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Exhibit 4.1    
    

 
 

REGISTRATION RIGHTS AGREEMENT    
    

        THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and
entered into as of December 28, 2006, by and between KGen Power Corporation, a Delaware corporation (the "Company"), and Friedman, Billings,
Ramsey & Co., Inc., a Delaware corporation ("FBR"), for the benefit of the purchasers of the Company's common stock, par value $0.01 per
share (the "Common Stock"), as participants ("Participants") in the private placement by the Company of
shares of its Common Stock (the "Private Placement") and the direct and indirect transferees of FBR and each of the Participants. 

W I T N E S S E T H:  

        WHEREAS, the Company and FBR entered into that certain Purchase/Placement Agreement dated as of
December 18, 2006 (the "Placement Agreement"), in connection with which on December 28, 2006, the Company sold or placed 48,719,925 newly
issued shares of the Common Stock (plus an additional 7,236,102 shares to cover additional allotments, if any, of the Common Stock), with FBR acting as initial purchaser of the
144A/Regulation S Shares (as defined herein) and placement agent with respect to the Private Placement Shares (as defined herein); 

        WHEREAS, to induce FBR to enter into the Placement Agreement, the Company has agreed to provide the registration rights provided for in
this Agreement for the holders of Registrable Shares (as defined below); and 

        WHEREAS, the execution of this Agreement is a condition to the closing of the transactions contemplated by the Placement Agreement. 

        NOW, THEREFORE, in consideration of the premises and the mutual covenants of the parties hereto, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: 

1.    Definitions.    As used in this Agreement, the following terms shall have the following meanings: 

        "144A/Regulation S Shares" means the shares of Common Stock initially sold to FBR in the Private Placement and resold by FBR to
"qualified institutional buyers" (as such term is defined in Rule 144A) or to "non-U.S. persons" (in accordance with Regulation S) in an "offshore transaction" (in accordance
with Regulation S). 

        "Acquisition Closing" means the date on which the acquisition by the Company of 100% of the limited liability company interests of KGen
Partners LLC, a Delaware limited liability company, is consummated, following satisfaction of all conditions precedent to such acquisition, as contemplated by the final and preliminary offering
memoranda prepared in connection with the Private Placement. 

        "Affiliate" means, as to any specified Person, (i) any Person that directly, or indirectly through one or more intermediaries,
controls or is controlled by, or is under common control with, the specified Person, (ii) any executive officer, director, trustee or general partner of the specified Person and
(iii) any legal entity for which the specified Person acts as an executive officer, director, trustee or general partner. For purposes of this definition,
"control" (including the correlative meanings of the terms "controlled by" and
"under common control with"), as used with respect to any Person, means the possession, directly, or indirectly through one or more intermediaries, of
the power to direct or cause the direction of the management and policies of such Person, whether by contract, through the ownership of voting securities, partnership interests or other equity
interests or otherwise. 

        "Agreement" is defined in the introductory paragraph of this Agreement. 

        "Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which banking institutions in New York, New
York are authorized or obligated by applicable law, regulation or executive order to close. 

 

        "Closing Time" means the Closing Time as defined in the Placement Agreement. 

        "Commission" means the Securities and Exchange Commission. 

        "Common Stock" is defined in the introductory paragraph of this Agreement. 

        "Company" is defined in the introductory paragraph of this Agreement, and includes any successor thereto. 

        "Controlling Person" is defined in Section 6(a). 

        "Designated Officers" is defined in Section 2(d). 

        "End of Suspension Notice" is defined in Section 5(b). 

        "Engagement Letter" is defined in Section 10(h). 

        "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated by the Commission pursuant
thereto. 

        "Fair Market Value" means, with respect to a share of Common Stock, (i) if such Common Stock is listed on a national securities
exchange in the United States, the 10 consecutive trading day average of the closing price per share of the Common Stock on such national securities exchange immediately following the time the
Mandatory Shelf Registration Statement is declared effective by the Commission, as published by the Wall Street Journal or other reliable publication,
(ii) if a public market exists for such shares of Common Stock but such shares are not listed on a national securities exchange, the 10 consecutive trading day average of the mean between the
closing bid and asked quotations in the over-the-counter market for a share of such Common Stock immediately following the time the Mandatory Shelf Registration Statement is
declared effective by the Commission, or (iii) if such Common Stock is not then listed on a national securities exchange or traded in the over-the-counter market, the
price per share of Common Stock determined in good faith by the Company's board of directors based on the average of the estimated fair market value of the Common Stock during the 10 consecutive
trading day period following the date on which the Mandatory Shelf Registration Statement is declared effective by the Commission. 

        "FBR" is defined in the introductory paragraph of this Agreement, and includes any successor thereto. 

        "Form 10-K" means an annual report required to be filed with the Commission pursuant to Section 13 or
Section 15(d) of the Exchange Act, as such form may be amended from time to time, or any similar form, rule or regulation hereafter adopted by the Commission as a replacement thereto having
substantially the same effect as such form, provided that such form need not include those items required by Section 404 of the Sarbanes-Oxley Act of 2002. 

        "Form 10-Q" means a quarterly report required to be filed with the Commission pursuant to Section 13 or
Section 15(d) of the Exchange Act, as such form may be amended from time to time, or any similar form, rule or regulation hereafter adopted by the Commission as a replacement thereto having
substantially the same effect as such form, provided that such form need not include those items required by Section 404 of the Sarbanes-Oxley Act of 2002. 

        "Free Writing Prospectus" means a free writing prospectus, as defined in Rule 405. 

        "Holder" means each record owner of any Registrable Shares from time to time, including FBR and its Affiliates. 

        "Indemnified Party" is defined in Section 6(c). 

        "Indemnifying Party" is defined in Section 6(c). 

2

 

        "IPO Registration Statement" is defined in Section 7. 

        "Issuer Free Writing Prospectus" means an issuer free writing prospectus, as defined in Rule 433. 

        "Liabilities" is defined in Section 6(a). 

        "Lock-Up Period" is defined in Section 7. 

        "Mandatory Shelf Registration Statement" is defined in  Section 2(a). 

        "NASD" means the National Association of Securities Dealers, Inc. 

        "No Objections Letter" is defined in Section 4(t). 

        "Notice and Questionnaire" is defined in Section 2(a)(iii). 

        "Participants" is defined in the introductory paragraph of this Agreement. 

        "Permitted Free Writing Prospectus" is defined in the last paragraph of Section 4. 

        "Person" means an individual, limited liability company, partnership, corporation, trust, unincorporated organization, government or
agency or political subdivision thereof, or any other legal entity. 

        "Piggyback Registration Statement" is defined in Section 2(b). 

        "Placement Agreement" is defined in the first recital clause of this Agreement. 

        "Private Placement" is defined in the introductory paragraph of this Agreement. 

        "Private Placement Shares" means Shares initially sold by the Company directly to "accredited investors" (within the meaning of
Rule 501(a) promulgated under the Securities Act) as Participants, with FBR acting as placement agent. 

        "Prospectus" means the prospectus included in any Registration Statement, including any preliminary prospectus, and all other amendments
and supplements to any such prospectus, including
post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference, if any, in such prospectus. 

        "Purchaser Indemnitee" is defined in Section 6(a). 

        "Registrable Shares" means the 144A/Regulation S Shares and the Private Placement Shares, upon original issuance thereof, and at
all times subsequent thereto, including upon the transfer thereof by the original holder or any subsequent holder and any shares or other securities issued in respect of such Registrable Shares
because of or in connection with any stock dividend, stock distribution, stock split, purchase in any rights offering or in connection with any exchange for or replacement of such Registrable Shares
or any combination of shares, recapitalization, merger or consolidation, or any other equity securities issued pursuant to any other pro rata distribution with respect to the Common Stock, until, in
the case of any such 144A/Regulation S Share or Private Placement Share, the earliest to occur of: 

          (i)  the
date on which it has been sold pursuant to a Registration Statement or sold pursuant to Rule 144; 

         (ii)  the
date on which it is saleable, in the opinion of counsel to the Company, without registration under the Securities Act, pursuant to Rule 144(k); 

        (iii)  the
date on which it is saleable, without restriction, pursuant to an available exemption from registration under the Securities Act; or 

        (iv)  the
date on which it is sold to the Company or its subsidiaries. 

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        "Registration Expenses" means any and all expenses incident to the performance of or compliance with this Agreement, including:
(i) all Commission, securities exchange, NASD registration, listing, inclusion and filing fees (including those of FBR and Holders associated or affiliated with FBR), (ii) all fees and
expenses incurred in connection with compliance with international, federal or state securities or blue sky laws (including any registration, listing and filing fees and reasonable fees and
disbursements of counsel in connection with blue sky qualification of any of the Registrable Shares and the preparation of a blue sky memorandum and compliance with the rules of the NASD),
(iii) all expenses of any Persons in preparing or assisting in preparing, word processing, duplicating, printing, delivering and distributing any Registration Statement, any Prospectus, any
amendments or supplements thereto, any underwriting agreements, securities sales agreements, certificates and any other documents relating to
the performance under and compliance with this Agreement, (iv) all fees and expenses incurred in connection with the listing or inclusion of any of the Registrable Shares on the New York Stock
Exchange, the American Stock Exchange or The NASDAQ Stock Market pursuant to Section 4(n), (v) the fees and disbursements of counsel for
the Company and of the independent public accountants of the Company (including the expenses of any special audit and "cold comfort" letters required by or incident to such performance) and the
reasonable fees and disbursements of one counsel, reasonably acceptable to the Company, for the Holders, selected by the Holders holding a majority of the Registrable Shares, (vi) any fees and
disbursements customarily paid in issues and sales of securities (including the fees and expenses of any experts retained by the Company in connection with any Registration Statement),  provided, however,
 that Registration Expenses shall exclude brokers' or underwriters' discounts and commissions and transfer taxes, if any, relating to
the sale or disposition of Registrable Shares by a Holder and the fees and disbursements of any counsel to the Holders other than as provided for in clause (v) above. 

        "Registration Statement" means any Mandatory Shelf Registration Statement or Piggyback Registration Statement. 

        "Regulation S" means Regulation S (Rules 901-905) promulgated by the Commission under the Securities Act,
as such rules may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission as a replacement thereto having substantially the same effect as such regulation. 

        "Rule 144", "Rule 144A",
"Rule 158", "Rule 405", "Rule 415",
"Rule 424" or "Rule 433", respectively, means such specified rule promulgated by the
Commission pursuant to the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission as a replacement thereto having
substantially the same effect as such rule. 

        "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations promulgated by the Commission thereunder. 

        "Shares" means the Shares of Common Stock being offered and sold pursuant to the terms and conditions of the Placement Agreement. 

        "Suspension Event" is defined in Section 5(b). 

        "Suspension Notice" is defined in Section 5(b). 

        "Underwritten Offering" means a sale of securities of the Company to an underwriter or underwriters for reoffering to the public. 

2.    Registration Rights.    

        (a)    Mandatory Shelf Registration.    As set forth in  Section 4, the Company agrees to use it commercially reasonably
efforts to file with the Commission within 60 days of the Acquisition
Closing, but in no event later than December 14, 2007, a shelf registration statement on Form S-1 or such other form under the Securities Act then available to the Company
providing for the resale pursuant to 

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Rule 415
from time to time by the Holders of all of their Registrable Shares (including the Prospectus, amendments and supplements to such registration statement or Prospectus, including
pre- and post-effective amendments, all exhibits thereto and all material incorporated by reference or deemed to be incorporated by reference, if any, in such registration
statement, the "Mandatory Shelf Registration Statement"). If the Company has an effective Mandatory Shelf Registration Statement on
Form S-1 under the Securities Act and becomes eligible to use Form S-3 or such other short-form registration statement form under the Securities Act,
the Company shall promptly give notice of such eligibility to the Holders covered thereby and may, or at the request of such Holders with a majority of such Registrable Shares shall, promptly convert
the Mandatory Shelf Registration Statement on Form S-1 to a registration statement on Form S-3 or such other short-form registration statement by
means of a post-effective amendment or otherwise, unless any Holder with Registrable Shares under the initial Mandatory Shelf Registration Statement notifies the Company within 10 Business
Days of receipt of the Company notice that such conversion would interfere with its distribution of Registrable Shares already in progress and provides a reasonable explanation therefor, in which case
the Company will delay the conversion of the Mandatory Shelf Registration Statement for a reasonable time after receipt of the first such notice, not to exceed 30 days in the aggregate, for all
Holders requesting such suspension (unless the Company, at such time as the conversion from Form S-1 to Form S-3 or such other short-form registration
statement may occur, would otherwise be required to amend the Mandatory Shelf Registration Statement and require that Holders suspend sales under  Section 4(i) or Section 5). 

        (i)    Effectiveness and Scope.    The Company shall use its commercially reasonable efforts to cause the Mandatory
Shelf Registration Statement to be declared effective by the Commission as promptly as practicable following such filing, and within 120 days of the Acquisition Closing, and to remain effective
until the date on which all Shares in respect thereof cease to be Registrable Shares. No other Person will have the right to include securities on the Mandatory Shelf Registration Statement. The
Mandatory Shelf Registration Statement shall provide for the resale from time to time, and pursuant to any method or combination of methods legally available (including an Underwritten Offering, a
direct sale to purchasers, a sale through brokers or agents or a sale over the internet) by the Holders of any and all Registrable Shares. 

        (ii)    Underwriting.    If any Holder proposes to conduct an Underwritten Offering under the Mandatory Shelf
Registration Statement, such Holder shall advise the Company and all other Holders whose securities are included in the Mandatory Shelf Registration Statement (if applicable), of the managing
underwriters for such proposed Underwritten Offering (which may be FBR or an Affiliate thereof); such managing underwriters to be subject to the approval of the Company, not to be unreasonably
withheld. In such event, the Company shall enter into an underwriting agreement in customary form with the managing underwriters, which shall include, among other provisions, indemnities to the effect
and to the extent provided in Section 6, and shall take all such other reasonable actions as are requested by the managing underwriter in order
to expedite or facilitate the registration and disposition of the Registrable Shares included in such Underwritten Offering; provided, however, that the
Company shall be required to cause appropriate officers of the Company or its Affiliates to participate in a "road show" or similar marketing effort being conducted by such underwriter with respect to
such Underwritten Offering only if the Holders reasonably anticipate gross proceeds from such Underwritten Offering of at least $10 million. All Holders proposing to distribute their
Registrable Shares through such Underwritten Offering shall enter into an underwriting agreement in customary form with the managing underwriters selected for such underwriting and complete and
execute any questionnaires, powers of attorney, indemnities, securities escrow agreements and other documents reasonably required under the terms of such underwriting, and furnish to the Company such
information in writing as the Company may reasonably request for inclusion in the Registration Statement; provided, however, that no Holder shall be
required to make any representations or 

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warranties
to or agreements with the Company or the underwriters other than representations, warranties or agreements as are customary and reasonably requested by the underwriters. Notwithstanding any
other provision of this Agreement, with respect to an Underwritten Offering in connection with the Mandatory Shelf Registration Statement, if the managing underwriters determine in good faith that
marketing factors require a limitation on the number of shares to be included in such Underwritten Offering, then the managing underwriters may exclude shares (including Registrable Shares) from the
Underwritten Offering, and any shares included in the Underwritten Offering shall be allocated to each of the Holders requesting inclusion of their Registrable Shares in such Underwritten Offering on
a pro rata basis based on the total number of such Registrable Shares requested to be included. 

        (iii)    Selling Stockholder Questionnaires.    Each Holder agrees, by its acquisition of Shares, that if such Holder
wishes to sell Registrable Shares pursuant to the Mandatory Shelf Registration Statement and related Prospectus, it will do so only in accordance with this  Section 2(a)(iii). Each Holder wishing to
sell Registrable Shares pursuant to the Mandatory Shelf Registration Statement and related Prospectus
agrees to deliver a written notice, substantially in form and substance of Annex A (a "Notice and
Questionnaire"), to the Company. The Company shall mail the Notice and Questionnaire to the Holders no later than the date of initial filing of the Mandatory Shelf Registration
Statement with the Commission. No Holder shall be entitled to be named as a selling securityholder in the Mandatory Shelf Registration Statement as of the initial effective date of the Mandatory Shelf
Registration Statement, and no Holder may use the Prospectus forming a part thereof for resales of Registrable Shares at any time, unless such Holder has returned a completed and signed Notice and
Questionnaire to the Company by the deadline for response set forth therein; provided, however, Holders shall have at least 20 days from the date
on which the Notice and Questionnaire is first mailed to such Holders to return a completed and signed Notice and Questionnaire to the Company. Notwithstanding the foregoing, (x) upon the
request of any Holder that did not return a Notice and Questionnaire on a timely basis or did not receive a Notice and Questionnaire because it was a subsequent transferee of
Registrable Shares after the Company mailed the Notice and Questionnaire, the Company shall distribute a Notice and Questionnaire to such Holders at the address set forth in the request and
(y) upon receipt of a properly completed Notice and Questionnaire from such Holder, the Company shall use its commercially reasonable efforts to name such Holder as a selling securityholder in
the Mandatory Shelf Registration Statement by means of a pre-effective amendment, by means of a post-effective amendment or, if permitted by the Commission, by means of a
Prospectus supplement to the Mandatory Shelf Registration Statement; provided, however, that the Company will have no obligation to add Holders to the
Mandatory Shelf Registration Statement as selling securityholders more frequently than once every 30 calendar days. 

        (b)    Piggyback Registration.    If, after the date hereof, the Company proposes to file a registration
statement under the Securities Act providing for a public offering of the Company's equity securities, other than the Mandatory Shelf Registration Statement or a registration statement on
Form S-8 or Form S-4 or any similar form hereafter adopted by the Commission as a replacement therefor (including the Prospectus, amendments and supplements to
such registration statement or Prospectus, including pre- and post-effective amendments, all exhibits thereto and all material incorporated by reference or deemed to be
incorporated by reference, if any, in such registration statement, the "Piggyback Registration Statement"), the Company will notify each Holder of the
proposed filing if clause (i) or (ii) of the following sentence applies, or only those affected Holders if clause (iii) of the following sentence applies. If (i) the
Piggyback Registration Statement relates to an Underwritten Offering, including an initial public offering, (ii) the Mandatory Shelf Registration Statement is not then effective or
(iii) Registrable Shares eligible for inclusion on the Mandatory Shelf Registration Statement when initially declared effective were not included in the Mandatory Shelf Registration Statement
(unless such shares can and will be added to the Mandatory Registration Statement at such 

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time),
then each Holder in the case of clauses (i) and (ii) and each such affected Holder in the case of clause (iii), shall be given an opportunity to include in such Piggyback
Registration Statement all or any part of such Holder's Registrable Shares. Each such Holder desiring to include in any such Piggyback Registration Statement all or part of such Holder's Registrable
Shares shall, within 10 days after delivery of the above-described notice by the Company, so notify the Company in writing, and in such notice shall inform the Company of the number of
Registrable Shares such Holder wishes to include in such Piggyback Registration Statement and provide, as a condition to such inclusion, such information regarding itself, its Registrable Shares and
the intended method of disposition of such securities as is required pursuant to Regulation S-K promulgated under the Securities Act to effect the registration of the Registrable
Shares. Any Holder's election to include any Registrable Shares in such Piggyback Registration Statement will not affect the inclusion of such Registrable Shares in the Mandatory Shelf Registration
Statement until such Registrable Shares have been sold under the Piggyback Registration Statement, at which time the Company may remove from the Mandatory Shelf Registration Statement such Registrable
Shares. 

        (i)    Right to Terminate Piggyback Registration.    At any time, the Company may terminate or withdraw any Piggyback
Registration Statement referred to in this Section 2(b), and without any obligation to any such Holder whether or not any Holder has elected to
include Registrable Shares in such registration. The Company may suspend the effectiveness and use of any Piggyback Registration Statement at any time
for an unlimited amount of time whether or not any Holder has elected to include Registrable Shares in such registration. 

        (ii)    Underwriting.    The Company shall advise the Holders of the identity of the managing underwriters for any
Underwritten Offering proposed under the Piggyback Registration Statement. The right of any such Holder's Registrable Shares to be included in any Piggyback Registration Statement pursuant to this  Section 2(b)
 shall be conditioned upon such Holder's participation in such Underwritten Offering and the inclusion of such Holder's Registrable
Shares in the Underwritten Offering to the extent provided herein. All Holders proposing to distribute their Registrable Shares through such Underwritten Offering shall enter into an underwriting
agreement in customary form with the managing underwriters selected for such underwriting and complete and execute any questionnaires, powers of attorney, indemnities, securities escrow agreements and
other documents reasonably required under the terms of such underwriting, and furnish to the Company such information in writing as the Company may reasonably request for inclusion in the Registration
Statement; provided, however, that no Holder shall be required to make any representations or warranties to or agreements with the Company or the
underwriters other than representations, warranties or agreements as are customary and reasonably requested by the underwriters. Notwithstanding any other provision of this Agreement, if the managing
underwriters determine in good faith that marketing factors require a limitation on the number of shares to be included, then the managing underwriters may exclude shares (including Registrable
Shares) from the Piggyback Registration Statement and the Underwritten Offering, and any shares of Common Stock included in the Piggyback Registration Statement and the Underwritten Offering shall be
allocated, first, to the Company, and second, to any Person exercising demand registration rights that
are the basis for such registration, and third, to each of the Holders requesting inclusion of their Registrable Shares in such Piggyback Registration
Statement on a pro rata basis based on the total number of such shares requested to be included; provided,
however, that the number of Registrable Shares to be included in the Piggyback Registration Statement shall not be reduced unless all other securities of the Company held by
other holders of the Company's capital stock with registration rights that are inferior (with respect to such reduction) to the registration rights of the Holders set forth herein, are first entirely
excluded from the underwriting and registration. If any Holder disapproves of the terms of any Underwritten Offering, such Holder may elect to withdraw therefrom by written notice to the Company and
the underwriter, delivered at least 10 Business Days before the effective date of the Piggyback Registration Statement. Any Registrable 

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Shares
excluded or withdrawn from such Underwritten Offering shall be excluded and withdrawn from the Piggyback Registration Statement. 

        (iii)    Hold-Back Agreement.    By electing to include Registrable Shares in the Piggyback Registration
Statement, if any, the Holder shall be deemed to have agreed not to effect any sale or distribution of securities of the Company of the same or similar class or classes of the securities included in
the Registration Statement or any securities convertible into or exchangeable or exercisable for such securities, including a sale pursuant to Rule 144 under the Securities Act, or enter into
any other transaction designed to directly or indirectly transfer any of the economic consequences of ownership of Common Stock of the Company, during such periods as reasonably requested (but in no
event longer than 60 days following the effective date of the Piggyback Registration Statement (subject to extension for earnings announcements or material events as provided in  Section 7)),
provided each of the executive officers and directors of the Company that holds shares of Common Stock of the
Company or securities convertible into or exchangeable or exercisable for shares of Common Stock of the Company is subject to at least the same restrictions for the entire time period required of the
Holders hereunder) by the managing underwriters, if an Underwritten Offering. 

        (iv)    Mandatory Shelf Registration not Impacted by Piggyback Registration Statement.    The Company's obligation to
file the Mandatory Shelf Registration Statement shall not be affected by the filing or effectiveness of the Piggyback Registration Statement. 

