled, (b) any
exchange of all of the Common Stock of the Company for cash, securities or
other property pursuant to a share exchange transaction or (c) any
liquidation or dissolution of the Company.

(2)           Consequences of a Reorganization Event on Awards Other than Restricted
Stock Awards.   In connection with a Reorganization Event, the
Board shall take any one or more of the following actions as to all or any
outstanding Awards other than Restricted Stock Awards on such terms as the
Board determines:  (i) provide that
Awards shall be assumed, or substantially equivalent Awards shall be
substituted, by the acquiring or succeeding corporation (or an affiliate
thereof), (ii) upon written notice to a Participant, provide that the
Participant’s unexercised Options or other unexercised Awards will terminate
immediately prior to the consummation of such Reorganization Event unless
exercised by the Participant within a specified period following the date of
such notice, (iii) provide that outstanding Awards shall become
exercisable, realizable, or deliverable, or restrictions applicable to an Award
shall lapse, in whole or in part prior to or upon such Reorganization Event, (iv) in
the event of a Reorganization Event under the terms of which holders of Common
Stock will receive upon consummation thereof a cash payment for each share
surrendered in the Reorganization Event (the 

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“Acquisition Price”),
make or provide for a cash payment to a Participant equal to the excess, if
any, of  (A) the Acquisition Price
times the number of shares of Common Stock subject to the Participant’s Options
or other Awards (to the extent the exercise price does not exceed the
Acquisition Price) over (B) the aggregate exercise price of all such
outstanding Options or other Awards, in exchange for the termination of such
Options or other Awards and any applicable tax withholdings, (v) provide
that, in connection with a liquidation or dissolution of the Company, Awards
shall convert into the right to receive liquidation proceeds (if applicable,
net of the exercise price thereof) and (vi) any combination of the
foregoing.

For purposes of clause (i) above, an Option shall
be considered assumed if, following consummation of the Reorganization Event,
the Option confers the right to purchase, for each share of Common Stock
subject to the Option immediately prior to the consummation of the
Reorganization Event, the consideration (whether cash, securities or other
property) received as a result of the Reorganization Event by holders of Common
Stock for each share of Common Stock held immediately prior to the consummation
of the Reorganization Event (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding shares of Common Stock); provided, however, that if the
consideration received as a result of the Reorganization Event is not solely
common stock of the acquiring or succeeding corporation (or an affiliate
thereof), the Company may, with the consent of the acquiring or succeeding
corporation, provide for the consideration to be received upon the exercise of
Options to consist solely of common stock of the acquiring or succeeding
corporation (or an affiliate thereof) equivalent in value (as determined by the
Board) to the per share consideration received by holders of outstanding shares
of Common Stock as a result of the Reorganization Event.

(3)           Consequences of a Reorganization Event on Restricted Stock Awards.   Upon
the occurrence of a Reorganization Event other than a liquidation or
dissolution of the Company, the repurchase and other rights of the Company
under each outstanding Restricted Stock Award shall inure to the benefit of the
Company’s successor and shall, unless the Board determines otherwise, apply to
the cash, securities or other property which the Common Stock was converted
into or exchanged for pursuant to such Reorganization Event in the same manner
and to the same extent as they applied to the Common Stock subject to such
Restricted Stock Award. Upon the occurrence of a Reorganization Event involving
the liquidation or dissolution of the Company, except to the extent
specifically provided to the contrary in the instrument evidencing any Restricted
Stock Award or any other agreement between a Participant and the Company, all
restrictions and conditions on all Restricted Stock Awards then outstanding
shall automatically be deemed terminated or satisfied.

11.                               General
Provisions Applicable to Awards

(a)           Transferability of Awards.   Awards
shall not be sold, assigned, transferred, pledged or otherwise encumbered by
the person to whom they are granted, either voluntarily or by operation of law,
except by will or the laws of descent and distribution or, other than in the
case of an Incentive Stock Option, pursuant to a qualified domestic relations
order, and, during the life of the Participant, shall be exercisable only by
the Participant; provided, however, that the Board may permit or provide in an
Award for the gratuitous transfer of the Award by the Participant to or for the
benefit of any immediate family member, family trust or other entity
established for the benefit of the Participant and/or an immediate family
member thereof if, with respect to such proposed transferee, the Company would
be eligible to use a Form S-8 for the registration of the sale of
the Common Stock subject to such Award under the Securities Act of 1933, as
amended; provided, further, that the Company shall not be required to recognize
any such transfer until such time as the Participant and such permitted
transferee shall, as a condition to such transfer, deliver to the Company a
written instrument in form and substance satisfactory to the Company confirming
that such transferee shall be bound by all of the terms and conditions of the
Award. References to a Participant, to the extent relevant in the context,
shall include references to authorized transferees.

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(b)           Documentation.   Each Award shall be evidenced in such
form (written, electronic or otherwise) as the Board shall determine. Each
Award may contain terms and conditions in addition to those set forth in the
Plan.

(c)           Board Discretion.   Except as otherwise provided by the
Plan, each Award may be made alone or in addition or in relation to any other
Award. The terms of each Award need not be identical, and the Board need not
treat Participants uniformly.

(d)           Termination of Status.   The Board shall determine the
effect on an Award of the disability, death, termination of employment,
authorized leave of absence or other change in the employment or other status
of a Participant and the extent to which, and the period during which, the
Participant, or the Participant’s legal representative, conservator, guardian
or Designated Beneficiary, may exercise rights under the Award.

(e)           Withholding.   The Participant must satisfy all
applicable federal, state, and local or other income and employment tax
withholding obligations before the Company will deliver stock certificates or
otherwise recognize ownership of Common Stock under an Award. The Company may
decide to satisfy the withholding obligations through additional withholding on
salary or wages. If the Company elects not to or cannot withhold from other
compensation, the Participant must pay the Company the full amount, if any,
required for withholding or have a broker tender to the Company cash equal to
the withholding obligations. Payment of withholding obligations is due before
the Company will issue any shares on exercise or release from forfeiture of an
Award or, if the Company so requires, at the same time as is payment of the
exercise price unless the Company determines otherwise. If provided for in an
Award or approved by the Board in its sole discretion, a Participant may
satisfy such tax obligations in whole or in part by delivery of shares of
Common Stock, including shares retained from the Award creating the tax
obligation, valued at their Fair Market Value; provided, however, except as
otherwise provided by the Board, that the total tax withholding where stock is
being used to satisfy such tax obligations cannot exceed the Company’s minimum
statutory withholding obligations (based on minimum statutory withholding rates
for federal and state tax purposes, including payroll taxes, that are
applicable to such supplemental taxable income). Shares surrendered to satisfy
tax withholding requirements cannot be subject to any repurchase, forfeiture,
unfulfilled vesting or other similar requirements.

(f)            Amendment of Award.   Except as otherwise provided in Section 5(h),
the Board may amend, modify or terminate any outstanding Award, including but
not limited to, substituting therefor another Award of the same or a different
type, changing the date of exercise or realization, and converting an Incentive
Stock Option to a Nonstatutory Stock Option, provided either (i) that the
Participant’s consent to such action shall be required unless the Board
determines that the action, taking into account any related action, would not
materially and adversely affect the Participant or (ii) that the change is
permitted under Section 10 hereof.

(g)           Conditions on Delivery of Stock.   The Company will not
be obligated to deliver any shares of Common Stock pursuant to the Plan or to
remove restrictions from shares previously delivered under the Plan until (i) all
conditions of the Award have been met or removed to the satisfaction of the
Company, (ii) in the opinion of the Company’s counsel, all other legal
matters in connection with the issuance and delivery of such shares have been
satisfied, including any applicable securities laws and any applicable stock
exchange or stock market rules and regulations, and (iii) the
Participant has executed and delivered to the Company such representations or
agreements as the Company may consider appropriate to satisfy the requirements
of any applicable laws, rules or regulations.

(h)           Acceleration.   The Board may at any time provide that
any Award shall become immediately exercisable in full or in part, free of some
or all restrictions or conditions, or otherwise realizable in full or in part,
as the case may be.

 9
 

 

(i)            Performance Awards.

(1)           Grants.   Restricted Stock Awards and Other Stock Unit
Awards under the Plan may be made subject to the achievement of performance
goals pursuant to this Section 11(i) (“Performance Awards”).

(2)           Committee.   Grants of Performance Awards to any Covered
Employee intended to qualify as “performance-based compensation” under Section 162(m) (“Performance-Based
Compensation”) shall be made only by a Committee (or subcommittee of a
Committee) comprised solely of two or more directors eligible to serve on a
committee making Awards qualifying as “performance-based compensation” under Section 162(m).
In the case of such Awards granted to Covered Employees, references to the
Board or to a Committee shall be deemed to be references to such Committee or
subcommittee. “Covered Employee” shall mean any person who is a “covered
employee” under Section 162(m)(3) of the Code.

(3)           Performance Measures.   For any Award that is intended
to qualify as Performance-Based Compensation, the Committee shall specify that
the degree of granting, vesting and/or payout shall be subject to the
achievement of one or more objective performance measures established by the
Committee. Such performance measures:  (i) may
vary by Participant and may be different for different Awards; (ii) may be
particular to a Participant or the department, branch, line of business,
subsidiary or other unit in which the Participant works and may cover such
period as may be specified by the Committee; and (iii) shall be set by the
Committee within the time period prescribed by, and shall otherwise comply with
the requirements of, Section 162(m). Awards that are not intended to
qualify as Performance-Based Compensation may be based on these or such other
performance measures as the Board may determine.

(4)           Adjustments.   Notwithstanding any provision of the
Plan, with respect to any Performance Award that is intended to qualify as
Performance-Based Compensation, the Committee may adjust downwards, but not
upwards, the cash or number of Shares payable pursuant to such Award, and the Committee
may not waive the achievement of the applicable performance measures except in
the case of the death or disability of the Participant.

(5)           Other.   The Committee shall have the power to impose
such other restrictions on Performance Awards as it may deem necessary or
appropriate to ensure that such Awards satisfy all requirements for
Performance-Based Compensation.

12.                               Miscellaneous

(a)           No Right To Employment or Other Status.   No person
shall have any claim or right to be granted an Award, and the grant of an Award
shall not be construed as giving a Participant the right to continued
employment or any other relationship with the Company. The Company expressly
reserves the right at any time to dismiss or otherwise terminate its
relationship with a Participant free from any liability or claim under the
Plan, except as expressly provided in the applicable Award.

(b)           No Rights As Stockholder.   Subject to the provisions of
the applicable Award, no Participant or Designated Beneficiary shall have any
rights as a stockholder with respect to any shares of Common Stock to be
distributed with respect to an Award until becoming the record holder of such
shares.

(c)           Effective Date and Term of Plan.   The Plan shall become
effective on the date the Plan is approved by the Company’s stockholders (the “Effective
Date”). No Awards shall be granted under the Plan after the completion of 10
years from the Effective Date, but Awards previously granted may extend beyond
that date.

(d)           Amendment of Plan.   The Board may amend, suspend or
terminate the Plan or any portion thereof at any time provided that (i) to
the extent required by Section 162(m), no Award granted to a 

 10
 

Participant that is intended to comply with Section 162(m) after
the date of such amendment shall become exercisable, realizable or vested, as
applicable to such Award, unless and until such amendment shall have been
approved by the Company’s stockholders if required by Section 162(m) (including
the vote required under Section 162(m)); (ii) no amendment that would
require stockholder approval under the rules of the NASDAQ Stock Market (“NASDAQ”)
may be made effective unless and until such amendment shall have been approved
by the Company’s stockholders; and (iii) if the NASDAQ amends its
corporate governance rules so that such rules no longer require
stockholder approval of material amendments to equity compensation plans, then,
from and after the effective date of such amendment to the NASDAQ rules, no
amendment to the Plan (A) materially increasing the number of shares
authorized under the Plan (other than pursuant to Section 10), (B) expanding
the types of Awards that may be granted under the Plan, or (C) materially
expanding the class of participants eligible to participate in the Plan shall
be effective unless stockholder approval is obtained. In addition, if at any
time the approval of the Company’s stockholders is required as to any other
modification or amendment under Section 422 of the Code or any successor
provision with respect to Incentive Stock Options, the Board may not effect
such modification or amendment without such approval. No Award shall be made
that is conditioned upon stockholder approval of any amendment to the Plan.

(e)           Provisions for Foreign Participants.   The Board may
modify Awards or Options granted to Participants who are foreign nationals or
employed outside the United States or establish subplans or procedures under
the Plan to recognize differences in laws, rules, regulations or customs of
such foreign jurisdictions with respect to tax, securities, currency, employee
benefit or other matters.

(f)            Compliance With Code Section 409A.   No Award shall
provide for deferral of compensation that does not comply with Section 409A
of the Code, unless the Board, at the time of grant, specifically provides that
the Award is not intended to comply with Section 409A of the Code. The
Company shall have no liability to a Participant, or any other party, if an
Award that is intended to be exempt from, or compliant with, Section 409A
is not so exempt or compliant or for any action taken by the Board.

(g)           Governing Law.   The provisions of the Plan and all
Awards made hereunder shall be governed by and interpreted in accordance with
the laws of the State of Delaware, excluding choice-of-law principles of the
law of such state that would require the application of the laws of a
jurisdiction other than such state.

 11Exhibit 10.1

ASSET
PURCHASE AGREEMENT

by
and between

DUKE
ENERGY INDIANA, INC.

as
Seller,

and

WABASH
VALLEY POWER ASSOCIATION, INC.,

as
Buyer

Dated
as of December 1, 2006

 

TABLE OF CONTENTS

	
  

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE I DEFINITIONS

  	
   

  	
   

  
	
   

  	
  1.1

  	
  Definitions

  	
   

  	
   

  
	
   

  	
  1.2

  	
  Construction

  	
   

  	
   

  
	
  ARTICLE
  II PURCHASE AND SALE

  	
   

  	
   

  
	
   

  	
  2.1

  	
  Purchased
  Assets and the Gasification Real Property.

  	
   

  	
   

  
	
   

  	
  2.2

  	
  Excluded
  Assets

  	
   

  	
   

  
	
   

  	
  2.3

  	
  Assumed Liabilities

  	
   

  	
   

  
	
   

  	
  2.4

  	
  Excluded Liabilities

  	
   

  	
   

  
	
  ARTICLE III THE CLOSING

  	
   

  	
   

  
	
   

  	
  3.1

  	
  Closing

  	
   

  	
   

  
	
   

  	
  3.2

  	
  Payment of Purchase
  Price

  	
   

  	
   

  
	
   

  	
  3.3

  	
  Determination
  of Purchase Price.

  	
   

  	
   

  
	
   

  	
  3.4

  	
  Allocation of
  Purchase Price

  	
   

  	
   

  
	
   

  	
  3.5

  	
  Prorations.

  	
   

  	
   

  
	
   

  	
  3.6

  	
  Deliveries by Seller

  	
   

  	
   

  
	
   

  	
  3.7

  	
  Deliveries by Buyer

  	
   

  	
   

  
	
   

  	
  3.8

  	
  Emission
  Allowance Allocation.

  	
   

  	
   

  
	
  ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLER

  	
   

  	
   

  
	
   

  	
  4.1

  	
  Incorporation

  	
   

  	
   

  
	
   

  	
  4.2

  	
  Authority

  	
   

  	
   

  
	
   

  	
  4.3

  	
  Consents and
  Approvals; No Violation.

  	
   

  	
   

  
	
   

  	
  4.4

  	
  Title

  	
   

  	
   

  
	
   

  	
  4.5

  	
  Environmental Matters.

  	
   

  	
   

  
	
   

  	
  4.6

  	
  [Reserved].

  	
   

  	
   

  
	
   

  	
  4.7

  	
  Condemnation

  	
   

  	
   

  
	
   

  	
  4.8

  	
  Contracts.

  	
   

  	
   

  
	
   

  	
  4.9

  	
  Legal
  Proceedings

  	
   

  	
   

  
	
   

  	
  4.10

  	
  Other
  Permits.

  	
   

  	
   

  
	
   

  	
  4.11

  	
  Taxes.

  	
   

  	
   

  
	
   

  	
  4.12

  	
  Intellectual Property

  	
   

  	
   

  
	
   

  	
  4.13

  	
  Compliance with Laws

  	
   

  	
   

  
	
   

  	
  4.14

  	
  Disclaimers
  Regarding Purchased Assets and the Gasification Real Property

  	
   

  	
   

  
	
  ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER

  	
   

  	
   

  
	
   

  	
  5.1

  	
  Organization

  	
   

  	
   

  
	
   

  	
  5.2

  	
  Authority

  	
   

  	
   

  
	
   

  	
  5.3

  	
  Consents and
  Approvals; No Violation.

  	
   

  	
   

  

 

 

 

	
  

  	
  5.4

  	
  Availability of Funds

  	
   

  	
  37

  
	
   

  	
  5.5

  	
  Legal
  Proceedings

  	
   

  	
  37

  
	
   

  	
  5.6

  	
  No Knowledge of
  Seller’s Breach

  	
   

  	
  37

  
	
   

  	
  5.7

  	
  Amended
  Site Lease

  	
   

  	
  38

  
	
  ARTICLE VI COVENANTS
  OF THE PARTIES

  	
   

  	
  38

  
	
   

  	
  6.1

  	
  Conduct of
  Business Relating to the Purchased Assets and the Gasification Real Property

  	
   

  	
  38

  
	
   

  	
  6.2

  	
  Access to Information.

  	
   

  	
  39

  
	
   

  	
  6.3

  	
  Public
  Statements

  	
   

  	
  41

  
	
   

  	
  6.4

  	
  Expenses

  	
   

  	
  41

  
	
   

  	
  6.5

  	
  Further Assurances.

  	
   

  	
  41

  
	
   

  	
  6.6

  	
  Governmental
  Authorizations.

  	
   

  	
  42

  
	
   

  	
  6.7

  	
  Fees and Commissions

  	
   

  	
  43

  
	
   

  	
  6.8

  	
  Tax
  Matters.

  	
   

  	
  43

  
	
   

  	
  6.9

  	
  Advise
  of Changes.

  	
   

  	
  44

  
	
   

  	
  6.10

  	
  Employees.

  	
   

  	
  45

  
	
   

  	
  6.11

  	
  Risk
  of Loss.

  	
   

  	
  45

  
	
   

  	
  6.12

  	
  Insurance

  	
   

  	
  46

  
	
   

  	
  6.13

  	
  Use of Certain Names.

  	
   

  	
  46

  
	
   

  	
  6.14

  	
  Emission Allowances

  	
   

  	
  46

  
	
   

  	
  6.15

  	
  Emissions
  Budget Program Compliance.

  	
   

  	
  47

  
	
   

  	
  6.16

  	
  Emissions Averaging

  	
   

  	
  48

  
	
  ARTICLE VII CONDITIONS

  	
   

  	
  48

  
	
   

  	
  7.1

  	
  Conditions to
  Obligations of Buyer

  	
   

  	
  48

  
	
   

  	
  7.2

  	
  Conditions to
  Obligations of Seller

  	
   

  	
  50

  
	
  ARTICLE VIII INDEMNIFICATION

  	
   

  	
  51

  
	
   

  	
  8.1

  	
  Indemnification.

  	
   

  	
  51

  
	
   

  	
  8.2

  	
  Defense
  of Claims.

  	
   

  	
  54

  
	
   

  	
  8.3

  	
  Remediation
  Procedures and Standards.

  	
   

  	
  56

  
	
   

  	
  8.4

  	
  Corrective
  Action Procedures and Standards.

  	
   

  	
  58

  
	
  ARTICLE IX TERMINATION

  	
   

  	
  59

  
	
   

  	
  9.1

  	
  Termination

  	
   

  	
  59

  
	
   

  	
  9.2

  	
  Procedure and
  Effect of Termination; Termination Fee.

  	
   

  	
  60

  
	
  ARTICLE X MISCELLANEOUS
  PROVISIONS

  	
   

  	
  61

  
	
   

  	
  10.1

  	
  Amendments,
  etc.

  	
   

  	
  61

  
	
   

  	
  10.2

  	
  Waivers

  	
   

  	
  61

  
	
   

  	
  10.3

  	
  Survival.

  	
   

  	
  61

  
	
   

  	
  10.4

  	
  Notices

  	
   

  	
  61

  
	
   

  	
  10.5

  	
  Assignment; No
  Third Party Beneficiaries

  	
   

  	
  62

  
	
   

  	
  10.6

  	
  GOVERNING
  LAW

  	
   

  	
  62

  
	
   

  	
  10.7

  	
  Counterparts

  	
   

  	
  63

  
	
   

  	
  10.8

  	
  Interpretation

  	
   

  	
  63

  

 

 

 

	
  

  	
  10.9

  	
  Disclosure

  	
   

  	
  63

  
	
   

  	
  10.10

  	
  Entire
  Agreement

  	
   

  	
  63

  
	
   

  	
  10.11

  	
  Acknowledgment;
  Independent Due Diligence

  	
   

  	
  64

  
	
   

  	
  10.12

  	
  Bulk
  Sales Laws

  	
   

  	
  64

  
	
   

  	
  10.13

  	
  Dispute Resolution.

