Document:

Exhibit
10.2

 

EXECUTION
VERSION

 

 

AMENDED
AND RESTATED

 

STOCKHOLDERS’
AGREEMENT,

 

 

dated
as of September 1, 2005,

 

 

by
and among

 

 

PROGRESS
RAIL SERVICES PARENT CORP.

 

 

and

 

THE
STOCKHOLDERS NAMED HEREIN

 

 

 

 

TABLE
OF CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE 1

  	
  CERTAIN DEFINITIONS

  	
  1

  
	
   

  	
   

  	
   

  
	
  1.1

  	
  Defined Terms

  	
  1

  
	
   

  	
   

  	
   

  
	
  ARTICLE 2

  	
  TRANSFERS OF SHARES

  	
  6

  
	
   

  	
   

  	
   

  
	
  2.1

  	
  Restrictions Generally;
  Securities Act

  	
  6

  
	
   

  	
   

  	
   

  
	
  2.2

  	
  Legend

  	
  6

  
	
   

  	
   

  	
   

  
	
  2.3

  	
  Transfers by
  Stockholders

  	
  7

  
	
   

  	
   

  	
   

  
	
  2.4

  	
  Drag-Along Rights

  	
  8

  
	
   

  	
   

  	
   

  
	
  2.5

  	
  Rights of Inclusion

  	
  9

  
	
   

  	
   

  	
   

  
	
  2.6

  	
  Rights of Offer

  	
  10

  
	
   

  	
   

  	
   

  
	
  ARTICLE 3

  	
  ELECTION OF DIRECTORS

  	
  10

  
	
   

  	
   

  	
   

  
	
  3.1

  	
  Board of Directors of
  Holdings

  	
  10

  
	
   

  	
   

  	
   

  
	
  3.2

  	
  Removal

  	
  11

  
	
   

  	
   

  	
   

  
	
  3.3

  	
  Vacancies

  	
  11

  
	
   

  	
   

  	
   

  
	
  3.4

  	
  Voting Agreement

  	
  11

  
	
   

  	
   

  	
   

  
	
  ARTICLE 4

  	
  CERTAIN COVENANTS OF THE PARTIES

  	
  11

  
	
   

  	
   

  	
   

  
	
  4.1

  	
  Management
  Stockholders; Additional Stockholders

  	
  11

  
	
   

  	
   

  	
   

  
	
  4.2

  	
  Purchaser
  Representative

  	
  12

  
	
   

  	
   

  	
   

  
	
  4.3

  	
  Holdback Obligations

  	
  12

  
	
   

  	
   

  	
   

  
	
  4.4

  	
  Non-Compete

  	
  12

  
	
   

  	
   

  	
   

  
	
  ARTICLE 5

  	
  MISCELLANEOUS

  	
  13

  
	
   

  	
   

  	
   

  
	
  5.1

  	
  Governing Law

  	
  13

  
	
   

  	
   

  	
   

  
	
  5.2

  	
  Entire Agreement;
  Amendments

  	
  13

  
	
   

  	
   

  	
   

  
	
  5.3

  	
  Term

  	
  13

  
	
   

  	
   

  	
   

  
	
  5.4

  	
  Certain Actions

  	
  14

  
	
   

  	
   

  	
   

  
	
  5.5

  	
  Inspection

  	
  14

  
	
   

  	
   

  	
   

  
	
  5.6

  	
  Recapitalization,
  Exchanges, Etc., Affecting Shares

  	
  14

  
	
   

  	
   

  	
   

  
	
  5.7

  	
  Waiver

  	
  15

  
	
   

  	
   

  	
   

  
	
  5.8

  	
  Successors and Assigns

  	
  15

  

 

1

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  5.9

  	
  Remedies

  	
  15

  
	
   

  	
   

  	
   

  
	
  5.10

  	
  Invalid Provisions

  	
  15

  
	
   

  	
   

  	
   

  
	
  5.11

  	
  Headings

  	
  15

  
	
   

  	
   

  	
   

  
	
  5.12

  	
  Further Assurances

  	
  15

  
	
   

  	
   

  	
   

  
	
  5.13

  	
  Gender

  	
  16

  
	
   

  	
   

  	
   

  
	
  5.14

  	
  Counterparts

  	
  16

  
	
   

  	
   

  	
   

  
	
  5.15

  	
  Notices

  	
  16

  
	
   

  	
   

  	
   

  
	
  5.16

  	
  Consent to Jurisdiction
  and Service of Process

  	
  17

  

 

2

 

AMENDED AND RESTATED
STOCKHOLDERS’ AGREEMENT, dated as of September 1, 2005 (the “Effective Date”),
by and among Progress Rail Services Parent Corp., a Delaware corporation (the “Company”),
One Equity Partners LLC, a Delaware limited liability company (“OEP”),
Gary Wilson (“GW”), Al Boyer (“AB”), Robert Day (“RD”) and
each of the individuals and entities whose names appear under the heading
“Management Group” on the signature pages hereto (individually, a “Management
Group Member” and, collectively, the “Management Group”).
Capitalized terms used and not otherwise defined herein have the respective
meanings ascribed thereto in Article I.

 

RECITALS

 

WHEREAS, on March 24, 2005 (the “Acquisition
Closing Date”), pursuant to the terms and conditions of that certain
Agreement and Plan of Merger, dated as of February 17, 2005, as amended,
modified and restated from time to time, by and among Progress Rail Services
Holdings Corp., a Delaware corporation and wholly owned direct subsidiary of
the Company (“Holdings”), PRSC Acquisition Corp., an Alabama corporation
and indirect wholly owned subsidiary of the Company (“Progress Rail Merger
Sub”), PMRC Acquisition Co., a Kentucky corporation and indirect wholly
owned subsidiary of the Company (“Progress Metal Merger Sub”), Progress
Rail Services Corporation (“Progress Rail”), Progress Metal Reclamation
Company (“Progress Metal”), Progress Fuels Corporation and Progress
Energy, Inc., (i) Progress Rail Merger Sub merged with and into Progress Rail,
with Progress Rail as the surviving corporation, and (ii) Progress Metal Merger
Sub merged with and into Progress Metal, with Progress Metal as the surviving
corporation (such mergers, collectively, the “Acquisition”); and

 

WHEREAS, in connection with the Acquisition, OEP
entered into a Stockholders’ Agreement, dated as of the Acquisition Closing
Date, which is hereby being amended and restated;

 

WHEREAS, on the Effective Date the parties
hereto will hold securities of the Company as set forth on Annex I; and

 

WHEREAS, the parties desire to enter into this
Agreement to regulate certain aspects of their relationship and to provide for,
among other things, restrictions on the transfer or other disposition of
securities of the Company and matters relating to the corporate governance of
the Company.

 

NOW,
THEREFORE, for
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:

 

ARTICLE
1

 

CERTAIN
DEFINITIONS

 

1.1          
Defined Terms.

 

(a)          
The following
capitalized terms, when used in this Agreement, have the respective meanings
set forth below:

 

“AB Stockholders” means AB and each Permitted
Transferee thereof (and each Transferee thereof that executes and delivers a
Joinder Agreement, if so provided in such Joinder Agreement) to whom such AB
Stockholder Transfers Shares and only with respect to such Transferred Shares,
so long as any such Person shall hold such Shares.

 

 

“Additional Stockholder” means any Person to
whom the Company issues Shares after the date hereof other than any OEP
Stockholder, GW Stockholder, AB Stockholder, RD Stockholder or Management
Stockholder.