        (c)    Expenses.    The Company shall pay all Registration Expenses (including those of FBR and Holders affiliated or
associated with FBR) in connection with the registration of the Registrable Shares pursuant to this Agreement. Each Holder participating in a registration pursuant to this  Section 2 shall bear such
Holder's proportionate share (based on the total number of Registrable Shares sold in such registration) of all
discounts and commissions payable to underwriters or brokers and all transfer taxes in connection with a registration of Registrable Shares pursuant to this Agreement and any other expense of the
Holders not specifically allocated to the Company pursuant to this Agreement relating to the sale or disposition of such Holder's Registrable Shares pursuant to any Registration Statement. 

        (d)    Executive Bonus.    If the Mandatory Shelf Registration Statement: 

          (i)  is
filed within 60 days of the Acquisition Closing and is declared effective by the Commission before August 30, 2007 then those executive officers
designated by the Company's board of directors before the Acquisition Closing (the "Designated Officers") shall receive an aggregate bonus of $500,000,
to be allocated among the Designated Officers by the Company's board of directors; 

         (ii)  is
declared effective by the Commission within 120 days of the Acquisition Closing then the Designated Officers shall receive an aggregate bonus of $500,000, to
be allocated among the Designated Officers by the Company's board of directors; 

        (iii)  is
declared effective by the Commission after 120 days of the Acquisition Closing but before December 14, 2007, then the Designated Officers shall
receive the aggregate $500,000 bonus contemplated by Section 2(d)(ii) (to be allocated among the Designated Officers by the Company's board of
directors) reduced by $7,500 for each day after the date that is 120 days from the Acquisition Closing until the Mandatory Shelf Registration Statement is declared effective; and 

        (iv)  has
not been filed by December 14, 2007, then the Designated Officers shall each forfeit 100% of any bonus compensation for the fiscal year ending
June 30, 2008 (whether or not payable in such fiscal year), whether under an employment agreement with the Company, a bonus plan or any other bonus arrangement, including any bonus compensation
for which payment would otherwise be deferred until after such fiscal year. 

        The
bonus payable under Section 2(d)(i), Section 2(d)(ii) and  Section 2(d)(iii) shall be payable
50% in cash and 50% in shares of Common Stock, with the number of shares of Common Stock issuable to be based
on the Fair Market Value of the Common Stock and payable after the Mandatory Shelf Registration Statement is declared effective. 

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3.    Rule 144 and Rule 144A Reporting; Reports to Holders.    

        (a)   With
a view to making available the benefits of certain rules and regulations of the Commission that may permit the sale of the Registrable Shares to the public without
registration, the Company agrees to, so long as any Holder owns any Registrable Shares: 

          (i)  make
and keep adequate current public information available, as those terms are understood and defined in Rule 144(c) at all times after the effective date of
the first registration statement filed by the Company for an offering of the Company's securities to the general public; 

         (ii)  use
its commercially reasonable efforts to file (including electronically on EDGAR) with the Commission in a timely manner all reports and other documents required to
be filed by the Company under the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements); 

        (iii)  so
long as a Holder owns any Registrable Shares constituting 144A/Regulation S Shares, if the Company is not required to file reports and other documents under
the Securities Act and the Exchange Act, it will make available other information as required by, and so long as necessary to permit sales of Registrable Shares pursuant to, Rule 144 or
Rule 144A; and 

        (iv)  furnish
to any Holder promptly upon request a written statement by the Company as to its compliance with the reporting requirements of Rule 144 (at any time
after 90 days after the effective date the first registration statement filed by the Company for an offering of its securities to the general public) and of the Exchange Act, a copy of the most
recent annual or quarterly report of the Company, and such other reports and documents of the Company, and take such reasonable further actions consistent with this  Section 3, as a Holder may
reasonably request in availing itself of any rule or regulation of the Commission allowing a Holder to sell any such
Registrable Shares without registration. 

        (b)   So
long as a Holder owns any Registrable Shares, notwithstanding that the Company may not be required to file reports under the Securities Act or the Exchange Act or
otherwise report on an annual and quarterly basis on forms provided for such annual and quarterly reporting pursuant to rules and regulations promulgated by the Commission, the Company shall furnish
to the Holders all quarterly and annual financial information that would be required to be contained in a filing with the Commission on Forms 10-K and 10-Q if the Company were
required to file such forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" and, with respect to the annual information only, audit reports thereon
by the certified independent accountants of the Company. Such annual reports shall be furnished within 90 days of fiscal year end and such quarterly reports shall be furnished within
45 days after the end of such quarter (60 days after the end of such quarter for quarters ending on or before March 31, 2007); and 

        (c)   Within
60 days of the end of each fiscal quarter or 75 days of the end of each fiscal quarter ending on or before March 31, 2007 (or, with respect
to the quarter ending on the Company's fiscal year end, 110 days of the end of such fiscal quarter), the Company shall hold a quarterly conference call of a type customarily held by companies
subject to the reporting requirements of the Exchange Act for the Holders to discuss the results of the prior quarter reported pursuant to  Section 3(b) and other relevant matters; provided, however, that if the Company's Board of
Directors determines in good faith upon the advice of legal counsel that such a call would be inadvisable due to the provisions of the Securities Act or Exchange Act as a result of any proposed
financing, acquisition, merger or other significant transaction involving the Company, the Company may suspend, delay or cancel such calls so long as and to the extent that it discontinues all similar
calls with investors in or persons or entities that do business with the Company; provided further that the Company shall not suspend such calls for
more than 150 days out of any 365-day period. 

9

 

4.    Registration Procedures.    In connection with the obligations of the Company with respect to any registration pursuant to
this Agreement, the Company shall: 

        (a)   notify
FBR, in writing, at least 10 Business Days before filing a Registration Statement, of its intention to file a Registration Statement with the Commission
and, at least 5 Business Days before filing, provide a copy of the Registration Statement to FBR; prepare and file with the Commission, as specified in this Agreement, each Registration Statement,
which Registration Statement shall comply as to form in all material respects with the requirements of the applicable form and include all financial statements required by the Commission to be filed
therewith and shall be acceptable to FBR; notify FBR at least 5 Business Days before filing of any amendment or supplement to such Registration Statement and, at least 3 Business Days before filing,
provide a copy of such amendment or supplement to FBR for review and comment; promptly following receipt from the Commission, provide to FBR copies of any comments made by the staff of the Commission
relating to such Registration Statement and the Company's responses thereto for review and comment; and use its commercially reasonable efforts to cause the Mandatory Shelf Registration Statement to
become effective as soon as practicable after filing and to remain effective as set forth in Section 2(a)(i); 

        (b)   subject
to Section 4(i), (i) prepare and file with the Commission such amendments and
post-effective amendments to each such Registration Statement as may be necessary to keep such Registration Statement effective for the period described in  Section 2(a)(i), (ii) cause each
Prospectus contained therein to be supplemented by any required Prospectus supplement, and as so
supplemented to be filed pursuant to Rule 424 or any similar rule that may be adopted under the Securities Act, (iii) promptly amend or supplement each such Registration Statement to
include the Company's quarterly and annual financial information and other material developments (until the Company is eligible to incorporate such information by reference into the Registration
Statement), during which time sales of the Registrable Shares under the Registration Statement will be suspended until such amendment or supplement is filed and effective, and (iv) comply in
all material respects with the provisions of the Securities Act with respect to the disposition of all Registrable Shares covered by each Registration Statement during the applicable period in
accordance with the intended method or methods of distribution by the selling Holders thereof; 

        (c)   furnish
to the Holders, without charge, as many copies of each Prospectus, including each preliminary Prospectus, any Issuer Free Writing Prospectus, and any amendment
or supplement thereto and such other documents as such Holder may reasonably request, in order to facilitate the public sale or other disposition of the Registrable Shares; the Company hereby consents
to the use of such Prospectus, including each preliminary Prospectus, and any Issuer Free Writing Prospectus by the Holders, if any, in connection with the offering and sale of the Registrable Shares
covered by any such Prospectus; 

        (d)   use
its commercially reasonable efforts to register or qualify, or obtain exemption from registration or qualification for, all Registrable Shares by the time the
applicable Registration Statement is declared effective by the Commission under all applicable state securities or "blue sky" laws of such domestic jurisdictions as FBR or any Holder covered by a
Registration Statement shall reasonably request in writing, keep each such registration or qualification or exemption effective during the period such Registration Statement is required to be kept
effective pursuant to Section 2(a)(i) and do any and all other acts and things that may be reasonably necessary or advisable to enable such
Holder to consummate the disposition in each such jurisdiction of such Registrable Shares owned by such Holder; provided, however, that the Company
shall not be required to (i) qualify generally to do business in any jurisdiction or to register as a broker or dealer in such jurisdiction where it would not otherwise be required to qualify
but for this Section 4(d), (ii) subject itself to taxation in any such jurisdiction, or (iii) submit to the general service of
process in any such jurisdiction; 

10

 

        (e)   use
its commercially reasonable efforts to cause all Registrable Shares covered by such Registration Statement to be registered and approved by such other domestic
governmental agencies or authorities, if any, as may be necessary to enable the Holders thereof to consummate the disposition of such Registrable Shares; 

        (f)    notify
FBR and each Holder with Registrable Shares covered by a Registration Statement promptly and, if requested by FBR or any such Holder, confirm such advice in
writing (i) when such Registration Statement has become effective and when any post-effective amendments and supplements thereto become effective, (ii) of the issuance by the
Commission or any state securities authority of any stop order suspending the effectiveness of such Registration Statement or the initiation or threatening of any proceedings for that purpose
(including a pending proceeding against the Company under Section 8A of the Securities Act in connection with the offering of the Registrable Shares), (iii) of any request by the
Commission or any other federal or state governmental authority for amendments or supplements to such Registration Statement or related Prospectus or any Issuer Free Writing Prospectus or for
additional information, and (iv) of the happening of any event during the period such Registration Statement is effective as a result of which such Registration Statement or the related
Prospectus or any Issuer Free Writing Prospectus or any document incorporated by reference therein contains any untrue statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not misleading (which information shall be accompanied by an instruction to suspend the use of the Registration Statement and the Prospectus
and such Issuer Free Writing Prospectus until the requisite changes have been made), and at the request of any such Holder; 

        (g)   during
the period of time referred to in Section 2(a)(i), use its commercially reasonable efforts to avoid the
issuance of, or if issued, to obtain the withdrawal of, any order enjoining or suspending the use or effectiveness of a Registration Statement or suspending the qualification (or exemption from
qualification) of any of the Registrable Shares for sale in any jurisdiction, as promptly as practicable; 

        (h)   upon
request, furnish to each requesting Holder with Registrable Shares covered by a Registration Statement, without charge, at least one conformed copy of such
Registration Statement and any post-effective amendment or supplement thereto (without documents incorporated therein by reference or exhibits thereto, unless requested); 

        (i)    except
as provided in Section 5, upon the occurrence of any event contemplated by  Section 4(f)(iv), use its commercially reasonable efforts to promptly
prepare a supplement or post-effective amendment to a
Registration Statement or the related Prospectus or any Issuer Free Writing Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter
delivered to the purchasers of the Registrable Shares, such Prospectus or Issuer Free Writing Prospectus will not contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, and, upon request, promptly furnish to each
requesting Holder covered by such Registration Statement a reasonable number of copies of each such supplement or post-effective amendment; 

        (j)    if
requested by the managing underwriters or any Holders of Registrable Shares being sold in connection with an Underwritten Offering, (i) promptly incorporate in
a Prospectus supplement or post-effective amendment such material information as the managing underwriters or such Holders indicate relates to them or otherwise reasonably request be
included therein and (ii) make all required filings of such Prospectus supplement or such post-effective amendment as soon as practicable after the Company has received notification
of the matters to be incorporated in such Prospectus supplement or post-effective amendment; 

        (k)   in
the case of an Underwritten Offering, use its commercially reasonable efforts to furnish or caused to be furnished to each Holder of Registrable Shares covered by
such Registration Statement 

11

 

and
the underwriters a signed counterpart, addressed to each such Holder and the underwriters, of: (i) an opinion of counsel for the Company, dated the date of each closing under the
underwriting agreement, reasonably satisfactory to the underwriters; and (ii) a "comfort" letter, dated the effective date of such Registration Statement and the date of each closing under the
underwriting agreement, signed by the independent public accountants who have certified the Company's financial statements included in such Registration Statement, covering substantially the same
matters with respect to such Registration Statement (and the Prospectus included therein) and with respect to events subsequent to the date of such financial statements, as are customarily covered in
accountants' letters delivered to underwriters in underwritten public offerings of securities, and such other financial matters as the underwriters may reasonably request and customarily obtained by
underwriters in underwritten offerings, provided that, to be an addressee of the comfort letter, each Holder may be required to confirm that it is in the category of persons to whom a comfort letter
may be delivered in accordance with applicable accounting literature; 

        (l)    enter
into customary agreements (including in the case of an Underwritten Offering, an underwriting agreement in customary form) and take all other action in connection
therewith to expedite or facilitate the distribution of the Registrable Shares included in such Registration Statement and, in the case of an Underwritten Offering, make representations and warranties
to the underwriters in such form and scope as are customarily made by issuers to underwriters in underwritten offerings and confirm the same to the extent customary if and when requested; 

        (m)  in
connection with an Underwritten Offering, use its commercially reasonable efforts to make available for inspection by the representative of any underwriters
participating in any disposition pursuant to a Registration Statement, all financial and other records, pertinent corporate documents and properties of the Company and cause the respective officers,
directors and employees of the Company to supply all information reasonably requested by any such representatives, the managing underwriters, counsel thereto or accountants in connection with a
Registration Statement; provided, however, that such records, documents or information that the Company determines, in good faith, to be confidential
and notifies such representatives, managing underwriters, counsel thereto or accountants are confidential shall not be used by the underwriters or the Holders as the basis for any market transactions
in the securities of the Company (unless and until such information is made generally available to the public through no violation of this  Section 7(m)) and shall not be disclosed by the
representatives, managing underwriters, counsel thereto or accountants unless (i) the
disclosure of such records, documents or information is necessary to avoid or correct a misstatement or omission in a Registration Statement or Prospectus, (ii) the release of such records,
documents or information is ordered pursuant to a subpoena or other order from a court of competent jurisdiction, or (iii) such records, documents or information have been generally made
available to the public; provided further, that upon learning that the disclosure of such records, documents or information is sought in a court of
competent jurisdiction, the recipient of such confidential information shall give notice to the Company and allow the Company at its expense to undertake appropriate action to prevent disclosure of
the information deemed confidential. To the extent practicable, the foregoing inspection and information gathering shall be coordinated on behalf of the Holders and the other parties entitled thereto
by one counsel designated by and on behalf of the Holders and the other parties, which counsel the Company determines in good faith is reasonably acceptable; 

        (n)   use
its commercially reasonable efforts (including seeking to cure in the Company's listing or inclusion application any deficiencies cited by the exchange or market) to
list or include all Registrable Shares on the New York Stock Exchange, the American Stock Exchange or The Nasdaq Stock Market as soon as practicable and thereafter maintain the listing on such
exchange or market; 

        (o)   prepare
and file in a timely manner all documents and reports required by the Exchange Act and, to the extent the Company's obligation to file such reports pursuant to
Section 15(d) of the Exchange Act expires before the expiration of the effectiveness period of the Registration Statement as 

12

 

required
by Section 2(a)(i), the Company shall register the Registrable Shares under the Exchange Act and shall maintain such registration
through the effectiveness period required by Section 2(a)(i); 

        (p)   provide
a CUSIP number for all Registrable Shares not later than the effective date of the Registration Statement; 

        (q)   (i) otherwise
use its commercially reasonable efforts to comply in all material respects with all applicable rules and regulations of the Commission,
(ii) make generally available to its stockholders, as soon as reasonably practicable, earnings statements covering at least 12 months that satisfy the provisions of Section 11(a)
of the Securities Act and Rule 158 thereunder, and (iii) delay filing any Registration Statement or Prospectus or amendment or supplement to such Registration Statement or Prospectus to
which any Holder of Registrable Shares covered by any such Registration Statement shall have reasonably objected on the grounds that such Registration Statement or Prospectus or amendment or
supplement does not comply in all material respects with the requirements of the Securities Act, such Holder having been furnished with a copy thereof at least 3 Business Days before the filing
thereof, provided that the Company may file such Registration Statement or Prospectus or amendment or supplement following such time as the Company shall have made a good faith effort to resolve any
such issue with the objecting Holder and shall have advised the Holder in writing of its reasonable belief that such filing complies in all material respects with the requirements of the Securities
Act; 

        (r)   cause
to be maintained a registrar and transfer agent for all Registrable Shares covered by any Registration Statement from and after a date not later than the effective
date of such Registration Statement; 

        (s)   in
connection with any sale or transfer of the Registrable Shares (whether or not pursuant to a Registration Statement) that will result in the securities being
delivered no longer constituting Registrable Shares, cooperate with the Holders and the managing underwriters to facilitate the timely preparation and delivery of certificates representing the
Registrable Shares to be sold, which certificates shall not bear any transfer restrictive legends (other than as required by the Company's charter), and to enable such Registrable Shares to be in such
denominations and registered in such names as the managing underwriters or the Holders may request at least 3 Business Days before any sale of the Registrable Shares; 

        (t)    if
required under the rules of the NASD, in connection with the initial filing of a Shelf Registration Statement and each amendment thereto with the Commission pursuant
to Section 2(a), prepare and, within one Business Day of such filing with the Commission, to file with the NASD all forms and information
required or requested by the NASD in order to obtain written confirmation from the NASD that the NASD does not object to the fairness and reasonableness of the underwriting terms and arrangements (or
any deemed underwriting terms and arrangements) (each such written confirmation, a "No Objections Letter") relating to the resale of Registrable Shares
pursuant to the Shelf Registration Statement, including, without limitation, information provided to the NASD through its COBRADesk system, and shall pay all costs, fees and expenses incident to the
NASD's review of the Shelf Registration Statement and the related underwriting terms and arrangements, including, without limitation, all filing fees associated with any filings or submissions to the
NASD and the legal expenses, filing fees and other disbursements of FBR and any other NASD member that is the holder of, or is affiliated or associated with an owner of, Registrable Shares included in
the Shelf Registration Statement (including in connection with any initial or subsequent member filing); 

        (u)   upon
effectiveness of the first Registration Statement filed under this Agreement, the Company will take such actions and make such filings as are necessary to effect
the registration of the Common Stock under the Exchange Act simultaneously with or immediately following the effectiveness of the Registration Statement; and 

13

 

        (v)   file
electronically on EDGAR any Registration Statement and any amendments or supplements thereto. 

        The
Company may require the Holders to furnish to the Company such information regarding the proposed distribution by such Holder as the Company may from time to time reasonably request
in writing or as shall be required to effect the registration of the Registrable Shares, and no Holder shall be entitled to be named as a selling stockholder in any Registration Statement and no
Holder shall be entitled to use the Prospectus forming a part thereof if such Holder does not provide such information to the Company. Each Holder further agrees to furnish promptly to the Company in
writing all information required from time to time to make the information previously furnished by such Holder not misleading. 

        Each
Holder agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in  Section 4(f)(ii), 4(f)(iii) or
4(f)(iv), such
Holder will immediately discontinue disposition of Registrable Shares pursuant to a Registration Statement until (i) any such stop order is vacated or (ii) if an event described in  Section 4(f)(iii)
 or 4(f)(iv) occurs, such Holder's receipt of the copies of the supplemented or
amended Prospectus. If so directed by the Company, such Holder will deliver to the Company (at the reasonable expense of the Company) all copies in its possession, other than permanent file copies
then in such Holder's possession, of the Prospectus covering such Registrable Shares current at the time of receipt of such notice. 

        Each
Holder represents that it has not prepared or had prepared on its behalf or used or referred to, and agrees that it will not prepare or have prepared on its behalf or use or refer
to, any Free Writing Prospectus, and has not distributed and will not distribute any written materials in connection with the offer or sale of the Registrable Shares without the prior express written
consent of the Company and, in connection with any Underwritten Offering, the underwriters. Any such Free Writing Prospectus consented to by the Company and the underwriters, as the case may be, is
hereinafter referred to as a "Permitted Free Writing Prospectus." The Company represents and agrees that it has treated and will treat, as the case may
be, each Permitted Free Writing Prospectus as an Issuer Free Writing Prospectus, including in respect of timely filing with the Commission, legending and record keeping. 

5.    Suspension Period.    

        (a)   Subject
to the provisions of this Section 5, following the effectiveness of a Registration Statement (and the
filings with any international, federal or state securities commissions), the Company may direct the Holders, in accordance with Section 5(b), to
suspend sales of the Registrable Shares pursuant to a Registration Statement for such times as the Company reasonably may determine is necessary and advisable (but in no event for more than an
aggregate of 90 days in any consecutive 12-month period commencing on the Closing Time or more than 60 days in any consecutive 90-day period, except as a result
of a review of any post-effective amendment by the Commission before declaring any post-effective amendment to the Registration Statement effective,  provided that the Company has used its commercially
reasonable efforts to cause such post-effective amendment to be declared effective) if
any of the following events shall occur: (i) the managing underwriters of an initial public offering of primary shares by the Company have advised the Company that the sale of shares of Common
Stock pursuant to the Registration Statement would have a material adverse effect on such initial public offering; (ii) the majority of the members of the Board of Directors of the Company
shall have determined in good faith that (1) the offer or sale of any Registrable Shares would materially impede, delay or interfere with any proposed financing, offer or sale of securities,
acquisition, merger, tender offer, business combination, corporate reorganization, consolidation or other significant transaction involving the Company, (2) upon the advice of counsel, the sale
of Registrable Shares pursuant to the Registration Statement would require disclosure of non-public material information not otherwise required to be disclosed under applicable law, and
(3) either (x) the Company has a bona 

14

 

fide
business purpose for preserving the confidentiality of such transaction, (y) disclosure would have a material adverse effect on the Company or the Company's ability to consummate such
transaction, or (z) the proposed transaction renders the Company unable to comply with Commission requirements, in each case under circumstances that would make it impractical or inadvisable to
cause the Registration Statement (or such filings) to become effective or to promptly amend or supplement the Registration Statement on a post-effective basis, as applicable; or
(iii) the majority of the members of the Board of Directors of the Company shall have determined in good faith, upon the advice of counsel, that it is required by law, rule, regulation or
Commission-published release or interpretation to supplement the Registration Statement or file a post-effective amendment to the Registration Statement in order to incorporate
information into the Registration Statement for the purpose of (1) including in the Registration Statement any prospectus required under Section 10(a)(3) of the Securities Act;
(2) reflecting in the prospectus included in the Registration Statement any facts or events arising after the effective date of the Registration Statement (or of the most-recent
post-effective amendment) that, individually or in the aggregate, represents a fundamental change in the information set forth therein; or (3) including in the prospectus included
in the Registration Statement any material information with respect to the plan of distribution not disclosed in the Registration Statement or any material change to such information. Upon the
occurrence of any such suspension, the Company shall use its commercially reasonable efforts to cause the Registration Statement to become effective or to promptly amend or supplement the Registration
Statement on a post-effective basis or to take such action as is necessary to make resumed use of the Registration Statement compatible with the Company's best interests, as applicable, so
as to permit the Holders to resume sales of the Registrable Shares as soon as possible. 