  	
   

  	
  64

  

 

 

Schedules and Exhibits

Exhibits

Exhibit A Assignment and Assumption Agreement

Exhibit B Bill of Sale

Exhibit C Deed

Exhibit D Facilities Operation and Services Agreement

Exhibit E FIRPTA Affidavit

Exhibit F Memorandum of Facilities Operation and Services Agreement

Exhibit G Operation and Maintenance Agreement

Exhibit H Authorized
Representation Agreement

Schedules

Schedule 1.1(51) Gasification Real Property

Schedule 1.1(65) Knowledge

Schedule 1.1(84) Permitted Encumbrances

Schedule 1.1(98) Seller’s Agreements

Schedule 1.1(108) Station Permits

Schedule 1.1 (110) Stormwater Pond Real Property

Schedule 1.1(123) Unit 1 Improvements

Schedule 1.1(124) Unit 1 Permits

Schedule 1.1(125) Unit 1 Real Property

Schedule 2.1(a)(iii) Tangible Personal Property and GSUs

Schedule 2.1(a)(xi) Intellectual Property

Schedule 2.2(n) Other Excluded Assets

Schedule 2.2(p) CF

Schedule 3.2 Net Book Value Calculation

Schedule 4.3(a)(i) Seller’s Required Third Party Consents

Schedule 4.3(b) Seller’s Required Regulatory Approvals

Schedule 4.5(a) Permits

Schedule 4.5(b) Violations; Claims

Schedule 4.5(c) Outstanding Judgments, Decrees or Judicial Orders

Schedule 4.7 Condemnation

Schedule 4.8(a) Material Contracts

Schedule 4.8(b) Contract Matters

Schedule 4.8(c) Default

Schedule 4.9 Legal Proceedings

Schedule 4.10(a) Permit Exceptions

 

 

Schedule 4.10(b) Other Permits

Schedule 4.11 Taxes

Schedule 4.12 Intellectual Property Matters

Schedule 5.3(a)(ii) Buyer’s Required Third Party Consents

Schedule 5.3(b) Buyer’s Required Regulatory Approvals

Schedule 6.1 Conduct of
Business Relating to the Purchased Assets

 

ASSET PURCHASE AGREEMENT

ASSET PURCHASE AGREEMENT (this “Agreement”), dated as of
December 1, 2006, by and between Duke Energy Indiana, Inc., an Indiana
corporation (“Seller”), and Wabash Valley Power Association, Inc., an
Indiana corporation (“Buyer”).  Seller
and Buyer may be referred to individually as a “Party,” and collectively
as the “Parties.”

RECITALS

WHEREAS, Seller owns the Wabash River Generating Station, consisting of
six electric generating units with an aggregate name plate capacity (summer rating)
of 928 megawatts (“MW”), together with ancillary properties, equipment
and facilities, located near Terre Haute, in Vigo County, Indiana (the “Station”);
and

WHEREAS, Buyer desires to purchase and assume, or cause to be purchased
and assumed, and Seller desires to sell and assign, or cause to be sold and
assigned Unit 1 (as defined below) of the Station, together with certain real
property, assets, rights and liabilities ancillary thereto, upon the terms and
conditions hereinafter set forth in this Agreement; and

WHEREAS, at the Closing (as defined below), the Parties intend to enter
into the Operation and Maintenance Agreement, the Facilities Operation and
Services Agreement and certain other agreements related to Unit 1.

NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements hereinafter set forth, and intending
to be legally bound hereby, the Parties agree as follows:

ARTICLE I

DEFINITIONS

Definitions.  As used
in this Agreement, the following terms have the meanings specified in this Section
1.1.

(1)             “Acquired
Real Property” means, collectively, the Unit 1 Real Property, the
Stormwater Pond Real Property and the Gasification Real Property.

(2)             “ADR”
has the meaning set forth in Section 10.13(a).

                                 
  
  
 

 

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

(4)             “Agreement”
has the meaning set forth in the Preamble.

(5)             “Amended
Site Lease” means that certain Site Lease, dated August 23, 1993, between
Seller and Destec Energy, Inc., as amended, supplemented, assigned, assumed and
otherwise modified prior to the date hereof.

(6)             “Applicable
Remedial Action Standard” means the most cost effective remediation
standard in effect at the time of the Remediation allowed by applicable
Environmental Law (considering initial capital costs, the present discounted
value of anticipated future monitoring, operation and maintenance costs, and
the cost and time of any required studies, risk assessments or other actions required
to obtain approval of any particular remediation standard) and based, to the
extent allowed by applicable Environmental Law, on either (i) remediation
standards published by applicable Governmental Authorities based upon the use
of the Acquired Real Property as of the Closing Date or (ii) site-specific
remediation standards based upon the assessment of risks to human health and
the environment, based upon the use of the Acquired Real Property as of the
Closing Date.

(7)             “Assignment
and Assumption Agreement” means the Assignment and Assumption Agreement
between Seller and Buyer, substantially in the form of Exhibit A, to be
delivered at the Closing, pursuant to which Seller shall assign the Seller’s
Agreements and other Purchased Assets to Buyer as required in this Agreement
and whereby Buyer shall assume the Seller’s Agreements and the other Assumed
Liabilities.

(8)             “Assumed
Liabilities” has the meaning set forth in Section 2.3.

(9)              “Base
Purchase Price” has the meaning set forth in Section 3.2.

(10)           “Bill
of Sale” means the Bill of Sale, substantially in the form of Exhibit B,
to be delivered at the Closing, with respect to the Tangible Personal Property
to be transferred to Buyer.

(11)           “Business
Day” shall mean any day other than Saturday, Sunday and any day which is a
day on which banking institutions in the 

 2
 

 

State of
Indiana are authorized or required by law or other governmental action to
close.

(12)           “Buyer”
has the meaning set forth in the Preamble.

(13)           “Buyer
Material Adverse Effect” has the meaning set forth in Section 5.3(a).

(14)           “Buyer’s
Indemnitee” has the meaning set forth in Section 8.1(b).

(15)           “Buyer-Related
Party” means any of Buyer, any Affiliate of Buyer, Wabash River Energy
Limited, any Affiliate of Wabash River Energy Limited and/or any predecessor
entity of any of the foregoing.  The
parties agree that as of the date hereof SGS is an Affiliate of Buyer.

(16)           “Buyer’s
Required Regulatory Approvals” has the meaning set forth in Section
5.3(b).

(17)           “Buyer’s
Required Third Party Consents” has the meaning set forth in Section
5.3(a).

(18)           “CERCLA”
means the Federal Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended.

(19)           “CF”
has the meaning set forth in Section 2.2(p).

(20)           “Closing”
has the meaning set forth in Section 3.1.

(21)           “Closing
Credit” means the aggregate amount of funds, if any, provided by Buyer or
any Affiliate thereof to, and actually received by, Seller prior to Closing, in
each case upon the request of Seller, specifically for the purpose of defraying
the cost of the HRSG Overhaul (it being understood that Buyer shall be
responsible for paying or reimbursing Seller for 100% of the actual documented
cost of the HRSG Overhaul) and payments by Buyer to Seller under a certain
Agreement between Buyer and Seller, dated August 28, 2006, with respect to
steam turbine repair prior to Closing (the “Steam Turbine Repair”).  Prior to the date hereof, Buyer has paid
Seller $4,932,772.73 for the cost of the HRSG Overhaul and it is anticipated
that between the date hereof and Closing Buyer will pay an additional
$67,227.27 towards the HRSG Overhaul and Buyer has paid Seller zero dollars for
the cost of the Steam Turbine Repair and it is anticipated that between the 

 3
 

 

date
hereof and Closing Buyer will pay an additional $4,500,000.00 towards the Steam
Turbine Repair.

(22)           “Closing
Date” has the meaning set forth in Section 3.1.

(23)           “COBRA”
means Section 601-608 of ERISA, Section 4980B(f) of the Code, and any similar
applicable state or other local insurance continuation law.

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

(25)           “Combustion
Turbine” means that certain syngas/natural gas combustion turbine located
at the Station (General Electric Model 7FA Serial No. 296281) that also includes
the HRSG, which can create steam for the Steam Turbine, the Evaporative Boiler,
the Auxiliary Boiler and the Water Treatment Systems.

(26)           “Commercially
Reasonable Efforts” means efforts that are reasonably within the
contemplation of the Parties at the time of executing this Agreement and that
do not require the performing Party to expend any funds other than expenditures
that are customary and reasonable in transactions of the kind and nature
contemplated by this Agreement in order for the performing Party to satisfy its
obligations hereunder.

(27)           “Confidentiality
Agreement” means the Confidentiality Agreement, dated as of December 15,
2004, by and between Seller and Buyer, on behalf of itself and SGS.

(28)           “CPR”
has the meaning set forth in Section 10.13(a).

(29)           “Deed”
means a special warranty deed which conveys to Buyer title to the Acquired Real
Property and which shall be in substantially the form attached hereto as Exhibit
C.

(30)           “Direct
Claim” has the meaning set forth in Section 8.2(c).

(31)            “Emission
Allowances” means: (i) NOx Allowance; (ii) SO2 Allowance; or (iii) Mercury
Allowance.

 4
 

 

(32)           “Emissions
Budget Program” means: (i) NOx Budget Program; (ii) SO2 Budget Program; and
(iii) Mercury Budget Program.

(33)           “Encumbrances”
means any mortgages, pledges, liens, claims, security interests, agreements,
easements, restrictions, defects of title or encumbrances of any kind.

(34)           “Environmental
Condition” means the presence or Release to the environment, whether at the
Station or at an Off-Site Location, of Hazardous Substances, including any
migration of those Hazardous Substances through air, soil or groundwater to or
from the Station or any Off-Site Location regardless of when such presence or
Release occurred or is discovered.

(35)           “Environmental
Laws” means all federal, state, 
local and foreign laws, regulations, rules, ordinances, codes, decrees,
judgments, directives, or judicial or administrative orders relating to
pollution or protection of the environment, natural resources or human health
and safety, including laws relating to Releases or threatened Releases of
Hazardous Substances (including Releases to ambient air, surface water,
groundwater, land, surface and subsurface strata) or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, Release,
transport or handling of Hazardous Substances. “Environmental Laws” include
CERCLA (42 U.S.C. 9601 et seq.), the Hazardous Materials Transportation Act (49
U.S.C. 1801 et seq.), the Resource Conservation and Recovery Act (42 U.S.C.
6901 et seq.), the Federal Water Pollution Control Act (33 U.S.C. 1251 et
seq.), the Clean Air Act (42 U.S.C. 7401 et seq.), the Toxic Substances Control
Act (15 U.S.C. 2601 et seq.), the Oil Pollution Act (33 U.S.C. 2701 et seq.), the
Emergency Planning and Community Right-to-Know Act (42 U.S.C. 11001 et seq.),
the Occupational Safety and Health Act (29 U.S.C. 651 et seq.) and all other
federal, state, local or foreign laws analogous to any of the above.

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

(37)           “ERISA
Affiliate” has the meaning set forth in Section 2.5(g).

(38)           “ERISA
Affiliate Plans” has the meaning set forth in Section 2.5(g).

(39)           “Estimated
Closing NBV” has the meaning set forth in Section 3.2.

 5
 

 

(40)           “Estimated
Closing Statement” has the meaning set forth in Section 3.3(a).

(41)           “Evaporative
Boiler” means a rated 550,000 lb per hour, natural gas fired steam boiler
utilized primarily to supply saturated steam to the HRSG in the absence of the
steam provided from the E-150 from the gasification island when Unit 1 is
operating on syngas fuel.

(42)           “Excluded
Assets” has the meaning set forth in Section 2.2.

(43)           “Excluded
Liabilities” has the meaning set forth in Section 2.4.

(44)           “Existing
Surveys” has the meaning set forth in Section 7.1(k).

(45)           “Facilities
Operation and Services Agreement” means the Facilities Operation and
Services Agreement between Seller and Buyer, substantially in the form of Exhibit
D to be delivered at the Closing.

(46)           “FERC”
means the Federal Energy Regulatory Commission, or any successor agency
thereto.

(47)           “Final
Closing NBV” has the meaning set forth in Section 3.3(b).

(48)           “FIRPTA
Affidavit” means the Foreign Investment in Real Property Tax Act
Certification and Affidavit, substantially in the form of Exhibit E.

(49)            “GAAP”
means United States generally accepted accounting principles as in effect from
time to time, applied on a consistent basis.

(50)           “Gasification
Facility” means the improvements, fixtures and all related equipment
(including interconnections with the power block) used in the production of
synthetic fuel and located on the Gasification Real Property.

(51)           “Gasification
Real Property” means the real property described in Schedule 1.1(51)
consisting in part of that certain real property currently leased by Seller to
SGS pursuant to the Amended Site Lease.

 6
 

 

(52)           “Good
Utility Practices” mean any of the practices, methods and acts engaged in
or approved by a significant portion of the electric utility industry during
the relevant time period, or any of the practices, methods or acts that, in the
exercise of reasonable judgment in light of the facts known at the time the
decision was made, could have been expected to accomplish the desired result at
a reasonable cost consistent with good business practices, reliability, safety
and expedition.  Good Utility Practices
are not intended to be limited to the optimum practices, methods or acts to the
exclusion of all others, but rather to be practices, methods or acts generally
accepted in the MISO region.

(53)           “Governmental
Authority” means any federal, state, local or other governmental,
regulatory or administrative agency, commission, department, board or other
governmental subdivision, court, tribunal, arbitrating body or other
governmental authority.

(54)           “Hazardous
Substances” means (a) any petrochemical or petroleum products, oil or coal
ash, radioactive materials, radon gas, asbestos in any form that is or could
become friable, urea formaldehyde foam insulation and transformers or other
equipment that contain dielectric fluid which may contain levels of
polychlorinated biphenyls; (b) any chemicals, materials or substances defined
as or included in the definition of “hazardous substances,” “hazardous wastes,”
“hazardous materials,” “hazardous constituents,” “restricted hazardous
materials,” “extremely hazardous substances,” “toxic substances,” “contaminants,”
“pollutants,” “toxic pollutants” or words of similar meaning and regulatory
effect under any applicable Environmental Law; and (c) any other chemical,
material or substance, exposure to which is prohibited, limited or regulated by
any applicable Environmental Law.

(55)           “HRSG”
means the heat recovery steam generator associated with Unit 1.

(56)           “HRSG Overhaul”
means the major maintenance planned for the HRSG and referenced in Section
5.2 of that certain Settlement Agreement by and between Seller and Buyer,
dated December 31, 2005.

(57)            “HSR
Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.

(58)           “Income
Tax” means any federal, state, local or foreign Tax  based upon, measured by or calculated with
respect to (a) net income, profits or receipts (including gross receipts Taxes,
capital gains Taxes and minimum Taxes) or (b) multiple bases (including
corporate franchise taxes) if one or more of the bases on which such Tax may be
based, measured by or calculated with respect 

 7
 

 

to, is
described in clause (a), in each case together with any interest, penalties or
additions to such Tax.

(59)           “Indemnifiable
Loss” has the meaning set forth in Section 8.1(a).

(60)           “Indemnifying
Party” has the meaning set forth in Section 8.1(e).

(61)           “Indemnitee”
has the meaning set forth in Section 8.1(c).

(62)           “Independent
Accounting Firm” means a nationally recognized certified public accounting
firm chosen jointly by Seller and Buyer.

(63)           “Intellectual
Property” means patents and patent rights, trademarks and trademark rights,
trade names and trade name rights, service marks and service mark rights,
service names and service name rights, brand names, inventions, copyrights and
copyright rights, computer programs and pending applications for and
registrations of patents, trademarks, service marks and copyrights.

(64)           “IURC”
means the Indiana Utility Regulatory Commission and any successor agency
thereto.

(65)           “Knowledge”
when used in a particular representation herein with respect to Seller, means
the knowledge of the individuals listed on Schedule 1.1(65), with
reasonable inquiry.

(66)           “Laws”
means all laws, statutes (including Environmental Laws), rules, Permits,
regulations, ordinances and other pronouncements having the effect of law of
the United States and any domestic state, county, city or other political
subdivision or of any Governmental Authority.

(67)           “Liability”
or “Liabilities” means any liability or obligation (whether known or
unknown, whether asserted or unasserted, whether absolute or contingent,
whether accrued or unaccrued, whether liquidated or unliquidated, whether
incurred or consequential, and whether due or to become due).

(68)           “Material
Adverse Effect” means any change in or effect on the condition of the
Purchased Assets and the Gasification Real Property, individually or in the
aggregate, that materially impairs the value of the Purchased Assets and the
Gasification Real Property taken as a whole; provided that the 

 8
 

 

following
shall not be considered when determining whether a Material Adverse Effect has
occurred: any effect resulting from (i) any change resulting from changes in
the national, regional or local wholesale or retail markets for electricity,
including any change in the structure, operating agreements, operations or
procedures of the Midwest System Operator, Inc. or any other regional
transmission organization or control area, (ii) any change resulting from
changes in the national, regional or local markets for any fuel or supplies
used at Unit 1, (iii) any change resulting from changes in the North American,
national, regional or local electricity transmission systems, (iv) changes in
Law, (v) any materially adverse change in the Purchased Assets and the
Gasification Real Property which is substantially cured (including by payment
of money) before the earlier of the Closing Date and the Termination Date, (vi)
any change in economic conditions generally or in the industry in which Seller
operates, (vii) any actions to be taken pursuant to or in accordance with this
Agreement, (viii) with respect to the Gasification Real Property, any action or
inaction of Buyer or any Buyer-Related Party, or (ix) any order of any court or
Governmental Authority applicable to providers of generation, transmission or
distribution of electricity generally that imposes restrictions, regulations or
other requirements thereon, including any order with respect to an independent
system operator or retail access in Indiana.

(69)           “Material
Contracts” has the meaning set forth in Section 4.8(a).

(70)           “Memorandum
of Amended Site Lease” means any memorandum of the Amended Site Lease or
any assignment thereof that is recorded in the applicable land records.

(71)           “Memorandum
of Facilities Operation and Services Agreement” means the Memorandum of
Facilities Operation and Services Agreement between Seller and Buyer, in
recordable form and otherwise substantially in the form of Exhibit F, to
be delivered at the Closing.

(72)           “Mercury
Allowance” means an allowance or authorization used to comply with a
Mercury Budget Program, including, but not limited to: (i) a Hg allowance as
that term is defined in 40 CFR 60.4102; (ii) a mercury allowance or
authorization (or similar term) as set forth in regulations and/or statutes
that may be promulgated by the State of Indiana or the Indiana Department of
Environmental Management or the Indiana Air Pollution Control Board after the
date hereof to implement the Clean Air Mercury Rule published in the Federal
Register on May 18, 2005; and (iii) a mercury allowance or authorization (or
similar term) promulgated pursuant to any future federal or state statute or
regulation that amends or supersedes any of the foregoing.

 

 9

 

(73)           “Mercury
Budget Program” means a statutory or regulatory program, promulgated by the
United States or a state pursuant to which the United States or state provides
for a limit on the mercury that can be emitted by all sources covered by the
program and establishes tradeable allowances or authorizations as the means for
ensuring compliance with the limit.

(74)           “Net
Book Value” means the net value (original cost less accumulated
depreciation) on the books of Seller, determined in accordance with GAAP applied
consistently with the Seller’s past and current accounting practices, of a
specified asset as of the date of determination.

(75)           “Neutral”
has the meaning set forth in Section 10.13(a).

(76)           “NOx”
means oxides of nitrogen.

(77)           “NOx
Allowance” means an allowance or authorization used to comply with a NOx
Budget Program, including, but not limited to: (i) a NOx Allowance as that term
is defined in 326 Indiana Administrative Code § 10-4-2 as of the date hereof;
(ii) a CAIR NOx allowance, as that term is defined in 40 CFR 96.102; (iii) a
CAIR NOx Ozone Season allowance, as that term is defined in 40 CFR 96.302; (iv)
a NOx  allowance or authorization (or
similar term) as set forth in regulations and/or statutes that may be
promulgated by the State of Indiana or the Indiana Department of Environmental
Management or the Indiana Air Pollution Control Board after the date hereof to
implement the Federal Clean Air Interstate Rule published in the Federal
Register on May 12, 2005; and (v) a NOx allowance or authorization (or similar
term) promulgated pursuant to any future federal or state statute or regulation
that amends or supersedes any of the foregoing.

(78)           “NOx
Budget Program” means a statutory or regulatory program promulgated by the
United States or a state pursuant to which the United States or state provides
for a limit on the NOx that can be emitted by all sources covered by the
program and establishes tradeable allowances or authorizations as the means for
ensuring compliance with the limit.

(79)           “Off-Site
Location” means any real property other than the real property underlying
the Station and the Purchased Assets. 
For the avoidance of doubt, the term “Off-Site Location” does not
include the Acquired Real Property.