 

“Affiliate” means, with respect to any Person,
any other Person that controls, is controlled by or is under common control
with such Person. For the purposes of this definition, “control” (including,
with its correlative meanings, the terms “controlled by” and “under common
control with”), as used with respect to any Person, shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of
securities, by contract or otherwise.

 

“Agreement” means this Amended and Restated
Stockholders’ Agreement and the exhibits and annexes hereto, as the same may be
amended, modified, supplemented or restated from time to time in accordance
with the terms hereof.

 

“Associate” means, with respect to any Person,
(i) any corporation or organization of which such Person is an officer or
partner or is, directly or indirectly, the beneficial owner of five (5%)
percent or more of any class of equity securities, (ii) any trust or other
estate in which such Person has a substantial beneficial interest or as to
which such Person serves as trustee or in a similar fiduciary capacity and
(iii) any relative or spouse of such Person, or any relative of such spouse,
who has the same home as such Person or who is a director or officer of such
Person or any of its parents or subsidiaries.

 

“Board” means the Board of Directors of the
Company.

 

“Commission” means the Securities and Exchange
Commission.

 

“Common Stock” means the Common Stock, par
value $.01 per share, of the Company, any securities into which such Common
Stock shall have been changed or any securities resulting from any
reclassification or recapitalization of such Common Stock.

 

“Competitor” means any company in the business
of, directly or indirectly, providing rail, railcar or transit systems parts or
repair or maintenance services, including, without limitation, railcar and
locomotive repair, trackwork, rail parts reconditioning and sales, scrap metal
recycling, railcar leasing and other rail-related products or services.

 

“Diluted Basis” means, (i) with respect to the
calculation of the number of shares of Common Stock, (A) with respect to all
outstanding shares of Common Stock, all shares of Common Stock outstanding at
the time of determination and all shares of Common Stock issuable upon the exercise,
conversion or exchange, as applicable, of all outstanding securities
exercisable, convertible or exchangeable for or into shares of Common Stock at
the time of determination and (B) with respect to shares of Common Stock owned
by one or more Stockholders, all shares of Common Stock owned by such
Stockholder or Stockholders and all shares of Common Stock issuable upon the
exercise, conversion or exchange, as applicable, of all securities owned by
such Stockholder or Stockholders exercisable, convertible or exchangeable into
shares of Common Stock and (ii) with respect to the calculation of the number
of shares of Preferred Stock, (A) with respect to all outstanding shares of
Preferred Stock, all shares of Preferred Stock outstanding at the time of determination
and (B) with respect to shares of Preferred Stock owned by one or more
Stockholders, all shares of Preferred Stock owned by such Stockholder or
Stockholders.

 

2

 

“GW Stockholders” means GW and each Permitted
Transferee thereof (and each Transferee thereof that executes and delivers a
Joinder Agreement, if so provided in such Joinder Agreement) to whom such GW
Stockholder Transfers Shares and only with respect to such Transferred Shares,
so long as any such Person shall hold such Shares.

 

“Investor Stockholders” means the OEP
Stockholders, the GW Stockholders, the AB Stockholders and the RD Stockholders.

 

“Joinder Agreement” means a Joinder Agreement
substantially in the form attached hereto as Exhibit A.

 

“Lien” means any lien, claim, restriction,
security interest, preemptive right, covenant, easement, mortgage, encumbrance
or other limitation.

 

“Management Stockholders” means the Management
Group Members and each employee of the Company or any of its Subsidiaries who
owns Shares and becomes a party hereto and each Permitted Transferee (and each
Transferee thereof that executes and delivers a Joinder Agreement, if so
provided in such Joinder Agreement) to whom such Management Stockholder
Transfers Shares and only with respect to such Transferred Shares, so long as
any such Person shall hold such Shares.

 

“New Stock” means any securities issued after
the Effective Date, other than any securities issued or issuable (i) in
connection with any stock split, stock dividend, reclassification, recapitalization,
or similar event of any securities; (ii) in a public offering registered under
the Securities Act; (iii) to officers, directors or employees of the Company or
any direct or indirect Subsidiary thereof; (iv) upon exercise, conversion,
exchange or redemption of any securities outstanding prior to the New Stock
Offer; or (v) in connection with any acquisition of assets or of any business
(whether by merger, stock acquisition, asset acquisition or otherwise).

 

“OEP Stockholders” means OEP and each Permitted
Transferee (and each Transferee thereof that executes and delivers a Joinder
Agreement, if so provided in such Joinder Agreement) to whom OEP or any OEP
Stockholder Transfers any Shares and only with respect to such Transferred
Shares, so long as any such Person shall hold such Shares.

 

“Permitted Transferee” means:

 

(i)            with respect to any Stockholder who is a
natural person, (A) the spouse, any lineal ancestor or descendant (including by
adoption and stepchildren) of such Stockholder or any of their Permitted
Transferees or any trust of which such Stockholder or any Permitted Transferees
of such Stockholder are the controlling trustees and which is established
solely for the benefit of any of the foregoing individuals, (B) the estate of
such Stockholder established by reason of any of the foregoing individual’s
death or any beneficiaries of such estate, or (C) any corporation, limited
liability company or partnership or any of their respective Permitted
Transferees, all of the interests of which are (or is) owned by one or more of
the Persons identified in this clause (i) or any of their respective Permitted
Transferees; provided, however, that (1) with respect to RD,
Oakmont Corporation, any of its directors or officers (other than any GW
Stockholder or AB Stockholder) and any sibling of RD shall also be deemed
Permitted Transferees of RD; (2) with respect to GW, any charitable
organization under the sole control of GW or any of his Permitted Transferees
shall also be deemed a Permitted Transferee of GW and (iii) with respect to AB,
any charitable organization under the sole control of AB or any of his
Permitted Transferees shall also be deemed a Permitted Transferee of AB;

 

3

 

(ii)           with respect to any OEP Stockholder, (A)
any other OEP Stockholder or any of their Permitted Transferees, (B) any
Affiliate of any OEP Stockholder or any of their Permitted Transferees, or (C)
in the case of OEP, any director, officer, employee, representative, general
partner, limited partner or member of OEP or any of their Permitted
Transferees; and

 

(iii)          with respect to any GW Stockholder, AB
Stockholder, RD Stockholder or Additional Stockholder that is not a natural
Person, any Affiliate of such Stockholder that is not also a Stockholder or an
Affiliate of another Stockholder.

 

“Person” means an individual, partnership,
corporation, limited liability company or partnership, trust, unincorporated
organization, joint venture, government (or agency or political subdivision
thereof) or any other entity of any kind.

 

“Preferred Stock” means the Series A
Participating Preferred Stock, par value $0.01 per share, of the Company, and
any securities into which such Preferred Stock shall have been changed or any
securities resulting from any reclassification or recapitalization of such
Preferred Stock.

 

“Pro Rata” means, with respect to one or more
Stockholders, (i) with respect to the Common Stock, in proportion to the number
of shares of Common Stock on a Diluted Basis owned by such Stockholder or
Stockholders and (ii) with respect to the Preferred Stock, in proportion to the
number of shares of Preferred Stock on a Diluted Basis owned by such
Stockholder or Stockholders.

 

“Qualifying Offering” means the consummation of
an underwritten public offering of Common Stock registered under the Securities
Act that together with the consummation of any other prior underwritten public
offerings of Common Stock registered under the Securities Act results in gross
proceeds to the Company of at least $90 million in the aggregate.

 

“RD Stockholders” means RD and each Permitted
Transferee thereof (and each Transferee thereof that executes and delivers a
Joinder Agreement, if so provided in such Joinder Agreement) to whom such RD
Stockholder Transfers Shares and only with respect to such Transferred Shares,
so long as any such Person shall hold such Shares.