        (b)   In
the case of an event that causes the Company to suspend the use of a Registration Statement (a "Suspension Event"),
the Company shall give written notice (a "Suspension Notice") to FBR and the Holders to suspend sales of the Registrable Shares and such notice shall
state generally the basis for the notice and that such suspension shall continue only for so long as the Suspension Event or its effect is continuing and the Company is using its best efforts and
taking all reasonable steps to terminate suspension of the use of the Registration Statement as promptly as possible. No Holder shall effect any sales of the Registrable Shares pursuant to such
Registration Statement (or such filings) at any time after it has received a Suspension Notice from the Company and before receipt of an End of Suspension Notice (as defined below). If so directed by
the Company, each Holder will deliver to the Company (at the expense of the Company) all copies other than permanent file copies then in such Holder's possession of the Prospectus and any Issuer Free
Writing Prospectus covering the Registrable Shares at the time of receipt of the Suspension Notice. The Holders may recommence effecting sales of the Registrable Shares pursuant to the Registration
Statement (or such filings) following further notice to such effect (an "End of Suspension Notice") from the Company, which End of Suspension Notice
shall be given by the Company to the Holders and FBR in the manner described above promptly following the conclusion of any Suspension Event and its effect. 

        (c)   Notwithstanding
any provision herein to the contrary, subject to any Suspension Events or as contemplated by  Section 4(f)(iv), each Registration Statement shall be maintained effective pursuant to this Agreement
until the Registrable Shares are not
Registrable Shares. 

6.    Indemnification and Contribution.    

        (a)   The
Company agrees to indemnify and hold harmless (i) FBR, each Holder and any underwriter (as determined in the Securities Act) for such Holder (including, if
applicable, FBR), (ii) each Person, if any, who controls (within the meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act) any of the foregoing (a
"Controlling Person"), and (iii) the respective officers, directors, partners, members, employees, representatives and agents of any such Person
or any Controlling Person (any Person referred to in clause (i), (ii) or (iii) may hereinafter be referred to as an "Purchaser
Indemnitee") from and against any and all losses, claims, damages, judgments, actions, reasonable out-of-pocket expenses, and other liabilities,
including, as incurred, 

15

 

reimbursement
of all reasonable costs of investigating, preparing, pursuing or defending any claim or action, or any investigation or proceeding by any governmental agency or body, commenced or
threatened, including the reasonable fees and expenses of outside counsel to any Purchaser Indemnitee, joint or several (the "Liabilities"), directly or
indirectly related to, based upon, arising out of or in connection with any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement, Prospectus or
Issuer Free Writing Prospectus (as amended or supplemented), or any preliminary Prospectus or any other document prepared by the Company used to sell the Registrable Shares, or any omission or alleged
omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of a Prospectus, in light of the circumstances under which they were
made), not misleading, except insofar as such Liabilities arise out of or are based upon (i) any untrue statement or omission or alleged untrue statement or omission made in reliance upon and
in conformity with information relating to any Purchaser Indemnitee furnished to the Company or any underwriter in writing by such Purchaser Indemnitee expressly for use therein, or (ii) any
sales by any Holder after the delivery by the Company to such Holder of a Suspension Notice and before the delivery by the Company of an End of Suspension Notice. The Company shall notify the Holders
promptly of the institution, threat or assertion of any claim, proceeding (including any governmental investigation), or litigation which it shall have become aware in connection with the matters
addressed by this Agreement which involves the Company or a Purchaser Indemnitee. The indemnity provided for herein shall remain in full force and effect regardless of any investigation made by or on
behalf of any Purchaser Indemnitee. 

        (b)   In
connection with any Registration Statement in which a Holder is participating, such Holder agrees, severally and not jointly, to indemnify and hold harmless FBR, the
Company, each Person who controls the Company or FBR within the meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act, and the respective officers, directors,
partners, members, representatives, employees and agents of such Person or Controlling Person to the same extent as the foregoing indemnity from the Company to each Purchaser Indemnitee, but only with
reference to (i) untrue statements or omissions or alleged untrue statements or omissions made in reliance upon and in strict conformity with information relating to such Holder furnished to
the Company in writing by such Holder expressly for use in any Registration Statement or Prospectus, any amendment or supplement thereto, or any preliminary Prospectus and (ii) any sales by any
Holder after the delivery by the Company to such Holder of a Suspension Notice and before the delivery by the Company of an End of Suspension Notice. The liability of any Holder pursuant to
clause (i) of the immediately preceding sentence shall in no event exceed the net proceeds received by such Holder from sales of Registrable Shares giving rise to such obligations. If a Holder
elects to include Registrable Shares in an Underwritten Offering, the Holder shall be required to agree to such customary indemnification provisions as may reasonably be required by the underwriter in
connection with such Underwritten Offering. 

16

   
        (c)   If any suit, action, proceeding (including any governmental or regulatory investigation), claim or demand shall be brought or asserted against any Person in respect of
which indemnity may be sought pursuant to Section 6(a) or 6(b), such Person (the
"Indemnified Party"), shall promptly notify the Person against whom such indemnity may be sought (the "Indemnifying
Party"), in writing (to the extent legally advisable) of the commencement thereof (but the failure to so notify an Indemnifying Party shall not relieve it from any Liability
which it may have under this Section 6, except to the extent the Indemnifying Party is materially prejudiced by the failure to give notice), and
the Indemnifying Party, upon request of the Indemnified Party, shall retain counsel reasonably satisfactory to the Indemnified Party to represent the Indemnified Party and any others the Indemnifying
Party may reasonably designate in such proceeding and shall assume the defense of such proceeding and pay the fees and expenses actually incurred by such counsel related to such proceeding.
Notwithstanding the foregoing, in any such proceeding, any Indemnified Party may retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party,
unless (i) the Indemnifying Party and the Indemnified Party shall have mutually agreed in writing to the contrary, (ii) the Indemnifying Party failed within a reasonable time after
notice of commencement of the action to assume the defense and employ counsel reasonably satisfactory to the Indemnified Party, (iii) the Indemnifying Party and its counsel do not pursue in a
reasonable manner the defense of such action or (iv) the named parties to any such action (including any impleaded parties) include both such Indemnified Party and the Indemnifying Party, or
any Affiliate of the Indemnifying Party, and such Indemnified Party shall have been reasonably advised by counsel that, either (x) there may be one or more legal defenses available to it which
are different from or additional to those available to the Indemnifying Party or such Affiliate of the Indemnifying Party or (y) a conflict may exist between such Indemnified Party and the
Indemnifying Party or such Affiliate of the Indemnifying Party, in which event the Indemnifying Party may not assume or direct the defense of such action on behalf of such Indemnified Party, it being
understood, however, that the Indemnifying Party shall not, in connection with any one such action or separate but substantially similar or related actions arising out of the same general allegations
or circumstances, be liable for the fees and expenses of more than one separate firm of attorneys (in addition to any local counsel) for all such Indemnified Parties, which firm shall be designated in
writing by those Indemnified Parties who sold a majority of the Registrable Shares sold by all such Indemnified Parties and any such separate firm for the Company, the directors, the officers and such
control Persons of the Company as shall be designated in writing by the Company. The Indemnifying Party shall not be liable for any settlement of any proceeding effected without its written consent,
which consent shall not be unreasonably withheld or delayed, but if settled with such consent or if there be a final judgment for the plaintiff, the Indemnifying Party agrees to indemnify any
Indemnified Party from and against any Liability by reason of such settlement or judgment to the extent provided in this Section 6 without
reference to this sentence. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending or threatened proceeding in respect of which
any Indemnified Party is or could have been a party and indemnity could have been sought hereunder by such Indemnified Party, unless such settlement includes an unconditional release of such
Indemnified Party from all Liability on claims that are the subject matter of such proceeding. 

        (d)   If
the indemnification provided for in Section 6(a) or 6(b) is for
any reason held to be unavailable to an Indemnified Party in respect of any Liabilities referred to therein (other than by reason of the exceptions provided therein) or is insufficient to hold
harmless a party indemnified thereunder, then each Indemnifying Party under such sections, in lieu of indemnifying such Indemnified Party thereunder, shall contribute to the amount paid or payable by
such Indemnified Party as a result of such Liabilities (i) in such proportion as is appropriate to reflect the relative benefits of the Indemnified Party on the one hand and the Indemnifying
Parties on the other in connection with the statements or omissions that resulted in such Liabilities, or (ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Indemnifying Parties 

17

 

and
the Indemnified Party, as well as any other relevant equitable considerations. The relative fault of the Company, on the one hand, and any Purchaser Indemnitees, on the other, shall be determined
by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by
the Company or by such Purchaser Indemnitees and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. 

        (e)   The
parties agree that it would not be just and equitable if contribution pursuant to this Section 6 were
determined by pro rata allocation (even if such Indemnified Parties were treated as one entity for such purpose), or by any other method of allocation
that does not take account of the equitable considerations referred to in Section 6(d). The amount paid or payable by an Indemnified Party as a
result of any Liabilities referred to in Section 6(d) shall be deemed to include, subject to the limitations set forth above, any reasonable
legal or other expenses actually incurred by such Indemnified Party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this  Section 6, in no
event shall a Purchaser Indemnitee be required to contribute any amount in excess of the amount by which proceeds received by
such Purchaser Indemnitee from sales of Registrable Shares exceeds the amount of any damages that such Purchaser Indemnitee has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. For purposes of this Section 6, each Person, if any, who controls (within the meaning of
Section 15 of the Securities Act or Section 20(a) of the Exchange Act) FBR or a Holder shall have the same rights to contribution as FBR or such Holder, as the case may be, and each
Person, if any, who controls (within the meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act) the Company, and each officer, director, partner, member,
employee, representative, agent or manager of the Company shall have the same rights to contribution as the Company. Any party entitled to contribution will, promptly after receipt of notice of
commencement of any action, suit or proceeding against such party in respect of which a claim for contribution may be made against another party or parties, notify each party or parties from whom
contribution may be sought, but the omission to so notify such party or parties shall not relieve the party or parties from whom contribution may be sought from any obligation it or they may have
under this Section 6 or otherwise, except to the extent that any party is materially prejudiced by the failure to give notice. No Person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act), shall be entitled to contribution from any Person who was not guilty of such fraudulent
misrepresentation. 

        (f)    The
indemnity and contribution agreements contained in this Section 6 will be in addition to any Liability which
any Indemnifying Party may otherwise have to any Indemnified Party. Each Purchaser Indemnitee's obligations to contribute pursuant to this  Section 6 are not joint but are several in the proportion
that the number of Shares sold by such Purchaser Indemnitee bears to the number of
Shares sold by all Purchaser Indemnities. 

7.    Market Stand-off Agreement.    Each Holder hereby agrees that it shall not directly or indirectly sell, offer to
sell, grant any option or otherwise transfer or dispose of any Registrable Shares or other shares of Common Stock of the Company or any securities convertible into or exchangeable or exercisable for
shares of Common Stock of the Company owned by such Holder (other than to donees or partners of the Holder who agree to be similarly bound), or enter into any other transaction designed to directly or
indirectly transfer any of the economic consequences of ownership of the Common Stock of the Company, including by shorting the Common Stock of the Company or securities convertible into or
exchangeable or exercisable for shares of the Common Stock of the Company, for a period of 60 days (the "Lock-Up Period") following
the effective date of a registration statement for an initial public offering of securities by the Company filed under the Securities Act (an "IPO Registration
Statement"); provided, however, that: 

        (a)   the
restrictions above shall not apply to (i) the sale of Registrable Shares as a selling stockholder under the IPO Registration Statement or (ii) the sale
of shares of Common Stock 

18

 

(x) acquired
by a Holder in such initial public offering or (y) acquired by a Holder on a national securities exchange or the Nasdaq Stock Market after such initial public offering, so
long as in each case such sales are made over such exchange or market, as the case may be; 

        (b)   all
executive officers and directors of the Company then holding shares of Common Stock of the Company or securities convertible into or exchangeable or exercisable for
shares of Common Stock of the Company are subject to at least the same restrictions for the entire time period required of the Holders hereunder; 

        (c)   the
Holders shall be allowed any concession or proportionate release allowed to any officer or director that entered into similar agreements (with such proportion being
determined by dividing the number of shares being released with respect to such officer or director by the total number of issued and outstanding shares held by such officer or director);  provided, that
nothing in this Section 7(c) shall be construed as a right to proportionate
release for the executive officers and directors of the Company upon the expiration of the 60 day period applicable to all Holders other than the executive officers and directors of the
Company. 

        Notwithstanding
the foregoing, if (i) during the last 17 days of the Lock-Up Period, the Company releases earnings results or announces material news or a
material event or (ii) prior to the
expiration of the Lock-Up Period, the Company announces that it will release earnings results during the 15-day period following the last day of the Lock-Up Period,
then in each case the Lock-Up Period will be automatically extended until the expiration of the 18-day period beginning on the date of release of the earnings results or the
announcement of the material news or material event, as applicable, unless the Company or the underwriters, as the case may be,. waives, in writing, such extension. 

        In
order to enforce the foregoing covenant, the Company shall have the right to place restrictive legends on the certificates representing the securities subject to this  Section 7 and to impose stop
transfer instructions with respect to the Registrable Shares and such other securities of each Holder (and the
securities of every other Person subject to the foregoing restriction) until the end of such period. 

8.    Termination of the Company's Obligations.    The Company shall have no further obligations pursuant to this Agreement at such
time as no Registrable Shares are outstanding after their original issuance, provided, however, that the Company's obligations under  Sections 3, and
6 (and any related definitions) shall remain in full force and effect following such
time; provided, further, that if no Registrable Shares are outstanding after their original issuance because the Company redeemed the Registrable Shares
pursuant to its charter documents, the Company's obligations hereunder shall terminate at such time. 

9.    Limitations on Subsequent Registration Rights.    From and after the date of this Agreement, the Company shall not, without
the prior written consent of the Holders of a majority of the Registrable Shares of such Holders, enter into any agreement with any holder or prospective holder of any securities of the Company that
would allow such holder or prospective holder (a) to include such securities in the Mandatory Shelf Registration Statement or Piggyback Registration Statement, if any, filed pursuant to the
terms hereof, unless under the terms of such agreement, such holder or prospective holder may include such securities on the Mandatory Shelf Registration Statement or such Piggyback Registration
Statement only to the extent that the inclusion of such securities will not reduce the amount of Registrable Shares of the Holders that is included on the Mandatory Shelf Registration Statement or
such Piggyback Registration Statement or (b) to have its Common Stock registered on a registration statement that could be declared effective within 180 days of the effective date of any
Registration Statement filed pursuant to this Agreement. 

10.    Miscellaneous.    

        (a)    Remedies.    In the event of a breach by the Company of any of its obligations under this Agreement, each
Holder, in addition to being entitled to exercise all rights provided herein or, in the 

19

 

case
of FBR, in the Placement Agreement, or granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Agreement. Subject to  Section 6, the Company
agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of any
of the provisions of this Agreement and hereby further agrees that, in the event of any action for specific performance in respect of such breach, it shall waive the defense that a remedy at law would
be adequate. 

        (b)    Amendments and Waivers.    This Agreement may not be amended, modified or supplemented, and waivers or consents
to or departures from the provisions hereof may not be given, without the written consent of the Company and Holders beneficially owning a majority of the Registrable Shares;  provided, however, that for
purposes of this Agreement, Registrable Shares owned, directly or indirectly, by an entity that is an Affiliate of the
Company due to the Company's owning an interest in such entity shall not be deemed to be outstanding. Notwithstanding the foregoing, a waiver or consent to or departure from the provisions hereof with
respect to a matter that relates exclusively to (i) the Mandatory Shelf Registration Statement may be given only with the consent of a majority of Registrable Shares covered thereby and
(ii) the rights of a Holder whose securities are being sold pursuant to a Registration Statement and that does not directly or indirectly affect, impair, limit or compromise the rights of other
Holders may be given by such Holder; provided that the provisions of this sentence may not be amended, modified or supplemented except in accordance
with the provisions of the immediately preceding sentence. 

        (c)    Notices.    All notices and other communications, provided for or permitted hereunder shall be made in writing
and delivered by facsimile (with receipt confirmed), overnight courier or registered or certified mail, return receipt requested, or by telegram, addressed as follows: 

          (i)  if
to a Holder, at the most current address given by the transfer agent and registrar of the Shares to the Company (including by email); 

         (ii)  if
to the Company, at the offices of the Company at 1330 Post Oak Boulevard, Suite 1500, Houston, Texas 77056, Attention: William Marlow, General Counsel (facsimile
(713) 979-1950); with a copy (which shall not constitute notice) to Milbank, Tweed, Hadley & McCloy LLP, One Chase Manhattan Plaza, New York, New York 10005, Attention:
Douglas Tanner, Esq. (facsimile (212) 822-5505); and 

        (iii)  if
to FBR, at the offices of FBR at 1001 19th Street North, Arlington, Virginia 22209, Attention: William Ginivan, Esq. (facsimile
(804) 788-8218); with a copy (which shall not constitute
notice) to Akin Gump Strauss Hauer & Feld LLP, 1111 Louisiana St., Houston, Texas 77002, Attention: Julien R. Smythe, Esq. (facsimile (713) 236-0822). 

        (d)    Successors and Assigns; Third Party Beneficiaries.    This Agreement shall inure to the benefit of and be
binding upon the successors and assigns of each of the parties hereto and shall inure to the benefit of each Holder. The Company agrees that the Holders shall be third party beneficiaries to the
agreements made hereunder by FBR and the Company, and each Holder shall have the right to enforce such agreements directly to the extent it deems such enforcement necessary or advisable to protect its
rights hereunder; provided, however, that such Holder fulfills all of its obligations hereunder. 

        (e)    Counterparts.    This Agreement may be executed in any number of counterparts and by the parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. 

        (f)    Governing Law.    THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW THAT WOULD
RESULT IN THE APPLICATION OF ANY LAW OTHER THAN THE LAW OF THE STATE OF NEW YORK. EACH OF THE PARTIES  

20

 

 HERETO HEREBY IRREVOCABLY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK OR THE SUPREME COURT OF THE STATE OF NEW YORK OR SITTING IN
NEW YORK COUNTY IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, ANY OBJECTION THAT IT MAY
NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM.

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

        (h)    Entire Agreement.    This Agreement, together with the Placement Agreement, is intended by the parties hereto
as a final expression of their agreement, and is intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained
herein and therein. All of the obligations, agreements, covenants, representations and warranties under the engagement letter dated December 18, 2006, between KGen Partners LLC and FBR (the
"Engagement Letter") shall survive the execution, delivery and termination and the performance of this Agreement and the consummation of the
transactions contemplated hereby without any modification thereof; provided, that to the extent there is a conflict between the provisions of the
Engagement Letter and the provisions of this Agreement, this Agreement shall prevail to that extent. 

        (i)    Registrable Shares Held by the Company or its Affiliates.    Whenever the consent or approval of Holders of a
specified percentage of Registrable Shares is required hereunder, Registrable Shares (or securities convertible into Registrable Shares) held by the Company or entities that are Affiliates of the
Company due to the Company's owning an interest in such entities shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage. 

        (j)    Survival.    This Agreement is intended to survive the consummation of the transactions contemplated by the
Placement Agreement. The indemnification and contribution obligations under Section 6 shall survive the termination of the Company's obligations
under Section 2. 

        (k)    Headings.    The headings in this Agreement are for convenience of reference only and shall not limit or
otherwise affect the provisions of this Agreement. All references made in this Agreement to "Section" refer to such Section of this Agreement, unless expressly stated otherwise. 

        (l)    Adjustment for Stock Splits, etc.    Wherever in this Agreement there is a reference to a specific number of
shares with respect to any securities, then upon the occurrence of any subdivision, combination, or stock dividend of such shares, the specific number of shares with respect to any securities so
referenced in this Agreement shall automatically be proportionally adjusted to reflect the effect on the outstanding shares of such class or series of stock by such subdivision, combination, or stock
dividend. 

21

 

        (m)    No Inconsistent Terms.    The Company represents, warrants and agrees that (i) the rights granted to the
Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of any other outstanding securities issued or guaranteed by the Company under any
other agreement and (ii) the Company has not entered into any agreement that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions
hereof. 

[Remainder
of this Page Intentionally Left Blank] 

22

 

        IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. 

	 	 	KGEN POWER CORPORATION
	 	 	 	 	 
	 	 	By:	 	/s/ Gerald Lindner

	 	 	Name:	 	Gerald Lindner

	 	 	Title:	 	Chief Executive Officer

	 	 	 	 	 
	 	 	FRIEDMAN, BILLINGS, RAMSEY & CO., INC. (for the benefit of the Holders)
	 	 	 	 	 
	 	 	By:	 	/s/ James R. Kleeblatt

	 	 	Name:	 	James R. Kleeblatt

	 	 	Title:	 	Senior Managing Director

23

QuickLinks

Exhibit 4.1

REGISTRATION RIGHTS AGREEMENTExhibit 10.1

 

REDACTED

 

MEMBERSHIP
INTEREST PURCHASE AND SALE AGREEMENT

 

 

by
and among

 

 

KGEN
POWER CORPORATION,

 

 

KGEN
HOLDCO LLC

 

 

and

 

 

GKL
CAPITAL, L.P.

 

 

Dated
as of

 

December 28,
2006

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
  No.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  ARTICLE I

  	
   

  	
   

  
	
   

  	
  DEFINITIONS

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 1.01

  	
  Definitions
  Defined Terms

  	
   

  	
  1

  
	
  Section 1.02

  	
  Construction of
  Certain Terms and Phrases

  	
   

  	
  7

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  ARTICLE II

  	
   

  	
   

  
	
   

  	
  PURCHASE AND SALE

  	
   

  	
   

  
	
  Section 2.01

  	
  Purchase and
  Sale

  	
   

  	
  8

  
	
  Section 2.02

  	
  Purchase Price

  	
   

  	
  8

  
	
  Section 2.03

  	
  Closing

  	
   

  	
  9

  
	
  Section 2.04

  	
  Conduct of
  Closing

  	
   

  	
  9

  
	
  Section 2.05

  	
  Further
  Assurances; Post-Closing Cooperation

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  ARTICLE III

  	
   

  	
   

  
	
   

  	
  REPRESENTATIONS AND WARRANTIES OF SELLER

  	
   

  	
   

  
	
  Section 3.01

  	
  Organization and
  Good Standing of Seller

  	
   

  	
  10

  
	
  Section 3.02

  	
  Authority

  	
   

  	
  10

  
	
  Section 3.03

  	
  Organization and
  Good Standing

  	
   

  	
  10

  
	
  Section 3.04

  	
  Seller
  Membership Interests

  	
   

  	
  10

  
	
  Section 3.05

  	
  Subsidiaries

  	
   

  	
  11

  
	
  Section 3.06

  	
  No Conflicts

  	
   

  	
  11

  
	
  Section 3.07

  	
  Governmental
  Approvals and Filings

  	
   

  	
  12

  
	
  Section 3.08

  	
  Taxes

  	
   

  	
  12

  
	
  Section 3.09

  	
  Compliance With
  Laws and Orders

  	
   

  	
  13

  
	
  Section 3.10

  	
  Real Property

  	
   

  	
  13

  
	
  Section 3.11

  	
  Tangible
  Personal Property

  	
   

  	
  13

  
	
  Section 3.12

  	
  Licenses

  	
   

  	
  14

  
	
  Section 3.13

  	
  Affiliate
  Transactions

  	
   

  	
  14

  
	
  Section 3.14

  	
  Brokers

  	
   

  	
  14

  
	
  Section 3.15

  	
  Solvency

  	
   

  	
  14

  
	
  Section 3.16

  	
  Payments;
  Capital Expenditures

  	
   

  	
  14

  
	
  Section 3.17

  	
  Financial
  Statements.