(80)           “Operation
and Maintenance Agreement” means the Operation and Maintenance Agreement
between Seller and Buyer, substantially in the form of Exhibit G, to be
delivered at the Closing.

 10
 

 

(81)           “OUCC”
means the Indiana Office of Utility Consumer Counselor

(82)           “Party”
or “Parties” has the meaning set forth in the Preamble.

(83)           “Permits”
means permits, certificates, licenses and governmental authorizations.

(84)           “Permitted
Encumbrances” means: (i) those Encumbrances set forth in Schedule
1.1(84); (ii) statutory liens for Taxes or other governmental charges or
assessments not yet delinquent (or that may subsequently be paid without
penalty) or which is being contested in good faith in appropriate proceedings;
(iii) mechanics’, carriers’, workers’, repairers’ and other similar liens
arising or incurred in the ordinary course of business that do not,
individually or in the aggregate, create a Material Adverse Effect; (iv)
zoning, entitlement, conservation, and other land use and environmental
restrictions and regulations by Governmental Authorities; (v) such other
Encumbrances which do not, individually or in the aggregate, create a Material
Adverse Effect; (vi) the terms of the Seller’s Agreements and liens of the
other parties to such Seller’s Agreements arising thereunder for sums not yet
due and payable that do not, individually or in the aggregate, create a
Material Adverse Effect; (vii) Encumbrances related to Assumed Liabilities or
created by this Agreement and each other agreement, document, instrument and
certificate to be executed in connection with the transactions contemplated
hereby; (viii) Encumbrances registered under the Uniform Commercial Code as
adopted in the state of Indiana by any lessor or licensor of Tangible Personal
Property to Seller; (ix) the rights, if any, of third party suppliers or
vendors in the Purchased Assets that do not, individually or in the aggregate,
create a Material Adverse Effect; (x) Encumbrances arising in the ordinary
course of business after the date hereof; (xi) Encumbrances arising or
resulting from any act or omission of Buyer or any Buyer—Related Party; and
(xii) the Amended Site Lease and any Encumbrances arising thereunder or as a
result thereof.

(85)           “Person”
means any individual, partnership, limited liability company, joint venture,
corporation, trust, unincorporated organization or any other business entity or
governmental entity or any department or agency thereof.

(86)           “Post-Closing
Adjustment” has the meaning set forth in Section 3.3(b).

(87)           “Post-Closing
Statement” has the meaning set forth in Section 3.3(b).

 11
 

 

(88)           “Proposed
Post-Closing Adjustment” has the meaning set forth in Section 3.3(b).

(89)           “Purchased
Assets” has the meaning set forth in Section 2.1(a).

(90)           “Purchase
Price” has the meaning set forth in Section 3.3(b).

(91)           “Related
Agreements” means the Syngas Tolling Agreement, the Memorandum of Amended
Site Lease and the Amended Site Lease.

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

(93)           “Remediation”
means actions to address an Environmental Condition, including:
(a) monitoring, investigation, assessment, treatment, cleanup,
containment, removal, mitigation, response or restoration work; (b) obtaining
any permits, consents, approvals or authorizations of any Governmental
Authority necessary to conduct any such activity; (c) preparing and
implementing any plans or studies for any such activity; (d) obtaining a
written notice from a Governmental Authority with jurisdiction over the Unit 1
Real Property, Unit 1 or an Off-Site Location under Environmental Laws that no
material additional work is required by such Governmental Authority; (e) the
use, implementation, application, installation, operation or maintenance of
removal actions on the Unit 1 Real Property, Unit 1 or an Off-Site Location,
remedial technologies applied to the surface or subsurface soils, excavation
and treatment or disposal of soils at an Off-Site Location, systems for long-term
treatment of surface water or ground water, engineering controls or
institutional controls; and (f) any other activities reasonably determined by a
Party to be necessary or appropriate or required under Environmental Laws to
address the presence or Release of Hazardous Substances at the Unit 1 Real
Property, Unit 1 or an Off-Site Location.

(94)           “Representatives”
of a Party means the Party and its Affiliates and their respective directors,
officers, employees, agents, partners, advisors (including accountants, legal
counsel, environmental consultants, engineering consultants, financial advisors
and other authorized representatives) and parents and other controlling
Persons.

(95)           “SEC”
means the Securities and Exchange Commission, and any successor agency thereto.

 12
 

 

(96)           “SGS”
means SG Solutions, LLC, an Indiana limited liability company, and any
successor thereto.

(97)           “Seller”
has the meaning set forth in the Preamble.

(98)           “Seller’s
Agreements” means those contracts, agreements, licenses (other than Permits
or Intellectual Property), leases, or other legally binding arrangements that
solely relate to the ownership, operation and maintenance of the Purchased
Assets, as set forth in Schedule 1.1(98).

(99)           “Seller’s
Indemnitee” has the meaning set forth in Section 8.1(a).

(100)         “Seller
Marks” has the meaning set forth in Section 6.13(a).

(101)         “Seller’s
Required Regulatory Approvals” has the meaning set forth in Section
4.3(b).

(102)         “Seller’s
Required Third Party Consents” has the meaning set forth in Section
4.3(a).

(103)         “SO2”
means sulfur dioxide.

(104)         “SO2
Allowance” means an allowance or authorization used to comply with a SO2
Budget Program, including, but not limited to: (i) an Allowance as that term is
defined in 40 CFR § 72.2; (ii) a CAIR SO2 Allowance, as that term is defined in
40 CFR 96.202; (iii) a SO2 allowance or authorization (or similar term) as set
forth in regulations and/or statutes that may be promulgated by the State of
Indiana or the Indiana Department of Environmental Management or the Indiana
Air Pollution Control Board after the date hereof to implement the Federal
Clean Air Interstate Rule published in the Federal Register on May 12, 2005;
and (iv) a SO2 allowance or authorization (or similar term) promulgated
pursuant to any future federal or state statute or regulation that amends or
supersedes any of the foregoing.

(105)         “SO2
Budget Program” means a statutory or regulatory program, promulgated by the
United States or a state pursuant to which the United States or state provides
for a limit on the SO2 that can be emitted by all sources covered by the
program and establishes tradeable allowances or authorizations as the means for
ensuring compliance with the limit.

 13
 

 

(106)         “S&P”
means Standard & Poor’s, a division of The McGraw-Hill Companies, Inc.

(107)         “Station”
has the meaning set forth in the Recitals.

(108)         “Station
Permits” means those Permits that are required pursuant to Environmental
Laws and related to emissions or effluents from Unit 1 and one or more of the
other units at the Station, but specifically excluding the Unit 1 Permits.  A complete list of the Station Permits is set
forth on Schedule 1.1(108).

(109)         “Steam
Turbine” means that certain Westinghouse steam turbine (Model 10-A-1404-2,
Serial No. 1-S-42P633) located at the Station.

(110)         “Stormwater
Pond Real Property”  means the real
property described in Schedule 1.1(110) upon which the stormwater
detention pond is located.

(111)          “Syngas
Tolling Agreement” means the Syngas Tolling Agreement, effective as of
April 1, 2005, between Buyer and Seller.

(112)         “Tangible
Personal Property” has the meaning set forth in Section 2.1(a).

(113)         “Taxes”
means all taxes, charges, fees, levies, penalties or other assessments imposed
by any federal, state, local or foreign taxing authority, including, but not
limited to, income, gross receipts, excise, property, sales, transfer, use,
franchise or other taxes, including any interest, penalties or additions
attributable thereto.

(114)         “Tax
Return” means any return, report, information return or other document and
any amendments thereto (including any related or supporting information)
required to be supplied to any taxing authority with respect to Taxes.

(115)         “Termination
Date” has the meaning set forth in Section 9.1(b).

(116)         “Termination
Fee” has the meaning set forth in Section 9.2(c).

 14
 

 

(117)         “Third
Party Claim” has the meaning set forth in Section 8.2(a).

(118)         “Title
Company” has the meaning set forth in Section 7.1(k).

(119)         “Title
Policy” has the meaning set forth in Section 7.1(k).

(120)         “Transaction
Agreements” means the Assignment and Assumption Agreement, the Bill of
Sale, the Operation and Maintenance Agreement, the Facilities Operation and
Services Agreement, the Memorandum of Facilities Operation and Services
Agreement, an Authorized Representation Agreement, as described in Section
6.15(d), and the Deed.

(121)         “Transfer
Taxes” means any and all transfer Taxes (excluding Taxes measured in whole
or in part by net income), including sales, use, excise, stock, stamp,
documentary, filing, recording, permit, license, authorization and similar
Taxes, fees, duties, levies, customs, tariffs, imposts, assessments,
obligations and charges.

(122)         “Unit 1”
means, collectively, together with any ancillary equipment and facilities (i)
the Steam Turbine and (ii) the Combustion Turbine.

(123)         “Unit 1
Improvements” means the buildings, fixtures and other improvements located
on the Unit 1 Real Property and listed in Schedule 1.1(123).  For the avoidance of doubt, the Unit 1
Improvements are separate and distinct from the Tangible Personal Property.

(124)         “Unit 1
Permits” means those Permits that pertain solely to the ownership, use and
operation of Unit 1.  A complete list of
the Unit 1 Permits is set forth on Schedule 1.1(124).

(125)         “Unit 1
Real Property” means the real property described in Schedule 1.1(125)
upon which the Combustion Turbine is sited, together with, to the extent of
Seller’s right, title and interest therein, the Unit 1 Improvements.

(126)         “Water
Treatment Systems” means those facilities and equipment associated with
supplying boiler feedwater to, and condensate from the Combustion Turbine and
Steam Turbine, including but not 

 15
 

 

limited
to pumps, piping, tanks, deaerators, polishers, filters, demineralizers and
chemical feed systems.

1.2           Construction.  All
article, section, subsection, schedule 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.

(a)           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, the singular shall include the plural and the plural shall
include the singular wherever and as often as may be appropriate, and words
importing the masculine gender shall include the feminine and neutral genders
and vice versa.  A reference to any party
hereto shall include a reference to such party’s permitted successors and
assigns.  The words “includes” or “including”
shall mean “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, unless
otherwise specified, are in U.S. Dollars.

(b)           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.

(c)           All
accounting terms used herein and not expressly defined herein shall have the
meanings given to them under GAAP.

(d)           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
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.

 16

 

ARTICLE II

PURCHASE AND SALE

2.1           Purchased Assets and the
Gasification Real Property.

(a)           Purchased Assets.  Upon the terms and subject to the
satisfaction of the conditions set forth in this Agreement, at the Closing,
Seller shall sell, assign, convey, transfer and deliver to Buyer, and Buyer
shall purchase, assume and acquire from Seller, free and clear of all
Encumbrances (except for Permitted Encumbrances), all of Seller’s right, title
and interest in and to the following assets, each as in existence on the
Closing Date (collectively, the “Purchased Assets”):

(i)            Unit 1;

(ii)           The Unit 1 Real Property and the
Stormwater Pond Real Property;

(iii)          The machinery, equipment, vehicles,
furniture and other personal property not otherwise constituting Unit 1, including
all spare parts and the generation step-up transformers set forth on Schedule
2.1(a)(iii), located on the Unit 1 Real Property on the Closing Date,
together with all the other tangible personal property of Seller used solely in
the operation of Unit 1, including without limitation, certain coal/petcoke
conveyance equipment, and listed in Schedule 2.1(a)(iii), other than, in
either case, property constituting part of the Excluded Assets (collectively, “Tangible
Personal Property”);

(iv)          The Seller’s Agreements, subject to
the receipt of necessary consents and approvals;

(v)           The Unit 1 Permits, subject to the
receipt of necessary consents and approvals;

(vi)          The right to operate under the Station
Permits until Buyer obtains its own Permits to replace the applicable Station
Permits in accordance with and as set forth in the Facilities Operation and
Services Agreement and the Operation and Maintenance Agreement;

(vii)         Those Emission Allowances related to
NOx and Mercury that will belong to Buyer, pursuant to Section 3.8;

(viii)        All unexpired, transferable warranties
and guarantees from third parties with respect to any item of Tangible Personal
Property;

 17
 

 

(ix)           The interests of Seller in and to the
name “Wabash River Repowering Combined Cycle Plant” or “Wabash River Coal
Gasification Repowering Project.”  Buyer
expressly understands that, except as just provided, Seller is not assigning or
transferring to Buyer any right, title or interest in or to the names “Wabash
River Station”, or any derivation or variation thereof, as well as any related
or similar name, or any other trade names, trademarks, service marks, corporate
names and logos or any part, derivation, colorable imitation or combination
thereof;

(x)            All books, expired purchase orders,
operating records, operating, safety and maintenance manuals, engineering
design plans, blueprints and as built plans, specifications, procedures,
studies, reports, equipment repair, safety, maintenance or service records, and
similar items, to the extent maintained and reasonably accessible by Seller and
related specifically to the Purchased Assets (subject to the right of Seller to
retain copies of same for its use) other than such items that are proprietary
to third parties or which constitute records of accounting or financial
performance of Seller;

(xi)           The Intellectual Property listed in Schedule
2.1(a)(xi), subject to the receipt of necessary consents and approvals;

(xii)          Any financial transmission rights
applicable to Unit 1 and any rights to interconnect and deliver the output of
Unit 1 to MISO; and

(xiii)         Buyer’s rights in all easements and
licenses as described and depicted in the Facilities Operation and Services
Agreement and transfer documents associated therewith.

(b)           Gasification Real Property.  In connection with the termination of the
Related Agreements and, as provided in Section 3.2 below, for no
additional monetary consideration, Seller shall convey, transfer and deliver to
Buyer, and Buyer shall acquire from Seller, all of Seller’s right, title and
interest in and to the Gasification Real Property.

2.2           Excluded Assets. 
Notwithstanding anything to the contrary in this Agreement, nothing in
this Agreement shall constitute or be construed as conferring on Buyer, and
Buyer is not acquiring, any right, title or interest of Seller or its
Affiliates in or to the following assets whether or not associated with the
Purchased Assets or the Gasification Real Property, and which are hereby
excluded from the sale and from the definition of Purchased Assets and the Gasification
Real Property herein (the “Excluded Assets”):

 18
 

 

(a)           Certificates
of deposit, shares of stock, securities, bonds, debentures, evidences of
indebtedness and interests in joint ventures, partnerships, limited liability
companies and other entities;

(b)           All cash,
cash equivalents, bank deposits, accounts and notes receivable (trade or
otherwise), prepaid expenses relating to the ownership and operation of the
Purchased Assets and the ownership of the Gasification Real Property and any
income, sales, payroll or other receivables with respect to Taxes;

(c)           The right,
title and interest of Seller and its successors, assigns, Affiliates and/or
Representatives in and to the names “Wabash River Station” or any derivation or
variation thereof, as well as any related or similar name, or any other trade
names, trademarks, service marks, corporate names and logos, or any part,
derivation, colorable imitation or combination thereof, other than as specified
in Section 2.1(a)(viii);

(d)           Except to
the extent, if any, constituting a Seller’s Agreement, all tariffs, agreements
and arrangements to which Seller or any Affiliate thereof is a party for the
purchase or sale of electric capacity and/or energy or for the purchase or sale
of ancillary services involving the Purchased Assets or otherwise;

(e)           Except in
respect of Assumed Liabilities, the rights of Seller or any Affiliate thereof
in and to any causes of action against third parties relating to any Acquired
Real Property, Tangible Personal Property, Unit 1 Permits, Station Permits,
Taxes or Seller’s Agreements, if any, including any claims for refunds (other
than those Tax refunds that are covered by Section 2.2(f)), prepayments, offsets, recoupment, insurance proceeds,
condemnation awards, judgments and the like, whether received as payment or
credit against future liabilities, relating specifically to Unit 1 or the
Acquired Real Property and relating to any period prior to the Closing Date;

(f)            Any
refunds of Taxes attributable to the Purchased Assets and the Gasification Real
Property, which refunds are the result of proceedings that, prior to the
Closing Date, were instituted by Seller or its Affiliates regardless of when
actually paid;

(g)           All
employees of Seller and all personnel records other than records the disclosure
of which to Buyer is required by Law;

(h)           The minute
books, stock transfer books, corporate seal and other corporate records of
Seller;

(i)            Any
amount received after the Closing Date for electricity generated by Unit 1 that
was sold or delivered prior to the Closing Date;

 19
 

 

(j)            All
insurance policies relating to the Purchased Assets and the Gasification Real
Property;

(k)           Any and
all of Seller’s rights in any contract or arrangement that is not a Seller’s
Agreement or that represents an intercompany transaction between Seller and an
Affiliate of Seller, whether or not such transaction relates to the provision
of goods and services, payment arrangements, intercompany charges or balances,
or the like;

(l)            Seller’s
rights under this Agreement, the Related Agreements and the Transaction
Agreements;

(m)          All rights
to the services of employees of Seller and all rights under and with respect to
any ERISA Affiliate Plans;

(n)           All of
Seller’s electric generating units at the Station other than Unit 1 and the
other properties, assets and rights set forth on Schedule 2.2(n);

(o)           All
electrical transmission facilities of Seller or any of its Affiliates located
at the Station (whether or not regarded as a “transmission” asset for
regulatory or accounting purposes), including all switchyard facilities,
substation facilities and support equipment (and related permits, contracts and
warranties), but excluding, for the avoidance of doubt, those generation
step-up transformers set forth on Schedule 2.1(a)(iii);

(p)           All
assets, equipment and tangible or intangible personalty and rights that are not
Purchased Assets, that are owned, operated or used by Seller or its Affiliates
at the Station but not solely for or in connection with Unit 1, including
without limitation those assets, equipment and tangible or intangible
personalty and rights that are used in connection with the operation or support
of any two or more of Seller’s electric generating units at the Station,
whether or not including Unit 1 (such assets and properties, the “CF”
including those items described in Schedule 2.2(p)).  For the avoidance of doubt, Seller is not
transferring or otherwise conveying to Buyer hereunder, as part of the
Purchased Assets or otherwise, any interest in the CF; it being understood
that, subject to the terms and conditions thereof, Seller shall make available
to Buyer under the Facilities Operation and Services Agreement a right to use
the CF commensurate with the Purchased Assets;

(q)           Any and
all rights in, under or to any real property other than the Acquired Real
Property;

(r)            The
Station Permits, the Parties acknowledging and understanding that Buyer’s
rights and obligations with respect to the Station Permits shall 

 20
 

 

be in
accordance with and as set forth in the Facilities Operation and Services
Agreement and the Operation and Maintenance Agreement; and

(s)           Any
Emissions Allowances other than those that will belong to Buyer, as described
in Section 3.8.

2.3           Assumed Liabilities.  On
the Closing Date, Buyer shall deliver to Seller the Assignment and Assumption
Agreement pursuant to which Buyer shall assume and agree to pay, perform and
discharge, without recourse to Seller or its Affiliates, all of the Liabilities
of Seller and its Affiliates that relate to the Purchased Assets and the
Gasification Real Property including those Liabilities described below, and
other than Excluded Liabilities, in accordance with the respective terms and
subject to the respective conditions thereof (collectively, “Assumed
Liabilities”):

(a)           All
Liabilities of Seller and its Affiliates under the Seller’s Agreements, the
Intellectual Property agreements identified in Schedule 2.1(a)(xi) and
the Unit 1 Permits in accordance with the terms thereof, except, in each case,
to the extent that such Liabilities, but for a breach or default by Seller or
its Affiliates, would have been paid, performed or otherwise discharged prior
to the Closing Date;

(b)           All
Liabilities in respect of Taxes attributable to the Purchased Assets or the
Gasification Real Property for taxable periods, or portions thereof, beginning
on and after the Closing Date;

(c)           Any
Liabilities relating to or resulting from any of the following: (i) any
violation or alleged violation of, or noncompliance with, Environmental Laws
with respect to the ownership or operation of any of the Purchased Assets or
the Gasification Real Property on or after the Closing Date, including any
fines or penalties or the costs associated with correcting such violations or
non-compliance; (ii) Environmental Conditions or exposure to Hazardous
Substances Released at, on, in, under, or migrating or discharged from the
Purchased Assets on or after the Closing Date, including loss of life, injury
to persons or property (including from exposure to asbestos-containing materials),
damage to natural resources, and Remediation of Environmental Conditions; (iii)
the transportation, storage, disposal, treatment, or recycling of Hazardous
Substances generated by and transported by or on behalf of Buyer or any of its
Affiliates in connection with the operation of the Purchased Assets or the
Gasification Real Property on or after the Closing Date to an Off-Site
Location, including claims related to loss of life, injury to persons or
property, natural resource damages or Remediation of Environmental Conditions;
and (iv) Environmental Conditions or exposure to Hazardous Substances Released
at, on, under or migrating or discharged from the Gasification Real Property on
or after January 14, 2005, including loss of life, injury to persons or property
(including from exposure to asbestos-containing materials), damage to natural
resources and Remediation of Environmental Conditions;

 21
 

 

(d)           All
Liabilities of Seller with respect to the Purchased Assets,  the Gasification Real Property under the agreements
or consent orders set forth on Schedule 4.5(c) arising on or after the
Closing Date;

(e)           All
Liabilities arising under or relating to the Permitted Encumbrances arising on
or after the Closing Date;

(f)            All
Liabilities allocated to Buyer in this Agreement or in any Transaction
Agreements;

(g)           Any
Liabilities for which Buyer has indemnified Seller pursuant to Article VIII;

(h)           All
Liabilities arising out of the use, ownership, maintenance or operation of the
Purchased Assets or the Gasification Real Property on or after the Closing
Date; and

(i)            All
Liabilities to third parties related to the use of syngas in Unit 1 on or after
April 1, 2005 in accordance with the terms of the Syngas Tolling Agreement.