 

 “Restricted Stock Purchase Agreements”
means the Restricted Stock Purchase Agreement entered into at any time or from
time to time on or after the date hereof, by the Company and any director,
officer, employee, consultant or agent of the Company or any of its
Subsidiaries, as any such agreement may be amended, restated or modified from
time to time, and any other agreement designated as such by the Board.

 

“Sale of the Company” means the sale of the
Company (whether by merger, consolidation, recapitalization, reorganization,
sale of securities, sale of assets or otherwise) in one transaction or series
of related transactions to a Person or Persons that is not (i) One Equity
Partners LLC or any Affiliate thereof or (ii) a Permitted Transferee of One
Equity Partners LLC or any Affiliate thereof pursuant to which such Person or
Persons (together with its Affiliates) acquires (a) securities representing at
least a majority of the voting power of the Common Stock of the Company,
assuming the conversion, exchange or exercise of all securities convertible,
exchangeable or exercisable for or into Common Stock, or (b) all or
substantially all of the Company’s assets on a consolidated basis.

 

4

 

“Sale of Preferred Stock” means the Transfer of
Shares (other than a Sale of the Company) to a Person or Persons that is not a
Stockholder or a Permitted Transferee or Associate of any Stockholder or of any
Permitted Transferee of any Stockholder in which only Preferred Stock is
Transferred.

 

“Securities Act” means the Securities Act of
1933, as amended, and the rules and regulations of the Commission thereunder.

 

“Series A Liquidation Preference” shall have
the meaning ascribed thereto in the Amended and Restated Certificate of
Incorporation of the Company, as the same may be amended from time to time.

 

“Shares” means shares of Common Stock and
shares of Preferred Stock and any other securities designated as such by the
Board.

 

“Stockholders” means each of the OEP
Stockholders, the GW Stockholders, the AB Stockholders, the RD Stockholders,
the Management Stockholders and the Additional Stockholders.

 

“Subscription Agreements” means that certain
Subscription Agreement, as of March 24, 2005, between the Company and OEP and
any other agreement pursuant to which a Stockholder purchases Shares from the
Company.

 

“Subsidiary” means, with respect to any Person,
any corporation, partnership, limited liability company, association or other
business entity of which (i) if a corporation, a majority of the total voting
power of shares of stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by that Person or
one or more of the other Subsidiaries of that Person or a combination thereof,
or (ii) if a partnership, limited liability company, association or other
business entity, a majority of the partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or indirectly, by
that Person or one or more Subsidiaries of that Person or a combination
thereof. For purposes hereof, a Person or Persons shall be deemed to have a
majority ownership interest in a partnership, limited liability company,
association or other business entity if such Person or Persons shall be
allocated a majority of partnership, limited liability company, association or
other business entity gains or losses or shall be or control the managing
director or general partner of such partnership, limited liability company,
association or other business entity.

 

“Transfer” means, directly or indirectly, any
sale, transfer, assignment, hypothecation, pledge or other disposition of any
Shares or any interests therein.

 

“Transferee” means any Person to whom a
Transfer is made.

 

(b)           Unless otherwise provided herein, all
accounting terms used in this Agreement shall be interpreted in accordance with
generally accepted accounting principles as in effect from time to time,
applied on a consistent basis.

 

(c)           The following terms, when used in this
Agreement, shall have the meanings defined for such terms in the Section set
forth below:

 

5

 

	
  Term

  	
   

  	
  Section

  
	
  “AB”

  	
   

  	
  Preamble

  
	
  “Acquisition Closing
  Date”

  	
   

  	
  Recitals

  
	
  “Buyer”

  	
   

  	
  2.6(a)

  
	
  “Company”

  	
   

  	
  Preamble

  
	
  “Effective Date”

  	
   

  	
  Preamble

  
	
  “Election Notice”

  	
   

  	
  2.6

  
	
  “GW”

  	
   

  	
  Preamble

  
	
  “GW Nominee”

  	
   

  	
  3.1(a)

  
	
  “GW Nominee Vacancy”

  	
   

  	
  3.3

  
	
  “Holdings”

  	
   

  	
  Recitals

  
	
  “Holdings Board”

  	
   

  	
  3.1(a)

  
	
  “Inclusion Notice”

  	
   

  	
  2.5(a)

  
	
  “Inclusion Right”

  	
   

  	
  2.5(b)

  
	
  “Inclusion Shares”

  	
   

  	
  2.5(b)

  
	
  “Management Group”

  	
   

  	
  Preamble

  
	
  “Management Group
  Members”

  	
   

  	
  Preamble

  
	
  “New Stock Notice”

  	
   

  	
  2.6

  
	
  “New Stock Offer”

  	
   

  	
  2.6

  
	
  “New Stock Offeree”

  	
   

  	
  2.6

  
	
  “New Stock Units”

  	
   

  	
  2.6

  
	
  “Nominee” and
  “Nominees”

  	
   

  	
  3.1(a)

  
	
  “OEP”

  	
   

  	
  Preamble

  
	
  “OEP Nominees”

  	
   

  	
  3.1(a)

  
	
  “Offerees”

  	
   

  	
  2.5(a)

  
	
  “Progress Metal”

  	
   

  	
  Recitals

  
	
  “Progress Metal Merger
  Sub”

  	
   

  	
  Recitals

  
	
  “Progress Rail”

  	
   

  	
  Recitals

  
	
  “Progress Rail Merger
  Sub”

  	
   

  	
  Recitals

  
	
  “RD”

  	
   

  	
  Preamble

  
	
  “Sale Notice”

  	
   

  	
  2.4(a)

  
	
  “Section 2.5 Offer”

  	
   

  	
  2.5(a)

  
	
  “Transferor”

  	
   

  	
  2.5(a)

  
	
  “Transferor Shares”

  	
   

  	
  2.5(a)

  
	
  “Wilson Nominee”

  	
   

  	
  3.1(a)

  

 

ARTICLE
2

TRANSFERS OF SHARES

 

2.1          
Restrictions Generally; Securities Act.

 

(a)          
Each Stockholder
agrees that it will not, directly or indirectly, Transfer any Shares in
violation of this Agreement. Any attempt by any Stockholder to Transfer any
Shares in violation of this Agreement shall be null and void and neither the
issuer of such securities nor any transfer agent of such securities shall give
any effect to such attempted Transfer in its stock records.

 

(b)          
Each Stockholder
agrees that, in addition to the other requirements relating to Transfer set
forth in this Agreement and in each Stockholder’s respective Subscription
Agreement or Restricted Stock Purchase Agreement, as applicable, it will not
Transfer any Shares except pursuant to an effective registration statement
under the Securities Act, or, unless waived by the Board, upon receipt by

 

6

 

the Company of an opinion of counsel to the
Stockholder reasonably satisfactory to the Company or a no-action letter from
the Commission addressed to the Company, to the effect that no registration statement
is required because of the availability of an exemption from registration under
the Securities Act.

 

2.2          
Legend.

 

(a)          
Each certificate
representing Shares shall be endorsed with the following legends and such other
legends as may be required by the Restricted Stock Purchase Agreements and
applicable state securities laws:

 

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO A STOCKHOLDERS’ AGREEMENT, DATED AS OF MARCH 24, 2005, AS SUCH
AGREEMENT MAY BE AMENDED, RESTATED OR MODIFIED FROM TIME TO TIME, AND MAY NOT
BE TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF
EXCEPT IN ACCORDANCE WITH THE PROVISIONS THEREOF AND ANY TRANSFEREE OF THESE
SECURITIES SHALL BE SUBJECT TO THE TERMS OF SUCH AGREEMENT. COPIES OF THE
FOREGOING AGREEMENT ARE MAINTAINED WITH THE CORPORATE RECORDS OF THE ISSUER AND
ARE AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICES OF THE ISSUER.”