  	
   

  	
  14

  
	
  Section 3.18

  	
  Contracts

  	
   

  	
  15

  
	
  Section 3.19

  	
  Environmental
  Condition

  	
   

  	
  15

  
	
  Section 3.20

  	
  Benefit Plans

  	
   

  	
  15

  
	
  Section 3.21

  	
  Litigation

  	
   

  	
  16

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  ARTICLE IV

  	
   

  	
   

  
	
   

  	
  REPRESENTATIONS AND WARRANTIES OF PURCHASER

  	
   

  	
   

  
	
  Section 4.01

  	
  Corporate
  Existence

  	
   

  	
  16

  
	
  Section 4.02

  	
  Authority

  	
   

  	
  16

  
	
  Section 4.03

  	
  No Conflicts

  	
   

  	
  16

  
	
  Section 4.04

  	
  Governmental
  Approvals and Filings

  	
   

  	
  17

  

 

i

 

	
  Section 4.05

  	
  Legal
  Proceedings

  	
   

  	
  17

  
	
  Section 4.06

  	
  Purchase for
  Investment

  	
   

  	
  17

  
	
  Section 4.07

  	
  Brokers

  	
   

  	
  17

  
	
  Section 4.08

  	
  Payments;
  Capital Expenditures

  	
   

  	
  17

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  ARTICLE V

  	
   

  	
   

  
	
   

  	
  REPRESENTATIONS AND WARRANTIES OF GKL

  	
   

  	
   

  
	
  Section 5.01

  	
  Organization and
  Good Standing of GKL

  	
   

  	
  17

  
	
  Section 5.02

  	
  Authority

  	
   

  	
  17

  
	
  Section 5.03

  	
  GKL Membership
  Interests

  	
   

  	
  18

  
	
  Section 5.04

  	
  No Conflicts

  	
   

  	
  18

  
	
  Section 5.05

  	
  Governmental
  Approvals and Filings

  	
   

  	
  18

  
	
  Section 5.06

  	
  Legal
  Proceedings

  	
   

  	
  18

  
	
  Section 5.07

  	
  Brokers

  	
   

  	
  18

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  ARTICLE VI

  	
   

  	
   

  
	
   

  	
  COVENANTS OF SELLER

  	
   

  	
   

  
	
  Section 6.01

  	
  Regulatory and
  Other Approvals

  	
   

  	
  19

  
	
  Section 6.02

  	
  HSR Filings

  	
   

  	
  19

  
	
  Section 6.03

  	
  Investigation by
  Purchaser

  	
   

  	
  19

  
	
  Section 6.04

  	
  Conduct of
  Business

  	
   

  	
  19

  
	
  Section 6.05

  	
  Certain
  Restrictions

  	
   

  	
  20

  
	
  Section 6.06

  	
  Affiliate
  Transactions

  	
   

  	
  21

  
	
  Section 6.07

  	
  Fulfillment of
  Conditions

  	
   

  	
  21

  
	
  Section 6.08

  	
  Seller
  Acquisition of MP Assets

  	
   

  	
  21

  
	
  Section 6.09

  	
  Redemption

  	
   

  	
  21

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  ARTICLE VII

  	
   

  	
   

  
	
   

  	
  COVENANTS OF PURCHASER

  	
   

  	
   

  
	
  Section 7.01

  	
  Regulatory and
  Other Approvals

  	
   

  	
  22

  
	
  Section 7.02

  	
  HSR Filings

  	
   

  	
  22

  
	
  Section 7.03

  	
  Transfer of MP
  Assets

  	
   

  	
  22

  
	
  Section 7.04

  	
  Indemnification
  of Directors and Officers

  	
   

  	
  23

  
	
  Section 7.05

  	
  Fulfillment of
  Conditions

  	
   

  	
  24

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  ARTICLE VIII

  	
   

  	
   

  
	
   

  	
  CONDITIONS TO OBLIGATIONS OF PURCHASER

  	
   

  	
   

  
	
  Section 8.01

  	
  Representations
  and Warranties

  	
   

  	
  24

  
	
  Section 8.02

  	
  Performance

  	
   

  	
  24

  
	
  Section 8.03

  	
  Officers’
  Certificates

  	
   

  	
  24

  
	
  Section 8.04

  	
  HSR Act Waiting
  Period

  	
   

  	
  25

  
	
  Section 8.05

  	
  Orders and Laws

  	
   

  	
  25

  
	
  Section 8.06

  	
  Regulatory
  Consents and Approvals

  	
   

  	
  25

  
	
  Section 8.07

  	
  Opinion of
  Counsel

  	
   

  	
  25

  
	
  Section 8.08

  	
  Financing

  	
   

  	
  25

  
	
  Section 8.09

  	
  Contribution
  Agreement

  	
   

  	
  25

  
	
  Section 8.10

  	
  MatlinPatterson
  Release

  	
   

  	
  25

  

 

ii

 

	
  Section 8.11

  	
  Participation
  Agreement

  	
   

  	
  25

  
	
  Section 8.12

  	
  Services
  Agreement

  	
   

  	
  25

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  ARTICLE IX

  	
   

  	
   

  
	
   

  	
  CONDITIONS TO OBLIGATIONS OF SELLER AND GKL

  	
   

  	
   

  
	
  Section 9.01

  	
  Representations
  and Warranties

  	
   

  	
  26

  
	
  Section 9.02

  	
  Performance

  	
   

  	
  26

  
	
  Section 9.03

  	
  Officers’
  Certificates

  	
   

  	
  26

  
	
  Section 9.04

  	
  HSR Act Waiting
  Period

  	
   

  	
  26

  
	
  Section 9.05

  	
  Orders and Laws

  	
   

  	
  26

  
	
  Section 9.06

  	
  Regulatory
  Consents and Approvals

  	
   

  	
  26

  
	
  Section 9.07

  	
  Opinion of
  Counsel

  	
   

  	
  26

  
	
  Section 9.08

  	
  Participation
  Agreement

  	
   

  	
  26

  
	
  Section 9.09

  	
  Services
  Agreement

  	
   

  	
  27

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  ARTICLE X

  	
   

  	
   

  
	
   

  	
  TAX MATTERS AND POST-CLOSING TAXES

  	
   

  	
   

  
	
  Section 10.01

  	
  Tax Return
  Filing

  	
   

  	
  27

  
	
  Section 10.02

  	
  Taxes Related to
  Purchase of Assets

  	
   

  	
  27

  
	
  Section 10.03

  	
  Cooperation on
  Tax Matters

  	
   

  	
  27

  
	
  Section 10.04

  	
  Allocation of
  Purchase Price and Purchase Price Allocation Forms

  	
   

  	
  27

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  ARTICLE XI

  	
   

  	
   

  
	
   

  	
  SURVIVAL; NO OTHER REPRESENTATIONS

  	
   

  	
   

  
	
  Section 11.01

  	
  Survival of
  Representations, Warranties, Covenants and Agreements

  	
   

  	
  27

  
	
  Section 11.02

  	
  No Other
  Representations

  	
   

  	
  28

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  ARTICLE XII

  	
   

  	
   

  
	
   

  	
  INDEMNIFICATION AND RELEASE

  	
   

  	
   

  
	
  Section 12.01

  	
  Seller’s
  Indemnity

  	
   

  	
  28

  
	
  Section 12.02

  	
  Other
  Indemnification

  	
   

  	
  28

  
	
  Section 12.03

  	
  Method of
  Asserting Claims

  	
   

  	
  30

  
	
  Section 12.04

  	
  Exclusivity

  	
   

  	
  32

  
	
  Section 12.05

  	
  Right of Offset

  	
   

  	
  32

  
	
  Section 12.06

  	
  Release

  	
   

  	
  32

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  ARTICLE XIII

  	
   

  	
   

  
	
   

  	
  TERMINATION

  	
   

  	
   

  
	
  Section 13.01

  	
  Termination

  	
   

  	
  33

  
	
  Section 13.02

  	
  Effect of
  Termination

  	
   

  	
  33

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  ARTICLE XIV

  	
   

  	
   

  
	
   

  	
  MISCELLANEOUS

  	
   

  	
   

  
	
  Section 14.01

  	
  Notices

  	
   

  	
  34

  
	
  Section 14.02

  	
  Entire Agreement

  	
   

  	
  35

  
	
  Section 14.03

  	
  Expenses

  	
   

  	
  35

  

 

iii

 

	
  Section 14.04

  	
  Public
  Announcements

  	
   

  	
  35

  
	
  Section 14.05

  	
  Confidentiality

  	
   

  	
  35

  
	
  Section 14.06

  	
  Waiver

  	
   

  	
  36

  
	
  Section 14.07

  	
  Amendment

  	
   

  	
  36

  
	
  Section 14.08

  	
  No Third Party
  Beneficiary

  	
   

  	
  36

  
	
  Section 14.09

  	
  No Assignment;
  Binding Effect

  	
   

  	
  36

  
	
  Section 14.10

  	
  Headings

  	
   

  	
  36

  
	
  Section 14.11

  	
  Invalid
  Provisions

  	
   

  	
  36

  
	
  Section 14.12

  	
  Governing Law

  	
   

  	
  36

  
	
  Section 14.13

  	
  Counterparts

  	
   

  	
  36

  
	
   

  	
   

  	
   

  
	
  Exhibit A

  	
  Opinion of
  Counsel for Seller

  	
   

  	
   

  
	
  Exhibit B

  	
  Opinion of Counsel
  for Purchaser

  	
   

  	
   

  
	
  Exhibit C

  	
  Contribution
  Agreement

  	
   

  	
   

  
	
  Exhibit D

  	
  Release

  	
   

  	
   

  
	
  Exhibit E

  	
  Participation
  Agreement

  	
   

  	
   

  
	
  Exhibit F

  	
  Services
  Agreement

  	
   

  	
   

  
	
  Schedule 4.03

  	
  Purchaser
  Consents and Notices

  	
   

  	
   

  
	
  Schedule 4.04

  	
  Purchaser
  Governmental Approvals and Filings

  	
   

  	
   

  
							

 

iv

 

This MEMBERSHIP INTEREST
PURCHASE AND SALE AGREEMENT dated as of December 28, 2006 is
made and entered into by and among KGen Power Corporation, a Delaware
corporation (“Purchaser”), KGen Holdco LLC, a Delaware limited liability
company (“Seller”) and GKL Capital, L.P. (“GKL”), a Delaware
limited partnership. Capitalized terms not otherwise defined herein have the
meanings set forth in Section 1.01.

 

PRELIMINARY
STATEMENTS:

 

A.                                   Seller and GKL
own 100% of the membership interests in KGen Partners LLC, a Delaware
limited liability company (the “Company” and such membership interests
being referred to herein as the “Membership Interests”);

 

B.                                     Purchaser
completed a private placement of shares of its common stock (the “Private
Placement”) for the purpose of acquiring the Membership Interests held by
Seller (the “Seller Membership Interests”) on the date hereof (the “Private
Placement Closing”).

 

C.                                     The proceeds of
such the private placement by Purchaser are being placed into an escrow with
The Bank of New York Trust Company, N.A. (the “Escrow Account”) which
funds will only be released to Seller in connection with the closing of the
transactions under this Agreement.

 

D.                                    GKL has agreed
in connection with the formation and initial capitalization of Purchaser to
contribute the GKL Membership Interests (as defined below) to Purchaser
concurrently with the closing of the transactions under this Agreement in
exchange for 408,000 shares of the common stock of Purchaser in a transaction
meeting the conditions of Section 351 of the Internal Revenue Code.

 

E.                                      Seller desires
to sell, and Purchaser desires to purchase, the Seller Membership Interests on
the terms and subject to the conditions set forth in this Agreement.

 

In consideration of the mutual covenants and
agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:

 

ARTICLE I

DEFINITIONS

 

Section 1.01           Definitions
Defined Terms. As used in this Agreement, the following defined terms have
the meanings indicated below:

 

“Actions or Proceedings” means any action,
suit, proceeding, arbitration or Governmental or Regulatory Authority
investigation.

 

“Affiliate” means any Person that directly, or
indirectly through one of more intermediaries, controls or is controlled by or
is under common control with the Person specified. For purposes of this
definition, control of a Person means the power, direct or indirect, to direct
or cause the direction of the management and policies of such Person whether by
Contract or otherwise and, in any event and without limitation of the previous
sentence, any Person owning 10% or more of the voting securities of another
Person shall be deemed to control that Person.

 

 

“Agreement” means this Membership Interest
Purchase and Sale Agreement and the Exhibits, the Disclosure Schedule and
the Schedules hereto and the certificates delivered in accordance with Sections 8.03
and 9.03, as the same shall be amended from time to time.

 

“Assets and Properties” of any Person means all
assets and properties of every kind, nature, character and description (whether
real, personal or mixed, whether tangible or intangible, and wherever situated),
including the goodwill related thereto, operated, owned or leased by such
Person.

 

“Benefit Plan” means any Plan established by
the Company or any Subsidiary, or any predecessor or Affiliate of any of the
foregoing, existing at the Closing Date or at any time within the five year
period prior thereto, to which the Company or any Subsidiary contributes or has
contributed, or under which any employee, former employee or director of the
Company or any Subsidiary or any beneficiary thereof is covered, is eligible
for coverage or has benefit rights.

 

“Books and Records” means all files, documents,
instruments, papers, books and records relating to the Business or Condition of
the Company, including without limitation financial statements, Tax Returns and
related work papers and letters from accountants, budgets, pricing guidelines,
ledgers, journals, deeds, title policies, minute books, stock certificates and
books, stock transfer ledgers, Contracts, Licenses, customer lists, computer
files and programs, retrieval programs, operating data and plans and
environmental studies and plans.

 

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

 

“Business or Condition of the Company” means
the business, financial condition or results of operations of the Company and
the Subsidiaries taken as a whole.

 

“Claim Notice” means written notification
pursuant to Section 12.03(a) of a Third Party Claim as to which
indemnity under Section 12.02 is sought by an Indemnified Party,
enclosing a copy of all papers served, if any, and specifying the nature of and
basis for such Third Party Claim and for the Indemnified Party’s claim against
the Indemnifying Party under Section 12.02, together with the
amount or, if not then reasonably determinable, the estimated amount,
determined in good faith, of the Loss arising from such Third Party Claim.

 

“Closing” means the closing of the transactions
contemplated by Section 2.03.

 

“Closing Date” means (a) the fifth
Business Day after the day on which the last of the consents, approvals,
actions, filings, notices or waiting periods described in or related to the
filings described in Sections 8.04 through 8.06 and Sections 9.04
through 9.06 has been obtained, made or given or has expired, as
applicable, or (b) such other date as Purchaser and Seller mutually agree
upon in writing.

 

“Code” means the Internal Revenue Code of 1986,
as amended, and the rules and regulations promulgated thereunder.

 

“Company” has the meaning ascribed to it in the
forepart of this Agreement.

 

“Contract” means any agreement, lease, license,
evidence of Indebtedness, mortgage, indenture, security agreement or other
contract.

 

“Credit Facility” means the Senior Credit
Facilities (as defined in the Engagement Letter dated November 26, 2006
between the Company and Morgan Stanley & Co. Incorporated).

 

 

2

 

“Cut-off Date” means, with respect to any
representation, warranty, covenant or agreement contained in this Agreement,
the date on which such representation, warranty, covenant or agreement ceases
to survive as provided in Section 11.01.

 

“Disclosure Schedule” means the record
delivered to Purchaser by Seller herewith and dated as of the date hereof,
containing all lists, descriptions, exceptions and other information and
materials as are required to be included therein by Seller pursuant to this
Agreement.

 

“Dispute Period” means the period
ending 90 days following receipt by an Indemnifying Party of either a
Claim Notice or an Indemnity Notice.

 

“Environmental Condition” means any condition
existing before the date hereof, and only to the extent in existence on the
date hereof with respect to the air, land, soil, surface, subsurface strata,
surface water, ground water or sediments which causes any Assets and Properties
of the Company or its Subsidiaries to be subject to remediation under, or not
in compliance with an Environmental Law or a material Contract

 

“Environmental Law” means any Law or Order
relating to pollution, the regulation or protection of human health, safety or
the environment, or to Releases or threatened Releases, or otherwise relating
to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials and Laws relating to the
protection, restoration, management and use of the environment.

 

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

 

“ERISA Affiliate” means any Person who is in
the same controlled group of corporations or who is under common control with
Seller or, before the Closing, the Company or any Subsidiary (within the
meaning of Section 414 of the Code).

 

“FERC” means the Federal Energy Regulatory
Commission and any successor thereto.

 

“FPA” means the Federal Power Act of 1935,
as amended, 16 U.S.C. §§ 792 et seq.,  and the rules and regulations promulgated threunder.

 

“GAAP” means generally accepted accounting
principles, consistently applied throughout the specified period and in the
immediately prior comparable period.

 

“GKL Membership Interests” shall mean a portion
of the membership interest originally held by GKL in the Company, with such portion
entitling GKL or its transferee, to receive the first $4,002,486 distributable
to GKL under Section 5.1(d) of the Company’s Second Amended and
Restated Limited Liability Company Agreement.

 

“Governmental or Regulatory Authority” means
any court, tribunal, arbitrator, authority, agency, commission, official or
other instrumentality of any nation or government, or any state or political
subdivision thereof.

 

“GPC” shall mean Georgia Power Company.

 

“Hazardous Material” means (A) any
petroleum or petroleum products, flamable explosives, radioactive materials,
asbestos in any form that is or could become friable, urea formaldehyde
foam 

 

3

 

insulation and transformers or other equipment that contain dielectric
fluid containing levels of polychlorinated biphenyls (PCBs); (B) any
chemicals or other materials or substances which are now or hereafter become
defined as or included in the definition of “hazardous substances,” “hazardous
wastes,” “hazardous materials,” “extremely hazardous wastes,” “restricted
hazardous wastes,” “toxic substances,” “toxic pollutants” or words of similar
import under any Environmental Law; and (C) any other chemical or other
material or substance, exposure to or Release, discharge or presence of which
is now or hereafter prohibited, limited or regulated by any Governmental or
Regulatory Authority under any Environmental Law.

 

“HSR Act” means Section 7A of the Clayton
Act (Title II of the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended) and the rules and regulations promulgated thereunder.

 

“Indebtedness” of any Person means all
obligations of such Person (i) for borrowed money, (ii) evidenced by
notes, bonds, debentures or similar instruments, (iii) for the deferred
purchase price of goods or services (other than trade payables or accruals
incurred in the ordinary course of business), (iv) under capital leases
and (v) in the nature of guarantees of the obligations described in
clauses (i) through (iv) above of any other Person.

 

“Indemnified Party” means any Person claiming
indemnification under any provision of Article XII.

 

“Indemnifying Party” means any Person against
whom a claim for indemnification is being asserted under any provision of Article XII.

 

“Indemnity Cap” has the meaning ascribed to
such term in Section 12.02(d).

 

“Indemnity Notice” means written notification
pursuant to Section 12.03(b) of a claim for indemnity under Article XII
by an Indemnified Party, specifying the nature of and basis for such claim, together
with the amount or, if not then reasonably determinable, the estimated amount,
determined in good faith, of the Loss arising from such claim.

 

“Intellectual Property” means all 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, processes,
formulae, trade dress, business and product names, logos, slogans, trade
secrets, industrial models, processes, designs, methodologies, computer
programs (including all source codes) and related documentation, technical
information, manufacturing, engineering and technical drawings, know-how and
all pending applications for and registrations of patents, trademarks, service
marks and copyrights.

 

“Investment Assets” means all debentures, notes
and other evidences of Indebtedness, stocks, securities (including rights to
purchase and securities convertible into or exchangeable for other securities),
interests in joint ventures and general and limited partnerships, mortgage
loans and other investment or portfolio assets owned of record or beneficially
by the Company or any Subsidiary and issued by any Person other than the
Company or any Subsidiary (other than trade receivables generated in the
ordinary course of business of the Company and the Subsidiaries).

 

“IRS” means the United States Internal Revenue
Service.

 

“KGen Power” means KGen Power LLC.

 

4

 

“Knowledge of Purchaser” means the actual
knowledge of the persons who are now or will become officers and employees of
Purchaser prior to the Closing.

 

“Knowledge of Seller” means the actual
knowledge of the officers and employees of Seller, including the officers of
KGen Power Management Inc.

 

“Laws” means all laws, statutes, rules,
regulations, ordinances and other pronouncements, including the common law,
having the effect of law of any nation or government or any political
subdivision thereof or of any Governmental or Regulatory Authority.

 

“Liabilities” means all Indebtedness,
obligations and other liabilities of a Person (whether absolute, accrued,
contingent, fixed or otherwise, or whether due or to become due).

 

“Licenses” means all licenses, permits,
certificates of authority, authorizations, approvals, registrations, franchises
and similar consents granted or issued by any Governmental or Regulatory
Authority.

 

“Liens” means any mortgage, pledge, assessment,
security interest, lease, lien, adverse claim, levy, charge or other
encumbrance of any kind, or any conditional sale Contract, title retention
Contract or other Contract to give any of the foregoing.

 

“Loss” means any and all damages, diminution in
value, fines, penalties, deficiencies, losses and expenses (including without
limitation interest, court costs, reasonable fees of attorneys, accountants and
other experts or other reasonable expenses of litigation or other proceedings
or of any claim, default or assessment).

 

“Membership Interests” has the meaning ascribed
to it in the forepart of this Agreement.

 

“MP Assets” means (i) the MP Membership
Interests and (ii) all right, title and interest in and to all real and
personal property owned by each MP Project Company of every nature, wherever
located, whether tangible and intangible, including, without limitation, all
fixed and mobile machinery and equipment, as well as similar items of tangible
personal property, including turbines, generators, transformers, tractors,
trailers and other vehicles, pumps, pipelines, fittings, metering equipment,
communications equipment, furniture, keys, furnishings and tools, all
inventories of fuel, chemical and gas inventories, supplies, materials and
spare parts, any Intellectual Property, all books, records, data, plans,
drawings, instruction manuals and similar items (whether existing in paper or
electronic format), including operation and generation records, service and
repair records, maintenance schedules, operating documents, specifications, and
diagrams, customer lists, historical customer files, reports, accounting and
tax records, test results, product specifications, drawings, construction plans
and records, training manuals, engineering data, safety and environmental
reports and documents, inventory records, business plans, and marketing and all
other studies, documents and records, any real property, together with all
improvements, structures and fixtures thereon, and all easements, privileges,
rights-of-way, riparian and other water rights, lands underlying any adjacent
streets or roads, appurtenances, licenses, and other rights pertaining to or
accruing to the benefit of such property and any permits obtained by or issued
to any MP Project Company, goodwill, customer deposits, cash and cash equivalents,
bank accounts and cash balances on deposit in such bank accounts, all amounts
owing to any MP Project Company, whether or not such MP Project Company has
submitted an invoice for such goods or services, tax records and rights to any
claims for tax refunds, all contracts, personal property leases and other
commitments to which any MP Project Company is a party, all rights under
insurance policies issued to any MP Project Company, intangible assets of or
relating to any MP Project Company, including claims against third-parties and
trade names, logos, designs or symbols which are used in connection with the
business of any MP Project 

 

5

 

Company; provided, that the MP Assets shall not include rights to
the trade name KGen or KGen Power or any derivation thereof, or any related
logos, designs or symbols employing such words.