2.4           Excluded Liabilities.  Except
for the Assumed Liabilities, Buyer shall not assume by virtue of this Agreement
or the transactions contemplated hereby, and shall have no liability for, any
of the following Liabilities (the “Excluded Liabilities”):

(a)           Any
Liabilities of Seller or its Affiliates in respect of any Excluded Assets or
other assets of Seller or its Affiliates which are not Purchased Assets, except
to the extent caused by the acts or omissions of Buyer or its Affiliates or
Buyer’s or its Affiliates’ ownership, operation or use of the Purchased Assets
or the Gasification Real Property;

(b)           Any
Liabilities in respect of Taxes attributable to the ownership and operation of
the Purchased Assets and the ownership of the Gasification Real Property (other
than as provided in the Amended Site Lease) for taxable periods, or portions
thereof, ending before the Closing Date;

(c)           Any
Liabilities of Seller or its Affiliates arising from the breach or default by
Seller or its Affiliates, prior to the Closing Date, of any Seller’s Agreement,
Intellectual Property agreement identified in Schedule 2.1(a)(xi), or
Unit 1 Permit;

(d)           Except as
otherwise set forth in Section 2.3(c) or 2.3(i), any and all Liabilities
to third parties for personal injury or tort, or similar causes of action
arising out of the ownership or operation of the Purchased Assets prior to the
Closing Date;

 22
 

 

(e)           Any fines
or penalties imposed by a Governmental Authority resulting from the willful
misconduct or gross negligence of Seller or its Affiliates prior to the Closing
Date;

(f)            Any Liabilities
relating to or resulting from the following: (i) any violation or alleged
violation of, or noncompliance with, Environmental Laws, with respect to the
ownership or operation of any of the Purchased Assets prior to the Closing
Date, including any fines or penalties or the costs associated with correcting
such violations or non-compliance; (ii) Environmental Conditions or exposure to
Hazardous Substances Released at, on, in, under, or migrating or discharged
from the Purchased Assets prior to the Closing Date, including loss of life,
injury to persons or property (including from exposure to asbestos-containing
materials prior to the Closing Date), damage to natural resources, and
Remediation of Environmental Conditions; (iii) the transportation, storage,
disposal, treatment, or recycling of Hazardous Substances generated by and
transported by or on behalf of Seller or any of its Affiliates in connection
with the operation of the Purchased Assets prior to the Closing Date to an
Off-Site Location, including claims related to loss of life, injury to persons
or property, natural resource damages or Remediation of Environmental
Conditions, and (iv) Environmental Conditions or exposure to Hazardous
Substances Released at, on, under or migrating or discharged from the
Gasification Real Property, commencing on or before January 13, 2005, including
loss of life, injury to persons or property (including from exposure to
asbestos-containing materials), damage to natural resources and Remediation of
Environmental Conditions.

(g)           Any
Liabilities relating to any Benefit Plan maintained by Seller or any trade or
business (whether or not incorporated) which is or within the six years
preceding the date hereof has been under common control, or which is or within
the six years preceding the date hereof has been treated as a single employer,
with Seller under Section 414(b), (c), (m) or (o) of the Code (“ERISA
Affiliate”) or to which Seller and any ERISA Affiliate contributed
thereunder (the “ERISA Affiliate Plans”), maintained by, contributed to,
or obligated to contribute to, by Seller or any ERISA Affiliate, including any
Liability (i) to the Pension Benefit Guaranty Corporation under Title IV of
ERISA or (ii) with respect to non-compliance with the notice and benefit continuation
requirements of COBRA;

(h)           Any
Liabilities relating to the employment or termination of employment, including
discrimination, wrongful discharge, unfair labor practices, or constructive
termination by Seller of any individual, attributable to any actions or
inactions by Seller or any Affiliate thereof other than such actions or
inactions taken at the direction of Buyer or its Affiliates; and

 23
 

 

(i)            Any
Liability of Seller arising from the making or performance of this Agreement or
the Transaction Agreements or the transactions contemplated hereby or thereby.

ARTICLE III

THE CLOSING

3.1           Closing.   The sale, assignment, conveyance, transfer
and delivery of the Purchased Assets to Buyer, the transfer and delivery of the
Gasification Real Property to Buyer, the payment of the Purchase Price to
Seller, and the consummation of the other respective obligations of the Parties
contemplated by this Agreement shall take place at a closing (the “Closing”),
to be held at the principal office of Seller at 10:00 a.m. local time, or at
another mutually acceptable time and location, on the date that is six (6)
Business Days following the date on which the last of the conditions to Closing
set forth in Article VII (except for conditions which by their nature can only
be satisfied at the Closing) have been either satisfied or waived by the Party
for whose benefit such conditions precedent exist or on such other date as may
be mutually agreed upon by the Parties. 
The date of Closing is hereinafter called the “Closing Date.”  For purposes of calculating the Closing Net
Book Value only, the Closing shall be deemed effective as of 11:59 p.m. local
time on the Closing Date.  For all
other purposes, the Closing shall be deemed effective as of 12:01 a.m. local
time on the Closing Date.

3.2           Payment of Purchase Price.  Upon
the terms and subject to the satisfaction of the conditions contained in this
Agreement, in consideration of the aforesaid sale, assignment, conveyance,
transfer and delivery of the Purchased Assets, Buyer shall pay or cause to be
paid to Seller at the Closing, to the account(s) previously identified by
Seller to Buyer, an amount in immediately available funds equal to (a) the
estimated Net Book Value of the Purchased Assets as of the Closing (the “Estimated
Closing NBV”) minus (b) the Closing Credit (such difference, the “Base
Purchase Price”).  Following the
Closing, Buyer or Seller, as appropriate, shall pay the other the Post-Closing
Adjustment Amount in accordance with Section 3.3(b).  Schedule 3.2 sets forth the
calculation of the Net Book Value as of July 31, 2006, including the
methodology for the calculation thereof, which methodology shall be
consistently used for calculating the Net Book Value in accordance with this
Agreement.  The Parties have agreed that,
because Seller acquired the Gasification Real Property for nominal
consideration, the Base Purchase Price shall not include any amounts allocable
to the Gasification Real Property; provided, however, in the event that,
for tax purposes or otherwise, a valuation is required to be assigned to the
Gasification Real Property, Seller and Buyer shall reasonably cooperate to
agree upon such a valuation.

 24
 

 

3.3           Determination of Purchase Price.

(a)           At least
five (5) Business Days prior to the expected Closing Date, Seller shall prepare
and deliver to Buyer an estimated closing statement (the “Estimated Closing
Statement”) that shall set forth in reasonable detail Seller’s best
estimate of the Estimated Closing NBV together with the Closing Credit.

(b)           Within
sixty (60) days following the Closing Date, Seller shall prepare and deliver to
Buyer a final closing statement (the “Post-Closing Statement”) that
shall set forth in reasonable detail (i) Seller’s final calculation of the Net
Book Value of the Purchased Assets as of the Closing Date (the “Final
Closing NBV”) and of the Closing Credit and (ii) Seller’s calculation of
the difference in amount, if any, between the Estimated Closing NBV and the
Final Closing NBV (including any difference in amount, if any, between the
Closing Credit as calculated in connection with the Estimated Closing NBV and
as calculated in connection with the Final Closing NBV) (the “Proposed
Post-Closing Adjustment”).  Within
thirty (30) days following the delivery of the Post-Closing Statement by Seller
to Buyer, Buyer may object to the calculation of the Proposed Post-Closing
Adjustment in writing.  Seller shall
cooperate with Buyer to provide Buyer and Buyer’s Representatives with
information reasonably requested by Buyer used by Seller in connection with
preparing the Post-Closing Statement.  If
Buyer objects to the Proposed Post-Closing Adjustment, the Parties shall
attempt to resolve such dispute by good faith negotiation.  If the Parties are unable to resolve such
dispute within thirty (30) days of any objection by Buyer, the Parties shall
appoint an Independent Accounting Firm, which shall be instructed to review the
Post-Closing Statement and determine the appropriate adjustment to the Base
Purchase Price within thirty (30) days thereafter.  Each of Buyer and Seller shall pay 50% of the
fees and disbursements of such Independent Accounting Firm.  The finding of such Independent Accounting
Firm shall be binding on the Parties. 
Upon determination of the appropriate adjustment (the “Post-Closing
Adjustment”) by agreement of the Parties or by binding determination of the
Independent Accounting Firm, the Party owing the difference shall deliver such
difference to the other Party no later than two (2) Business Days after such
determination, by wire transfer of 
immediately available funds denominated in U.S. dollars or in any other
manner as reasonably requested by the payee. 
Any amount paid under this Section 3.3(b) to Buyer or Seller
shall be paid with interest for the period from, and including, the Closing
Date to, but excluding, the date of payment, calculated at the 90-day U.S.
treasury bill rate as published in The Wall Street Journal in the “Money Rates”
section on the Closing Date.  The Base
Purchase Price, as finally adjusted pursuant to this Section 3.3 shall
be the deemed the “Purchase Price.”

3.4           Allocation of Purchase Price.  Buyer and Seller shall use their good faith
best efforts to agree upon an
allocation among the Purchased Assets of the sum of the Purchase Price and the
Assumed Liabilities consistent with Section 1060 of the Code and the Treasury
Regulations thereunder within sixty (60) days after the Closing Date.  In the event that the Parties cannot agree on
a mutually satisfactory allocation within said time 

 25
 

 

period, the Parties shall
appoint an Independent Accounting Firm which shall, at Seller’s and Buyer’s
equal expense, determine the appropriate allocation with respect to the issues
in dispute.  The finding of such
Independent Accounting Firm shall be binding on the Parties.  After determination of the allocation by
agreement of the Parties or by binding determination of the Independent
Accounting Firm, Buyer and Seller agree to file, for the tax year in which
Closing occurs, Internal Revenue Service Form 8594, and all federal, state,
local and foreign Tax Returns, in accordance with such allocation.  Buyer and Seller shall report the
transactions contemplated by this Agreement for Tax purposes in a manner
consistent with the allocation determined pursuant to this Section 3.4.  Buyer and Seller agree to provide the other
promptly with any information required to complete Form 8594.  Buyer and Seller shall notify and provide the
other with reasonable assistance in the event of an examination, audit or other
proceeding regarding the agreed upon allocation of the Purchase Price.

3.5           Prorations.

(a)           Buyer and
Seller agree that all of the items normally prorated, including those listed
below (but not including Income Taxes), relating to the business and operation
of the Purchased Assets and the Gasification Real Property shall be prorated as
of the Closing Date, with Seller liable to the extent such items relate to any
time period prior to the Closing Date, and Buyer liable to the extent such
items relate to periods commencing with the Closing Date (measured in the same
units used to compute the item in question, otherwise measured by calendar
days):

(i)                   Personal
property, real estate and occupancy Taxes, assessments and other charges, if
any, on or with respect to the business and operation of the Purchased Assets
and, subject to the terms of the Amended Site Lease, the Gasification Real
Property;

(ii)                  Rent,
Taxes and all other items (including prepaid services or goods not included in
Inventory) payable by or to Seller under any of the Seller’s Agreements or the
Intellectual Property agreements identified in Schedule 2.1(a)(xi);

(iii)                 Any
permit, license, registration, emission fees or other fees with respect to any
Unit 1 Permit; and

(iv)                 Sewer
rents and charges for water, telephone, electricity and other utilities.

(b)           In
connection with the prorations referred to in Section 3.5(a), in the
event that actual figures are not available at the Closing Date, the proration
shall be based upon the actual Taxes or other amounts accrued through the
Closing Date or paid 

 26
 

 

for the
most recent year (or other appropriate period) for which actual Taxes or other
amounts paid are available.  Such
prorated Taxes or other amounts shall be re-prorated and paid to the
appropriate Party within sixty (60) days after the date that the previously
unavailable actual figures become available. 
Seller and Buyer agree to furnish each other with such documents and
other records as may be reasonably requested in order to confirm all adjustment
and proration calculations made pursuant to this Section 3.5.

(c)           Notwithstanding
anything to the contrary herein and for the avoidance of doubt, no proration
shall be made under this Section 3.5 with respect to (i) real property
Tax refunds described in Section 2.2(f) or (ii) Transfer Taxes described
in Section 6.8(a).

3.6           Deliveries by Seller.  At
the Closing, Seller will deliver, or cause to be delivered, the following to
Buyer:

(a)           Each of
the Transaction Agreements, duly executed and in recordable form, if
appropriate;

(b)           A FIRPTA
Affidavit, duly executed by Seller;

(c)           Copies of
all Seller’s Required Third Party Consents and Seller’s Required Regulatory
Approvals and any and all governmental and other third party consents, waivers
or approvals obtained by Seller with respect to the transfer of the Purchased
Assets and the Gasification Real Property, or the consummation of the
transactions contemplated by this Agreement and the Transaction Agreements;

(d)           Copies,
certified by the Secretary or Assistant Secretary of Seller, of corporate
resolutions authorizing the execution and delivery of this Agreement, each
Transaction Agreement and all of the other agreements and instruments to be
executed and delivered by Seller in connection herewith, and the consummation
of the transactions contemplated hereby and thereby;

(e)           A
certificate of the Secretary or Assistant Secretary of Seller identifying the
name and title and bearing the signatures of the officers of Seller authorized
to execute and deliver this Agreement, each Transaction Agreement and the other
agreements and instruments contemplated hereby;

(f)            A
certificate of good standing with respect to Seller, dated as of a date not
earlier than five (5) Business Days prior to the Closing, from the office of
the Secretary of State of the state of Indiana;

(g)           Any
amounts for which Seller is liable pursuant to Section 3.5;

 

 27

 

(h)           One or
more instruments, executed by Seller, evidencing termination of each of the
Related Agreements;

(i)            Such
other agreements, documents, instruments and writings as are required to be
delivered by Seller at or prior to the Closing Date pursuant to this Agreement
or otherwise reasonably required in connection herewith; and

(j)            Rights to
those Emission Allowances as provided for in Section 3.8.

3.7           Deliveries by Buyer.  At
the Closing, Buyer will deliver, or cause to be delivered, the following to Seller:

(a)           The Base
Purchase Price, together with any amounts for which Buyer is liable pursuant to
Section 3.5, by wire transfer of immediately available funds in
accordance with Seller’s instructions or by such other means as may be agreed
to by Seller and Buyer;

(b)           Each of
the Transaction Agreements, duly executed and in recordable form, if
appropriate;

(c)           Copies of
all Buyer’s Required Third Party Consents and Buyer’s Required Regulatory
Approvals and any and all governmental and other third party consents, waivers
or approvals obtained by Buyer with respect to its acquisition of the Purchased
Assets and the Gasification Real Property, or the consummation of the
transactions contemplated by this Agreement and the Transaction Agreements;

(d)           Copies,
certified by the Secretary or Assistant Secretary of Buyer, of resolutions
authorizing the execution and delivery of this Agreement, each Transaction
Agreement and all of the other agreements and instruments to be executed and
delivered by Buyer in connection herewith, and the consummation of the
transactions contemplated hereby and thereby;

(e)           A
certificate of the Secretary or Assistant Secretary of Buyer identifying the
name and title and bearing the signatures of the officers of such Buyer
authorized to execute and deliver this Agreement, each Transaction Agreement
and the other agreements and instruments contemplated hereby;

(f)            A
certificate of good standing with respect 
to Buyer, dated as of a date not earlier than five (5) Business Days
prior to the Closing, from the office of the Secretary of State of such entity’s
organization;

(g)           One or
more instruments, executed by Buyer or SGS, as applicable, evidencing
termination of each of the Related Agreements; and

 28
 

 

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

3.8           Emission Allowance Allocation.

(a)           SO2
Allowances.  Buyer shall have no
right to existing or future SO2 Allowances allocated or to be allocated to Unit
1.  Seller shall retain the rights to all
existing or future SO2 Allowances allocated or to be allocated to Unit 1.

(b)           NOx
Allowances.  Buyer shall have the
right to NOx Allowances that have been or will be allocated to Unit 1, as
follows:

(i)            Year of the Closing:    If the transaction closes from and
including January 1 through and including April 30, Buyer shall have the right
to all NOx Allowances that have been allocated to Unit 1 for the year of the
Closing.  If the transaction closes on
any date from and including May 1 through and including September 30, Buyer
shall have the right to receive a “pro rata” share of NOx Allowances for the
year of the Closing.  Buyer’s pro-rata share
of NOx Allowances shall be calculated by: (A) calculating the number of days
Buyer owns Unit 1, from and including the Closing Date through and including
September 30, and dividing this number by 153; and (B) multiplying the number
calculated in clause (A) by the number of NOx Allowances allocated to Unit 1 by
the Indiana Department of Environmental Management for the year of the
Closing.  If the transaction closes from
and including October 1 through and including December 31, Seller shall retain
all NOx Allowances that have been allocated to Unit 1 for the year of the
Closing.

(ii)           Years
Following the Closing:  Buyer shall
have the right to all NOx Allowances that have been or will be allocated to
Unit 1 for vintage years subsequent to the year of the Closing.

(c)           Mercury
Allowances.  Buyer shall have the
right to all Mercury Allowances that are allocated to Unit 1 for the vintage
years following the Closing.  This
assumes that no Mercury Budget Program will be effective during or prior to the
year of the Closing.  If a Mercury Budget
Program becomes effective during the year of the Closing, the Parties will
agree to allocate Mercury Allowances for the year of the Closing consistent
with the pro-rata principle set forth in Section 3.8(b)(i) of this Agreement.

(d)           Allocation
of NOx Allowances and Mercury Allowances if any NOx Budget Program or Mercury
Budget Program Only Allocates Emissions Allowances on a Facility-Wide Basis.  If a NOx Budget Program or Mercury Budget
Program allocates Emissions Allowances to the Station rather to individual
units at the Station, 

 29
 

 

the foregoing provisions shall continue to apply, provided, that Seller
and Buyer will first internally allocate said Emission Allowances to the units
at the Station prior to applying the terms of this Section 3.8.  If the NOx Budget Program or Mercury Budget
Program, as applicable, sets forth the allocation of Emissions Allowances to
each of the units of the Station (even if the actual allocation is to one
account covering the entire Station), Buyer shall have the right to the
Emissions Allowances allocated to Unit 1 as set forth in Section 3.8(b)
or (c), as applicable.  If the NOx
Budget Program or Mercury Budget Program, as applicable, does not specifically
identify unit specific Emissions Allocations, Emissions Allowances shall be
assigned to Unit 1 based on Unit 1’s heat input, relative to the heat input of
the other emissions units at the Station that are subject to the NOx Budget
Program or Mercury Budget Program (as the case may be), for the baseline year
used in the allocation of Emissions Allowances to the Station under said
program.  Allowances allocated to Unit 1
as described in this Section 3.8(d) shall belong to Buyer or Seller in
accordance with the terms of Sections 3.8(b) or (c).  Allowances allocated to other units of the
Station shall remain the property of Seller.

REPRESENTATIONS AND
WARRANTIES OF SELLER

Seller hereby represents and warrants to Buyer, as follows:

4.1           Incorporation. 
Seller is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Indiana and has all requisite corporate
power and authority to own, lease and operate its properties and to carry on
its business as it is now being conducted.

4.2           Authority.  Seller
has full corporate power and authority to execute and deliver this Agreement
and each of the Transaction Agreements to which it is a party and to consummate
the transactions contemplated hereby and thereby.  The execution and delivery of this Agreement
and each of the Transaction Agreements by Seller and the consummation of the
transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action required on the part of
Seller.  This Agreement has been, and the
Transaction Agreements to which Seller is a party, when executed and delivered,
shall have been, duly and validly executed and delivered by Seller and, subject
to the receipt of Seller’s Required Regulatory Approvals, this Agreement
constitutes, and upon the execution and delivery by Seller of each of the
Transaction Agreements, each such Transaction Agreement will constitute, legal,
valid and binding obligations of Seller, enforceable against Seller in
accordance with their terms, except that such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other similar laws affecting or relating to enforcement of
creditors’ rights generally and general principles of equity (regardless of
whether enforcement is considered in a proceeding at law or in equity).