 

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS, AND MAY BE OFFERED AND SOLD ONLY IF SO REGISTERED OR IF AN
EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.”

 

(b)          
Any certificate
issued at any time in exchange or substitution for any certificate bearing such
legends (except a new certificate issued upon the completion of a Transfer
pursuant to a registered public offering under the Securities Act and made in
accordance with the Securities Act) shall also bear such legends, unless in the
opinion of counsel for the Company, the Shares represented thereby are no
longer subject to the provisions of this Agreement or the restrictions imposed
under the Securities Act or state securities laws, in which case the applicable
legend (or legends) may be removed.

 

2.3          
Transfers by Stockholders.

 

(a)          
Each of the GW
Stockholders, the AB Stockholders, the RD Stockholders, the Management
Stockholders and the Additional Stockholders severally agrees not to Transfer
any Shares, except (i) to any Permitted Transferee who shall have executed and
delivered to the Company a Joinder Agreement and thereby becomes a party to
this Agreement; (ii) on the terms, and subject to the conditions, set forth in
Section 2.4 (Drag-Along Rights); (iii) on the terms, and subject to the
conditions, set forth in Section 2.5 (Rights of Inclusion); and (iv) on the
terms, and subject to the conditions, set forth in the Restricted Stock
Purchase Agreements or Subscription Agreements, if applicable.

 

(b)          
Notwithstanding
anything herein to contrary, each of the GW Stockholders, the AB Stockholders,
the RD Stockholders, Management Stockholders and Additional Stockholders
severally agrees not to Transfer any Shares to a Competitor except pursuant to
(i) a Sale of the Company, (ii) on the terms, and subject to the conditions,
set forth in Section 2.4 (Drag-Along Rights); or (iii) on the terms, and
subject to the conditions, set forth in Section 2.5 (Rights of Inclusion).

 

7

 

2.4          
Drag-Along Rights.

 

(a)          
Sale of the
Company.    If the OEP Stockholders notify (a “Sale
Notice”) each other Stockholder in writing that the OEP Stockholders desire
to effect a Sale of the Company and specify the terms and conditions of such
proposed sale then, notwithstanding any other provision of this Agreement, each
such other Stockholder shall take all necessary and desirable actions
reasonably requested by such OEP Stockholders in connection with the
consummation of such Sale of the Company, including, without limitation, if
applicable, (i) within ten (10) business days of the receipt of such notice (or
such longer period of time as such OEP Stockholders shall designate in such
notice) such other Stockholders shall cause a Pro Rata number of their respective
Shares (for the avoidance of doubt, based on the percentage of Shares, on a
Diluted Basis, owned by the OEP Stockholders that is being sold) to be sold to
the designated purchaser on the same terms and conditions and for the same per
share consideration and at the same time as the Shares being sold by such OEP
Stockholders or (ii) otherwise participating in such Sale of the Company on the
same terms and conditions and for the same consideration and at the same time
as such OEP Stockholders; provided, that, in the absence of fraud or
willful misconduct, the indemnification obligations, if any, of each
Stockholder provided to the designated purchaser shall not be greater than the
gross proceeds received by each such Stockholder in connection with the Sale of
the Company; provided further, that before the payment of any
consideration in connection with such Sale of the Company to the holders of
Common Stock, the holders of shares of Preferred Stock shall be entitled to
receive the Series A Liquidation Preference in connection with any Sale of the
Company. In furtherance, and not in limitation, of the foregoing, in connection
with a Sale of the Company effected in accordance with this Section 2.4(a),
each Stockholder will, (1) consent to and raise no objections against the Sale
of the Company or the process pursuant to which it was arranged, (2) waive any
dissenter’s rights and other similar rights and (3) execute all documents
containing such terms and conditions as those executed by all such OEP Stockholders
as directed by such OEP Stockholders. In connection with a Sale of the Company,
the Company will pay (A) the costs and expenses incurred by such OEP
Stockholders and (B) the costs and expenses incurred by the GW Stockholders, AB
Stockholders and RD Stockholders as a group (in an amount not to exceed $25,000
in the aggregate), in each case which are not otherwise paid by the purchaser
in connection with such Sale of the Company.

 

(b)          
Sale of Preferred
Stock.  If, at any time or from time to time, the OEP
Stockholders notify each other Stockholder that holds Preferred Stock in
writing that the OEP Stockholders desire to effect a Sale of Preferred Stock
and specify the terms and conditions of such proposed sale then,
notwithstanding any other provision of this Agreement, each such other
Stockholder shall take all necessary and desirable actions reasonably requested
by such OEP Stockholders in connection with the consummation of such Sale of
Preferred Stock, and within ten (10) business days of the receipt of such
notice (or such longer period of time as such OEP Stockholders shall designate
in such notice) such other Stockholders shall cause a Pro Rata number of their
respective Shares of Preferred Stock (for the avoidance of doubt, based on the percentage
of Shares of Preferred Stock, on a Diluted Basis, owned by the OEP Stockholders
that is being sold) to be sold to the designated purchaser on the same terms
and conditions and for the same per share consideration and at the same time as
the Shares of Preferred Stock being sold by such OEP Stockholders; provided,
that, in the absence of fraud or willful misconduct, the indemnification
obligations, if any, of each Stockholder provided to the designated purchaser
shall not be greater than the gross proceeds received by each such Stockholder
in connection with the Sale of Preferred Stock. In furtherance, and not in
limitation, of the foregoing, in connection with a Sale of Preferred Stock
effected in accordance with this Section 2.4(b), each Stockholder will, (i)
consent to and raise no objections against the Sale of Preferred Stock or the
process pursuant to which it was arranged, (ii) waive any dissenter’s rights
and other similar rights and (iii) execute all documents containing such terms
and conditions as those executed by all such OEP Stockholders as directed by
such OEP Stockholders. In connection with a Sale of Preferred Stock, the
Company will pay (A) the costs and expenses incurred by such OEP Stockholders
and (B) the costs and expenses incurred by the GW

 

8

 

Stockholders, AB Stockholders and RD Stockholders as a
group (in an amount not to exceed $10,000 in the aggregate), in each case which
are not otherwise paid by the purchaser in connection with such Sale of
Preferred Stock.

 

2.5          
Rights of Inclusion.

 

(a)          
If any OEP
Stockholder (the “Transferor”) proposes to Transfer any Shares (the “Transferor
Shares”) to one or more third parties (any such third parties are referred
to as the “Buyer”), then, as a condition to such Transfer, the
Transferor shall cause the Buyer to make a written offer (the “Section 2.5
Offer”) to each of the Stockholders holding Shares of the same class (and
series) as the Transferor Shares who are not Transferors (collectively, the “Offerees”),
to sell to the Buyer, at the option of each Offeree, that number of Shares of
the same class (and series) of Shares as the Transferor, determined in
accordance with Section 2.5(b), on the same terms and conditions, including,
without limitation, with respect to price, as are applicable to the Transferor
Shares, all of which will be specified in the Section 2.5 Offer; provided,
however, that the provisions of this Section 2.5 shall not apply to any
Transfer of Shares (i) by the OEP Stockholders to a direct or indirect
Permitted Transferee or (ii) by OEP that, individually or in the aggregate,
does not result in a Transfer other than to direct or indirect Permitted
Transferees (together with all previous such Transfers) of more than 15% of the
Shares of Common Stock owned by OEP on the Acquisition Closing Date to any
Person(s) who is or will be a member of the Management Group or any direct or
indirect Permitted Transferee thereof. The Transferor shall provide a written
notice (the “Inclusion Notice”) of the Section 2.5 Offer to each
Offeree, which may accept the Section 2.5 Offer by providing a written notice
of acceptance of the Section 2.5 Offer to the Transferor no later than thirty
(30) days after delivery of the Inclusion Notice.