 

“MP Membership Interests” means the membership
interests directly or indirectly held by the Company in each MP Project
Company.

 

“MP Project Company” shall mean each of KGen
Power, KGen Enterprise LLC, KGen New Albany LLC, KGen Southaven, LLC and KGen
Marshall LLC.

 

“Offering Memorandum” shall mean the Offering
Memorandum dated December 18, 2006 relating to the sale of shares of common
stock of the Company.

 

“Old Credit Facility” has the meaning ascribed
to such term in Section 2.02(a)(i).

 

“Option” with respect to any Person means any
security, right, subscription, warrant, option, “phantom” stock right or other
Contract that gives the right to (i) purchase or otherwise receive or be
issued any shares of capital stock or other equity interest of such Person or
any security of any kind convertible into or exchangeable or exercisable for
any shares of capital stock or equity interest of such Person or (ii) receive
or exercise any benefits or rights similar to any rights enjoyed by or accruing
to the holder of shares of capital stock of or equity interest in such Person,
including any rights to participate in the equity or income of such Person or
to participate in or direct the election of any directors or officers of such
Person or the manner in which any shares of capital stock of or equity interest
in such Person are voted.

 

“Order” means any writ, judgment, decree,
injunction or similar order of any Governmental or Regulatory Authority (in
each such case whether preliminary or final).

 

“Permitted Lien” means (i) any Lien for
Taxes not yet due or delinquent or being contested in good faith by appropriate
proceedings for which adequate reserves have been established in accordance
with GAAP, (ii) any statutory Lien arising in the ordinary course of
business by operation of Law with respect to a Liability that is not yet due or
delinquent, (iii) any Lien that will be released on or before the Closing,
(iv) any minor imperfection of title or similar Lien which individually or
in the aggregate with other such Liens would not reasonably be expected to
materially adversely affect the Business or Condition of the Company, (v) Liens
securing development bonds issued by Subsidiaries of the Company, and (vi) Liens
permitted under the existing secured credit facility of KGen LLC.

 

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

 

“Plan” means any bonus, incentive compensation,
deferred compensation, pension, profit sharing, retirement, stock purchase,
stock option, stock ownership, stock appreciation rights, phantom stock, leave
of absence, layoff, vacation, day or dependent care, legal services,
cafeteria, life, health, accident, disability, workmen’s compensation or other
insurance, severance, separation or other employee benefit plan, practice,
policy or arrangement of any kind, whether written or oral, including, but not
limited to, any “employee benefit plan” within the meaning of Section 3(3) of
ERISA.

 

“Power Purchase Agreement” means the Contract
for the Purchase of Firm Capacity and Energy, dated as of June 3, 2002 (as
amended, supplemented or assigned from time to time) between KGen Murray I and
II LLC and GPC.

 

6

 

“Purchase Price” has the meaning ascribed to it
in Section 2.02.

 

“Purchaser” has the meaning ascribed to it in
the forepart of this Agreement.

 

“Purchaser Indemnified Parties” means Purchaser
and its officers, directors, employees, agents and Affiliates.

 

“Release” means any release, spill, emission,
leaking, pumping, pouring, injection, deposit, disposal, discharge, dispersal,
emptying, escaping, leaching or migration into the indoor or outdoor
environment, including, without limitation, the movement of Hazardous Materials
through ambient air, soil, sediment, surface water, ground water, wetlands,
land or subsurface strata.

 

“Representatives” has the meaning ascribed to
it in Section 6.03.

 

“Resolution Period” means the period
ending 90 days following receipt by an Indemnified Party of a written
notice from an Indemnifying Party stating that it disputes all or any portion
of a claim set forth in a Claim Notice or an Indemnity Notice.

 

“Seller” has the meaning ascribed to it in the
forepart of this Agreement.

 

“Seller Indemnified Parties” means Seller and
its officers, directors, employees, agents and Affiliates.

 

“Seller Membership Interests” has the meaning
ascribed to it in the forepart of this Agreement.

 

“Subsidiary” means any Person in which the
Company, directly or indirectly through Subsidiaries or otherwise, beneficially
owns more than 50% of either the equity interests in, or the voting
control of, such Person, but shall not include any MP Project Company.

 

“Tax Returns” means has the meaning ascribed to
in Section 3.08(a).

 

“Taxes” means has the meaning ascribed to in Section 3.08(b).

 

“Third Party Claim” has the meaning ascribed to
it in Section 12.03(a).

 

Section 1.02           Construction
of Certain Terms and Phrases. Unless the context of this Agreement
otherwise requires, (i) words of any gender include each other gender; (ii) words
using the singular or plural number also include the plural or singular number,
respectively; (iii) the terms “hereof,” “herein,” “hereby” and derivative
or similar words refer to this entire Agreement; (iv) the terms “Article”
or “Section” refer to the specified Article or Section of this
Agreement; and (v) in the case of the Company or any of its Subsidiaries,
the phrase “ordinary course of business” refers to the business of the Company
and its Subsidiaries, taken as a whole. Whenever this Agreement refers to a
number of days, such number shall refer to calendar days unless Business Days
are specified. All accounting terms used herein and not expressly defined
herein shall have the meanings given to them under GAAP. Any representation or
warranty contained herein as to the enforceability of a Contract shall be
subject to the effect of any bankruptcy, insolvency, reorganization, moratorium
or other similar law affecting the enforcement of creditors’ rights generally
and to general equitable principles (regardless of whether such enforceability
is considered in a proceeding in equity or at Law).

 

7

 

ARTICLE II

PURCHASE AND SALE

 

Section 2.01           Purchase
and Sale. Seller agrees to sell to Purchaser, and Purchaser agrees to
purchase from Seller, all of the right, title and interest of Seller in and to
the Seller Membership Interests at the Closing on the terms and subject to the
conditions set forth in this Agreement provided that the liabilities or
obligations in respect of or in connection with the MP Assets shall remain with
Seller until and after the MP Assets are transferred to Seller pursuant to Section 7.03.

 

Section 2.02           Purchase
Price. The purchase price (the “Purchase Price”) for the Seller
Membership Interests is $801,326,868 , subject to adjustment as provided below.

 

(a)                                  The Purchase Price will be reduced by:

 

(i)                                     the amount required to
pay principal, accrued interest, premium, penalty and expenses, and any other
amounts required to pay off all amounts outstanding under the Amended and
Restated Credit Agreement dated March 15, 2005 (the “Old Credit
Facility”) among KGen LLC, as Borrower, the Lenders named therein, Credit
Suisse First Boston, as administrative agent and collateral agent, and the
Guarantors at the Closing;

 

(ii)                                  $ 42,033,299  of the discount and placement fee to the
placement agent and initial purchaser in the Private Placement;

 

(iii)                               50% of the aggregate,
legal, roadshow and printing expenses in connection with the Private Placement
(including legal expenses associated with the Old Credit Facility) that are not
payable by Friedman Billings Ramsey (it being understood that, to the extent
any of such expenses have been paid by Seller before the Private Placement
Closing (the “Paid Expenses”), such Paid Expenses shall not be counted
for purposes of this clause (iii) and the Company will reimburse
Seller for 50% of such Paid Expenses; and

 

(iv)                              any obligations incurred
to obtain any consents or approvals necessary to consummate the transactions
contemplated hereby from the date hereof to the Closing Date.

 

(b)                                 The Purchase Price will be increased by:

 

(i)                                     the amount of cash
expense that would have accrued between the Private Placement Closing and the
Closing Date under the Credit Facility had the Credit Facility been entered
into by the Purchaser at the Private Placement Closing and the $200 million
term loan funded on such date, including the fees that would have accrued if
the $120 million letter of credit had been issued on such date but excluding
any such fees that would have accrued after January 1, 2007;

 

(ii)                                  the amount of interest
or other income earned on the offering proceeds from the Private Placement
while in the Escrow Account (less all escrow expenses);

 

(iii)                               the amount of cash
payments made by the Company and its Subsidiaries prior to the Private
Placement Closing (A) to outside consultants, advisers and accountants in
connection with the transactions contemplated by this Agreement and (B) as

 

8

 

severance
or similar termination payments to employees of the Company and its
Subsidiaries.

 

(iv)                              the amount of cash on
the Company’s balance sheet at the Private Placement Closing, plus any cash the Company receives in respect of the MP
Assets between the Private Placement Closing and the Closing Date minus the aggregate of any payments made by the Company in
respect of the MP Assets between the Private Placement Closing and the Closing
Date and obligations of the Company to make such payments on the Closing Date
that do not become the responsibility of Seller as of the Closing Date.

 

(c)                                  Three Business Days
before the Closing, Seller will prepare a final settlement statement containing
a final reconciliation of the adjustments to the Purchase Price specified in
this Section (the “Final Settlement Statement”). Unless Purchaser
objects in writing within two Business Days of receipt of the Final Settlement
Statement to any items in the Final Settlement Statement that Purchaser believes
in good faith to be questionable at or before the Closing, the Final Settlement
Statement will be deemed correct.

 

(d)                                 The Purchase Price shall be payable in immediately
available United States funds on the Closing Date to an account designated by
Seller at least two Business Days prior to the Closing Date.

 

Section 2.03              Closing . The
closing of the purchase and sale of the Seller Membership Interests and the
contribution of the GKL Membership Interests contemplated by this Agreement
(the “Closing”) will take place on a Business Day selected by Purchaser
and Seller that is no sooner than one day and no later than five days after the
day on which the last of the conditions set forth in Articles 6 or 7
(other than those conditions which are only capable of being satisfied
contemporaneous with the Closing) is fulfilled or waived or on such other date
as the parties may agree (the “Closing Date”) at such place as the
parties hereto mutually agree (including Closing by facsimile or “PDF”
electronic mail transmission exchange of executed documents or signature pages
followed promptly by overnight courier of originals).

 

Section 2.04              Conduct of
Closing. 

 

(a)                                  At
or prior to the Closing, Seller shall deliver to Purchaser:

 

(i)                                     Any validly
executed transfer documents evidencing the transfer by Seller of the Seller
Membership Interests with appropriate powers, if necessary, with respect
thereto duly endorsed by Seller;

 

(ii)                                  The
certificates required in Section 8.03 hereof;

 

(iii)                               The opinion of
counsel referred to in Section 8.07;

 

(iv)                              Any other
documents and certificates contemplated by Article 8 or Article 9
hereof to be delivered by or on behalf of the Seller.

 

(b)                                 At or prior to
the Closing, Purchaser shall deliver to the Seller:

 

(i)                                     The
certificates referred to in Section 9.03 hereof;

 

(ii)                                  The opinion of
counsel referred to in Section 9.07;

 

9

 

(iii)                               Any other
documents and certificates contemplated by Article 8 or Article 9
hereof.

 

(c)                                  At or prior to
Closing, GKL shall deliver to the Purchaser any validly executed transfer
documents evidencing the transfer by GKL of the GKL Membership Interests
together with appropriate powers, if necessary, with respect thereto duly
endorsed by GKL.

 

(d)                                 At or prior to
Closing, Purchaser shall deliver to GKL a certificate or certificates
representing 308,000 shares of common stock of Purchaser.

 

Section 2.05        Further Assurances;
Post-Closing Cooperation . Subject to the terms and conditions of this
Agreement, at any time or from time to time after the Closing, each of the
parties hereto shall execute and deliver such other documents and instruments,
provide such materials and information and take such other actions as may reasonably
be necessary, proper or advisable, to the extent permitted by Law, to fulfill
its obligations under this Agreement.

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF SELLER

 

Seller hereby represents and warrants to Purchaser as
follows:

 

Section 3.01        Organization and Good
Standing of Seller . Seller is a limited liability company duly formed,
validly existing and in good standing under the Laws of the State of Delaware. Seller
has full limited liability company power and authority to execute and deliver
this Agreement and to perform its obligations hereunder and to consummate
the transactions contemplated hereby, including without limitation to own,
hold, sell and transfer (pursuant to this Agreement) the Seller Membership
Interests.

 

Section 3.02        Authority . The
Seller has duly authorized, executed and delivered this Agreement, and this
Agreement constitutes its legal, valid and binding obligation enforceable
against it in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, reorganization, fraudulent conveyance or
transfer, moratorium, insolvency and similar laws affecting the rights or
remedies of creditors generally, and by general principles of equity,
regardless of whether considered in a proceeding at law or in equity.

 

Section 3.03        Organization and Good
Standing . The Company and each Subsidiary is a limited liability company
or corporation organized, validly existing and in good standing under the laws
of its jurisdiction of organization and is qualified to do business and is in
good standing in each jurisdiction where its properties (or the character of
its business) requires such qualification.

 

Section 3.04        Seller Membership
Interests. As of the Closing, the Seller Membership Interests are duly
authorized, validly issued and outstanding. As of the Closing, Seller will own the
Seller Membership Interests, beneficially and of record, free and clear of all
Liens, except for such Liens as disclosed in Section 3.04 of the
Disclosure Schedule. Except for this Agreement and as disclosed in the
Offering Memorandum, there are no outstanding Options with respect to the
Company. The transfer of the Seller Membership Interests in the manner provided
in Section 2.03 will transfer to Purchaser good and valid title to
the Seller Membership Interests, free and clear of all Liens other than Liens
created or suffered to exist by Purchaser.

 

10

 

Section 3.05        Subsidiaries. Except
as disclosed in the Offering Memorandum, all of the outstanding equity
interests of each Subsidiary have been duly authorized and validly issued, are
owned, beneficially and of record, by the Company or Subsidiaries wholly owned
by the Company free and clear of all Liens other than Permitted Liens. Except
as disclosed in the Offering Memorandum, there are no outstanding Options with
respect to any Subsidiary. Seller has prior to the execution of this Agreement
delivered to Purchaser true and complete copies of the charter documents of
each of the Subsidiaries as in effect on the date hereof.

 

Section 3.06        No Conflicts. The
execution and delivery by Seller of this Agreement do not, and at the Closing the
performance by Seller of its obligations under this Agreement and the
consummation of the transactions contemplated hereby will not:

 

(a)                                  conflict with or
result in a violation or breach of any of the terms, conditions or provisions
of the charter documents of Seller, the Company, any Subsidiary or any MP
Project Company;

 

(b)                                 subject to
obtaining the consents, approvals and actions, making the filings and giving
the notices disclosed in the Offering Memorandum, or in connection with the Old
Credit Facility or in this Agreement, conflict with or result in a violation or
breach of any term or provision of any Law or Order applicable to Seller, the
Company or any Subsidiary or any of their respective Assets and Properties
(other than such conflicts, violations or breaches (i) which would not in
the aggregate reasonably be expected to adversely affect the validity or
enforceability of this Agreement or to have a material adverse effect on the
Business or Condition of the Company or (ii) as would occur solely as a
result of the identity or the legal or regulatory status of Purchaser or any of
its Affiliates); or

 

(c)                                  except as
disclosed in the Offering Memorandum, as contemplated by this Agreement, as
required under the Old Credit Facility or as would not, individually or in the
aggregate, reasonably be expected to be materially adverse to the Business or
Condition of the Company or to adversely affect the ability of Seller to
consummate the transactions contemplated hereby or to perform its
obligations hereunder, (i) conflict with or result in a violation or
breach of, (ii) constitute (with or without notice or lapse of time or
both) a default under, (iii) require Seller, the Company or any Subsidiary
to obtain any consent, approval or action of, make any filing with or give any
notice to any Person as a result or under the terms of (other than with respect
to those consents or approvals that will have been obtained as of the Closing
Date), (iv) result in or give to any Person any right of termination,
cancellation, acceleration or modification in or with respect to, or (v) result
in the creation or imposition of any Lien upon Seller, the Company or any
Subsidiary or any of their respective Assets and Properties under, any Contract
or License to which Seller, the Company or any Subsidiary is a party or by
which any of their respective Assets and Properties is bound.

 

11

 

Section 3.07        Governmental Approvals
and Filings. Except as disclosed in the Offering Memorandum or as
contemplated by this Agreement, no consent, approval or action of, filing with
or notice to any Governmental or Regulatory Authority on the part of Seller,
the Company or any Subsidiary is required in connection with the execution,
delivery and performance of this Agreement or the consummation of the
transactions contemplated hereby, except (i) where the failure to obtain
any such consent, approval or action, to make any such filing or to give any
such notice would not reasonably be expected to adversely affect the ability of
Seller to consummate the transactions contemplated by this Agreement or to perform its
obligations hereunder, or to have a material adverse effect on the Business or
Condition of the Company, (ii) those as would be required solely as a
result of the identity or the legal or regulatory status of Purchaser or any of
its Affiliates and (iii)  with respect to those consents or approvals that
will have been obtained as of the Closing Date.

 

Section 3.08              Taxes. Except
as set forth in a Section 3.08 of the Disclosure Schedule:

 

(a)                                  Company and its
Subsidiaries have timely filed with the appropriate federal, state, local or
foreign governmental authorities (each a “Taxing Authority”) any and all
declarations, returns, reports, estimates, information returns, schedules,
statements or other documents filed or required to be filed with any Taxing
Authority, (“Tax Returns”) on or before the date hereof (taking into
account any extension of time obtained or allowed for filing such Tax Returns)
except where the failure to file would not reasonably be expected to have a
material adverse effect on the Business or Condition of the Company (and will
file all such Tax Returns required to be filed after the date hereof through
the Closing Date), and such Tax Returns are (or will be) true, correct and
complete in all material respects.

 

(b)                                 Company and its
Subsidiaries have paid in full all federal, state and local or foreign
estimated, payroll, withholding, excise, sales, use, real and personal
property, use and occupancy, business and occupation, mercantile, transfer,
capital stock and franchise or other taxes of any kind whatsoever (all the
foregoing taxes, including interest, additions and penalties thereon, being
hereinafter collectively called (“Taxes”) required to have been paid by
Company and its Subsidiaries (whether or not shown on any Tax Return) except
where the failure to pay would not reasonably be expected to have a material
adverse effect on the Business or Condition of the Company.

 

(c)                                  None of Company
or its Subsidiaries is delinquent in the payment of any Tax or has requested or
been granted any extension of time within which to file any Tax Return except
where the failure to make any such payment would not reasonably be expected to
have a material adverse effect on the Business or Condition of the Company.

 

(d)                                 There are no
outstanding requests for rulings or determinations in respect of any Tax or Tax
attribute pending between Company or either of its Subsidiaries and any Taxing
Authority.

 

(e)                                  None of Company
or its Subsidiaries has granted any extension or waiver of the statute of
limitations period applicable to assessment or collection of any Tax, which
period (after, giving effect to such extension or waiver) has not expired.

 

(f)                                    There are no
ongoing audits relating to Taxes of Company or either of its Subsidiaries or
examinations of any Tax Return which includes Company or either of its

 

12

 

Subsidiaries and no written
notice of such audit or examination has been received by Company or either of
its Subsidiaries in respect of any such future audit or examination.

 

(g)                                 Company and its
Subsidiaries have not entered into, nor has there been entered into on their
behalf, any closing or similar agreement with any Taxing Authority and have not
obtained any ruling or determination in each case relating to Taxes that
remains in effect.

 

(h)                                 All monies
which Company or its Subsidiaries are required by law to withhold from
employees or other third parties have been withheld and either timely paid to
the proper governmental authority or set aside in accounting for payment when
due and accrued in the books of Company or its Subsidiaries and the Company and
its Subsidiaries have complied with all information reporting and backup
withholding requirements except in each case where the failure to take action
would not reasonably be expected to have a material adverse effect on the
Business or Condition of the Company.

 

(i)                                     The Company and
each of its Subsidiaries other than KGen Management Inc. are and, to the
Knowledge of Seller, at all times since their formation have been, partnerships
or entities which are disregarded as entities separate from their owners
pursuant to Treasury Regulations section 301.7701-2 and -3.

 

Section 3.09        Compliance With Laws
and Orders. Except as disclosed in the Offering Memorandum, neither the
Company nor any Subsidiary is in violation of or in default under any Law or
Order applicable to the Company or any Subsidiary or any of their respective
Assets and Properties the effect of which, individually or in the aggregate
with other such violations and defaults, would reasonably be expected to be
materially adverse to the Business or Condition of the Company.

 

Section 3.10        Real Property. Except
as described in the Offering Memorandum, the Company and the Subsidiaries own
or lease or otherwise have the right to use all real property which is used by
the Company and the Subsidiaries in connection with the operation and
management of the Company as described in the Offering Memorandum and that is
material to the Business or Condition of the Company (“Real Property”).
All such Real Property is free and clear of all Liens other than Permitted
Liens. Except as disclosed in the Offering Memorandum, the Company or a
Subsidiary has good title to the Real Property owned by it. The Company or a
Subsidiary has a valid and subsisting leasehold estate in and the right to
quiet enjoyment of the Real Property leased by it for the full term of the
lease thereof. Each such lease is a legal, valid and binding agreement,
enforceable in accordance with its terms, of the Company or a Subsidiary and,
to the Knowledge of Seller, of each other Person that is a party thereto, and
except as set forth in the Offering Memorandum, to the Knowledge of Seller
there is no default (or any condition or event which, after notice or lapse of
time or both, would constitute a default) thereunder, except for such defaults
the occurrence of which either individually or in the aggregate would not
reasonably be expected to have a material adverse effect on the Business or
Condition of the Company.

 

Section 3.11        Tangible Personal Property.
The Company or a Subsidiary is in possession of and has good title to, or has
valid leasehold interests in or valid rights under Contract to use, all
tangible personal property used in and individually or in the aggregate with
other such property material to the Business or Condition of the Company. All
such tangible personal property is free and clear of all Liens, other than
Permitted Liens, Liens disclosed in the Offering Memorandum, and Liens that
neither individually nor in the aggregate would reasonably be expected to have
a material adverse effect on the Business or Condition of the Company, and is
in all material respects in good working order and condition, ordinary wear and
tear excepted, except for such deficiencies or defects the occurrence of 

 

13

 

which either individually or in the aggregate would not reasonably be
expected to have a material adverse effect on the Business or Condition of the
Company.

 

Section 3.12        Licenses. The
Company or a Subsidiary is in possession of and owns or validly holds all
Licenses material to the Business or Condition of the Company, each such
License is valid, binding and in full force and effect, and neither the Company
nor any Subsidiary is in default (or with the giving of notice or lapse of time
or both, would be in default) under any such License in any material respect;
except for any such License or Licenses the lack of which either individually
or in the aggregate would reasonably be expected to have a material adverse
effect on the Business or Condition of the Company.

 

Section 3.13        Affiliate Transactions.
Except as disclosed in the Offering Memorandum or as contemplated by this
Agreement, (i) there is no Indebtedness between the Company or any
Subsidiary, on the one hand, and Seller, any officer, director or Affiliate
(other than the Company or any Subsidiary) of Seller, on the other, (ii) neither
Seller nor any such officer, director or Affiliate provides or causes to be
provided any assets, services or facilities to the Company or any Subsidiary
which are individually or in the aggregate material to the Business or
Condition of the Company, (iii) neither the Company nor any Subsidiary
provides or causes to be provided any assets, services or facilities to Seller
or any such officer, director or Affiliate which are individually or in the
aggregate material to the Business or Condition of the Company and (iv) neither
the Company nor any Subsidiary beneficially owns, directly or indirectly, any
Investment Assets issued by Seller or any such officer, director or Affiliate.