 30
 

 

4.3           Consents and Approvals; No
Violation.

(a)           Neither
the execution and delivery of this Agreement and the Transaction Agreements by
Seller nor the consummation by Seller of the transactions contemplated hereby
will (i) conflict with or result in any breach of any provision of the articles
of incorporation or by-laws of Seller; (ii) except as set forth on Schedule
4.3(a)(ii), result in a default under (or give rise to any right of
termination, cancellation or acceleration with respect thereto), or to avoid
any such effect will require Seller or any Affiliate to obtain a consent,
novation or waiver of, under or with respect to (each a “Seller’s Required
Third Party Consent”), any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, material contract, agreement or other
instrument or obligation to which Seller is a party or by which it, or any of
the Purchased Assets or the Gasification Real Property, may be bound, except
for such defaults (or rights of termination, cancellation or acceleration)
which, would not, individually or in the aggregate, create a Material Adverse
Effect; or (iii) subject to obtaining the Seller’s Required Regulatory
Approvals, constitute violations of any law, regulation, order, judgment or
decree applicable to Seller, which violations, individually or in the
aggregate, would create a Material Adverse Effect.

(b)           Except as
set forth in Schedule 4.3(b) (the filings and approvals referred to in Schedule
4.3(b) are collectively referred to as the “Seller’s Required Regulatory
Approvals”), no consent or approval of, filing with, or notice to, any
Governmental Authority is necessary for the execution and delivery of this
Agreement and the Transaction Agreements by Seller or the consummation by
Seller of the transactions contemplated hereby or thereby, other than (i) such
consents, approvals, filings or notices which, if not obtained or made, will
not prevent Seller from performing its material obligations under this
Agreement and the Transaction Agreements, and (ii) such consents, approvals,
filings or notices which become applicable to Seller or the Purchased Assets or
the Gasification Real Property as a result of the specific regulatory status of
the Buyer (or any of its Affiliates) or as a result of any other facts that
specifically relate to the business or activities in which the Buyer (or any of
its Affiliates) is or proposes to be engaged.

4.4           Title.  Except as
would not have a Material Adverse Effect, and subject to Permitted
Encumbrances, Seller has good and valid title to or a valid leasehold interest
in or license or right to use the Purchased Assets and the Gasification Real
Property.  

 31
 

 

4.5           Environmental Matters.  

(a)           Except as
set forth on Schedule 4.5(a), Seller holds and is in compliance with the
Station Permits and the Unit 1 Permits issued pursuant to applicable
Environmental Laws that are required to operate the Purchased Assets and Seller
is otherwise in compliance with applicable Environmental Laws with respect to
the business and operations of the Purchased Assets, except for such failures
to hold or comply with required Station Permits and Unit 1 Permits, or such
failures to be in compliance with applicable Environmental Laws, as would not,
individually or in the aggregate, create a Material Adverse Effect;

(b)           Except as
set forth on Schedule 4.5(b), Seller, with respect to the Purchased
Assets and Gasification Real Property, has not received written or, to the
Knowledge of Seller, oral notice alleging that it is violation of or liable
under any applicable Environmental Law, or received a request for information
with respect to a matter arising under Environmental Law, which violation,
liability or matter is unresolved, except with respect to such liabilities,
violations or matters as would not be reasonably likely to, individually or in
the aggregate, result in a Material Adverse Effect.  Except as set forth on Schedule 4.5(b),
there are no claims, actions, proceedings or investigations pending or, to the
Knowledge of Seller, threatened against Seller relating to the Purchased Assets
or Gasification Real Property before any Governmental Authority or body acting
in an adjudicative capacity relating in any way to any Environmental Laws,
except for such claims, actions, proceedings or investigations as would not be
reasonably likely to, individually or in the aggregate, create a Material
Adverse Effect; and

(c)           Except as set forth on Schedule
4.5(c), there are no outstanding judgments, decrees, or judicial orders
relating to the Purchased Assets or, to the Knowledge of Seller, the
Gasification Real Property under any Environmental Law, except for such consent
decrees or orders, judgments, decrees or judicial orders as would not,
individually or in the aggregate, create a Material Adverse Effect.

4.6           [Reserved].

4.7           Condemnation. 
Except as set forth in Schedule 4.7, there are no pending or, to the
Knowledge of Seller, threatened proceedings or governmental actions to condemn
or take by power of eminent domain all or any material part of the Purchased
Assets or the Gasification Real Property.

4.8           Contracts.

(a)           Schedule
4.8(a) lists the Seller’s Agreements that are material to the ownership and
operation of the Purchased Assets and the ownership of the Gasification Real
Property as of the date hereof, other than (i) personal property leases, 

 32
 

 

licenses,
contracts or other agreements or instruments that are expected to expire or
terminate prior to the Closing Date, (ii) personal property leases, licenses, contracts
or other agreements or instruments that also relate to property of Seller other
than the Purchased Assets and the Gasification Real Property, and (iii)
personal property leases, licenses, contracts or other agreements or
instruments that individually provide for annual payments after the date hereof
of less than $500,000 (collectively, the “Material Contracts”).

(b)           Except as
disclosed in Schedule 4.8(b) or as would not have a Material Adverse
Effect, (i) each Material Contract constitutes a legal, valid and binding
obligation of Seller and, to Seller’s Knowledge, each other party thereto, (ii)
Seller has not delivered or received any written notice alleging a default or
breach thereunder or termination thereof, and (iii) each Material Contract may be
transferred to Buyer pursuant to this Agreement without the consent of the
other parties thereto.

(c)           Except as
set forth in Schedule 4.8(c), to the Knowledge of Seller, there is not
under any Material Contract any default or event which, with notice or lapse of
time or both, (i) would constitute a default on the part of Seller or any other
party thereto or (ii) would cause the acceleration of any of the Seller’s
obligations thereunder or result in the creation of any Encumbrance (other than
any Permitted Encumbrance) on any of the Purchased Assets.

4.9           Legal Proceedings. 
Except as set forth in Schedule 4.9, there are no actions or proceedings
pending or, to the Knowledge of Seller, threatened against Seller before any
Governmental Authority that would, individually or in the aggregate, reasonably
be expected to create a Material Adverse Effect.  Except as set forth in Schedule 4.9, Seller
is not subject to any outstanding judgments, rules, orders, writs, injunctions
or decrees of any Governmental Authority that would, individually or in the
aggregate, create a Material Adverse Effect.

4.10         Other Permits.  

(a)           Seller has
and is in compliance with all Permits (other than the Station Permits, which
are addressed by Section 4.5 and the Unit 1 Permits described in and
addressed by Section 4.5) necessary to own and operate the Purchased
Assets and to own the Gasification Real Property, except where the failure to
have such Permits, or to be in compliance therewith, would not, individually or
in the aggregate, create a Material Adverse Effect.  Except as disclosed in Schedule 4.10(a),
Seller has not received any written notification that it is in violation, nor
does Seller have Knowledge of any violations, of any such Permits, except for
violations that would not, individually or in the aggregate, create a Material
Adverse Effect.

 33
 

 

(b)           Schedule
4.10(b) sets forth all Permits described in Section 4.10(a) above.

4.11         Taxes.

(a)           Except as
disclosed on Schedule 4.11, Seller has filed all Tax Returns that are
required to be filed by it with respect to any Tax relating to the Purchased
Assets or the Gasification Real Property, such Tax Returns are true, accurate
and complete in all material respects and Seller has paid or caused to be paid
all Taxes shown as due on such Tax Returns, except where the failure to so file
or pay would not be reasonably likely to create a Material Adverse Effect.

(b)           There are
no audits, claims, assessments, levies, administrative proceedings, or lawsuits
pending, or to Seller’s Knowledge, threatened against Seller with respect to
the Purchased Assets or the Gasification Real Property by any taxing authority.

(c)           There are
no Encumbrances for Taxes on any of the Purchased Assets or the Gasification
Real Property, except for Permitted Encumbrances.

(d)           To Seller’s
Knowledge, no claim has ever been made by a Governmental Authority in a
jurisdiction where a Tax Return is not filed with respect to any of the
Purchased Assets or the Gasification Real Property, that either the Purchased
Assets or the Gasification Real Property are or may be subject to taxation in
that jurisdiction.

4.12         Intellectual Property. 
Schedule 2.1(a)(xi) sets forth all material Seller Intellectual Property
used in and, individually or in the aggregate, with other Intellectual Property
material to the ownership or operation of the Purchased Assets or the ownership
of the Gasification Real Property, each of which Seller either has all right,
title and interest in or valid and binding rights under contract to use in
connection with the operation of the Purchased Assets and the ownership of the
Gasification Real Property, except where the failure to have such ownership,
license or right to use would not, individually or in the aggregate, have a
Material Adverse Effect.  Except as disclosed
in Schedule 4.12, (i) Seller is not, nor has it received any notice that it is,
in default (or with the giving of notice or lapse of time or both, would be in
default), under any contract to use such Intellectual Property, (ii) there are
no material restrictions on the transfer of any material contract, or any
interest therein, held by Seller in respect of such Intellectual Property, and
(iii) to Seller’s Knowledge, such Intellectual Property is not being infringed
by any other Person.  Seller has not
received notice that it is infringing any Intellectual Property of any other
Person in connection with the ownership or operation of the Purchased Assets or
the ownership of the Gasification Real Property and Seller, to its Knowledge,
is not infringing any Intellectual Property of any other Person the effect of
which, individually or in the aggregate, would have a Material Adverse Effect.

 

 34

 
  

4.13         Compliance
with Laws.  To Seller’s Knowledge, Seller is in
compliance with all applicable Laws with respect to the ownership or operation
of the Purchased Assets and its ownership of the Gasification Real Property,
except where the failure to be in compliance would not, individually or in the
aggregate, create a Material Adverse Effect.

4.14         Disclaimers
Regarding Purchased Assets and the Gasification Real Property.  EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES
SET FORTH IN THIS ARTICLE IV, THE PURCHASED ASSETS AND THE GASIFICATION REAL
PROPERTY ARE SOLD AND/OR CONVEYED “AS IS, WHERE IS”, AND SELLER EXPRESSLY
DISCLAIMS ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND OR NATURE, EXPRESS OR
IMPLIED, AS TO LIABILITIES, OPERATIONS OF THE PURCHASED ASSETS AND THE
GASIFICATION REAL PROPERTY, THE TITLE, CONDITION, VALUE OR QUALITY OF THE
PURCHASED ASSETS AND THE GASIFICATION REAL PROPERTY OR THE PROSPECTS (FINANCIAL
AND OTHERWISE), RISKS AND OTHER INCIDENTS OF THE PURCHASED ASSETS AND THE
GASIFICATION REAL PROPERTY AND SELLER SPECIFICALLY DISCLAIMS ANY REPRESENTATION
OR WARRANTY OF MERCHANTABILITY, USAGE, SUITABILITY OR FITNESS FOR ANY
PARTICULAR PURPOSE WITH RESPECT TO THE PURCHASED ASSETS, OR ANY PART THEREOF,
OR AS TO THE WORKMANSHIP THEREOF, OR THE ABSENCE OF ANY DEFECTS THEREIN,
WHETHER LATENT OR PATENT, AND ANY REPRESENTATION OR WARRANTY REGARDING
COMPLIANCE OF THE PURCHASED ASSETS OR THE GASIFICATION REAL PROPERTY WITH
ENVIRONMENTAL REQUIREMENTS, OR THE APPLICABILITY OF ANY GOVERNMENTAL
REQUIREMENTS THERETO, INCLUDING BUT NOT LIMITED TO ANY ENVIRONMENTAL LAWS, OR
WHETHER SELLER POSSESSES SUFFICIENT REAL PROPERTY OR PERSONAL PROPERTY TO
OPERATE THE PURCHASED ASSETS.  EXCEPT AS
OTHERWISE EXPRESSLY PROVIDED HEREIN, SELLER FURTHER SPECIFICALLY DISCLAIMS ANY
REPRESENTATION OR WARRANTY REGARDING THE ABSENCE OF HAZARDOUS SUBSTANCES OR
LIABILITY OR POTENTIAL LIABILITY ARISING UNDER ENVIRONMENTAL LAWS WITH RESPECT
TO THE PURCHASED ASSETS AND THE GASIFICATION REAL PROPERTY.  WITHOUT LIMITING THE GENERALITY OF THE
FOREGOING, EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN, SELLER EXPRESSLY
DISCLAIMS ANY REPRESENTATION OR WARRANTY OF ANY KIND REGARDING THE CONDITION OF
THE PURCHASED ASSETS OR THE SUITABILITY OF THE PURCHASED ASSETS FOR OPERATION
AS A POWER PLANT, AND NO SCHEDULE OR EXHIBIT TO THIS AGREEMENT, NOR ANY OTHER
MATERIAL OR INFORMATION PROVIDED BY OR COMMUNICATIONS MADE BY SELLER OR ITS
RESPECTIVE REPRESENTATIVES, WILL CAUSE OR 

 35
  
 

 
  

CREATE
ANY WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, CONDITION, VALUE OR QUALITY
OF THE PURCHASED ASSETS AND THE GASIFICATION REAL PROPERTY.

ARTICLE V

REPRESENTATIONS AND
WARRANTIES OF BUYER

Buyer hereby represents and warrants to Seller as follows:

5.1           Organization.  Buyer
is a not-for-profit corporation duly organized, validly existing and in good
standing under the laws of the State of Indiana and has all requisite corporate
power and authority to own, lease or operate its properties and to carry on its
business as it is now being conducted.

5.2           Authority.  Buyer
has full power and corporate authority to execute and deliver this Agreement
and each of the Transaction Agreements and to consummate the transactions
contemplated by it hereby and thereby. 
The execution and delivery of this Agreement and each of the Transaction
Agreements by Buyer and the consummation of the transactions contemplated
hereby and thereby have been duly and validly authorized by all necessary
corporate action required on the part of Buyer. 
This Agreement has been, and the Transaction Agreements, when executed
and delivered, shall have been, duly and validly executed and delivered by
Buyer and, subject to the receipt of Buyer’s Required Regulatory Approvals,
this Agreement constitutes, and upon the execution and delivery by Buyer of
each of the Transaction Agreements, each such Transaction Agreement will
constitute, legal, valid and binding obligations of Buyer, enforceable against
Buyer in accordance with their respective terms, except that such
enforceability may be limited by applicable bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium or other similar laws affecting or relating
to enforcement of creditors’ rights generally and general principles of equity
(regardless of whether enforcement is considered in a proceeding at law or in
equity).

5.3           Consents
and Approvals; No Violation.

(a)           Neither
the execution and delivery of this Agreement and the Transaction Agreements by
Buyer nor the consummation by Buyer of the transactions contemplated hereby and
thereby will (i) conflict with or result in any breach of any provision of the
articles of incorporation or by-laws (or other similar governing documents) of
Buyer; (ii) except as set forth in Schedule 5.3(a)(ii), result in a
default under (or give rise to any right of termination, cancellation or
acceleration with respect thereto), or to avoid any such effect will require
Buyer or any Affiliate thereof to obtain a consent, novation or waiver of,
under or with respect thereto (each, a “Buyer’s Required Third Party Consent”),
any of the terms, conditions or provisions of any note, bond, mortgage, 

 36
  
 

 
  

indenture,
material contract, agreement or other instrument or obligation to which Buyer
is a party or by which any of its assets may be bound, except for such defaults
(or rights of termination, cancellation or acceleration) which would not,
individually or in the aggregate, materially impair or delay the ability of
Buyer to perform its obligations under this Agreement and the Transaction
Agreements (“Buyer Material Adverse Effect”); or (iii) subject to obtaining
Buyer’s Required Regulatory Approvals, constitute violations of any law,
regulation, order, judgment or decree applicable to Buyer, which violations,
individually or in the aggregate, would create a Buyer Material Adverse Effect.

(b)           Except as
set forth in Schedule 5.3(b) (the filings and approvals referred to in
such Schedule are collectively referred to as the “Buyer’s Required
Regulatory Approvals”), no consent or approval of, filing with, or notice
to, any Governmental Authority is necessary for the execution and delivery of
this Agreement and the Transaction Agreements by Buyer or the consummation by
Buyer of the transactions contemplated hereby and thereby, other than such
consents, approvals, filings or notices, which, if not obtained or made, are
not reasonably likely to have a Buyer Material Adverse Effect.

5.4           Availability
of Funds.  Buyer has access to, and will have
at the Closing, sufficient funds available to it to pay the Purchase
Price.  Buyer acknowledges and agrees
that its obligation to pay the Purchase Price is not subject to any financing
contingencies.

5.5           Legal
Proceedings.  There are no actions or proceedings pending
or, to the knowledge of Buyer, threatened against Buyer before any court,
arbitrator or Governmental Authority, that could, individually or in the
aggregate, reasonably be expected to create a Buyer Material Adverse
Effect.  Buyer is not subject to any
outstanding judgments, rules, orders, writs, injunctions or decrees of any
court, arbitrator or Governmental Authority that would, individually or in the
aggregate, create a Buyer Material Adverse Effect.

5.6           No
Knowledge of Seller’s Breach.  As of the date hereof, Buyer
has no knowledge of any breach by Seller of any representation or warranty of
Seller, or of any other condition or circumstances that would excuse Buyer from
its timely performance of its obligations hereunder.  Buyer shall promptly notify Seller, with
respect to Seller’s representations and warranties or such other conditions or
circumstances, if any such information comes to Buyer’s attention prior to the
Closing.  Except as otherwise provided in
Section 6.9, this Section 5.7 shall have no effect on the right of Buyer to
bring a claim as provided for in this Agreement.

5.7           Amended
Site Lease.   The Amended Site Lease is valid and in full
force and effect.  Seller is not, to the
best of Buyer’s knowledge, in default in the performance of the terms and
provisions of the Amended Site Lease, nor does there exist, 

 37
  
 

 
  

to the
best of Buyer’s knowledge, any fact or condition which, with notice or lapse of
time or both, will become such a default. 
SGS is not in default in the performance of the terms and provisions of
the Amended Site Lease, nor does there exist any fact or condition which, with
notice or lapse of time or both, will become such a default.  All amounts payable by SGS to Seller pursuant
to the terms of the Amended Site Lease have been paid current, and as of the
date of this Agreement, SGS has no present charge, lien or claim of offset, nor
has SGS asserted any charge, lien or claim of offset, under the Amended Site
Lease or otherwise, against amounts due or to become due under the Amended Site
Lease.

ARTICLE VI

COVENANTS OF THE PARTIES

6.1           Conduct
of Business Relating to the Purchased Assets and the Gasification Real Property.  Except as described in
Schedule 6.1 or as expressly contemplated by this Agreement or to the extent
Buyer otherwise consents in writing (which consent shall not be unreasonably
withheld, delayed or conditioned), during the period from the date of this
Agreement to the Closing Date, Seller will operate the Purchased Assets in the
ordinary course of business consistent with the past practices of Seller and
with Good Utility Practices and shall use all Commercially Reasonable Efforts
to preserve intact the Purchased Assets. 
Without limiting the generality of the foregoing and except (a) as
contemplated in this Agreement, (b) as provided for in the annual budgets or
capital budgets of Seller or its Affiliates, (c) in connection with necessary
repairs due to breakdown or casualty, or other actions taken in response to a
business emergency or other unforeseen operational matters, (d) as described in
Schedule 6.1, (e) as required under applicable Law or by any Governmental
Authority, or (f) as contemplated by this Agreement or any Related Agreement,
between the date hereof and the Closing Date, without the prior written consent
of Buyer (which consent shall not be unreasonably withheld, delayed or
conditioned), Seller shall not with respect to the Purchased Assets or the
Gasification Real Property, as applicable:

(i)  Sell,
lease (as lessor), encumber, pledge, transfer or otherwise dispose of, any
Purchased Assets or the Gasification Real Property (except for Purchased Assets
used, consumed or replaced in the ordinary course of business consistent with
past practices of Seller and with Good Utility Practices), except in the
ordinary course of business up to $1,000,000 or to encumber any such Purchased
Asset or the Gasification Real Property with Permitted Encumbrances;

(ii)    Modify, amend or voluntarily terminate prior
to the expiration date any of the Material Contracts or any of the Station
Permits or material Unit 1 Permits in any material respect, other than (a) in
the ordinary course of business, to the extent consistent with the past
practices of 

 38
  
 

 
  

Seller or with Good Utility Practices, (b) with cause, to the
extent consistent with past practices of Seller or with Good Utility Practices,
or (c) as may be required in connection with transferring Seller’s rights or
obligations thereunder to Buyer pursuant to this Agreement;

(iii)  Except
as otherwise provided herein, enter into any contract, agreement, commitment or
arrangement relating solely to the Purchased Assets (other than capital expenditures)
that materially exceeds the amount budgeted for such contract, agreement,
commitment or arrangement in Seller’s annual budget;

(iv)  Except
as otherwise provided herein, enter into any contract, agreement, commitment or
arrangement relating solely to any Purchased Asset that individually exceeds
$250,000 or in the aggregate exceeds $1,000,000 unless it is terminable by
Seller (or, after the Closing Date, by Buyer) without penalty or premium upon
no more than six (6) months notice; or

(v)   Except
as otherwise provided herein, enter into any written or oral contract,
agreement, commitment or arrangement with respect to any of the proscribed
transactions set forth in the foregoing paragraphs (i) through (iv).