 

(b)          
Each Offeree shall
have the right (an “Inclusion Right”) to sell pursuant to the Section
2.5 Offer a Pro Rata number of its Shares (the “Inclusion Shares”) (for
the avoidance of doubt, based on the percentage of Shares, on a Diluted Basis,
owned by the Transferor that is being sold) as is sold by the Transferor.

 

(c)          
The Buyer shall have
ninety (90) days, commencing on the day the Inclusion Notice is mailed, in
which to purchase from the Transferor and the Offerees, the number of Shares
covered by the Section 2.5 Offer with respect to which the Inclusion Right has
been exercised (and the number of Transferor Shares). The terms and conditions
of such sale, including, without limitation, price and form of consideration,
shall be as set forth in the Inclusion Notice, and the timing of such sale
shall be contemporaneously with the sale of the Transferor Shares. If at the
end of such ninety (90)-day period the Buyer has not completed the purchase of
all the Transferor Shares and all the Offerees’ Shares proposed to be sold, the
provisions of this Section 2.5 shall continue to be in effect with respect to
all such Shares as if no Inclusion Notice had been given with respect thereto.

 

(d)          
Prior to any Transfer
of Shares to a Buyer pursuant to this Section 2.5, such Buyer shall execute and
deliver to the Company, for the benefit of the Company and all Stockholders, a
Joinder Agreement and thereby become a party to this Agreement.

 

2.6          
Right of Offer.  Prior to issuing any New Stock to any OEP Stockholder, the
Company shall offer (the “New Stock Offer”) each of the GW Stockholders,
AB Stockholders and RD Stockholders (collectively, the “New Stock Offerees”
and, each, a “New Stock Offeree”) an opportunity to purchase in cash any
or all of its Pro Rata portion of such New Stock on the same terms and
conditions as offered to the OEP Stockholder(s), and, if such New Stock is to
be issued as a part of a unit of securities, the Company shall offer each of
the New Stock Offerees an opportunity to purchase any or all of its Pro Rata
portion of such unit of securities (together with the New Stock, the “New
Stock Units”) on the same terms and conditions as offered to the OEP
Stockholders. The Company shall make such New Stock Offer by

 

9

 

providing each New Stock Offeree with notice (the “New
Stock Notice”) setting forth (i) each New Stock Offeree’s Pro Rata portion
of such New Stock or of such New Stock Units, as the case may be, (ii) the cash
consideration to be paid for each share of New Stock or each unit of New Stock
Units, as the case may be, and (iii) all other material terms of such New Stock
Offer. Each New Stock Offeree may elect to accept the New Stock Offer
delivering written notice of its acceptance to the Company within seven (7)
days after delivery of the New Stock Notice (the “Election Notice”). If
any New Stock Offeree has elected to purchase the New Stock or New Stock Units,
as applicable, the sale thereof shall be consummated on the proposed closing
date set forth in the New Stock Offer which shall be no sooner than the
fifteenth (15th) day following the giving of the New Stock Notice. In the event
any New Stock Offeree elects not to exercise its right pursuant to this Section
2.6, fails to timely give an Election Notice or fails to purchase the
securities allocated to it at the closing designated therefor by the Company,
such New Stock Offeree shall cease to have any rights hereunder with respect to
such New Stock Offer and no New Stock Offeree shall have the right to purchase
the securities offered to such New Stock Offeree. For purposes of determining
the Pro Rata portion of New Stock Units under this Section 2.6, only clause (i)
of the definition of Pro Rata shall be applicable. This Section 2.6 will
terminate automatically and be of no further force and effect upon the
consummation of an underwritten public offering registered under the Securities
Act of Common Stock.

 

ARTICLE
3

 

CORPORATE
GOVERNANCE

 

3.1          
Board of Directors of the Company.

 

(a)          
Election of
Directors. From
and after the date hereof, each Stockholder shall vote or cause to be voted all
shares of Common Stock and any other voting securities of the Company over
which such Stockholder has voting control, at any regular or special meeting of
stockholders called for the purpose of filling positions on the Board of
Directors of the Company (the “Board”), or execute a written consent in
lieu of such a meeting of stockholders for the purpose of filling positions on
the Board, and shall take all actions necessary, to ensure the election to the
Board of (i) any and all individuals designated by the OEP Stockholders (the “OEP
Nominees”), and (ii) for as long as GW and his Permitted Transferees own
the Shares owned by GW on the Effective Date (other than Shares sold by them in
accordance with Sections 2.4 and 2.5 hereof), one nominee of the GW
Stockholders which, subject to Section 3.3 below, shall be GW (the “GW
Nominee”); provided, that, in the event of a GW Nominee Vacancy,
subject to Section 3.3 below, there shall be one GW Nominee for as long as RD
and his Permitted Transferees own the Shares owned by RD on the Effective Date
(other than Shares sold by them in accordance with Section 2.4 and 2.5 hereof).
The OEP Nominees and the GW Nominee are referred to, collectively, as the “Nominees”
and, individually, as a “Nominee”.

 

(b)          
Replacements. If prior to his or her election to the
Board pursuant to Section 3.1(a), any OEP Nominee shall be unable or unwilling
to serve as a director, the OEP Stockholders that nominated such OEP Nominee
shall nominate a replacement who shall then be a Nominee for purposes of
Section 3.1(a).

 

3.2          
Removal.
If (a) the OEP Stockholders that designated a Nominee pursuant to Section 3.1
request, by written notice to the other Stockholders, that such OEP Nominee
elected as a director be removed (with or without cause) or (b) with respect to
the GW Nominee, GW and his Permitted Transferees shall cease to own the Shares
owned by GW on the Effective Date or, if there shall have occurred a GW Nominee
Vacancy (as hereinafter defined), RD and his Permitted Transferees shall cease
to own the Shares owned by RD on the Effective Date (in each case, other than
the Shares sold by them in accordance with Sections 2.4 and 2.5 hereof) and the
OEP Stockholders request by written notice to the

 

10

 

other Stockholders that the GW Nominee be removed
(with or without cause), such director shall be removed, and each Stockholder
hereby agrees to vote all shares of Common Stock owned by such Stockholder and
other securities over which such Stockholder has voting control to effect such
removal or to consent in writing to effect such removal upon such request and
the GW Nominee shall lose his right to serve as a director pursuant to Section
3.1(a) hereof.

 

3.3          
Vacancies. In the event that a vacancy is created on the Board at
any time by the death, disability, retirement, resignation or removal (with or
without cause) of an OEP Nominee, the OEP Stockholders who designated such OEP
Nominee may designate a new OEP Nominee to fill the vacancy. In the event that
a vacancy with respect to the GW Nominee is created on the Board at any time by
the death or disability of GW (a “GW Nominee Vacancy”) then the
resulting vacancy on the Board may be filled by having Kashif F. Sheikh serve
as the GW Nominee; provided, however, that if Mr. Sheikh ceases
to be the Executive Vice President of, or serve in an equivalent or more senior
position of, Oakmont Corporation or is unable to serve as the GW Nominee due to
death or disability then the resulting vacancy on the Board may be filled by a
representative designated by the RD Stockholders and approved by OEP, which
approval shall be granted or withheld by OEP in its sole discretion.