 

Section 3.14        Brokers. All
negotiations relative to this Agreement and the transactions contemplated
hereby have been carried out by Seller directly with Purchaser without the
intervention of any Person on behalf of Seller in such manner as to give rise
to any valid claim by any Person against Purchaser, the Company or any
Subsidiary for a finder’s fee, brokerage commission or similar payment.

 

Section 3.15        Solvency. KGen
Power is not now insolvent, nor will KGen Power be rendered insolvent by the
transfer of KGen Sandersville LLC, KGen Hot Springs LLC and KGen Hinds LLC to
KGen LLC or a Subsidiary, as contemplated by this Agreement. “Insolvent” for
purposes of this Section 3.15 means when the sum of its liabilities
and obligations is greater than a fair valuation of all of its property.

 

Section 3.16        Payments; Capital
Expenditures. From September 30, 2006 through the Private Placement
Closing, the Company and its Subsidiaries have made all payments to third
parties and all capital expenditures and collected all amounts no less quickly
than in the ordinary course of business in accordance with past practice.

 

Section 3.17        Financial Statements.

 

(a)                                  Seller
has delivered to Purchaser true, complete and correct copies of the following
financial statements:

 

(i)                                     the
audited balance sheets of the Company as of June 30, 2006 and 2005 and the
related audited statements of operations, member’s equity and cash flows for
the year ended September 30, 2006 and for the period August 5, 2004
through June 30, 2005, together with the related notes, schedules and
report of the Company’s independent accountants (such balance sheets, the
related statements 

 

14

 

of operations, member’s equity and cash flows and the
related notes and schedules are referred to herein as the “Year-End Financial
Statements”); and

 

(ii)                                  the
unaudited balance sheet of the Company as of September 30, 2006 (the “Balance
Sheet Date”) and the related unaudited statements of operations, member’s
equity and cash flows for the period ended on the Balance Sheet Date, together
with the related notes and schedules (such balance sheets, the related
statements of operations, member’s equity and cash flows and the related notes
and schedules are referred to herein as the “Interim Financial Statements”). The
Year-End Financial Statements and Interim Financial Statements are referred to
collectively as “Financial Statements.”

 

(b)                                 The
Financial Statements have been prepared from the books and records of the
Company in conformity with GAAP and present fairly the financial position and
results of operations of the Company as of the dates of such statements and for
the periods covered thereby. The books of account of the Company have been kept
accurately in all material respects in the ordinary course of business, the
transactions entered therein represent bona fide transactions, and the
revenues, expenses, assets and liabilities of the Company have been properly recorded
therein in all material respects.

 

Section 3.18        Contracts. Each of
the Contracts material to Business or Condition of the Company is valid and
enforceable against Company or such Subsidiary in accordance with its terms,
and there is no default under any such Contract either by Company or any of its
Subsidiaries which is a party to such Contract or, to the Knowledge of Seller,
by any other party thereto, and no event has occurred that with the lapse of
time or the giving of notice or both would constitute a default thereunder by
Company or such Subsidiary or, to the Knowledge of Seller, any other party
thereto which would reasonably be expected to have a material adverse effect on
the Business or Condition of the Company. Neither Company nor any Subsidiary
has received any written notice of default or termination under any such
Contract where such default or termination would reasonably be expected to have
a material adverse effect on the Business or Condition of the Company.

 

Section 3.19        Environmental Condition.
Except as set forth on Section 3.19 of the Disclosure Schedule, to
the Knowledge of Seller, there are no Actions or Proceedings pending or, to the
Knowledge of Seller, threatened against, relating to or affecting Seller, the
Company or any Subsidiary caused by or arising out of or relating to any
Environmental Condition pending with regard to the ownership or operation of
the Assets and Properties of the Company or its Subsidiaries and there are no
Environmental Conditions presently subject to affirmative action or remedial
work taken to remove or otherwise remedy an Environmental Condition (including
any survey, site assessment, audit, investigation, inspection, sampling,
analysis, removal, excavation, pump and treat, cleanup, disposal, storage,
handling or treating) with respect to the Assets and Properties of the Company
or its Subsidiaries where such Action or Proceeding would reasonably be
expected to have a material adverse effect on the Business or Condition of the
Company.

 

Section 3.20        Benefit Plans. All Benefit Plans
have been operated in material compliance with their terms and applicable Laws
such that the operation of the Benefit Plans will have no material adverse
effect on the Business or Condition of the Company.

 

15

 

Section 3.21        Litigation. Section 3.21
of the Disclosure Schedule sets forth each instance in which the
Company or any Subsidiary (a) is subject to any outstanding Actions or
Proceedings or (b) is a party, the subject of or, to the Knowledge of
Seller, is threatened to be made a party to or the subject of any Actions or
Proceedings where the existence of such Actions or Proceedings or the outcome
of such Actions or Proceedings, individually or in the aggregate would reasonably
be expected to have a material adverse effect on the Business or Condition of
the Company. There are no Actions or Proceedings pending or, to the Knowledge
of Seller, threatened against, relating to or affecting Seller, the Company,
its Subsidiaries or any of their respective Assets and Properties which could
reasonably be expected to result in the issuance of an Order restraining,
enjoining or otherwise prohibiting or making illegal the consummation of any of
the transactions contemplated by this Agreement.

 

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF PURCHASER

 

Purchaser hereby represents and warrants to Seller and
GKL as follows:

 

Section 4.01        Corporate Existence.
Purchaser is a corporation duly incorporated, duly organized, validly existing
and in good standing under the Laws of the State of Delaware. Purchaser has
full corporate power and authority to execute and deliver this Agreement, to
perform its obligations hereunder and to consummate the transactions
contemplated hereby.

 

Section 4.02        Authority. The
execution and delivery by Purchaser of this Agreement, and the performance by
Purchaser of its obligations hereunder, have been duly and validly authorized
by the Board of Directors of Purchaser, no other corporate action on the part of
Purchaser or its stockholders being necessary. This Agreement has been duly and
validly executed and delivered by Purchaser and constitutes a legal, valid and
binding obligation of Purchaser enforceable against Purchaser in accordance
with its terms.

 

Section 4.03        No Conflicts. The
execution and delivery by Purchaser of this Agreement do not, the performance
by Purchaser of its obligations under this Agreement and the consummation of
the transactions contemplated hereby will not:

 

(a)                                  conflict with
or result in a violation or breach of any of the terms, conditions or
provisions of the articles of incorporation or by-laws (or other comparable
corporate charter document) of Purchaser;

 

(b)                                 subject to
obtaining the consents, approvals and actions, making the filings and giving
the notices disclosed in Schedule 4.03 hereto, conflict with or
result in a violation or breach of any term or provision of any Law or Order
applicable to Purchaser or any of its Assets and Properties (other than such
conflicts, violations or breaches which would not in the aggregate reasonably
be expected to adversely affect the validity or enforceability of this
Agreement); or

 

(c)                                  except as
disclosed in Schedule 4.03 hereto or as would not, individually or
in the aggregate, reasonably be expected to adversely affect the ability of
Purchaser to consummate the transactions contemplated hereby or to perform its
obligations hereunder, (i) conflict with or result in a violation or
breach of, (ii) constitute (with or without notice or lapse of time or both)
a default under, (iii) require Purchaser to obtain any consent, approval
or action of, make any filing with or give any notice to any Person as a result
or under the terms of, or (iv) result in the creation or imposition of any
Lien 

 

16

 

upon Purchaser, the Company
or any Subsidiary or any of their Assets or Properties under, any Contract or
License to which any of them is a party or by which any of their Assets and
Properties is bound.

 

Section 4.04        Governmental Approvals
and Filings. Except as disclosed in Schedule 4.04 hereto, no
consent, approval or action of, filing with or notice to any Governmental or
Regulatory Authority on the part of Purchaser is required in connection
with the execution, delivery and performance of this Agreement or the
consummation of the transactions contemplated hereby, except where the failure
to obtain any such consent, approval or action, to make any such filing or to
give any such notice would not reasonably be expected to adversely affect the
ability of Purchaser to consummate the transactions contemplated by this
Agreement or to perform its obligations hereunder.

 

Section 4.05        Legal Proceedings. There
are no Actions or Proceedings pending or, to the Knowledge of Purchaser,
threatened against, relating to or affecting Purchaser or any of its Assets and
Properties which would reasonably be expected to result in the issuance of an
Order restraining, enjoining or otherwise prohibiting or making illegal the
consummation of any of the transactions contemplated by this Agreement.

 

Section 4.06        Purchase for Investment.
The Membership Interests will be acquired by Purchaser for its own account for
the purpose of investment, it being understood that the right to dispose of
such Membership Interests shall be entirely within the discretion of Purchaser
(or such assignee, as the case may be). Purchaser (or such assignee, as
the case may be) will refrain from transferring or otherwise disposing of
any of the Membership Interests, or any interest therein, in such manner as to
cause Seller to be in violation of the registration requirements of the
Securities Act of 1933, as amended, or applicable state securities or blue
sky laws.

 

Section 4.07        Brokers. All
negotiations relative to this Agreement and the transactions contemplated
hereby have been carried out by Purchaser directly with Seller without the
intervention of any Person on behalf of Purchaser in such manner as to give
rise to any valid claim by any Person against Seller, the Company or any
Subsidiary for a finder’s fee, brokerage commission or similar payment.

 

Section 4.08        Payments; Capital
Expenditures. From
September 30, 2006 through the Private Placement Closing, the Company and
its Subsidiaries have not accelerated any payments to third parties or any
capital expenditures and have not deferred the collection of any amounts
outside the ordinary course of business in accordance with past practice.

 

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF GKL

 

GKL hereby represents and warrants to Purchaser as
follows:

 

Section 5.01        Organization and Good
Standing of GKL. GKL is a limited partnership duly formed, validly existing
and in good standing under the Laws of the State of Delaware. GKL has full
limited partnership power and authority to execute and deliver this Agreement
and to perform its obligations hereunder and to consummate the
transactions contemplated hereby, including without limitation to contribute
and transfer (pursuant to this Agreement) the GKL Membership Interests.

 

Section 5.02        Authority. GKL has
duly authorized, executed and delivered this Agreement, and this Agreement
constitutes its legal, valid and binding obligation enforceable against it in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, 

 

17

 

reorganization, fraudulent conveyance or transfer, moratorium,
insolvency and similar laws affecting the rights or remedies of creditors
generally, and by general principles of equity, regardless of whether
considered in a proceeding at law or in equity.

 

Section 5.03        GKL Membership
Interests. The GKL Membership Interests are duly authorized, validly
issued, outstanding, fully paid and nonassessable. GKL owns the GKL Membership
Interests, beneficially and of record, free and clear of all Liens. At the
Closing, GKL will transfer to Purchaser good and valid title to the GKL
Membership Interests, free and clear of all Liens other than Liens created or
suffered to exist by Purchaser.

 

Section 5.04        No Conflicts. The
execution and delivery by GKL of this Agreement do not, the performance by GKL
of its obligations under this Agreement and the consummation of the
transactions contemplated hereby will not:

 

(a)                                  conflict with
or result in a violation or breach of any of the terms, conditions or
provisions of the articles of corporate charter document of GKL; or

 

(b)                                 except as could
not, individually or in the aggregate, reasonably be expected to adversely
affect the ability of GKL to consummate the transactions contemplated hereby or
to perform its obligations hereunder, (i) conflict with or result in
a violation or breach of, (ii) constitute (with or without notice or lapse
of time or both) a default under, (iii) require GKL to obtain any consent,
approval or action of, make any filing with or give any notice to any Person as
a result or under the terms of, or (iv) result in the creation or
imposition of any Lien upon GKL or any of its Assets or Properties under, any
Contract or License to which GKL is a party or by which any of its Assets and
Properties is bound.

 

Section 5.05        Governmental Approvals
and Filings. No consent, approval or action of, filing with or notice to
any Governmental or Regulatory Authority on the part of GKL is required in
connection with the execution, delivery and performance of this Agreement or
the consummation of the transactions contemplated hereby, except where the
failure to obtain any such consent, approval or action, to make any such filing
or to give any such notice could not reasonably be expected to adversely affect
the ability of GKL to consummate the transactions contemplated by this
Agreement or to perform its obligations hereunder.

 

Section 5.06        Legal Proceedings. There
are no Actions or Proceedings pending or, to the knowledge of GKL, threatened
against, relating to or affecting GKL or any of its Assets and Properties which
could reasonably be expected to result in the issuance of an Order restraining,
enjoining or otherwise prohibiting or making illegal the consummation of any of
the transactions contemplated by this Agreement.

 

Section 5.07        Brokers. All
negotiations relative to this Agreement and the transactions contemplated
hereby have been carried out by GKL directly with Seller without the
intervention of any Person on behalf of GKL in such manner as to give rise to
any valid claim by any Person against Seller, the Company or any Subsidiary for
a finder’s fee, brokerage commission or similar payment..

 

18

 

ARTICLE VI

COVENANTS OF SELLER

 

Seller covenants and agrees with Purchaser that, at
all times from and after the date hereof until the Closing, Seller will comply
with all covenants and provisions of this Article VI, except to the
extent Purchaser may otherwise consent in writing.

 

Section 6.01        Regulatory and Other
Approvals. Seller will, and will cause the Company and the Subsidiaries to,
as promptly as practicable (a) take all commercially reasonable steps
necessary or desirable to obtain all consents, approvals or actions of, make
all filings with and give all notices to Governmental or Regulatory Authorities
or any other Person required of Seller, the Company or any Subsidiary to
consummate the transactions contemplated hereby, (b) provide such other
information and communications to such Governmental or Regulatory Authorities
or other Persons as such Governmental or Regulatory Authorities or other
Persons may reasonably request in connection therewith and (c) provide
reasonable cooperation to Purchaser in connection with the performance of its
obligations under Sections 7.01 and 7.02. Seller will provide
prompt notification to Purchaser when any such consent, approval, action,
filing or notice referred to in clause (a) above is obtained, taken,
made or given, as applicable, and will advise Purchaser of any communications
(and, unless precluded by Law, provide copies of any such communications that
are in writing) with any Governmental or Regulatory Authority or other Person
regarding any of the transactions contemplated by this Agreement.

 

Section 6.02        HSR Filings. In
addition to and not in limitation of Seller’s covenants contained in Section 6.01,
Seller will (a) take promptly all actions necessary to make the filings
required of Seller or its Affiliates under the HSR Act, (b) comply at the
earliest practicable date with any request for additional information received
by Seller or its Affiliates from the Federal Trade Commission or the Antitrust
Division of the Department of Justice pursuant to the HSR Act and (c) cooperate
with Purchaser in connection with Purchaser’s filing under the HSR Act and in
connection with resolving any investigation or other inquiry concerning the
transactions contemplated by this Agreement commenced by either the Federal
Trade Commission or the Antitrust Division of the Department of Justice or
state attorneys general.

 

Section 6.03        Investigation by
Purchaser. Seller will, and will cause the Company and the Subsidiaries to,
(a) provide Purchaser and its officers, employees, counsel, accountants,
financial advisors, consultants and other representatives (together, “Representatives”)
with full access, upon reasonable prior notice and during normal business
hours, to all officers, employees, agents and accountants of the Company and
the Subsidiaries and their Assets and Properties and Books and Records, but
only to the extent that such access does not unreasonably interfere with the
business and operations of the Company and the Subsidiaries, and (b) furnish
Purchaser and such other Persons with all such information and data (including
without limitation copies of Contracts, Benefit Plans and other Books and
Records) concerning the business and operations of the Company and the
Subsidiaries as Purchaser or any of such other Persons reasonably may request
in connection with such investigation, except to the extent that furnishing any
such information or data would violate any Law, Order, Contract or License
applicable to Seller, the Company or any Subsidiary or by which any of their
respective Assets and Properties is bound.

 

Section 6.04        Conduct of Business.
Except as otherwise described in the Offering Memorandum, Seller will cause the
Company and the Subsidiaries to conduct business only in the ordinary course
consistent with past practice. Without limiting the generality of the
foregoing, Seller will cause the Company and the Subsidiaries to use
commercially reasonable efforts, to the extent the officers of the Company
believe such action to be in bests interests of the Company and the Subsidiaries,
to (a) preserve intact the present business organization and reputation of
the Company and the 

 

19

 

Subsidiaries in all material respects, (b) keep available (subject
to dismissals and retirements in the ordinary course of business) the services
of the following officers:  Gerald
Lindner, Donald Boyd, James Sweeney, Richard McClean, William Marlow, Daniel
East and Kevin Redmond and of the non-officer employees of the Company and the
Subsidiaries, (c) maintain the Assets and Properties of the Company and
the Subsidiaries in good working order and condition, ordinary wear and tear
excepted, and (d) maintain the good will of key customers, suppliers and
lenders and other Persons with whom the Company or any Subsidiary otherwise has
significant business relationships.

 

Section 6.05        Certain Restrictions.
Except as otherwise described in the Offering Memorandum, Seller will cause the
Company and the Subsidiaries to refrain from:

 

(a)                                  amending their
corporate charter documents in any material respect or taking any action with
respect to any such amendment or any recapitalization, reorganization,
liquidation or dissolution of any such corporation;

 

(b)                                 authorizing,
issuing, selling or otherwise disposing of any shares of capital stock or other
equity interest of or any Option with respect to the Company or any Subsidiary,
or modifying or amending any right of any holder of outstanding equity of or
Option with respect to the Company or any Subsidiary;

 

(c)                                  declaring,
setting aside or paying any dividend or other distribution in respect of the
capital stock or equity interest of the Company or directly or indirectly
redeeming, purchasing or otherwise acquiring any capital stock or other e           quity of or any Option with
respect to the Company, in each case other than with the proceeds of sales of
MP Assets;

 

(d)                                 other than in
the ordinary course of business, consistent with past practice, acquiring or
disposing of, or incurring any Lien (other than a Permitted Lien) on, any
Assets and Properties individually or in the aggregate material to the Business
or Condition of the Company;

 

(e)                                  except in the
ordinary course of business and in an action that would not reasonably be
expected to result in a material adverse effect on the Business or Condition of
the Company, entering into, amending, modifying, terminating (partially or
completely), granting any waiver under or giving any consent with respect to
any Contract or License material to the Business or Condition of the Company;

 

(f)                                    other than in
the ordinary course of business, voluntarily incurring Indebtedness (net
of any amounts of Indebtedness discharged during such period);

 

(g)                                 engaging with
any Person in any merger or other business combination;

 

(h)                                 other than in
the ordinary course of business consistent with past practice or to the extent
required by applicable Law, described in the Offering Memorandum, or done in
connection with the transactions described in Section 6.08,
adopting, entering into or becoming bound by any material Benefit Plan,
employment-related Contract or collective bargaining agreement, or amending,
modifying or terminating (partially or completely) any such Benefit Plan,
employment-related Contract or collective bargaining agreement; provided,
that Seller will assume all obligations under the KGen Partners LLC Profit
Sharing Plan (also known as the “KEEPP” plan), and Seller will indemnify
the Company against any liability on and after the Closing related to the KEEPP
plan 

 

20

 

including, as applicable,
with respect to any Liabilities arising in connection with the assumption
thereof by Seller or any change of control or related payments required to be
made thereunder;

 

(i)                                     failing to
maintain in full force and effect insurance policies covering the Company and
its Subsidiaries, and their respective Assets and Properties and businesses in
a form and amount consistent with their current insurance program (except
in the ordinary course of business consistent with past practice to the extent
any such policies expire in accordance with their terms and they are replaced
with policies consistent with good practice for companies in the same industry,
subject to insurance market conditions; or

 

(j)                                     entering into
any Contract to do or engage in any of the foregoing.

 

Section 6.06        Affiliate Transactions.
Except as set forth in the Offering Memorandum, immediately prior to the
Closing, all Indebtedness and other amounts owing under Contracts between
Seller, any officer, director or Affiliate (other than the Company or any
Subsidiary) of Seller, on the one hand, and the Company or any of the
Subsidiaries, on the other, will be paid in full (except that amounts due to
Alan Rosenberg in connection with his departure from the Company shall be paid
when due, which may include payments after the Closing), and Seller will
terminate and will cause any such officer, director or Affiliate to terminate
each Contract with the Company or any Subsidiary. Prior to the Closing, neither
the Company nor any Subsidiary will enter into any Contract or amend or modify
any existing Contract, and will not engage in any transaction outside the
ordinary course of business other than on an arm’s-length basis with Seller or
any such officer, director or Affiliate.

 

Section 6.07        Fulfillment of
Conditions. Seller will take all commercially reasonable steps necessary or
desirable and proceed diligently and in good faith to satisfy each condition to
the obligations of Purchaser contained in this Agreement and will not, and will
not permit the Company or any Subsidiary to, take or fail to take any
commercially reasonable action that would reasonably be expected to result in
the nonfulfillment of any such condition.

 

Section 6.08        Seller Acquisition of
MP Assets. The transfer of the MP Assets pursuant to Section 7.03
shall occur no later than June 30, 2007 (the “Transfer Deadline”). At
any time on or after the Transfer Deadline, upon written request of Purchaser,
Seller shall be required to purchase the MP Assets for a purchase price of
$1.00. If Seller does not obtain the relevant consents required to acquire the
MP Assets pursuant to Section 7.03 and such transfer does not occur
on or prior to the Transfer Deadline, Seller shall pay to Purchaser liquidated
damages in an amount equal to $25,000 per month or (pro rated for a
partial month) until such transfer occurs. Seller shall use its commercially
reasonable best efforts to cause the transfer of the MP Assets to occur as
promptly as practicable at or after the Closing, and to use its commercially
reasonable best efforts to obtain all required consents to such transfer.

 

Section 6.09        Redemption. If the
Closing does not occur and Purchaser, as contemplated by Purchaser’s
certificate of incorporation, is required to redeem its common stock issued in
the Private Placement, Seller will not take any action to prevent the
redemption or make any claim against Purchaser’s stockholders.

 

21

 

ARTICLE VII

COVENANTS OF PURCHASER

 

Purchaser covenants and agrees with Seller that, at
all times from and after the date hereof until the Closing and, in the case of Sections 7.03
and 7.04, thereafter, Purchaser will comply with all covenants and
provisions of this Article VII, except to the extent Seller may otherwise
consent in writing.

 

Section 7.01        Regulatory and Other
Approvals. Purchaser will as promptly as practicable (a) take all
commercially reasonable steps necessary or desirable to obtain all consents,
approvals or actions of, make all filings with and give all notices to
Governmental or Regulatory Authorities or any other Person required of
Purchaser to consummate the transactions contemplated hereby, (b) provide
such other information and communications to such Governmental or Regulatory
Authorities or other Persons as such Governmental or Regulatory Authorities or
other Persons may reasonably request in connection therewith and (c) provide
reasonable cooperation to Seller, the Company and the Subsidiaries in
connection with the performance of their obligations under Sections 6.01
and 6.02. Purchaser will provide prompt notification to Seller when any
such consent, approval, action, filing or notice referred to in clause (a) above
is obtained, taken, made or given, as applicable, and will advise Seller of any
communications (and, unless precluded by Law, provide copies of any such
communications that are in writing) with any Governmental or Regulatory
Authority or other Person regarding any of the transactions contemplated by
this Agreement.