6.2           Access
to Information.

(a)           Between the
date of this Agreement and the Closing Date, Seller will (i) during
ordinary business hours and upon reasonable notice, give Buyer and its
Representatives reasonable access to all books, records, plans, offices and
other facilities and properties constituting the Purchased Assets or the
Assumed Liabilities; (ii) furnish Buyer with such other information with
respect to the Purchased Assets and the Gasification Real Property or the
Assumed Liabilities as Buyer may from time to time reasonably request; and (iii)
upon request, furnish Buyer with a copy of each material report, schedule, or
other document filed or received by Seller with the FERC, the IURC, or other
Governmental Authority with respect to the Purchased Assets and the
Gasification Real Property or the Assumed Liabilities; provided, however,
that (A) any such inspections and investigations shall be conducted in such a
manner as not to interfere with the operation of the Purchased Assets, (B)
Seller shall not be required to take any action which would constitute a waiver
of the attorney-client or other privilege, and (C) Seller need not supply
Buyer with any information which Seller is under a legal or contractual
obligation not to supply.  Where reasonably
practicable, Seller shall use reasonable commercial efforts to obtain any
consents necessary in order to provide Buyer with information, at Buyer’s
reasonable request, that it is otherwise under a contractual obligation not to
supply.  Buyer agrees to indemnify and
hold Seller and its Affiliates 

 39
  
 

 
  

harmless
from any and all claims and liabilities, including costs and expenses for loss,
injury to or death of any Representative of Buyer, and any loss, damage to or
destruction of any property owned by Seller, its Affiliates or others
(including claims or liabilities for loss of use of any property) resulting
directly or indirectly from the action or inaction of any of the
Representatives of Buyer during any visit to the business or property sites of
Seller or its Affiliates prior to the Closing Date, whether pursuant to this Section
6.2 or otherwise, unless directly caused by the gross negligence or willful
misconduct of Seller Notwithstanding anything in this Section 6.2 to the
contrary, prior to the Closing Date, Buyer shall not have the right to perform
or conduct any environmental sampling or testing at, in, on or underneath the
Purchased Assets; provided, however, that within sixty (60) days after
the signing of this Agreement, Buyer may collect and analyze samples of water
and sediments from the wastewater pond and the stormwater pond currently used
for the disposal of wastewater and stormwater from the Gasification Facility
and Unit 1.  Buyer shall provide Seller
with at least five (5) Business Days written notice of its intent to undertake
such sampling.  Buyer shall provide
Seller with copies of laboratory results of any samples collected within three
(3) Business Days of the receipt of such samples.  Buyer shall provide Seller with copies of any
report drafted with respect to such sampling within three (3) Business Days of
its receipt of such report(s).  Neither
Buyer nor its Representatives shall disclose the results of such sampling to
any Person, including but not limited to Governmental Authorities, unless
required by applicable Environmental Law.

(b)           Subject to
any applicable exceptions provided therein, all information furnished to or
obtained by Buyer and Buyer’s Representatives pursuant to this Section 6.2
shall be deemed Proprietary Information and otherwise subject to all of the
restrictions set forth in the Confidentiality Agreement.  The foregoing notwithstanding, any Party may
provide Proprietary Information of the other Parties to the IURC, the OUCC, the
SEC, the FERC or any other Governmental Authority with jurisdiction or any
stock exchange, as may be necessary to obtain Seller’s Required Regulatory
Approvals or Buyer’s Required Regulatory Approvals, respectively, or to comply
generally with any relevant Laws.  The
disclosing Party will notify the other Parties as far in advance as is practicable
of its intention to release to any Governmental Authority any Proprietary
Information.  Except as specifically
provided herein or in the Confidentiality Agreement, nothing in this Section
shall impair or modify any of the rights or obligations of Buyer or its
Affiliates under the Confidentiality Agreement, all of which remain in effect
until termination of such agreement in accordance with its terms.

(c)           For a
period of seven (7) years after the Closing Date, each Party and its
Representatives shall have reasonable access to all of the books and records of
the Purchased Assets and the Gasification Real Property in the possession of
the other Party to the extent that such access may reasonably be required by
such Party in connection with the Assumed Liabilities or the Excluded
Liabilities, or other matters relating to or affected by the ownership or
operation of the Purchased Assets and the ownership of the Gasification Real
Property.  Such access shall be afforded
by the Party in 

 40
  
 

 
  

possession
of any such books and records upon receipt of reasonable advance notice and
during normal business hours.  The Party
exercising this right of access shall be solely responsible for any costs or
expenses incurred by it or the other Party with respect to such access pursuant
to this Section 6.2(c).  If the
Party in possession of such books and records shall desire to dispose of any
books and records upon or prior to the expiration of such seven-year period,
such Party shall, prior to such disposition, give the other Party a reasonable
opportunity at such other Party’s expense, to segregate and remove such books
and records as such other Party may select.

(d)           Buyer
agrees that, prior to the Closing Date, it will not contact any vendors,
suppliers, employees, or other contracting parties of Seller or its Affiliates
with respect to any aspect of the Purchased Assets or the transactions
contemplated hereby, without the prior written consent of Seller, which consent
shall not be unreasonably withheld.

6.3           Public
Statements.  Subject to the requirements imposed by
any Governmental Authority or stock exchange, prior to the Closing Date, no
press release or other public announcement or public statement or comment in
response to any inquiry relating to the transactions contemplated by this
Agreement or the Transaction Agreements shall be issued or made by any Party
without the prior approval of the other Party (which approval shall not be
unreasonably withheld).  The Parties
agree to cooperate in preparing such announcements.

6.4           Expenses.  Except
to the extent specifically provided herein, whether or not the transactions
contemplated hereby are consummated, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall
be borne by the Party incurring such costs and expenses.  Notwithstanding anything to the contrary
herein, (a) Buyer and Seller will each be responsible for 50% of all Transfer
Taxes, if any, arising out of or in connection with the transactions
contemplated hereby and 50% of the costs of the Title Policy, and (b) Buyer
will be solely responsible for all filing fees under the HSR Act.

6.5           Further
Assurances. 

(a)           Subject to
the terms and conditions of this Agreement, each of the Parties shall use its
Commercially Reasonable Efforts to take, or cause to be taken, all actions, and
to do, or cause to be done, all things necessary, proper or advisable under
applicable Laws to consummate and make effective the purchase, sale and/or
conveyance of the Purchased Assets and the Gasification Real Property pursuant
to this Agreement, the assumption of the Assumed Liabilities and the execution
and delivery of each Transaction Agreement, including using its Commercially
Reasonable Efforts to ensure satisfaction of the conditions precedent to each
Party’s obligations hereunder, including obtaining the Buyer’s Required Third
Party Consents 

 41
  
 

 
  

and the
Seller’s Required Third Party Consents, and to effectuate a transfer of the
applicable Permits to Buyer.  Buyer
agrees to reasonably cooperate with Seller with respect to Seller’s efforts to
obtain the Seller’s Required Regulatory Approvals.  Seller agrees to reasonably cooperate with
Buyer with respect to Buyer’s efforts to obtain Buyer’s Required Regulatory
Approvals.

(b)           The
Parties agree that prior to the Closing Date, neither Party shall enter into
any other contract to acquire nor acquire nor enter into any contract to sell
or sell any electric generation facilities or uncommitted generation capacity
if such acquisition of such additional electric generation facilities or
uncommitted generation capacity might reasonably be expected to prevent or
materially impede, interfere with or delay the transactions contemplated by
this Agreement.  Buyer shall give Seller
reasonable advance notice (and in any event not less than ten (10) days notice)
before it contracts to acquire or acquires any electric generation facility or
uncommitted generation capacity.

(c)           To the
extent that Seller’s rights under any Seller’s Agreement may not be assigned
without the consent of another Person which consent has not been obtained by
the Closing Date, this Agreement shall not constitute an agreement to assign
the same, if an attempted assignment would constitute a breach thereof or be
unlawful.  Seller and Buyer shall
cooperate and shall each use Commercially Reasonable Efforts prior to and after
the Closing Date to obtain an assignment of such Seller’s Agreement to Buyer.

6.6           Governmental
Authorizations.

(a)           As
promptly as possible, and in any case within forty-five (45) days, after the
date of this Agreement, Seller and Buyer shall each file, or cause to be filed,
with the Federal Trade Commission and the United States Department of Justice
any initial notifications required to be filed under the HSR Act and the rules
and regulations promulgated thereunder with respect to the transactions
contemplated hereby.  The Parties shall
use Commercially Reasonable Efforts to respond promptly to any requests for
additional information made by, or to satisfy any conditions imposed by, either
of such agencies, and to cause the waiting periods under the HSR Act to
terminate or expire at the earliest possible date after the date of filing.

(b)           As
promptly as possible, and in any case within forty-five (45) days, after the date
of this Agreement, Buyer shall make any filings required by the Federal Power
Act, individually or jointly with Seller, as reasonably determined by the
Parties.  Prior to filings with the FERC,
Buyer shall submit such filings to Seller for prompt review and comment and
shall incorporate into the application any revisions reasonably requested.  Each Party shall be equally but severally
responsible for the cost of preparing and filing the application, any
petition(s) for rehearing, or any reapplication.  If the initial filing is rejected by the
FERC, Buyer agrees to petition the FERC for rehearing and/or to re-submit an
application with the FERC, provided that in either case this action is 

 42
  
 

 
  

directed
by Seller and does not create a Material Adverse Effect on Seller or
Buyer.  The Parties shall use
Commercially Reasonable Efforts to respond promptly to any requests for
additional information made by, or to satisfy any conditions imposed by, the
FERC and to cause the approval of the FERC to be obtained at the earliest
possible date after the date of filing.

(c)           As
promptly as possible, and in any case within forty-five (45) days, after the
date of this Agreement, Seller and Buyer shall each file, or cause to be filed,
with the IURC and any other Governmental Authority, any initial filings
required to be made with respect to the transactions contemplated hereby.  The Parties shall use Commercially Reasonable
Efforts to respond promptly to any requests for additional information made by,
or to satisfy any conditions imposed by, such agencies and to cause any such
regulatory approval to be obtained at the earliest possible date after the date
of filing.  Each Party will bear its own
costs of the preparation of any such filing.

(d)           Seller and
Buyer shall have the right to review in advance all characterizations of the
information relating to the transactions contemplated by this Agreement or in
any of the Transaction Agreements or Related Agreements that will appear in any
filing made in connection with the transactions contemplated hereby or
thereby.  Such review shall be made in a
reasonably timely manner.

6.7           Fees
and Commissions.  Seller and Buyer represent and warrant to the
other that no broker, finder or other Person is entitled to any brokerage fees,
commissions or finder’s fees in connection with the transaction contemplated
hereby by reason of any action taken by the Party making such
representation.  Seller, on the one hand,
and Buyer, on the other hand, will pay to the other or otherwise discharge, and
will indemnify and hold the other harmless from and against, any and all claims
or liabilities for all brokerage fees, commissions and finder’s fees (other
than the fees, commissions and finder’s fees payable to the Parties listed
above) incurred by reason of any action taken by the indemnifying Party.

6.8           Tax
Matters.

(a)           Liability
for Transfer Taxes, if any, arising out of or in connection with the
transactions contemplated by this Agreement shall be borne 50% by Seller and
50% by Buyer.  The Parties shall cooperate
to prepare and file all necessary documentation and Tax Returns with respect to
such Transfer Taxes and, if necessary, join in the execution of any such Tax
Returns or other documentation.

(b)           With
respect to Taxes to be prorated in accordance with Section 3.5, Buyer
shall prepare and timely file all Tax Returns required to be filed on or after
the Closing Date with respect to the Purchased Assets and the Gasification Real
Property, if any, and shall duly and timely pay all such Taxes shown to be due
on such Tax 

 43
  
 

 
  

Returns.  All such Tax Returns shall be prepared in a
manner consistent with Seller’s past practice. 
Buyer’s preparation of any such Tax Returns shall be subject to Seller’s
approval, which approval shall not be unreasonably withheld.  Buyer shall make such Tax Returns available
for Seller’s review and approval no later than fifteen (15) Business Days prior
to the due date for filing each such Tax Return.

(c)           Buyer and
Seller, with respect to Sections 6.8(a) and 6.8(b) shall provide
the other with such assistance as may reasonably be requested by the other
Party in connection with the preparation of any Tax Return, any audit or other
examination by any taxing authority, or any judicial or administrative
proceedings relating to liability for Taxes, and each shall retain and provide
the requesting Party with any records or information that may be relevant to
such return, audit, examination or proceedings. 
Any information obtained pursuant to this Section 6.8(c) or
pursuant to any other Section hereof providing for the sharing of information
or review of any Tax Return or other instrument relating to Taxes shall be kept
confidential by the Parties.

(d)           In the
event that a dispute arises between Seller and Buyer regarding Taxes, or any
amount due under this Section 6.8, the Parties shall attempt in good
faith to resolve such dispute and any agreed upon amount shall be paid to the
appropriate Party.  If such dispute is
not resolved within thirty (30) days, the Parties shall submit the dispute to
an Independent Accounting Firm for resolution within thirty (30) days
thereafter, which resolution shall be final, conclusive and binding on the
Parties.  Notwithstanding anything in
this Agreement to the contrary, the fees and expenses of the Independent Accounting
Firm in resolving the dispute shall be borne 50% by Seller and 50% by
Buyer.  Any payment required to be made
as a result of the resolution of the dispute by the Independent Accounting Firm
shall be made within ten (10) days after such resolution, together with any
interest, as required for the applicable Tax.

6.9           Advise
of Changes.

(a)           From the
date hereof to the Closing, each Party will promptly advise the other in
writing with respect to any matter arising after execution of this Agreement of
which that Party obtains knowledge and which, if it had existed or occurred at
the date of this Agreement, would have been required to be set forth in this
Agreement, including any of the Schedules. 
Either Party may amend or supplement the Schedules prior to Closing by
giving written notice to the other Party of such matter, and such amendment or
supplement shall be effective for all purposes. 
Unless such other Party has the right to terminate this Agreement
pursuant to Section 9.1 by reason of such amendment or supplement and
exercises that right within the period of fifteen (15) days after receipt of
such written notice, said written notice will be deemed to have amended or
supplemented this Agreement, including the appropriate Schedule or Exhibit, to
have qualified the applicable representations and warranties contained in Article
IV and to have cured any inaccuracy that otherwise might have existed
hereunder by reason of the 

 44
  
 

 
  

development.  In such case, the Party receiving such notice
in accordance with the foregoing provisions will be deemed to have forever
waived any right to terminate this Agreement based on such supplement or
amendment.

(b)           Without
limiting the generality of the provisions of Sections 6.6 and 6.9(a),
each Party will advise the other in writing, promptly upon obtaining knowledge
thereof but in any event within a reasonable period of time prior thereto, of
any hearings or proceedings before any Governmental Authority that concern any
of the Seller’s Required Regulatory Approvals or the Buyer’s Required
Regulatory Approvals.  Each Party agrees
that the other Party shall be permitted to participate in any such hearings or
proceedings and to use Commercially Reasonable Efforts to cooperate with such
other Party in the advancement of any position reasonably taken by such other
Party to protect their respective interests, and in any case shall not take any
position that may create a Material Adverse Effect or a Buyer Material Adverse
Effect in any such hearing or proceeding.

6.10         Employees.  None of
Seller’s employees will transfer to the Buyer in connection with transactions
contemplated hereby.

6.11         Risk
of Loss.

(a)           From the
date hereof through the Closing Date, except as set forth in Section 6.11(b)
and Section 6.11(c), all risk of loss or damage to the Purchased Assets
and the Gasification Real Property shall be borne by Seller, other than loss or
damage caused by the acts, omissions or negligence of Buyer or any of its
Representatives, which loss or damage shall be the responsibility of Buyer.

(b)           If, before
the Closing Date, all or any material portion of the Purchased Assets and the
Gasification Real Property are (i) taken by eminent domain or are the subject
of a pending or (to the Knowledge of Seller) contemplated taking which has not
been consummated, or (ii) damaged or destroyed by fire or other casualty,
Seller shall (A) notify Buyer promptly in writing of such fact and (B) either
restore the damage or assign the condemnation proceeds (or, in the case of
condemnation proceeds applicable to the Gasification Real Property, the portion
thereof that is allocable to Seller pursuant to the Amended Site Lease) or the
insurance proceeds therefor, as applicable (and, in the case of casualty, pay
the amount of any deductible and/or self-insured amount in respect of such
casualty) to Buyer at the Closing. 
Notwithstanding the above, if such taking or casualty results in a
Material Adverse Effect, then Seller and Buyer shall negotiate in good faith to
settle the loss resulting from such taking or casualty (and such negotiation
shall include the negotiation of a fair and equitable payment to Buyer to
offset such loss).  If no such settlement
is reached within sixty (60) days after Seller has notified Buyer of such
taking or casualty, then Buyer or Seller may terminate this Agreement pursuant
to Section 9.1(g).  In the event
of damage or destruction which Seller elects to restore, Seller will 

 45
  
 

 
  

have the
right to postpone the Closing for up to six (6) months and Buyer will have the
right to inspect and observe, or have its Representatives inspect or observe,
all repairs necessitated by any such damage or destruction.

(c)           Notwithstanding
the foregoing, with respect to the Gasification Real Property, the provisions
of this Section 6.11 shall be subject to the terms and conditions of the
Amended Site Lease.

6.12         Insurance.  Seller
shall use Commercially Reasonable Efforts to maintain or cause to be maintained
the insurance policies covering Unit 1 until the Closing.  All insurance coverages relating solely to Unit
1 shall be terminated as of the Closing and neither Seller nor any of its
Affiliates shall have any liability for any claims made or reported under such
insurance policies after the Closing. 
Buyer shall be solely responsible for providing insurance for the
Purchased Assets and the Gasification Real Property from and after the
Closing.  

6.13         Use
of Certain Names.

(a)           Within ten
(10) days following Closing, Buyer shall cease using the words “Duke Energy”, “Duke
Energy Indiana, Inc.”, “Cinergy”, “Cinergy-PSI”, “PSI Energy, Inc.”, “Wabash
River Station” or any word or expression similar thereto or constituting an
abbreviation or extension thereof, other than “Wabash River Repowering Combined
Cycle Plant” (the “Seller Marks”), including eliminating such words from
the Purchased Assets and disposing of any unused stationery and literature of
Seller bearing such words, and thereafter, Buyer and its Affiliates shall not
use any logos, trademarks, trade names, patents or other Intellectual Property
rights belonging to Seller or any Affiliate thereof, and Buyer acknowledges
that it has no rights whatsoever to use such Intellectual Property.

(b)           Within
thirty (30) days after the Closing, Buyer shall provide evidence to Seller, in
a format that is acceptable to Seller, that Buyer has provided notice to all
applicable Governmental Authorities, if required, and all counterparties to the
Seller’s Agreements regarding the sale of the Purchased Assets to Buyer and the
new addresses for notice purposes.

6.14             Emission Allowances.  Buyer
and Seller hereby agree to take all necessary actions, including, but not
limited to, executing any required forms or providing appropriate notices to
Governmental Authorities, in a timely fashion, to ensure that (i) Buyer will
obtain all, or the rights to all, Emission Allowances that are to be
transferred to it pursuant to Section 3.8, including the right to receive
Emission Allowances that are to be allocated or issued by a Governmental
Authority in the future, and (ii) Seller will retain or obtain all, or the
rights to all, Emission Allowances that are Excluded Assets, including Emission
Allowances that are to be allocated or issued by a Governmental Authority in
the 

 46
  
 

 
  

future
that are Excluded Assets pursuant to this Agreement.  Buyer and Seller further acknowledge and
agree that such actions may be required before and after the Closing Date, and
accordingly, that this covenant will survive indefinitely after the Closing
Date until such time as the purposes of this covenant have been completely
satisfied.

6.15             Emissions Budget Program
Compliance.

(a)           With respect to the federal Acid Rain
Program (as that term is defined in 40 CFR § 72.2) and the Indiana NOx Budget
Program in effect as of the date of this Agreement, and any future Emissions
Budget Program, Seller shall appoint the authorized or designated
representatives and alternate representatives responsible for the management of
the emissions accounts for the Station, provided, that to the extent that an
Emissions Budget Program allows an owner or operator of a subject emissions
unit at a facility to appoint an authorized representative for said individual
emissions unit, Buyer shall appoint the authorized representative and
alternative representative for Unit 1.

(b)           For each compliance period for each
Emissions Budget Program, Buyer shall be responsible for providing Emissions
Allowances to the compliance accounts established for said Emissions Budget
Program, whether such compliance accounts are for Unit 1 or for the Station as
a whole, depending on the design of said Emissions Budget Program, that equal
the emissions of NOx, SO2 or mercury (as applicable) from Unit 1 for said
compliance period.   For each compliance
period for each Emissions Budget Program, Seller shall be responsible for
providing Emissions Allowances to the compliance accounts established for said
Emissions Budget Program, whether such compliance accounts are for all units at
the Station other than Unit 1 or for the Station as a whole, depending on the
design of said Emissions Budget Program, that equal the emissions of NOx, SO2
or mercury (as applicable) from all units at the Station other than Unit 1
subject to the relevant Emissions Budget Program for said compliance period.