 

3.4          
Voting Agreement. Each Investor Stockholder agrees to cast all votes
to which such Investor Stockholder is entitled in respect of Shares, whether at
any annual or special meeting, by written consent or otherwise, in each case as
required by law, in such a manner as the holders of Shares representing a
majority of all shares of Common Stock on a Diluted Basis held in the aggregate
by all Investor Stockholders may determine. In order to effectuate the
provisions of this Section 3.4 and, in addition and not in lieu thereof, each
of the Investor Stockholders hereby grants to OEP an irrevocable proxy (which
proxy is coupled with an interest) to vote at any annual or special meeting of
stockholders or to take action by written consent or otherwise, all of the
Shares owned or held of record by each Investor Stockholder in accordance with
the provisions of this Section 3.4.

 

ARTICLE
4

 

CERTAIN
COVENANTS OF THE PARTIES

 

4.1          
Management Stockholders; Additional Stockholders. Unless otherwise required by the OEP
Stockholders, the parties hereto agree that as a condition precedent to the
initial issuance by the Company of Shares (a) to any employee of the Company or
its Subsidiaries or (b) any Person other than any such employee, any Investor
Stockholder or any Management Stockholder, the Company shall require such
employee or other Person to execute a Joinder Agreement and thereby enter into
and become a party to this Agreement. From and after such time, the term
“Management Stockholder” shall be deemed to include such employees referred to
in (a) above and the term “Additional Stockholder” shall be deemed to include
such other Person referred to in (b) above. Nothing contained herein nor the
ownership of any Shares shall confer upon any Management Stockholder the right
to employment or to remain in the employ of the Company or any of its
Subsidiaries. Notwithstanding the foregoing, to the extent approved by the OEP
Stockholders and specified in any Joinder Agreement (or amendment thereto)
pursuant to which any employee or other Person who is deemed to be a GW
Stockholder, an AB Stockholder, a RD Stockholder or a Management Stockholder or
Additional Stockholder may become a party hereto, the provisions of this
Agreement may be varied to be more or less restrictive with respect to any such
employee or other Person who is deemed to be a GW Stockholder, an AB
Stockholder, a RD Stockholder or a Management Stockholder or Additional
Stockholder; provided, however, that with respect to any such GW
Stockholder, AB Stockholder or RD Stockholder, the consent of such GW
Stockholder, AB Stockholder or RD Stockholder, respectively, shall be required
for any such variation.

 

11

 

4.2          
Purchaser Representative. If the Company enters into any negotiation or
transaction involving the issuance of securities of another party to the
Stockholders for which Rule 506 (or any similar rule then in effect)
promulgated under the Securities Act by the Commission may be available with
respect to such negotiation or transaction (including a merger, consolidation
or other reorganization), each GW Stockholder, AB Stockholder, RD Stockholder,
Management Stockholder and Additional Stockholder (if an individual) will, at
the request of the Company, appoint a purchaser representative (as such term is
defined in Rule 501 under the Securities Act) reasonably acceptable to the
Company. If any such GW Stockholder, AB Stockholder, RD Stockholder, Management
Stockholder or Additional Stockholder appoints the purchaser representative
designated by the Company, the Company will pay the fees of such purchaser
representative, but if any such GW Stockholder, AB Stockholder, RD Stockholder,
Management Stockholder or Additional Stockholder declines to appoint the
purchaser representative designated by the Company, such GW Stockholder, AB
Stockholder, RD Stockholder, Management Stockholder or Additional Stockholder
will appoint, at his own expense, another purchaser representative reasonably
acceptable to the Company.

 

4.3          
Holdback Obligations. Unless otherwise agreed to by the OEP Stockholders,
each Stockholder agrees that, in the case of any underwritten offering of
Shares of Common Stock, each holder of Shares of Common Stock agrees, if and to
the extent requested in good faith, in writing, by the managing underwriter or
underwriters administering such offering as promptly as practicable (but in any
event prior to the commencement of the seven-day period referred to below), not
to effect any public sale or distribution of Shares of Common Stock, or any
securities convertible, exchangeable or exercisable for or into Shares of
Common Stock, during the seven (7) days prior to, and the one hundred eighty
(180) day period beginning on, the effective date of any underwritten offering;
provided, that:

 

(a)          
the directors and
each holder of at least five percent (5%) of the equity securities of the
Company (determined on a Diluted Basis) enter into agreements that are no less
restrictive;

 

(b)          
the aggregate of the
period in which such dispositions of Shares of Common Stock are restricted
pursuant to this Section 4.3 shall not exceed one hundred eighty (180) days in
any twelve-month period; and

 

(c)          
this Section 4.3
shall be applicable only during the two (2) year period following the effective
date of the final prospectus distributed pursuant to the first time a
registration statement filed under the Securities Act with the Commission
respecting an offering, whether primary or secondary, of Common Stock (or
securities convertible, exercisable or exchangeable for or into Common Stock or
rights to acquire Common Stock or such securities), which is underwritten on a
firmly committed basis, is declared effective and the securities so registered
are issued and sold.

 

4.4          
Non-Compete. Each of GW, AB and RD will, as long as any GW Stockholder, AB
Stockholder or RD Stockholder owns Shares, and, in each case, for a period of
two (2) years from the date that all such Persons cease to own any Shares,
refrain from, either alone or in conjunction with any other Person, directly or
indirectly through its present or future Affiliates or otherwise, participating
or engaging in (other than through the ownership of 3% or less of any class of
securities registered under the Securities Exchange Act of 1934, as amended),
or otherwise lending financial assistance or otherwise assisting, providing
advice or acting as a consultant to any Person participating or engaged in, the
business of, directly or indirectly, providing products and services or advice
with respect to rail, railcar or transit systems, including, without
limitation, railcar and locomotive repair, trackwork, rail parts reconditioning
and sales, scrap metal recycling, railcar leasing and other rail-related
products or services provided by the Company or any of its Subsidiaries; provided,
however, that each of GW, AB and RD may make investments in commercial
or passenger railroad companies in which such person and his

 

12

 

respective Affiliates are and remain passive investors
and neither have the right to serve nor do actually serve on the board of
directors of any such company.

 

ARTICLE
5

MISCELLANEOUS

 

5.1          
Governing Law. The corporate laws of the State of Delaware will govern all questions
concerning the relative rights of the Company and its stockholders hereunder.
All other questions concerning the construction, validity and interpretation of
this Agreement shall be governed and construed in accordance with the domestic
laws of the State of New York, without giving effect to any choice of law or
conflict of law provision or rule (whether of the State of New York or any
other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of New York.

 

5.2          
Entire Agreement; Amendments. This Agreement constitutes the entire agreement of
the parties with respect to the subject matter hereof and this Agreement may be
amended, modified or supplemented only by a written instrument duly executed by
the Company and the OEP Stockholders, except that (a) any amendment,
modification or supplement that materially, adversely and disproportionately
affects the GW Stockholders, the AB Stockholders, the RD Stockholders, the
Management Stockholders or the Additional Stockholders, as the case may be,
shall require the consent of the GW Stockholders, the AB Stockholders, the RD
Stockholders, the Management Stockholders or the Additional Stockholders,
respectively, and (b) any amendment, modification or supplement that
materially, adversely and disproportionately affects less than all of the GW
Stockholders, the AB Stockholders, the RD Stockholders, the Management
Stockholders or the Additional Stockholders, as the case may be, shall require
the consent of the GW Stockholders, the AB Stockholders, the RD Stockholders,
the Management Stockholders or the Additional Stockholders, so affected.