 

Section 7.02        HSR Filings. In
addition to and without limiting Purchaser’s covenants contained in Section 7.01,
Purchaser will (a) take promptly all actions necessary to make the filings
required of Purchaser or its Affiliates under the HSR Act, (ii) comply at
the earliest practicable date with any request for additional information
received by Purchaser or its Affiliates from the Federal Trade Commission or
the Antitrust Division of the Department of Justice pursuant to the HSR Act and
(iii) cooperate with Seller in connection with Seller’s filing under the
HSR Act and in connection with resolving any investigation or other inquiry
concerning the transactions contemplated by this Agreement commenced by either
the Federal Trade Commission or the Antitrust Division of the Department of
Justice or state attorneys general.

 

Section 7.03        Transfer of MP Assets.

 

(a)                                  At or following
the Closing and subject to the receipt of any approvals or consents necessary
to do so, Purchaser shall for no further consideration (except as required
pursuant to Section 6.08) cause (i) KGen Power to transfer all
member interests in KGen Sandersville LLC, KGen Hot Springs LLC and KGen Hinds
LLC and any assets and liabilites related to such entities or their business or
operations to KGen LLC or a Subsidiary, and (ii) KGen LLC to transfer all
membership interests in KGen Power (including any MP Assets held by it) to
Seller (subject to clause (i) above) and Purchaser shall cause all other
MP Assets held, directly or indirectly, by Purchaser, the Company or any
Subsidiary to be transferred to Seller, in each case without any representation
or warranty of any kind. Purchaser agrees to cooperate with Seller to obtain
necessary consents and approvals at Seller’s expense.

 

(b)                                 At or following
Closing, until all MP Assets have been transferred to Seller, Purchaser agrees (i) at
the request of Seller, to elect to the board of directors or other governing
body of any MP Project Company or any other Person comprising any portion of
the MP Assets (each, an “MP Asset Entity”) such individuals that Seller
designates; (ii) to maintain a segregated bank account for the MP Asset
Entities and (iii) that the MP Assets are solely for the benefit of Seller
and in the event Purchaser receives cash, assets, property, value or other
consideration in any form (collectively, “MP Asset Proceeds”), on
or after the date hereof, on account of or arising from any rights, claims or
interests in the MP Assets, such MP Asset Proceeds shall be segregated and
deemed to be held in constructive trust for 

 

22

 

the
benefit of Seller, and Purchaser shall notify Seller promptly after receipt of
such MP Asset Proceeds of the amount and nature of the MP Asset Proceeds
received, and as soon as practicable transfer such MP Asset Proceeds, net of
any expenses incurred by Purchaser or any Subsidiary in connection with the MP
Assets, to the Seller.

 

(c)                                  The Purchaser
and Seller agree that the ownership and operation of the MP Assets are for the economic
benefit and at the economic risk of the Seller from the date of the Closing and
that the ownership and operation of the other assets of the Seller as of the
date of this Agreement are for the economic benefit and at the economic risk of
the Purchaser from the date of the Closing. In addition, the other provisions
with respect to sharing of costs, benefits and indemnities in this Agreement
shall apply. The Seller and Purchaser agree to use commercially reasonable
efforts to cooperate to achieve the intent of the parties set forth above,
including by way of any assignments of contracts or transfers of assets or
liabilities that may be required and the transfer of the economic benefit
of contract rights relating to the assets that should be for the benefit of one
party or its Affiliates that are in the name of another party or its
Affiliates.

 

(d)                                 Purchaser
agrees to maintain at the cost and risk of Seller the aggregate $2,175,000
letters of credit in place at the date of this Agreement supporting the MP
Assets until the earlier of (i) six months after the Closing Date and (ii) such
time as such letters of credit are replaced by Seller. At the time such letters
of credit are replaced or this obligation expires, the Purchaser shall be
entitled to a return of any cash balances supporting such letters of credit
and, in the event any such letter of credit has been drawn, Purchaser shall be
entitled to reimbursement by Seller of any amounts paid by Purchaser or taken
from cash deposits by the issuer of a letter of credit.

 

(e)                                  Notwithstanding
the other clauses of this Section 7.03, Purchaser shall maintain a
minimum of $2,000,000 otherwise distributable to Seller in connection with the
MP Assets until such time as all the MP Assets have been transferred to Seller.

 

Section 7.04        Indemnification of
Directors and Officers. Until the sixth anniversary of the Closing Date, Purchaser will not,
nor will it permit any of its subsidiaries (including the Company) to, take any
action to amend any provision of the organizational or corporate charter
documents of the Company and the Subsidiaries that provides for indemnification
of directors, officers, managers, members or employees (including an amendment
effected through a merger, consolidation, sale of all or substantially all the
assets, liquidation or dissolution of any such corporation), if the effect of
such amendment would be to adversely affect the rights provided thereby to any
Person who shall have served as a director, manager, member, officer or
employee of the Company or any Subsidiary prior to the Closing Date in respect
of actions taken in such capacity on or prior to the Closing Date, unless such
Person would immediately thereafter be entitled to indemnification by Purchaser
or another subsidiary of Purchaser comparable to that provided by the affected
provision prior to any such amendment. The Purchaser agrees that any fiduciary
of a Benefit Plan shall be indemnified pursuant to the Company’s organizational
documents, except to the extent that Seller would be required to indemnify
Purchaser with respect to the MP Assets under Section 12.02(a) or
the “KEEPP” plan under Section 6.05(h).

 

(a)                                  Purchaser
shall, or shall cause the Company to, maintain, at no expense to the
beneficiaries, in effect for six years from the Closing Date the current
policies of the directors’ and officers’ liability insurance maintained by the
Company (provided, that Purchaser or the Company may substitute therefor
policies of at least the same coverage containing terms and conditions which
are not materially less advantageous to any beneficiary thereof) with respect
to matters existing or occurring at or prior to the Closing Date; provided,
however, that, if the aggregate annual premiums for such insurance shall
exceed 200% of the current aggregate annual premium, then Purchaser shall
provide or cause to be provided a policy for the applicable individuals with as
much coverage as is reasonably practicable at an 

 

23

 

annual
premium of 200% of the current aggregate annual premium. Purchaser shall have
the right to cause coverage to be extended under the Company’s directors’ and
officers’ liability insurance policies by obtaining and causing to be
maintained a six-year “tail” policy on terms and conditions no less
advantageous than the Company’s existing directors’ and officers’ liability
insurance policies, and such “tail” policy shall satisfy the provisions of this
Section. Purchaser agrees to honor and perform under, and to cause the
Company to honor and perform under, all presently existing directors’,
managers and/or officers’ indemnification agreements (or the like) entered into
by any Company or any of its Subsidiaries as presently in effect.

 

(b)                                 In the event
that Purchaser or the Company or any of its successors or assigns (i) consolidates
with or merges into any other Person and shall not be the continuing or
surviving entity of such consolidation or merger or (ii) transfers all or
substantially all of its properties and assets to any Person, then, in each
such case, the Purchaser shall make proper provisions so that the successors
and assigns of Purchaser or the Company, as the case may be, shall assume
the obligations set forth in this Section. The Purchaser shall cause the
Company to perform its obligations under this Section.

 

Section 7.05        Fulfillment of
Conditions. Purchaser will take all commercially reasonable steps necessary
or desirable and proceed diligently and in good faith to satisfy each condition
to the obligations of Seller contained in this Agreement and will not take or
fail to take any action that would reasonably be expected to result in the
nonfulfillment of any such condition.

 

ARTICLE VIII

CONDITIONS TO OBLIGATIONS OF PURCHASER

 

The obligations of Purchaser hereunder to purchase the
Seller Membership Interests are subject to the fulfillment, at or before the
Closing, of each of the following conditions (all or any of which may be
waived in whole or in part by Purchaser in its sole discretion):

 

Section 8.01        Representations and
Warranties. The representations and warranties made by Seller and GKL in
this Agreement, taken as a whole, shall be true and correct, in all respects
material to the validity and enforceability of this Agreement and to the
Business or Condition of the Company, on and as of the Private Placement
Closing as though made on and as of the Private Placement Closing or, in the
case of representations and warranties made as of a specified date earlier than
the Private Placement Closing, on and as of such earlier date.

 

Section 8.02        Performance. Seller
and GKL shall have performed and complied with, in all material respects, the
agreements, covenants and obligations required by this Agreement to be so
performed or complied with by Seller at or before the Closing.

 

Section 8.03        Officers’ Certificates.
Seller shall have delivered to Purchaser a certificate, dated the Private
Placement Closing and executed in the name and on behalf of Seller by the
Managing Member of Seller confirming that the representations and warranties
contained in Article III were true and correct in all respects
material to the validity and enforceability of this Agreement and to the
Business or Condition of the Company on and as of the Private Placement Closing
(except with respect to representations and warranties made as of a specific
date which shall be true and correct in all respects material to the validity
and enforceability of this Agreement and to the Business or Condition of the
Company as of such date), with the same force and effect as though such
representations and warranties had been made on, as of and with reference to
such time.

 

24

 

Section 8.04        HSR Act Waiting Period.
The waiting period under HSR Act shall have passed or been terminated early and
there shall be no outstanding requests for information thereunder.

 

Section 8.05        Orders and Laws. There
shall not be in effect on the Closing Date any Order or Law restraining,
enjoining or otherwise prohibiting or making illegal the consummation of any of
the transactions contemplated by this Agreement.

 

Section 8.06        Regulatory Consents and
Approvals. All consents, approvals and actions of, filings with and notices
to any Governmental or Regulatory Authority (including, for the avoidance of
doubt, an order issued by FERC granting approval under Section 203 of the
FPA and any consent required by GPC pursuant to the Power Purchase Agreement)
necessary to permit Purchaser and Seller to perform their obligations
under this Agreement and to consummate the transactions contemplated hereby
shall have been duly obtained, made or given and shall be in full force and
effect, and all terminations or expirations of waiting periods imposed by any
Governmental or Regulatory Authority necessary for the consummation of the
transactions contemplated by this Agreement shall have occurred.

 

Section 8.07        Opinion of Counsel.
Purchaser shall have received from counsel for Seller and the Company an
opinion dated the date of the Private Placement Closing substantially in the form set
forth in Exhibit A.

 

Section 8.08        Financing. All the
conditions to funding under the Credit Facility shall have been satisfied, a
borrowing request for $200 million of term loans has been issued by
Purchaser thereunder and the net proceeds of the Private Placement Closing
shall have been released from escrow.

 

Section 8.09        Contribution Agreement.
On or prior to the Closing, MatlinPatterson Global Opportunities Partners
(Cayman) II L.P. and certain of its Affiliates (“MatlinPatterson”) shall
have entered into a contribution agreement with Seller, in form and
substance attached as Exhibit C (the “Contribution Agreement”),
pursuant to which MatlinPatterson shall have agreed to contribute amounts to
Seller to support its indemnification obligations under Article XII, to
the extent Seller does not have funds available therefor, subject to the limits
set forth therein, and of which Purchaser shall be a third party beneficiary.

 

Section 8.10        MatlinPatterson Release.
On or prior to the Closing, MatlinPatterson and GKL shall have entered into a
mutual release with Purchaser, in form and substance attached as Exhibit D
(the “Release”).

 

Section 8.11        Participation Agreement.
If the industrial revenue bonds issued by Marshall County, Kentucky in connection
with the MP Asset in such county are outstanding as of the Closing Date, KGen
Power and KGen LLC shall have entered into a participation agreement and a
reassignment and assumption agreement, in form and substance attached as Exhibit E
(together, the “Participation Agreement”), pursuant to which KGen LLC
shall transfer to KGen Power the beneficial and economic interests in such
industrial revenue bonds.

 

Section 8.12        Services Agreement.
On or prior to the Closing, Purchaser and Seller shall enter into a services
agreement, in form and substance attached as Exhibit F (the “Services
Agreement”), with respect to the MP Project Companies and the MP Assets
pursuant to which Purchaser shall agree, for the benefit and at the expense of
Seller, to provide management and related services for the MP Assets until the
MP Assets are sold or transferred pursuant to Section 7.03.

 

25

 

ARTICLE IX

CONDITIONS TO OBLIGATIONS OF SELLER AND GKL

 

The obligations of GKL to contribute its Member
Interests are subject to the release from escrow of the proceeds of the Private
Placement for the use in acquiring the Membership Interests. The obligations of
the Seller to sell its Membership Interests are subject to the fulfillment, at
or before the Closing, of each of the following conditions (all or any of which
may be waived in whole or in part by Seller in its sole discretion):

 

Section 9.01        Representations and
Warranties. The representations and warranties made by Purchaser in this
Agreement, taken as a whole, shall be true and correct in all material respects
on and as of the Private Placement Closing as though made on and as of the
Private Placement Closing .

 

Section 9.02        Performance. Purchaser
shall have performed and complied with, in all material respects, the
agreements, covenants and obligations required by this Agreement to be so
performed or complied with by Purchaser at or before the Closing.

 

Section 9.03        Officers’ Certificates.
Purchaser shall have delivered to Seller a certificate, dated the Private
Placement Closing and executed in the name and on behalf of Purchaser by the
Chairman of the Board, the Chief Executive Officer or Vice President of
Purchaser confirming that the representations and warranties contained in Article IV
were true and correct in all material respects on and as of the Private
Placement Closing (except with respect to representations and warranties made
as of a specific date which shall be true and correct in all material respects
as of such date), with the same force and effect as though such representations
and warranties had been made on, as of and with reference to such time.

 

Section 9.04        HSR Act Waiting Period.
The waiting period under HSR Act shall have passed or been terminated early and
there shall be no outstanding requests for information thereunder

 

Section 9.05        Orders and Laws. There
shall not be in effect on the Closing Date any Order or Law restraining,
enjoining or otherwise prohibiting or making illegal the consummation of any of
the transactions contemplated by this Agreement.

 

Section 9.06        Regulatory Consents and
Approvals. All consents, approvals and actions of, filings with and notices
to any Governmental or Regulatory Authority (including, for the avoidance of
doubt, an order issued by FERC granting approval under Section 203 of the
FPA and any consent required by GPC pursuant to the Power Purchase Agreement)
necessary to permit Seller and Purchaser to perform their obligations
under this Agreement and to consummate the transactions contemplated hereby
shall have been duly obtained, made or given and shall be in full force and
effect, and all terminations or expirations of waiting periods imposed by any
Governmental or Regulatory Authority necessary for the consummation of the transactions
contemplated by this Agreement shall have occurred.

 

Section 9.07        Opinion of Counsel.
Seller shall have received from counsel for Purchaser an opinion dated the date
of the Private Placement Closing substantially in the form set forth in Exhibit B.

 

Section 9.08        Participation Agreement.
If required by Section 8.11, on or prior to the Closing, KGen Power
and KGen LLC shall have entered into the Participation Agreement.

 

26

 

Section 9.09        Services Agreement.
On or prior to the Closing, Purchaser and Seller shall have entered into the
Services Agreement.

 

ARTICLE X

TAX MATTERS AND POST-CLOSING TAXES

 

Section 10.01          Tax Return Filing.
Purchaser shall
be responsible for preparing or causing to be prepared Tax Returns for Company
and its Subsidiaries that are required to be filed after the Closing Date.

 

Section 10.02          Taxes Related to
Purchase of Assets. All federal, state and local sales, transfer, gains
(other than capital gains), excise, value-added or other similar Taxes,
including, without limitation, all state and local Taxes in connection with the
purchase and sale of the Seller Membership Interests pursuant to this Agreement
(the “Transaction”) and all recording and filing fees (collectively, “Transaction
Taxes” shall be paid by Seller. Purchaser and Seller agree to cooperate to
mitigate the amount of Transaction Taxes payable in connection with the
transactions contemplated under this Agreement. Seller and Purchaser agree to
assist each other reasonably in the preparation and filing of any and all Tax
Returns for or with respect to such Transaction Taxes with any and all
appropriate taxing authorities.

 

Section 10.03          Cooperation on Tax
Matters. Purchaser and Seller agree to furnish or cause to be furnished to
each other, as promptly as practicable, such information and assistance
relating to the Transaction as is reasonably necessary for the preparation and
filing of any Tax Return, claim for refund or other required or optional
filings relating to Tax matters, for the preparation for and proof of facts
during any Tax audit, for the preparation for any Tax protest, for the
prosecution or defense of any suit or other proceeding relating to Tax matters
and for the answer to any governmental or regulatory inquiry relating to Tax
matters.

 

Section 10.04          Allocation of
Purchase Price and Purchase Price Allocation Forms. Purchaser and Seller
agree to allocate the Purchase Price (which shall be increased for any
liabilities that are deemed to be assumed for federal income tax purposes)
among the assets of the Company accordance with a schedule to be prepared
by Purchaser and delivered to Seller within 60 days of the Closing and
agreed to by Seller within 15 days of delivery to Seller, such agreement
not to be unreasonably withheld. If Seller does not agree to the schedule within
such 15 days, subject to its rights to assert that such action by the
Seller is unreasonable, Seller and Purchaser shall meet within 10 days of
notice by either party and attempt to agree upon a schedule. In the event the
Parties cannot agree, the Seller and Purchaser will submit the issue to a
determination by an independent accounting firm selected by the primary
accounting firms of each of Seller and Purchaser. Seller and Purchaser will
cooperate in filing with the Internal Revenue Service their respective Forms
8594 as provided for in Section 1060 of the Code on a basis consistent
with the Allocation, and the Allocation shall be reflected on any Tax Returns
required to be filed as a result of the transactions contemplated hereby. Any
adjustment to Purchase Price, shall, to the extent possible, be allocated to
the assets that relate to such adjustment, and, subsequently, shall be
allocated to goodwill.

 

ARTICLE XI

SURVIVAL; NO OTHER REPRESENTATIONS

 

Section 11.01          Survival of
Representations, Warranties, Covenants and Agreements. Other than the
representations, warranties and covenants contained in 

 

27

 

Sections 3.01, 3.02,
3.04, 3.13, 3.14, 3.16, 4.01, 4.02, 4.07,
4.08, 6.05(h), 6.06, 6.08, 6.09, 7.03 and
7.04, which shall survive the Closing indefinitely, the representations,
warranties and covenants contained in this Agreement shall not survive the
Closing, and there shall be no liability in respect thereof, whether such
liability has accrued prior to the Closing Date or after the Closing Date, on
the part of either party or its officers, directors, employees, agents and
Affiliates. Nothing in the foregoing sentence shall preclude Purchaser from bringing
an action for fraud involving intentional and wanton conduct involving the
entire transaction provided for in this Agreement. This Section shall not
limit in any way the survival and enforceability of any covenant or agreement
of the parties hereto which by its terms contemplates performance after the
Closing Date, which shall survive for the respective periods set forth herein.

 

Section 11.02          No Other
Representations. Notwithstanding anything to the contrary contained in this
Agreement, it is the explicit intent of each party hereto that each of Seller,
Purchaser and GKL is making no representation or warranty whatsoever, express
or implied, except those representations and warranties contained in Article III,
Article IV and Article V, as the case may be, and
in any certificate delivered pursuant to Section 8.03 or Section 9.03,
as the case may be.

 

ARTICLE XII

INDEMNIFICATION AND RELEASE

 

Section 12.01          Seller’s Indemnity.
After the Closing Date, Seller shall be responsible for and shall indemnify and
hold harmless Purchaser, the Company and each Subsidiary from and against any
and all Losses (collectively, “Tax Losses”) arising from or relating to (i) all
Taxes and Tax-related fees (including Taxes and Tax-related fees resulting from
the deemed sales of assets of a Subsidiary) for (A) any taxable periods
ending on or before the Closing Date and (B) the portion of any taxable
periods ending at the close of business on the Closing Date, in excess, in each
case, of the amount specifically accrued as a reserve for such Tax as of the
Closing Date (and which is listed as a liability on the accounts of the Company
or any Subsidiary as of the Closing Date); (ii) any and all Tax Liability
arising by reason of the Company being severally liable for any Taxes of
another Person pursuant to Treasury Regulation section 1.1502-6 (or any
predecessor or successor thereof or any analogous or similar provision of Law)
with respect to any taxable period ending on or before the Closing Date and
which is in excess of the amount specifically accrued as a reserve for such
Taxes as of the Closing Date; (iii) the failure of any of the
representations and warranties contained in Section 3.08 to be true
and correct in all respects (determined without regard to any qualification related
to materiality contained therein); and (iv) the failure by Seller or any
Subsidiary to timely pay any and all Taxes required to be borne by Seller
pursuant to this Section 12.01. Notwithstanding anything to the
contrary contained in this Agreement, no amounts of indemnity shall be payable
as a result of any claim arising under this Section 12.01 unless
the Indemnified Party has given the Indemnifying Party a notice with respect to
such claim, setting forth in reasonable detail the specific facts and circumstances
pertaining thereto, (A) as soon as practical following the time at which
the Indemnified Party discovered such claim and (B) in any event prior to
the date three years after the Closing Date.

 

Section 12.02          Other Indemnification.

 

(a)                                  Subject
to paragraph (c) of this Section and the other Sections of this Article XII,
Seller shall indemnify the Purchaser Indemnified Parties in respect of, and
hold each of them harmless from and against, any and all Losses suffered,
incurred or sustained by any of them or to which any of them becomes subject,
resulting from, arising out of or relating to (i) any breach of
representation or warranty or nonfulfillment of or failure to perform any
covenant or agreement on the part of Seller contained in Sections 3.01,
3.02, 3.04, 3.13, 3.14, 3.16, 6.05(h),
6.06, 6.08, 6.09 or 7.03, (ii) the MP Assets
arising before the Closing, and (iii) the MP Assets arising after the
Closing.

 

28

 

(b)                                 Subject
to paragraph (c) of this Section and the other Sections of this Article XII,
Purchaser shall indemnify the Seller Indemnified Parties in respect of, and
hold each of them harmless from and against, any and all Losses suffered,
incurred or sustained by any of them or to which any of them becomes subject,
resulting from, arising out of or relating to (i) any breach of
representation or warranty or nonfulfillment of or failure to perform any
covenant or agreement on the part of Purchaser contained in Sections 2.01,
4.01, 4.02, 4.07, 4.08, 7.03 or 7.04, (ii) the
Company or its Subsidiaries arising before the Closing, or (iii) the
Company and its Subsidiaries arising after the Closing, except (in the case of
clause (ii) and (iii) above) to the extent related to the MP Assets
or any Liabilities or Loss assumed or retained by Seller under this Agreement
or other document ancillary hereto.