(c)           For purposes of clarification, during
the year of the Closing, Buyer’s obligation to provide Emissions Allowances as
set forth in Section 6.15(b) shall only be to offset emissions of NOx,
SO2 or mercury (as applicable) from Unit 1 on or after the Closing Date.  During the year of the Closing, Seller shall
retain the responsibility of providing Emissions Allowances to offset emissions
of NOx, SO2 or mercury (as applicable) from Unit 1 before the Closing Date.

(d)           Seller and Buyer shall execute on or
before the Closing an Authorized Representation Agreement as set forth in Exhibit
H hereto, which agreement shall provide, inter alia,
for the distribution of allocated allowances from the compliance account; the
right of the authorized representative to request emissions allowances from
Buyer, consistent with Buyer’s obligations as set forth in Sections 6.15(b)
and 6.15(c) above, in order to comply with applicable requirements; the
right of the authorized 

 47
  
 

 
  

representative to acquire
allowances at market prices if Buyer fails to meet its obligations to provide
required allowances; the reimbursement by Buyer of Seller, with interest, for
any monies expended to purchase replacement emission allowances; and other
terms customary for such an agreement.

6.16         Emissions
Averaging.  With respect to existing Environmental
Laws, including, but not limited to, the NOx emissions limits set forth in
Title IV of the federal Clean Air Act, that allow facilities to achieve
compliance with unit specific emission limitations by averaging emissions of
the subject pollutant from all subject emissions units at a facility (or in
some cases, with units at other facilities), and any future legislation or
regulations passed by the United States or Indiana that also allow for such
emission averaging to achieve compliance, Buyer agrees that at Seller’s option,
it will (to the extent permitted by applicable Law) allow Unit 1 to be included
in such emission averaging plan, provided that if the costs that Buyer will
incur to participate in such emissions averaging plan are reasonably likely to
exceed Buyer’s expected cost to comply with the legislation or regulation
absent such participation, Buyer shall only be obligated to participate in such
plan if Seller will agree to reimburse Buyer for any additional costs or
expenses incurred by Buyer as a result of its participation in the emissions
averaging plan above the costs and expenses it would have otherwise incurred to
comply with the legislation or regulation. Without limiting the foregoing, to
the extent that the United States Environmental Protection Agency promulgates
maximum achievable control technology regulations pursuant to Section 112 of
the federal Clean Air Act to regulate mercury emissions from coal-fired or
coal-derived fuel electrical generating units, and said regulations allow
emissions averaging among subject units at the Station or with units at other
Seller-owned or operated facilities to achieve compliance with such
regulations, Buyer agrees, at Seller’s option, to participate in an emissions
averaging plan designed to achieve compliance with such regulation, subject to
the conditions otherwise set forth in this Section 6.16.  

ARTICLE VII

CONDITIONS

7.1           Conditions
to Obligations of Buyer.  The obligation of Buyer to effect the
purchase and/or acquisition of the Purchased Assets and the Gasification Real
Property and the other transactions contemplated by this Agreement shall be
subject to the fulfillment at or prior to the Closing Date (or the waiver by
Buyer) of the following conditions:

(a)           The waiting period under the HSR Act
applicable to the consummation of the sale and/or conveyance of the Purchased
Assets and the Gasification Real Property contemplated hereby shall have
expired or been terminated;

 48
  

 

(b)           No
preliminary or permanent injunction or other order or decree by any federal or
state court or Governmental Authority which prevents the consummation of the
sale and/or conveyance of the Purchased Assets and the Gasification Real
Property contemplated herein shall have been issued and remain in effect (each
Party agreeing to use its Commercially Reasonable Efforts to have any such
injunction, order or decree lifted) and no statute, rule or regulation shall
have been enacted by any state or federal government or Governmental Authority
that prohibits the consummation of the sale and/or conveyance of the Purchased
Assets and the Gasification Real Property;

(c)           Buyer
shall have received all of Buyer’s Required Regulatory Approvals;

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

(e)           The
representations and warranties of Seller set forth in this Agreement shall be
true and correct in all material respects as of the Closing Date as though made
at and as of the Closing Date (unless made as of a specific earlier date, in
which case any such representation and warranty shall have been true and
correct in all material respects as of such earlier date);

(f)            Buyer
shall have received a certificate from an authorized officer of Seller, dated
the Closing Date, to the effect that, to such officer’s Knowledge, the
conditions set forth in Sections 7.1(d) and 7.1(e) have been
satisfied;

(g)           Seller
shall have delivered, or caused to be delivered, to Buyer at the Closing,
Seller’s closing deliveries described in Section 3.6;

(h)           There
shall not have occurred and be continuing a deterioration in the operating
condition of Unit 1 since the date hereof that creates a Material Adverse
Effect;

(i)            Buyer
shall have received all of Buyer’s Required Third-Party Consents;

(j)            Neither
Seller nor any of Seller’s Affiliates shall be in material default or breach under
any Related Agreement; and

(k)           First
American Title Insurance Company (the “Title Company”) shall have issued
to Buyer (or otherwise made an irrevocable commitment to issue to Buyer,
including by way of a signed pro forma title policy), at Closing, an ALTA (Form
B-1992) Owner Policy of Title Insurance, with an endorsement providing 

 49
 

 

“extended
coverage” over the standard exceptions (other than the standard survey
exception, unless the Title Company agrees to insure over the same based upon
the survey plats of the Acquired Real Property prepared by Stradtner, Rowland
& Assoc., Inc. and provided to Buyer prior to the date of this Agreement
(the “Existing Surveys”)) contained in such form of Owner Policy of
Title Insurance (collectively with the endorsements listed below, the “Title
Policy”), in the amount of One Hundred Million United States Dollars
($100,000,000), and insuring that good and marketable title to the Acquired
Real Property is vested in Buyer, subject to no exceptions other than the
Permitted Encumbrances.  The premium for
the Title Policy shall be allocated as set forth in Section 6.4.  The Title Policy shall contain the following
endorsements:  (i) owner’s comprehensive,
(ii) separate tax lot, (iii) access and entry, (iv) same as survey, (v) zoning
(ALTA 3.1 with parking), (vi) deletion of creditors’ rights exclusion and (vii)
contiguity, provided that any such endorsement that is dependent upon a survey
for issuance shall be required only to the extent that the Title Company agrees
to issue the same based upon the Existing Surveys.  Buyer shall bear the full cost of any other
endorsements requested by Buyer.  In
addition, if the Title Policy shall not have been delivered to Buyer at Closing
as a result of the failure by Buyer to pay its portion of the costs therefor as
provided in this Agreement, the condition set forth in this Section 7.1(k)
shall be deemed to have been satisfied by Seller.

7.2           Conditions to Obligations of
Seller.  The obligation of Seller to
effect the sale and/or conveyance of the Purchased Assets and the Gasification
Real Property and the other transactions contemplated by this Agreement
shall be subject to the fulfillment at or prior to the Closing Date (or the
waiver by Seller) of the following conditions:

(a)           The waiting
period under the HSR Act applicable to the consummation of the sale and/or
conveyance of the Purchased Assets and the Gasification Real Property
contemplated hereby shall have expired or been terminated;

(b)           No
preliminary or permanent injunction or other order or decree by any federal or
state court which prevents the consummation of the sale and/or conveyance of
the Purchased Assets and the Gasification Real Property contemplated herein
shall have been issued and remain in effect (each Party agreeing to use its
reasonable best efforts to have any such injunction, order or decree lifted)
and no statute, rule or regulation shall have been enacted by any  state or federal government or Governmental
Authority in the United States which prohibits the consummation of the sale
and/or conveyance of the Purchased Assets and the Gasification Real Property;

(c)           Seller
shall have received all of Seller’s Required Regulatory Approvals, including
with respect to the IURC, an approval that has no terms or conditions that, in
Seller’s reasonable judgment, would have a material and adverse effect on
Seller;

 50
 

 

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

(e)           The
representations and warranties of Buyer set forth in this Agreement shall be
true and correct in all material respects as of the Closing Date as though made
at and as of the Closing Date (unless made as of a specific earlier date, in
which case any such representation and warranty shall have been true and
correct in all material respects as of such earlier date);

(f)            Seller
shall have received a certificate from an authorized officer of Buyer, dated
the Closing Date, to the effect that, to such officer’s knowledge, the
conditions set forth in Sections 7.2(d) and 7.2(e) have been
satisfied;

(g)           Buyer
shall have delivered, or caused to be delivered, to Seller at the Closing,
Buyer’s closing deliveries described in Section 3.7;

(h)           Seller
shall have acquired replacement electric generation capacity that is adequate
in size, location, condition, reliability and cost, in Seller’s sole
discretion;

(i)            Seller
shall have received all of Seller’s Required Third-Party Consents; and

(j)            Neither
Buyer nor any of Buyer’s Affiliates shall be in material default or breach
under any Related Agreement.

ARTICLE VIII

INDEMNIFICATION

8.1           Indemnification.

(a)           From and
after the Closing, Buyer shall indemnify, defend and hold harmless Seller and
its Representatives (each, a “Seller’s Indemnitee”), in accordance with Sections
8.3 and 8.4 hereof from and against any and all claims, demands,
suits, losses, liabilities, penalties, damages, obligations, payments, costs and
expenses (including the costs and expenses of any and all actions, suits,
proceedings, assessments, judgments, settlements and compromises relating
thereto and reasonable attorneys’ fees and reasonable disbursements in
connection therewith) (each, an “Indemnifiable Loss”), asserted against
or suffered by any Seller’s Indemnitee relating to, resulting from or arising
out of (i) any breach by Buyer of any representation, warranty, covenant or
agreement of Buyer contained in this Agreement, (ii) the Assumed Liabilities,
(iii) the 

 51
 

 

ownership
or operation of the Gasification Facility by Buyer, any Affiliate of Buyer or
SGS or any successor-in-interest to Buyer, any Affiliate of Buyer or SGS, or
(iv) any Third Party Claims against a Seller’s Indemnitee arising out of or in
connection with Buyer’s ownership or operation of the Purchased Assets and
Buyer’s ownership of the Gasification Real Property on or after the Closing
Date.  In addition, notwithstanding
anything to the contrary set forth in Section 8.1(b), Buyer shall
indemnify Seller’s Indemnitee for 50% of the Indemnifiable Losses incurred by
Seller’s Indemnitee with respect to Excluded Liabilities relating to the
Gasification Real Property identified in Section 2.4(f)(iv), but only to
the extent that said Liabilities arise from or relate to an action, omission,
occurrence, event or Release commencing on or after December 31, 1999 and on or
before January 13, 2005.

(b)           From and
after the Closing, Seller shall indemnify, defend and hold harmless Buyer and
its Representatives (each, a “Buyer’s Indemnitee”), in accordance with Sections
8.3 and 8.4 hereof from and against any and all Indemnifiable Losses
asserted against or suffered by any Buyer’s Indemnitee after the Closing Date
relating to, resulting from or arising out of (i) any breach by Seller of any
representation, warranty, covenant or agreement of Seller contained in this
Agreement, (ii) the Excluded Liabilities, (iii) any Third Party Claims against
a Buyer’s Indemnitee arising out of or in connection with Seller’s ownership or
operation of the Excluded Assets, and (iv) any Third Party Claims arising out
of the ownership and use of the Purchased Assets by Seller prior to the Closing
Date and other than in respect of the Assumed Liabilities.  In addition, notwithstanding anything to the
contrary set forth in Section 8.1(a), Seller shall indemnify Buyer
Indemnitee for 50% of the Indemnifiable Losses incurred by Buyer Indemnitee
with respect to Assumed Liabilities relating to the Gasification Real Property
identified in Section 2.3(c)(iv), but only to the extent that said
Liabilities arise from or relate to an action, omission, occurrence, event or
Release commencing on or after December 31, 1999 and on or before January 13,
2005.

(c)           The amount
of any Indemnifiable Loss shall be reduced (i) to the extent that any Person
entitled to receive indemnification under this Agreement (an “Indemnitee”)
receives any insurance proceeds with respect to such Indemnifiable Loss, (ii)
to take into account any net Tax benefit realized by the Indemnitee arising
from the recognition of such Indemnifiable Loss, and (iii) by the amount of any
other payment actually received by the Indemnitee from a Person that is not a
Party or an Affiliate of a  Party with
respect to an Indemnifiable Loss.

(d)           Any party
seeking indemnity hereunder shall use Commercially Reasonable Efforts to (i)
seek coverage (including both costs of defense and indemnity) under applicable
insurance policies with respect to any such Indemnifiable Loss and (ii) mitigate
all losses, damages and the like relating to a claim under these
indemnification provisions, including availing itself of any defenses,
limitations, rights of contribution, claims against third persons and other
rights at law or equity.  The 

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Indemnitee’s
Commercially Reasonable Efforts shall include the reasonable expenditure of
money to mitigate or otherwise reduce or eliminate any loss or expenses for
which indemnification would otherwise be due, and the Indemnifying Party shall
reimburse the Indemnitee for the Indemnitee’s reasonable expenditures in
undertaking the mitigation.

(e)           The
expiration or termination of any covenant, agreement, representation or
warranty shall not affect the Parties’ obligations under this Section 8.1
if the Indemnitee provided the Person required to provide indemnification under
this Agreement (the “Indemnifying Party”) with proper notice of the
claim or event for which indemnification is sought prior to such expiration,
termination or extinguishment.

(f)            On and
after the Closing, the rights and remedies of Seller and Buyer under this Article
VIII are exclusive and in lieu of any and all other rights and remedies
which Seller and Buyer may have under this Agreement, the Bill of Sale and the
Assignment and Assumption Agreement and the transactions contemplated hereby
and thereby or otherwise for declaratory, injunctive or monetary relief, with
respect to any breach of or failure to perform any representation, warranty,
covenant or agreement set forth in this Agreement, the Bill of Sale and the
Assignment and Assumption Agreement and the transactions contemplated hereby
and thereby.

(g)           Each Party
waives any provision of Law to the extent that it would limit or restrict the
agreements contained in this Section 8.1.

(h)           EXCEPT WITH
RESPECT TO FRAUD OR INTENTIONAL MISCONDUCT, NOTWITHSTANDING ANYTHING TO THE
CONTRARY HEREIN, NO PARTY (INCLUDING AN INDEMNITEE) SHALL BE ENTITLED TO
RECOVER FROM ANY OTHER PARTY (INCLUDING AN INDEMNIFYING PARTY) FOR ANY
LIABILITIES, DAMAGES, OBLIGATIONS, PAYMENTS, LOSSES, COSTS, OR EXPENSES UNDER
THIS AGREEMENT IN EXCESS OF THE ACTUAL COMPENSATORY DAMAGES, COURT COSTS AND
REASONABLE ATTORNEY’S FEES SUFFERED BY SUCH PARTY.  EXCEPT WITH RESPECT TO FRAUD OR INTENTIONAL
MISCONDUCT, BUYER AND SELLER WAIVE ANY RIGHT TO RECOVER PUNITIVE, SPECIAL,
EXEMPLARY AND CONSEQUENTIAL DAMAGES ARISING IN CONNECTION WITH OR WITH RESPECT
TO THIS AGREEMENT.  THE PROVISIONS OF
THIS SECTION 8.1(h) SHALL NOT APPLY TO INDEMNIFICATION FOR A THIRD PARTY
CLAIM.

(i)            A breach
of a representation or warranty or covenant in this Agreement in connection
with any single item or group of related items that results in an Indemnifiable
Loss of less than $25,000 shall be deemed, for all purposes, not to be a breach
of such representation or warranty or covenant. 
Neither Buyer nor Seller, as the case may be, shall have any liability
to an Indemnitee for breaches of representations or warranties or covenants
pursuant to this Section 8.1 until the aggregate indemnification 

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obligation
of Buyer or Seller, as the case may be, for breaches of representations or
warranties or covenants pursuant to this Section 8.1 exceeds
$2,000,000, and then only to the extent that the aggregate amount of such
indemnification obligation exceeds $2,000,000, and (ii) the liability of Buyer
or Seller, as the case may be, for breaches of representations or warranties or
covenants pursuant to this Section 8.1 shall not exceed, in the
aggregate, $20,000,000.

8.2           Defense of Claims.

(a)           If any
Indemnitee receives notice of the assertion of any claim or of the commencement
of any claim, action, or proceeding made or brought by any Person who is not a
party to this Agreement or any Affiliate of a Party to this Agreement (a “Third
Party Claim”) with respect to which indemnification is to be sought from an
Indemnifying Party, the Indemnitee shall give such Indemnifying Party
reasonably prompt written notice thereof, but in any event such notice
shall  not be given later than twenty
(20) days after the Indemnitee’s receipt of notice of such Third Party
Claim.  Such notice shall describe the
nature of the Third Party Claim in reasonable detail and shall indicate the
estimated amount, if practicable, of the Indemnifiable Loss that has been or may
be sustained by the Indemnitee.  The Indemnifying
Party will have the right to participate in or, by giving written notice to the
Indemnitee, to elect to assume the defense of any Third Party Claim at such
Indemnifying Party’s expense and by such Indemnifying Party’s own counsel,
provided that the counsel for the Indemnifying Party who shall conduct the
defense of such Third Party Claim shall be reasonably satisfactory to the
Indemnitee. The Indemnitee shall cooperate in good faith in such defense at
such Indemnitee’s own expense. If an Indemnifying Party elects not to assume
the defense of any Third Party Claim, the Indemnitee may compromise or settle
such Third Party Claim over the objection of the Indemnifying Party, which
settlement or compromise shall conclusively establish the Indemnifying Party’s
liability pursuant to this Agreement.

(b)           If, within
twenty (20) days after an Indemnitee provides written notice to the
Indemnifying Party of any Third Party Claims, the Indemnitee receives written
notice from the Indemnifying Party that such Indemnifying Party has elected to
assume the defense of such Third Party Claim as provided in Section 8.2(a),
the Indemnifying Party will not be liable for any legal expenses subsequently
incurred by the Indemnitee in connection with the defense thereof; provided,
however, that if the Indemnifying Party shall fail to take reasonable steps
necessary to defend diligently such Third Party Claim within twenty (20) days
after receiving notice from the Indemnitee that the Indemnitee believes the
Indemnifying Party has failed to take such steps, the Indemnitee may assume its
own defense and the Indemnifying Party shall be liable for all reasonable
expenses thereof.  Without the prior
written consent of the Indemnitee, the Indemnifying Party shall not enter into
any settlement of any Third Party Claim which would lead to liability or create
any financial or other obligation on the part of the Indemnitee for which the
Indemnitee is not entitled to indemnification hereunder.  If a 

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firm
offer is made to settle a Third Party Claim without leading to liability or the
creation of a financial or other obligation on the part of the Indemnitee for
which the Indemnitee is not entitled to indemnification hereunder and the
Indemnifying Party desires to accept and agree to such offer, the Indemnifying
Party shall give written notice to the Indemnitee to that effect.  If the Indemnitee fails to consent to such
firm offer within ten (10) days after its receipt of such notice, the
Indemnifying Party shall be relieved of its obligations to defend such Third
Party Claim and the Indemnitee may contest or defend such Third Party
Claim.  In such event, the maximum
liability of the Indemnifying Party as to such Third Party Claim will be the
amount of such settlement offer plus reasonable costs or expenses paid or
incurred by Indemnitee up to the date of said notice.

(c)           Any claim
by an Indemnitee on account of an Indemnifiable Loss which does not result from
a Third Party Claim (a “Direct Claim”) shall be asserted by giving the
Indemnifying Party reasonably prompt written notice thereof, stating the nature
of such claim in reasonable detail and indicating the estimated amount, if
practicable, but in any event such notice shall not be given later than twenty
(20) days after the Indemnitee becomes aware of such Direct Claim, and the
Indemnifying Party shall have a period of thirty (30) days within which to
respond to such Direct Claim.  If the
Indemnifying Party does not respond within such thirty (30) day period, the
Indemnifying Party shall be deemed to have accepted such claim.  If the Indemnifying Party rejects such claim,
the Indemnitee will be free to seek enforcement of its right to indemnification
under this Agreement.

(d)           If the
amount of any Indemnifiable Loss, at any time subsequent to the making of an
indemnity payment in respect thereof, is reduced by recovery, settlement or
otherwise under or pursuant to any insurance coverage, or pursuant to any
claim, recovery, settlement or payment by, from or against any other entity,
the amount of such reduction, less any costs, expenses or premiums incurred in
connection therewith (together with interest thereon from the date of payment
thereof at the publicly announced prime rate then in effect of Citibank) shall
promptly be repaid by the Indemnitee to the Indemnifying Party.