 

5.3          
Term.
This Agreement shall terminate upon the earliest to occur of (a) a Qualifying
Offering and (b) a Sale of the Company; provided, however, that
this Article 5 (other than Section 5.5) shall survive termination pursuant to
(a) or (b) above; and provided  further, that in the event of (i)
a Qualifying Offering, the obligations of each of the Stockholders under
Sections 4.3 and 4.4 shall not terminate until the end of the 180-day period
beginning on the effective date of the Qualifying Offering or (ii) a Sale of
the Company in which securities representing at least a majority of the voting
power of the Common Stock of the Company are acquired, the obligations of each
of the Stockholders under Section 4.4 shall not terminate as long as any GW
Stockholder, AB Stockholder or RD Stockholder (together with all other GW
Stockholders, AB Stockholders or RD Stockholders, respectively) owns 50% or
more of the shares of Common Stock or Preferred Stock (subject to any stock
split, stock dividend, reclassification, recapitalization or similar event with
respect to the Common Stock or Preferred Stock, as the case may be) owned by
GW, AB or RD, as the case may be, on the Effective Date.

 

5.4          
Certain Actions. Unless otherwise expressly provided herein, whenever any action is
required under this Agreement by:

 

(a)          
the OEP Stockholders,
it shall be by the affirmative vote of the holders representing more than fifty
percent (50%) of the total number of shares of Common Stock on a Diluted Basis
then held by the OEP Stockholders as a group, or as otherwise agreed in writing
by the OEP Stockholders as a group;

 

(b)          
the GW Stockholders,
it shall be by the affirmative vote of the holders representing more than fifty
percent (50%) of the total number of shares of Common Stock on a Diluted

 

13

 

Basis then held by the GW Stockholders as a group, or
as otherwise agreed in writing by the GW Stockholders as a group;

 

(c)          
the AB Stockholders,
it shall be by the affirmative vote of the holders representing more than fifty
percent (50%) of the total number of shares of Common Stock on a Diluted Basis
then held by the AB Stockholders as a group, or as otherwise agreed in writing
by the AB Stockholders as a group;

 

(d)          
the RD Stockholders,
it shall be by the affirmative vote of the holders representing more than fifty
percent (50%) of the total number of shares of Common Stock on a Diluted Basis
then held by the RD Stockholders as a group, or as otherwise agreed in writing
by the RD Stockholders as a group;

 

(e)          
the Management
Stockholders, it shall be by the affirmative vote of the holders representing
more than fifty percent (50%) of the total number of shares of Common Stock on
a Diluted Basis then held by the Management Stockholders as a group, or as
otherwise agreed in writing by the Management Stockholders as a group; or

 

(f)           
the Additional
Stockholders, it shall be by the affirmative vote of the holders representing
more than fifty percent (50%) of the total number of shares of Common Stock on
a Diluted Basis then held by the Additional Stockholders as a group, or as
otherwise agreed in writing by the Additional Stockholders as a group.

 

The Stockholders hereby agree, notwithstanding
anything to the contrary in any other agreement or at law or in equity, that
when any Stockholder takes any action under this Agreement or pursuant to the
Delaware General Corporation Law to give or withhold its consent in its
capacity as a Stockholder, such Stockholder shall have no duty (fiduciary or
other) to consider the interests of the Company or the other Stockholders, may
act exclusively in its own interest and shall have only the duty to act in good
faith; provided, however, that the foregoing shall in no way
affect the obligations of the parties hereto to comply with the provisions of
this Agreement.

 

5.5          
Inspection.
For so long as this Agreement shall remain in effect, this Agreement shall be
made available for inspection by any Stockholder at the principal executive
offices of the Company.

 

5.6          
Recapitalization, Exchanges, Etc., Affecting Shares. The provisions of this Agreement shall
apply, to the full extent set forth herein with respect to the Shares, to any
and all shares of the Company capital stock or any successor or assign of the
Company (whether by merger, consolidation, sale of assets, or otherwise,
including shares issued by a parent corporation in connection with a triangular
merger) which may be issued in respect of, in exchange for, or in substitution
of, any Shares and shall be appropriately adjusted for any stock dividends,
splits, reverse splits, combinations, reclassifications and the like occurring
after the date hereof.

 

5.7          
Waiver.
No waiver by any party of any term or condition of this Agreement, in one or
more instances, shall be valid unless in writing, and no such waiver shall be
deemed to be construed as a waiver of any subsequent breach or default of the
same or similar nature.

 

5.8          
Successors and Assigns. Except as otherwise expressly provided herein, this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns (including, without limitation,
Transferees of Shares); provided, however, that (a) nothing
contained herein shall be construed as granting any GW Stockholder, AB
Stockholder, RD Stockholder, Management Stockholder or Additional Stockholder
the right to Transfer any Shares except in accordance

 

14

 

with this Agreement, (b) unless otherwise provided in
the terms of the Transfer, none of the provisions of this Agreement, other than
those set forth in Sections 2.1 and 2.2 to the extent those Sections require
compliance with the Securities Act, delivery of opinions of counsel and
placement of Securities Act (or state securities laws) legends or other
legends, shall apply to any Transfer of Shares (or to the Transferee thereof)
subsequent to a Transfer of those securities pursuant to a registered public
offering under the Securities Act made in accordance with the Securities Act,
and (c) notwithstanding any Transfer of Shares among any OEP Stockholder, GW
Stockholder, AB Stockholder, RD Stockholder, Management Stockholder or
Additional Stockholder, if permitted, any restrictions under this Agreement
that are applicable to the Transferor but not the Transferee shall not be
applicable to the Transferee or to the Shares in the hands of the Transferee
following any such Transfer.

 

5.9          
Remedies.
In the event of a breach by any party to this Agreement of its obligations
under this Agreement, any party injured by such breach, in addition to being
entitled to exercise all rights granted by law, including recovery of damages
and costs (including reasonable attorneys’ fees), will be entitled to specific
performance of its rights under this Agreement. The parties agree that the
provisions of this Agreement shall be specifically enforceable, it being agreed
by the parties that the remedy at law, including monetary damages, for breach
of any such provision will be inadequate compensation for any loss and that any
defense in any action for specific performance that a remedy at law would be
adequate is waived.

 

5.10        
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,
(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 and (d) in lieu of such illegal, invalid
or unenforceable provision, there will be added automatically as a part of this
Agreement a legal, valid and enforceable provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible.

 

5.11        
Headings.
The headings used in this Agreement have been inserted for convenience of
reference only and do not define or limit the provisions hereof.

 

5.12        
Further Assurances. Each party hereto shall cooperate and shall take
such further action and shall execute and deliver such further documents as may
be reasonably requested by any other party in order to carry out the provisions
and purposes of this Agreement.

 

5.13        
Gender.
Whenever the pronouns “he” or “his” are used herein they shall also be deemed
to mean “she” or “hers” or “it” or “its” whenever applicable. Words in the
singular shall be read and construed as though in the plural and words in the
plural shall be construed as though in the singular in all cases where they
would so apply.

 

5.14        
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.