 

(c)                                  Notwithstanding
anything to the contrary contained in this Agreement, no amounts of indemnity
shall be payable as a result of any claim in respect of a Loss arising under Section 12.02(a) or
(b) unless:

 

(i)                                     with respect to
any claim, such claim involves Losses in excess of $50,000;

 

(ii)                                  and until and
then only to the extent that the applicable Indemnified Parties have suffered,
incurred, sustained or become subject to Losses referred to in such paragraph
in excess of $750,000 in the aggregate; and

 

(iii)                               the Indemnified
Party has given the Indemnifying Party a Claim Notice or Indemnity Notice, as
applicable, with respect to such claim, setting forth in reasonable detail the
specific facts and circumstances pertaining thereto, (A) as soon as
practical following the time at which the Indemnified Party discovered or
reasonably should have discovered such claim (except to the extent the
Indemnifying Party is not prejudiced by any delay in the delivery of such
notice) and (B) in any event prior to the applicable Cut-off Date;or

 

(iv)                              and to the
extent that the applicable Indemnified Party had a reasonable opportunity, but
failed, in good faith to mitigate the Loss, including but not limited to the
failure to use commercially reasonable efforts to recover under a policy of
insurance or under a contractual right of set-off or indemnity;

 

provided,
that no indemnity shall be payable as a result of any claim in respect of a
Loss arising (y) under Section 12.02(a)(i) (as to Section 6.08,
6.09 and 7.03 only) to the extent it arises from or was caused by
actions taken or failed to be taken by Purchaser or any of its Affiliates after
the Closing, and (z) under Section 12.02(b)(i) (as to Sections
7.03 and 7.04 only), to the extent it arises from or was caused by actions
taken or failed to be taken by Seller or any of its Affiliates after the
Closing; and  

 

provided further,
that the limitations contained in clauses (i) and (ii) shall not
apply to Losses arising from breach of the representations contained in Sections 3.14,
3.16, 4.07 and 4.08, the agreements contained in Sections 14.03
and 14.05, the liquidated damages payable under Section 6.08,
or amounts payable under Sections 6.05(h), 7.03(e) and
7.04.

 

(d)                                 Each of Seller
and Purchaser agree that the maximum, aggregate amount of the indemnities
payable by Seller under Section 12.02(a)(i) and (ii) and
by the Purchaser under Section 12.02(b)(i) and (ii) shall
be capped at $185,000,000 (the “Indemnity Cap”) provided that such
Indemnity Cap shall be reduced to an aggregate amount of $50,000,000 (including
all prior claims) at September 30, 2007, an aggregate amount of
$25,000,000 (including all prior claims) at May 31, 2008 and zero at January 31,
2009 (no Claim Notices or Indemnity Notices may be received after January 31,
2009) ; provided, that, any Claim Notices and/or Indemnity Notices
received prior to September 30, 2007 will be 

 

29

 

considered
under the $185,000,000 Indemnity Cap, any Claim Notices and/or Indemnity
Notices received on or after September 30, 2007 and prior to May 31,
2008 will be considered under the $50,000,000 Indemnity Cap and any Claim
Notices and/or Indemnity Notices received on or after May 31, 2008 and
prior to January 31, 2009 will be considered under the $25,000,000
Indemnity Cap.

 

(e)                                  Articles
XII and XIV shall survive the Closing.

 

Section 12.03          Method of Asserting
Claims. All claims for indemnification by any Indemnified Party under Section 12.02
will be asserted and resolved as follows:

 

(a)                                  In the event
any claim or demand in respect of which an Indemnified Party might seek
indemnity under Section 12.02 is asserted against or sought to be
collected from such Indemnified Party by a Person other than Seller, the
Purchaser or any Affiliate of Seller or of Purchaser (a “Third Party Claim”),
the Indemnified Party shall deliver a Claim Notice with reasonable promptness
to the Indemnifying Party. The Indemnifying Party will notify the Indemnified
Party as soon as practicable within the Dispute Period whether the Indemnifying
Party disputes its liability to the Indemnified Party under Section 12.02
and whether the Indemnifying Party desires, at its sole cost and expense, to
defend the Indemnified Party against such Third Party Claim.

 

(i)                                     If the
Indemnifying Party notifies the Indemnified Party within the Dispute Period
that the Indemnifying Party desires to defend the Indemnified Party with
respect to the Third Party Claim pursuant to this Section 12.03(a),
then the Indemnifying Party will have the right to defend, at the sole cost and
expense of the Indemnifying Party, such Third Party Claim by all appropriate
proceedings, which proceedings will be vigorously and diligently prosecuted by
the Indemnifying Party to a final conclusion or will be settled at the
discretion of the Indemnifying Party (but only with the consent of the
Indemnified Party, which consent will not be unreasonably withheld, in the case
of any settlement that provides for any relief other than the payment of
monetary damages as to which the Indemnified Party will be indemnified in full).
The Indemnifying Party will have full control of such defense and proceedings,
including (except as provided in the immediately preceding sentence) any
settlement thereof; provided, however, that the Indemnified Party
may, at the sole cost and expense of the Indemnified Party, at any time prior
to the Indemnifying Party’s delivery of the notice referred to in the first
sentence of this clause (i), file any motion, answer or other pleadings or
take any other action that the Indemnified Party reasonably believes to be
necessary or appropriate to protect its interests and not prejudicial to the
Indemnifying Party (it being understood and agreed that, except as provided in
clause (ii) below, if an Indemnified Party takes any such action that
is prejudicial and causes a final adjudication that is adverse to the
Indemnifying Party, the Indemnifying Party will be relieved of its obligations
hereunder with respect to the portion of such Third Party Claim prejudiced by
the Indemnified Party’s action); and provided  further, that if
requested by the Indemnifying Party, the Indemnified Party will, at the sole
cost and expense of the Indemnifying Party, cooperate with the Indemnifying
Party and its counsel in contesting any Third Party Claim that the Indemnifying
Party elects to contest, or, if appropriate and related to the Third Party
Claim in question, in making any counterclaim against the Person asserting the
Third Party Claim, or any cross-complaint against any Person (other than the
Indemnified Party or any of its Affiliates). The Indemnified Party may retain
separate counsel to represent it in, but not control, any defense or settlement
of any Third Party Claim controlled by the Indemnifying Party pursuant to this
clause (i), and the Indemnified Party will bear its own costs and expenses
with respect to such separate counsel except as provided in the preceding sentence
and except that the Indemnifying Party will pay the costs and expenses of such
separate counsel if (x) in the Indemnified Party’s good faith judgment, it
is advisable, based on advice of counsel, for the Indemnified party to be
represented by separate counsel because a conflict or potential conflict exists
between the 

 

30

 

Indemnifying Party and the
Indemnified Party which makes representation of both parties inappropriate
under applicable standards of professional conduct or (y) the named
parties to such Third Party Claim include both the Indemnifying Party and the
Indemnified Party and the Indemnified Party determines in good faith, based on
advice of counsel, that defenses are available to it that are unavailable to
the Indemnifying Party. Notwithstanding the foregoing, the Indemnified Party may retain
or take over the control of the defense or settlement of any Third Party Claim
the defense of which the Indemnifying Party has elected to control if the Indemnified
Party irrevocably waives its right to indemnity under Section 12.02
with respect to such Third Party Claim.

 

(ii)                                  If the
Indemnifying Party fails to notify the Indemnified Party within the Dispute
Period that the Indemnifying Party desires to defend the Third Party Claim
pursuant to this Section 12.03(a), then the Indemnified Party will
have the right to defend, at the sole cost and expense of the Indemnifying
Party, the Third Party Claim by all appropriate proceedings, which proceedings
will be vigorously and diligently prosecuted by the Indemnified Party to a
final conclusion or will be settled at the discretion of the Indemnified Party
(with the consent of the Indemnifying Party, which consent will not be
unreasonably withheld). The Indemnified Party will have full control of such
defense and proceedings, including (except as provided in the immediately
preceding sentence) any settlement thereof; provided, however,
that if requested by the Indemnified Party, the Indemnifying Party will, at the
sole cost and expense of the Indemnifying Party, cooperate with the Indemnified
Party and its counsel in contesting any Third Party Claim which the Indemnified
Party is contesting, or, if appropriate and related to the Third Party Claim in
question, in making any counterclaim against the Person asserting the Third
Party Claim, or any cross-complaint against any Person (other than the
Indemnifying Party or any of its Affiliates). Notwithstanding the foregoing
provisions of this clause (ii), if the Indemnifying Party has notified the
Indemnified Party within the Dispute Period that the Indemnifying Party
disputes its liability hereunder to the Indemnified Party with respect to such
Third Party Claim and if such dispute is resolved in favor of the Indemnifying Party
in the manner provided in clause (iii) below, the Indemnifying Party
will not be required to bear the costs and expenses of the Indemnified Party’s
defense pursuant to this clause (ii) or of the Indemnifying Party’s
participation therein at the Indemnified Party’s request, and the Indemnified
Party will reimburse the Indemnifying Party in full for all reasonable costs
and expenses incurred by the Indemnifying Party in connection with such
litigation. The Indemnifying Party may retain separate counsel to
represent it in, but not control, any defense or settlement controlled by the
Indemnified Party pursuant to this clause (ii), and the Indemnifying Party
will bear its own costs and expenses with respect to such participation.

 

(iii)                               If the
Indemnifying Party notifies the Indemnified Party that it does not dispute its
liability to the Indemnified Party with respect to the Third Party Claim under Section 12.02
or fails to notify the Indemnified Party within the Dispute Period whether the
Indemnifying Party disputes its liability to the Indemnified Party with respect
to such Third Party Claim, the Loss arising from such Third Party Claim will be
conclusively deemed a liability of the Indemnifying Party under Section 12.02
and the Indemnifying Party shall pay the amount of such Loss to the Indemnified
Party on demand following the final determination thereof. If the Indemnifying
Party has timely disputed its liability with respect to such claim, the
Indemnifying Party and the Indemnified Party will proceed in good faith to
negotiate a resolution of such dispute, and if not resolved through
negotiations within the Resolution Period, such dispute shall be resolved by
litigation in a court of competent jurisdiction.

 

(b)                                 In the event
any Indemnified Party should have a claim under Section 12.02
against any Indemnifying Party that does not involve a Third Party Claim, the
Indemnified Party shall deliver an 

 

31

 

Indemnity
Notice with reasonable promptness to the Indemnifying Party. If the
Indemnifying Party notifies the Indemnified Party that it does not dispute the
claim described in such Indemnity Notice or fails to notify the Indemnified
Party within the Dispute Period whether the Indemnifying Party disputes the
claim described in such Indemnity Notice, the Loss arising from the claim
specified in such Indemnity Notice will be conclusively deemed a liability of
the Indemnifying Party under Section 12.02 and the Indemnifying
Party shall pay the amount of such Loss to the Indemnified Party on demand
following the final determination thereof. If the Indemnifying Party has timely
disputed its liability with respect to such claim, the Indemnifying Party and
the Indemnified Party will proceed in good faith to negotiate a resolution of
such dispute, and if not resolved through negotiations within the Resolution
Period, such dispute shall be resolved by litigation in a court of competent
jurisdiction.

 

(c)                                  In the event of
any claim for indemnity under Section 12.02(a), Purchaser agrees to
give Seller and its Representatives reasonable access to the Books and Records
and employees of the Company and the Subsidiaries in connection with the
matters for which indemnification is sought to the extent Seller reasonably
deems necessary in connection with its rights and obligations under this Article XII.

 

Section 12.04          Exclusivity. After
the Closing, to the extent permitted by Law, the indemnities set forth in this Article XII
shall be the exclusive remedies of Purchaser and Seller and their respective
officers, directors, employees, agents and Affiliates for any
misrepresentation, breach of warranty or nonfulfillment or failure to be
performed of any covenant or agreement contained in this Agreement, and, except
for the remedy of specific performance below, the parties shall not be entitled
to a rescission of this Agreement or to any further indemnification rights or
claims of any nature whatsoever in respect thereof, all of which the parties
hereto hereby waive. The parties hereto agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. Accordingly,
the parties further agree that each party shall be entitled to an injunction or
restraining order to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the United States
or any state having jurisdiction, this being in addition to the parties’
indemnification rights hereunder.

 

Section 12.05          Right of Offset. In
the event Seller or Purchaser or any of their respective Affiliates (an “Offsetting
Party) is entitled to indemnification pursuant to this Article XII or
any other payment owing to it by another party hereto or any of such party’s
respective Affiliates under this Agreement or any other agreement entered into
in connection with the transactions contemplated hereby, the Offsetting Party
may, at its option, in lieu of obtaining a cash payment directly from the
Person from which payment is due, offset against any payment owed by the
Offsetting Party to such Person or any of its Affiliates the amount of any
claim for indemnification or any other payments to which the Offsetting Party
is entitled by reason of the provisions of this Agreement or any other
agreement entered into in connection with the transactions contemplated hereby.
To the extent that payments owed by the Offsetting Party are not sufficient to
cover the amount of any such claim, the Person subject to such offset shall pay
to the Offsetting Party the amount of such claim to which the Offsetting Party
is entitled by reason of the provisions of this Agreement or other agreement
entered into in connection with the transactions contemplated hereby, in each
case in accordance with the terms for such payment under the applicable
agreement..

 

Section 12.06          Release.

 

(a)                                  Subject to the
occurrence of the Closing, each of Seller and Purchaser, on behalf of such
Person and each of such Person’s Affiliates (for this purpose, the Company and
its Subsidiaries are deemed to be Affiliates of Purchaser) and all of their
respective heirs, representatives, successors, and assigns, hereby releases and
forever discharges each Releasee (as defined below) from any and all 

 

32

 

liabilities,
claims, demands, debts and causes of action, whether known or unknown,
suspected or unsuspected, contingent, unmatured or inchoate, both at law and in
equity, which such Person’s or any of such Person’s Affiliates or any of their
respective heirs, representatives, successors or assigns now has, have ever had
or may hereafter have against the respective Releasees arising
contemporaneously with or prior to the Closing or on account of or arising out
of any matter, cause, or event occurring contemporaneously with or prior to the
Closing Date, whether or not relating to actions pending on, or asserted after,
the Closing; provided, however, that nothing contained herein will operate to
release any Liabilities of a Releasee expressly assumed or retained by such
Releasee under this Agreement or under a document executed in connection with
the transactions contemplated hereby, or to any future transactions between the
parties.

 

(b)                                 Each of Seller
and Purchaser hereby irrevocably covenants to refrain from, directly or
indirectly, asserting any cause of action, or commencing, instituting or
causing to be commenced, any action, of any kind against any Releasee, based
upon any matter purported to be released hereby.

 

(c)                                  “Releasee”
or “Releasees” means, (i) with respect to the release given by
Purchaser in (a), each of the Seller and its officers, directors, managers,
employees, advisors, attorneys, agents, equityholders, controlling persons,
representatives and Affiliates, and each of their respective heirs, successors
and assigns and (ii) with respect to the release given by Seller in (a),
each of the Purchaser, the Company, its Subsidiaries, and their respective
officers, directors, managers, employees, advisors, attorneys, agents,
equityholders, controlling persons, representatives and Affiliates, and each of
their respective heirs, successors and assigns.

 

ARTICLE XIII

TERMINATION

 

Section 13.01          Termination. This
Agreement may be terminated, and the transactions contemplated hereby may be
abandoned:

 

(a)                                  at any time
before the Closing, by mutual written agreement of Seller and Purchaser;

 

(b)                                 at any time
before the Closing, by Seller or Purchaser, in the event that any Order or Law
becomes effective restraining, enjoining or otherwise prohibiting or making
illegal the consummation of any of the transactions contemplated by this
Agreement, upon notification of the non-terminating party by the terminating
party; or

 

(c)                                  at any time
after February 28, 2007 (or up to 30 days thereafter if the
purchasers of shares of common stock of the Purchaser shall have exercised
their rights to extend the redemption of their shares in accordance with the
Certificate of Incorporation of the Purchaser) by Seller or Purchaser upon
notification of the non-terminating party by the terminating party if the
Closing shall not have occurred on or before such date and such failure to
consummate is not caused by a breach of this Agreement by the terminating
party.

 

Section 13.02          Effect of Termination.
If this Agreement is validly terminated pursuant to Section 13.01,
this Agreement will forthwith become null and void, and there will be no
liability or obligation on the part of Seller or Purchaser (or any of
their respective officers, directors, employees, agents or other
representatives or Affiliates), except that the provisions with respect to
notices 

 

33

 

under Section 14.01, expenses in Section 14.03
and confidentiality in Section 14.05 will continue to apply
following any such termination.

 

ARTICLE XIV

MISCELLANEOUS

 

Section 14.01          Notices. All
notices, requests and other communications hereunder must be in writing and
will be deemed to have been duly given only if delivered personally or by
facsimile transmission or mailed (first class postage prepaid) to the
parties at the following addresses or facsimile numbers:

 

If to Purchaser, to:

 

*******

*******

*******

*******

*******

*******

*******

 

with a copy to:

 

*******

*******

*******

*******

*******

 

If to Seller, to:

 

*******

*******

*******

*******

*******

*******

*******

 

with a copy to:

 

*******

*******

*******

*******

*******

 

*** Certain information on this page has been omitted and filed
separately with the SEC.  Confidential treatment
has been requested with respect to the omitted portions.

 

34

 

All such notices, requests and other communications
will (i) if delivered personally to the address as provided in this
Section, be deemed given upon delivery, (ii) if delivered by facsimile
transmission to the facsimile number as provided in this Section, be deemed
given upon receipt, and (iii) if delivered by mail in the manner described
above to the address as provided in this Section, be deemed given upon receipt
(in each case regardless of whether such notice, request or other communication
is received by any other Person to whom a copy of such notice, request or other
communication is to be delivered pursuant to this Section). Any party from time
to time may change its address, facsimile number or other information for
the purpose of notices to that party by giving notice specifying such change to
the other party hereto.

 

Section 14.02          Entire Agreement.
This Agreement supersedes all prior discussions and agreements between the
parties with respect to the subject matter hereof.

 

Section 14.03          Expenses. Except
as otherwise expressly provided in this Agreement, whether or not the
transactions contemplated hereby are consummated, each party will pay its own
costs and expenses incurred in connection with the negotiation, execution and
closing of this Agreement and the transactions contemplated hereby.

 

Section 14.04          Public Announcements.
At all times at or before the Closing, Seller and Purchaser will not issue or
make any reports, statements or releases to the public with respect to this
Agreement or the transactions contemplated hereby without the consent of the
other, which consent shall not be unreasonably withheld. If either party is
unable to obtain the approval of its public report, statement or release from
the other party and such report, statement or release is, in the opinion of
legal counsel to such party, required by Law in order to discharge such party’s
disclosure obligations, then such party may make or issue the legally
required report, statement or release and promptly furnish the other party with
a copy thereof. Seller and Purchaser will also obtain the other party’s prior
approval of any press release to be issued immediately following the Closing
announcing the consummation of the transactions contemplated by this Agreement.

 

Section 14.05          Confidentiality. Each
party hereto will hold, and will use its best efforts to cause its Affiliates,
and in the case of Purchaser, any Person who has provided, or who is
considering providing, financing to Purchaser to finance all or any portion of
the Purchase Price, and their respective Representatives to hold, in strict
confidence from any Person (other than any such Affiliate, Person who has
provided, or who is considering providing, financing or Representative), unless
(i) compelled to disclose by judicial or administrative process (including
without limitation in connection with obtaining the necessary approvals of this
Agreement and the transactions contemplated hereby of Governmental or
Regulatory Authorities) or by other requirements of Law or (ii) disclosed
in an Action or Proceeding brought by a party hereto in pursuit of its rights
or in the exercise of its remedies hereunder, all confidential documents and
information concerning the other party or any of its Affiliates furnished to it
by the other party or such other party’s Representatives in connection with
this Agreement or the transactions contemplated hereby, except to the extent
that such documents or information can be shown to have been (a) previously
known by the party receiving such documents or information, (b) in the
public domain (either prior to or after the furnishing of such documents or
information hereunder) through no fault of such receiving party or (c) later
acquired by the receiving party from another source if the receiving party is
not aware that such source is under an obligation to another party hereto to
keep such documents and information confidential; provided that
following the Closing the foregoing restrictions will not apply to Purchaser’s
use of documents and information concerning the Company and the Subsidiaries
furnished by Seller hereunder. In the event the transactions contemplated
hereby are not consummated, upon the request of the other party, each party
hereto will, and will cause its Affiliates and their respective Representatives
to, promptly (and in no event later than five Business Days after such request)
redeliver or cause to be redelivered all copies of confidential documents and
information

 

35

 

furnished by the other party in connection with this
Agreement or the transactions contemplated hereby and destroy or cause to be
destroyed all notes, memoranda, summaries, analyses, compilations and other
writings related thereto or based thereon prepared by the party furnished such
documents and information or its Representatives.

 

Section 14.06          Waiver. Any term
or condition of this Agreement may be waived at any time by the party that
is entitled to the benefit thereof, but no such waiver shall be effective
unless set forth in a written instrument duly executed by or on behalf of the
party waiving such term or condition. No waiver by any party of any term or
condition of this Agreement, in any one or more instances, shall be deemed to
be or construed as a waiver of the same or any other term or condition of this
Agreement on any future occasion. All remedies, either under this Agreement or
by Law or otherwise afforded, will be cumulative and not alternative.

 

Section 14.07          Amendment. This
Agreement may be amended, supplemented or modified only by a written
instrument duly executed by or on behalf of each party hereto.

 

Section 14.08          No Third Party Beneficiary.
The terms and provisions of this Agreement are intended solely for the benefit
of each party hereto and their respective successors or permitted assigns, and
it is not the intention of the parties to confer third-party beneficiary rights
upon any other Person other than any Person entitled to indemnity under Article XII.

 

Section 14.09          No Assignment;
Binding Effect. Neither this Agreement nor any right, interest or
obligation hereunder may be assigned by any party hereto without the prior
written consent of the other party hereto and any attempt to do so will be
void, except (a) for assignments and transfers by operation of Law and (b) that
Purchaser may assign any or all of its rights, interests and obligations
hereunder to a wholly-owned subsidiary, provided that any such subsidiary
agrees in writing to be bound by all of the terms, conditions and provisions
contained herein, but no such assignment referred to in clause (b) shall
relieve Purchaser of its obligations hereunder. Subject to the preceding
sentence, this Agreement is binding upon, inures to the benefit of and is
enforceable by the parties hereto and their respective successors and assigns.

 

Section 14.10          Headings. The
headings used in this Agreement have been inserted for convenience of reference
only and do not define or limit the provisions hereof.

 

Section 14.11          Invalid Provisions.
If any provision of this Agreement is held to be illegal, invalid or
unenforceable under any present or future Law, and if the rights or obligations
of any party hereto under this Agreement will not be materially and adversely
affected thereby, (a) such provision will be fully severable, (b) this
Agreement will be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part hereof, and (c) the
remaining provisions of this Agreement will remain in full force and effect and
will not be affected by the illegal, invalid or unenforceable provision or by
its severance herefrom.

 

Section 14.12          Governing Law. This
Agreement shall be governed by and construed in accordance with the Laws of the
State of New York applicable to a Contract executed and performed in such
State, without giving effect to the conflicts of laws principles thereof.

 

Section 14.13          Counterparts. This
Agreement may be executed in any number of counterparts, each of which
will be deemed an original, but all of which together will constitute one and
the same instrument.

 

36

 

[SIGNATURES FOLLOW]

 

37

 

IN WITNESS WHEREOF, this
Agreement has been duly executed and delivered by the duly authorized officer
of each party hereto as of the date first above written.

 

 

	
   

  	
  KGEN POWER
  CORPORATION,

  
	
   

  	
  as Purchaser

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  KGEN HOLDCO LLC,

  
	
   

  	
  as Seller

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  MatlinPatterson
  Global Opportunities Partners

  II, L.P., a Majority-In-Interest Member

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  MatlinPatterson
  Global Partners II LLC,

  
	
   

  	
   

  	
  its General
  Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  GKL CAPITAL L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Titles:

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00133-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00133-of-00352.parquet"}]]