(e)           A failure
to give timely notice as provided in this Section 8.2 shall not affect
the rights or obligations of any Party hereunder except if, and only to the
extent that, as a result of such failure, the Party which was entitled to
receive such notice was actually prejudiced as a result of such failure.

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8.3           Remediation Procedures and
Standards.

(a)           Buyer
shall promptly provide Seller with written notice of any Direct Claim or Third
Party Claim for indemnification relating to any Remediation of Hazardous
Substances that have been Released into the environment at, under or migrating
from the Purchased Assets prior to the Closing Date or the Gasification Real
Property on or prior to January 13, 2005. 
Seller shall retain the right to take the lead with respect to any such
Remediation as to which it is responsible, in whole or in part, pursuant to the
terms of this Agreement, subject to the limitations set forth in this Section
8.3.

(b)           Any
Remediation of the Acquired Real Property that is subject to indemnification by
Seller shall be conducted to meet the Applicable Remedial Action Standard.

(c)           To the
extent necessary to implement a Remediation meeting the Applicable Remedial
Action Standard, institutional or engineering controls may be utilized where
the use of such controls would not significantly interfere with the use of the
Acquired Real Property for the purpose for which it is intended to be used as
of the date hereof.  To the extent that
engineering or institutional controls at the Acquired Real Property satisfying
the requirements of this Agreement are used in connection with a Remediation,
Seller shall be responsible for any operation and maintenance costs associated
with such controls.  If the use of such
institutional and/or engineering controls meets the conditions of this section,
but Buyer refuses to accept such institutional and/or engineering controls,
Buyer shall be responsible for and shall reimburse Seller for any and all
additional costs and expenses incurred in undertaking the Remediation as a
result of such refusal.

(d)           Seller
shall not be responsible for those costs in connection with a Remediation with
respect to the Purchased Assets or the Gasification Real Property pursuant to
this Agreement to the extent that such costs are caused by an Assumed Liability
as set forth in Section 2.3. 
Seller shall also not be responsible for any consequential damages,
including costs incurred as a result of disruption of the business operations
with respect to the Purchased Assets or the Gasification Real Property, as a
result of a requirement to undertake a Remediation subject to indemnification
pursuant to this Agreement.

(e)           With
respect to any Release of Hazardous Substances from the Purchased Assets or the
Gasification Real Property that (i) is an Assumed Liability and (ii) impacts
real property owned by Seller after the Closing Date, Seller shall promptly
provide Buyer with written notice of the Direct Claim or Third Party Claim for
indemnification relating to the Remediation of Hazardous Substances and Seller
shall retain the right to control the Remediation of said Release.  Buyer shall indemnify and reimburse Seller
with respect to all reasonable costs and expenses associated with said 

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Remediation.  If (x) a Remediation meeting the Applicable
Remedial Action Standard can be met using institutional or engineering controls
and (y) the use of such controls will not impose significant operation and
maintenance costs on Seller, then Buyer’s obligation to indemnify and reimburse
Seller with respect to such Remediation will be limited to the cost of a
Remediation utilizing said institutional and engineering controls.  Seller may undertake a more expensive
Remediation with respect to such Release, but shall be responsible for the
additional costs and expenses associated with such Remediation. Buyer shall
also not be responsible for any consequential damages, including costs incurred
as a result of disruption of the business operations with respect to any real
property owned by Seller, as a result of a requirement to undertake a
Remediation subject to indemnification pursuant to this Agreement.

(f)            With
respect to a Remediation undertaken by Seller pursuant to a notice provided as
set forth in Section 8.3(a):

(i)  Seller
shall provide to Buyer for review and comment drafts of any proposed work
plans, reports or other submissions for any significant activity (including
investigation and remediation activities) that Seller intends to deliver or
submit to the appropriate Governmental Authority prior to said submission.  Buyer shall have fifteen (15) days to provide
comments to Seller regarding any such draft submissions, unless such review
period is not reasonably possible within the schedule or due date established
by the Governmental Authority, in which case Seller shall endeavor to provide
Buyer as much time as reasonably possible under the schedule for their
review.  Such review and comments shall
be at Buyer’s own expense and shall not be subject to indemnification
hereunder.  Seller shall give good faith
consideration to Buyer’s comments regarding such draft submissions.

(ii) To
the extent that Buyer notifies Seller, in writing, that: (A) any planned
activity will have a significant or material impact on Buyer’s operation of the
Purchased Assets or Gasification Real Property; (B) Buyer proposes a
technically feasible alternative approach to such activity that will meet the
requirements of the relevant Governmental Authority and applicable
Environmental Law with respect to the Remediation; and (C) such alternative
approach will not be reasonably likely to result in a significant or material
increase in the cost of the specific activity at issue or the overall
Remediation, then Seller shall implement Buyer’s proposed alternative.  To the extent that conditions (A) and (B)
have been satisfied, but condition (C) has not been satisfied, Buyer and Seller
shall negotiate (each to bear their own costs and expense) in good faith to
develop an alternative that addresses the concerns of Buyer and Seller with
respect to the Remediation.

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(iii)                  Seller shall promptly provide
copies to Buyer of all written notices, final submissions, final work plans and
final reports related to such Remediation.

(iv)                 Buyer may, at its own
expense (which expense shall not be subject to indemnification hereunder), hire
its own consultants, attorneys or other professionals to monitor the
Remediation, including any field work undertaken by Seller, and Seller shall
provide Buyer with the results of all such field work.

8.4           Corrective Action Procedures and
Standards.

(a)           With
respect to any claims for indemnification by Buyer related to violations of
applicable Environmental Law, other than matters that involve a Remediation
with respect to the Release of Hazardous Substances at or from the Purchased
Assets or the Gasification Real Property, Seller shall have the right, subject
to the approval of Buyer, such approval not be unreasonably withheld,
conditioned or delayed, and consistent with applicable Environmental Law, to
determine and implement commercially reasonable actions to correct any failures
to comply with applicable Environmental Law in effect as of the Closing
Date.  Seller  shall consult with Buyer in all material
respects in connection with undertaking said corrective actions; shall provide
Buyer with copies of all material correspondence submitted to and received by
any Governmental Authorities with respect to such matters; and shall provide
Buyer with a reasonable opportunity to comment on any material submissions to
Governmental Authorities with respect to such matters, including corrective
action proposals.

(b)           Without
limiting the foregoing, Seller shall not be obligated to indemnify Buyer for
the capital costs incurred in connection with the implementation of a
corrective action that are in excess of the minimum amount required to achieve
compliance with applicable Environmental Law in effect as of the Closing Date,
provided that the corrective action for purposes of this Section 8.4
shall be sufficient to allow Buyer to operate Unit 1 in a manner that is
consistent with its intended use, as of the date hereof.  Seller shall in no event be responsible for
any operating costs related to compliance with applicable Environmental Law
after the Closing Date.  To the extent
that Buyer desires that a corrective action be implemented that goes beyond the
standard set forth above, including implementing a corrective action that
allows for an expansion in operations or that is required to achieve compliance
with Environmental Law that does not become applicable until after the Closing
Date, Seller shall not be obligated to implement such corrective action and
shall not be responsible for any additional or excess costs associated with
such corrective action.

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(c)           For the
avoidance of doubt, corrective actions contemplated by this Section 8.4
shall not include any Remediation related to Releases of Hazardous Substances.

ARTICLE IX

TERMINATION

9.1           Termination.  This Agreement
and the transactions contemplated hereby may be terminated and such
transactions abandoned at any time prior to the Closing Date under any of the
following circumstances:

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

(b)           by Seller
or Buyer if (i) any federal or state court of competent jurisdiction shall have
issued an order, judgment or decree permanently restraining, enjoining or
otherwise prohibiting the Closing, and such order, judgment or decree shall
have become final and nonappealable; (ii) any statute, rule, order or
regulation shall have been enacted or issued by any Governmental Authority
that, directly or indirectly, prohibits the consummation of the Closing; or
(iii) the Closing contemplated hereby shall have not occurred on or before
December 31, 2007 (the “Termination Date”); provided, however,
that the right to terminate this Agreement under this Section 9.1(b)
shall not be available to any Party whose failure to fulfill any obligation
under this Agreement has been the cause of, or resulted in, the failure of the
Closing to occur on or before such date.

(c)           by Buyer
if any of the Buyer’s Required Regulatory Approvals, the receipt of which is a
condition to the obligation of Buyer to consummate the Closing as set forth in Section
7.1(c), shall have been denied (and a petition for rehearing or refiling of
an application initially denied without prejudice shall also have been denied)
and such denial was not caused by a breach of this Agreement by Buyer.

(d)           by Seller
if any of the Seller’s Required Regulatory Approvals, the receipt of which is a
condition to the obligation of Seller to consummate the Closing as set forth in
Section 7.2(c), shall have been denied (and a petition for rehearing or
refiling of an application initially denied without prejudice shall also have
been denied) and such denial was not caused by a breach of this Agreement by
Seller.

(e)           by Buyer
if (i) there has been a material violation or breach by Seller of any covenant,
representation or warranty contained in this Agreement that would cause a
failure to satisfy any condition to the obligations of Buyer to effect the
Closing and (ii) such violation or breach is not cured by the earlier of the
Closing Date or the date thirty (30) days after receipt by Seller of written
notice specifying in reasonable detail such violation or breach, and such
violation or breach has not been waived by Buyer.

 

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(f)            by
Seller, if (i) there has been a material violation or breach by Buyer of any
covenant, representation or warranty contained in this Agreement that would
cause a failure to satisfy any condition to the obligations of Seller to effect
the Closing and (ii) such violation or breach is not cured by the earlier of
the Closing Date or the date thirty (30) days after receipt by Buyer of written
notice specifying in reasonable detail such violation or breach, and such
violation or breach has not been waived by Seller.

(g)           by Seller
or Buyer in accordance with the provisions of Section 6.11.

9.2           Procedure and
Effect of Termination; Termination Fee. In the event any Party
determines to terminate this Agreement under any of the applicable
circumstances specified in Section 9.1 (other than Section 9.1(a)),
written notice thereof shall forthwith be given by the terminating Party to the
other Party, whereupon, upon the effectiveness of such notice, if this
Agreement is terminated pursuant to any of Sections 9.1(a) through 9.1(d)
and 9.1(g), (i) subject to Section 9.2(b), this Agreement shall
be of no further force or effect and (ii) subject to Sections 9.2(b) and
9.2(c), neither Party shall have any Liability or obligation to the
other by reason of this Agreement or the transactions contemplated hereby.

(b)           Notwithstanding
any other provision of this Agreement, Sections 6.2(b), 6.4, 6.7,
9.2, 10.1, 10.2, 10.4 through 10.6, 10.8,
10.10 and 10.13 shall survive such termination in accordance with
their terms.

(c)           If this Agreement
is terminated pursuant to Sections 9.1(e) or 9.1(f), the
non-terminating Party shall, within three (3) Business Days of receipt of a
written demand from the terminating Party, pay as liquidated damages to the
terminating Party $5,000,000 (the “Termination Fee”) by wire transfer of
immediately available funds denominated in U.S. dollars or by such other means
as are agreed upon by the Parties. 
Seller and Buyer acknowledge and agree that (i) the Termination Fee is
an integral part of the transactions contemplated by this Agreement and that
without it, they would not enter into this Agreement, (ii) actual damages to a
Party in the event that the Agreement is terminated pursuant to Sections
9.1(e) or 9.1(f) are difficult to determine, and that the Termination
Fee represents a fair and reasonable estimate of such damages, and (iii) if
this Agreement is terminated pursuant to Sections 9.1(e) or 9.1(f),
the Termination Fee shall be the exclusive remedy for the non-terminating Party
and in lieu of any and all other rights and remedies which Seller and Buyer may
have under this Agreement except in the case of fraud or willful
misconduct.  In the event of a
termination by Seller pursuant to Section 9.1(f), Buyer shall be entitled to
apply as a credit against the Termination Fee up to $5,000,000 of any Closing
Credit to which Buyer is entitled.

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ARTICLE X

MISCELLANEOUS PROVISIONS

10.1         Amendments, etc. 
Subject to applicable Law, this Agreement may be amended, modified or
supplemented only by written agreement of Seller and Buyer.

10.2         Waivers.   
Except as otherwise specifically provided in this Agreement, any failure
of any of the Parties to comply with any obligation, covenant, agreement or
condition herein may be waived by the Party entitled to the benefits thereof
only by a written instrument signed by the Party granting such waiver, but such
waiver of such obligation, covenant, agreement or condition shall not operate
as a waiver of, or estoppel with respect to, any subsequent failure to comply
therewith.

10.3         Survival.  

(a)           Subject to
the provisions of Section 9.2 and except as set forth in Section
10.3(b), each and every representation and warranty of Seller and Buyer
contained in this Agreement shall survive the Closing for a period of twelve
(12) months from the Closing Date.  The
covenants in this Agreement that relate to periods on or after the Closing
shall survive the Closing in accordance with their respective terms.

(b)           The
representations and warranties and disclaimers contained in Sections 4.1,
4.2, 4.3, 4.4, 4.5, 4.11, 4.14, 5.1,
5.2 and 5.3 shall survive the Closing for two (2) years from the
Closing Date.

10.4         Notices.   All
notices and other communications hereunder shall be in writing and shall be
deemed given if delivered personally or by facsimile transmission, or mailed by
overnight courier or registered or certified mail (return receipt requested),
postage prepaid, to the recipient Party at its address (or at such other
address or facsimile number for a Party as shall be specified by like notice; provided,
however, that notices of a change of address shall be effective only upon
receipt thereof):

(a)           If to
Seller, to:

                Duke Energy Indiana, Inc.

                1000 East Main Street

                Plainfield, IN 
46168

                Attention: 
President

                Facsimile:  (317) 838-2111

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                with a copy to:

                Duke Energy Corporation

                5265 Church Street

                EC03T

                Charlotte, NC 28201-1244

                Attention: General Counsel, Franchised Electric and
Gas

                Facsimile:  (704) 382-5690

(b)           if to
Buyer, to:

                Wabash Valley Power Association

                722 N. High School Road

                Indianapolis, IN 46214

                Attention: 
Rick Coons, President & CEO

                Facsimile:  (317) 243-6416

                with
a copy to:

                Wabash Valley Power Association, Inc.

                722 N. High School Road

                Indianapolis, IN 46214

                Attention: 
Contract Administrator

                Facsimile:  (317) 243-6416

10.5         Assignment; No
Third Party Beneficiaries.  This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the Parties and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any
Party, including by operation of law, without the prior written consent of the
other Party, nor is this Agreement intended to confer upon any other Person
except the Parties any rights, interests, obligations or remedies hereunder.

10.6         GOVERNING LAW.  THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE
STATE OF INDIANA (WITHOUT GIVING EFFECT TO CONFLICT OF LAW PRINCIPLES) AS TO
ALL MATTERS, INCLUDING BUT NOT LIMITED TO MATTERS OF VALIDITY, CONSTRUCTION,
EFFECT, PERFORMANCE AND REMEDIES.  THE
PARTIES AGREE THAT VENUE IN ANY AND ALL ACTIONS AND PROCEEDINGS RELATED TO THE
SUBJECT MATTER OF THIS AGREEMENT SHALL BE IN THE STATE AND FEDERAL COURTS IN
AND FOR THE STATE OF INDIANA WHICH COURTS SHALL HAVE EXCLUSIVE 

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JURISDICTION FOR SUCH
PURPOSE, AND THE PARTIES IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION OF
SUCH COURTS AND IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT FORUM TO THE
MAINTENANCE OF ANY SUCH ACTIONS OR PROCEEDINGS. 
SERVICE OF PROCESS MAY BE MADE IN ANY MANNER RECOGNIZED BY SUCH
COURTS.  EACH OF THE PARTIES IRREVOCABLY
WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING
OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.

10.7         Counterparts. 
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.

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

10.9         Disclosure.  Seller
may, at its option, include in the Schedules items that are not material
in order to avoid any misunderstanding, 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, 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 under this
Agreement notwithstanding any reference to a specific section, and all such
information shall be deemed to qualify the entire Agreement and not just such
section.

10.10       Entire Agreement. 
This Agreement, the Exhibits (including the Transaction Agreements) and
Schedules contain or will contain the entire agreement between the Parties with
respect to the transactions contemplated herein and therein and shall supersede
all previous oral and written and all contemporaneous oral negotiations,
commitments, and understandings (except for the Confidentiality Agreement)
including all letters, memoranda or other documents or communications, whether
oral, written or electronic, submitted or made by (a) Buyer or its
Representatives to Seller or any of its Representatives or (b) Seller or its
Representatives to Buyer or any of its Representatives, in connection with the
sale process that occurred prior to the execution of this Agreement or
otherwise in connection with the negotiation and execution of this Agreement.  No communications by or on behalf of Seller,
including responses to any questions or inquiries, whether orally, in writing
or electronically, and no information provided in any data room or any copies
of any information from any data room provided to Buyer or any other information
shall be deemed to (x) constitute a representation, warranty or an agreement of
the Seller or (y) be part of this Agreement.

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10.11       Acknowledgment;
Independent Due Diligence.  Buyer acknowledges that: (a) Buyer,
either alone or together with any individuals or entities Buyer has retained to
advise it with respect to the transactions contemplated hereby, has knowledge
and experience in transactions of this type and in the business of Seller and
is therefore capable of evaluating the risks and merits of acquiring the
Purchased Assets and the Gasification Real Property; (b) it has relied on
its own independent investigation, and has not relied on any information or
representations furnished by Seller or any representative or agent thereof
(except as specifically set forth herein), in determining to enter into this
Agreement; (c) neither Seller nor any representative or agent thereof has
given any investment, legal or other advice or rendered any opinion as to
whether the purchase and/or acquisition of the Purchased Assets and the
Gasification Real Property is prudent, and Buyer is not relying on any
representation or warranty by Seller or any representative or agent thereof
except as set forth in this Agreement; (d) Buyer has conducted extensive
due diligence, including a review of the documents provided by or on behalf of
Seller; and (e) Seller has made available to Buyer all documents, records
and books pertaining to the Purchased Assets and the Gasification Real Property
that Buyer and Buyer’s Representatives have requested, and Buyer and its
Representatives have had the opportunity to visit Unit 1 and ask questions and
receive answers concerning the Purchased Assets and the Gasification Real
Property and Unit 1 and the terms and conditions of this Agreement.  All such questions have been answered to
Buyer’s full and complete satisfaction.

10.12       Bulk Sales Laws.  Buyer
acknowledges that, notwithstanding anything in this Agreement to the contrary,
Seller will not comply with the provision of the bulk sales laws of any
jurisdiction in connection with the transactions contemplated by this
Agreement.  Buyer hereby waives
compliance by Seller with the provisions of the bulk sales laws of all
applicable jurisdictions.

10.13       Dispute Resolution.

(a)       If a dispute
arises between the Parties relating to this Agreement other than with respect
to Section 6.8, the Parties agree to use the following alternative
dispute resolution (“ADR”) procedure prior to either Party pursuing
other available remedies:

(i)  A
meeting shall be held promptly between the Parties, attended by individuals
with decision-making authority regarding the dispute, to attempt in good faith
to negotiate a resolution of the dispute.

(ii)    If, within thirty (30) days after such
meeting, the Parties have not succeeded in negotiating a resolution of the
dispute, they will jointly appoint a mutually acceptable neutral person not
affiliated with either of the Parties (the “Neutral”) to act as a
mediator.  If the Parties are unable to 

 64
 

 

agree on the Neutral within twenty (20) days, they shall seek
assistance in such regard from the CPR Institute for Dispute Resolution, Inc. (“CPR”).
The fees of the Neutral and all other common fees and expenses shall be shared
equally by the Parties.

(iii)  The
mediation may proceed in accordance with CPR’s Model Procedure for Mediation of
Business Disputes, or the Parties may mutually establish their own procedure.

(iv)  The
Parties shall pursue mediation in good faith and in a timely manner.  In the event the mediation does not result in
resolution of the dispute within sixty (60) days, then, upon seven (7) days’
written notice to the other Party either Party may suggest another form of ADR,
e.g., arbitration, a mini-trial or a summary jury trial, or may pursue other
available remedies.

(b)       All ADR
proceedings shall be strictly confidential and used solely for the purposes of
settlement.  Any materials prepared by
one Party for the ADR proceedings shall not be used as evidence by the other
Party in any subsequent litigation; provided, however, the underlying
facts supporting such materials may be subject to discovery.

(c)       Each Party
fully understands its specific obligations under the ADR provisions of the
Contract.  Neither Party considers such
obligations to be vague or in any way unenforceable, and neither Party will
contend to the contrary at any future time or in any future proceedings.

[Signature
page follows]

 65

 

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

                SELLER:

                DUKE
ENERGY INDIANA, INC.

                By:
____________________________________

                Name:     _______________________

                Title:       _______________________

                BUYER:

                WABASH
VALLEY POWER ASSOCIATION, INC.

                By:
_____________________________________

                Name:     _______________________

                Title:       _______________________

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