 

5.15        
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 against
written receipt or by facsimile transmission or mailed by prepaid first class
mail, return receipt requested, or sent by overnight courier prepaid to the
parties at the following addresses or facsimile numbers:

 

15

 

	
  (a)

  	
  If to an OEP
  Stockholder, to:

  
	
   

  	
   

  
	
   

  	
  One Equity Partners LLC

  
	
   

  	
  One Bank One Plaza

  
	
   

  	
  Chicago, Illinois
  60670-0610

  
	
   

  	
  Facsimile:

  	
  (312) 732-7495

  
	
   

  	
  Attention:

  	
  Thomas J. Kichler

  
	
   

  	
   

  
	
   

  	
  with a copy to:

  
	
   

  	
   

  
	
   

  	
  Morgan, Lewis &
  Bockius LLP

  
	
   

  	
  101 Park Avenue

  
	
   

  	
  New York, New York
  10178-0060

  
	
   

  	
  Facsimile:

  	
  (212) 309-6001

  
	
   

  	
  Attention:

  	
  Ira White, Esq.

  
	
   

  	
   

  
	
  (b)

  	
  If to any other
  Stockholder, to:

  
	
   

  	
   

  
	
   

  	
  The last known address
  of such Stockholder on the books and records of the Company;

  
	
   

  	
   

  
	
  (c)

  	
  If to the Company, to:

  
	
   

  	
   

  
	
   

  	
  Progress Rail Services
  Parent Corp.

  
	
   

  	
  c/o One Equity
  Partners LLC

  
	
   

  	
  One Bank One Plaza

  
	
   

  	
  Chicago, Illinois
  60670-0610

  
	
   

  	
  Facsimile:

  	
  (312) 732-7495

  
	
   

  	
  Attention:

  	
  Thomas J. Kichler

  
	
   

  	
   

  
	
   

  	
  with copies to:

  
	
   

  	
   

  
	
   

  	
  Morgan, Lewis &
  Bockius LLP

  
	
   

  	
  101 Park Avenue

  
	
   

  	
  New York, New York
  10178-0060

  
	
   

  	
  Facsimile:

  	
  (212) 309-6001

  
	
   

  	
  Attention:

  	
  Ira White, Esq.

  
	
   

  	
   

  
	
   

  	
  and

  
	
   

  	
   

  
	
   

  	
  the OEP Stockholders.

  

 

All such notices, requests and other communications
will (w) if delivered personally to the address as provided in this
Section 5.15 be deemed given upon delivery, (x) if delivered by facsimile
transmission to the facsimile number as provided in this Section 5.15 be deemed
given upon facsimile confirmation, and (y) if delivered by mail in the
manner described above to the address as provided in this Section 5.15 upon
receipt and (z) if delivered by overnight courier to the address as provided in
this Section 5.15, be deemed given upon receipt. 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
parties hereto.

 

5.16        
Consent to Jurisdiction and Service of Process.          EACH OF THE PARTIES HERETO CONSENTS TO
THE EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL

 

16

 

COURT LOCATED WITHIN THE STATE OF NEW YORK OR THE STATE OF DELAWARE AND
IRREVOCABLY AGREES THAT ALL ACTIONS OR PROCEEDINGS RELATING TO THIS AGREEMENT
SHALL BE LITIGATED IN SUCH COURTS. EACH OF THE PARTIES HERETO ACCEPTS FOR
ITSELF AND IN CONNECTION WITH ITS RESPECTIVE PROPERTIES, GENERALLY AND
UNCONDITIONALLY, THE EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES
ANY DEFENSE OF FORUM  NON  CONVENIENS, AND IRREVOCABLY AGREES
TO BE BOUND BY ANY FINAL AND NONAPPEALABLE JUDGMENT RENDERED THEREBY IN
CONNECTION WITH THIS AGREEMENT. EACH OF THE PARTIES HERETO FURTHER IRREVOCABLY
CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN
ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF VIA OVERNIGHT
COURIER, TO SUCH PARTY AT THE ADDRESS SPECIFIED IN THIS AGREEMENT, SUCH SERVICE
TO BECOME EFFECTIVE FOURTEEN CALENDAR DAYS AFTER SUCH MAILING. NOTHING HEREIN
SHALL IN ANY WAY BE DEEMED TO LIMIT THE ABILITY OF EITHER PARTY HERETO TO SERVE
ANY SUCH LEGAL PROCESS, SUMMONS, NOTICES AND DOCUMENTS IN ANY OTHER MANNER
PERMITTED BY APPLICABLE LAW OR TO OBTAIN JURISDICTION OVER OR TO BRING ACTIONS,
SUITS OR PROCEEDINGS AGAINST THE OTHER PARTY HERETO IN SUCH OTHER
JURISDICTIONS, AND IN SUCH MANNER, AS MAY BE PERMITTED BY ANY APPLICABLE LAW.

 

[Signature Page to
Follow.]

 

17

 

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

 

 

	
   

  	
  Company:

  
	
   

  	
   

  
	
   

  	
  PROGRESS RAIL SERVICES
  PARENT CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
       /s/
  William P. Ainsworth

  	
   

  
	
   

  	
   

  	
  Name:  William
  P. Ainsworth

  
	
   

  	
   

  	
  Title:  President
  and Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  OEP:

  
	
   

  	
   

  
	
   

  	
  ONE EQUITY PARTNERS LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
       /s/
  Thomas J. Kichler

  	
   

  
	
   

  	
   

  	
  Name:  Thomas
  J. Kichler

  
	
   

  	
   

  	
  Title:  Partner

  

 

[Signature Page to
Stockholders’ Agreement]

 

 

	
   

  	
  Other
  Stockholders:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
              /s/
  Gary L. Wilson

  	
   

  
	
   

  	
  Gary L. Wilson

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
              /s/
  Alfred D. Boyer

  	
   

  
	
   

  	
  Alfred D. Boyer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
              /s/
  Robert Day

  	
   

  
	
   

  	
  Robert Day

  

 

[Signature Page to
Stockholders’ Agreement]

 

 

Annex
I

 

	
  Stockholder

  	
   

  	
  Shares
  of Common Stock

  	
   

  	
  Shares
  of

  Series A Participating

  Preferred Stock

  	
   

  
	
  One Equity Partners LLC
  and its Permitted Transferees

  	
   

  	
  8,790,000

  	
  * 

  	
  1,111,112

  	
   

  
	
  Gary L. Wilson

  	
   

  	
  769,125

  	
   

  	
  97,222.2222

  	
   

  
	
  Alfred D. Boyer

  	
   

  	
  109,875

  	
   

  	
  13,888.8889

  	
   

  
	
  Robert Day

  	
   

  	
  1,758,000

  	
   

  	
  222,222.2222

  	
   

  
	
  Total

  	
   

  	
  11,427,000

  	
  * 

  	
  1,444,445.3333

  	
   

  

 

*Numbers shown for One
Equity Partners LLC and its Permitted Transferees and the total number of
shares of Common Stock outstanding reflect contemplated direct sales of shares
of Common Stock by One Equity Partners LLC to management and Lee M. Gardner. In
the event that contemplated direct sales to management and Mr. Gardner are not
effected, in whole or in part, the share numbers for OEP and Messrs. Wilson,
Boyer and Day will be appropriately readjusted.

 

 

Exhibit
A

 

Form
of Joinder Agreement

 

Progress Rail Services Parent Corp.

c/o One Equity Partners LLC

One Bank One Plaza

Chicago, Illinois 60670-0610

 

 

Attn:  Board of Directors

 

Gentlemen:

 

In consideration of the [transfer][issuance] to the
undersigned of
             
shares of Common Stock, par value $0.01 per share,] [Describe any other
security being transferred or issued] of Progress Rail Services Parent Corp., a
Delaware corporation (the “Company”), the undersigned [represents that it is a
Permitted Transferee of [Insert name of transferor] and]* agrees that, as of the
date written below, [he] [she] [it] shall become a party to that certain
Stockholders’ Agreement dated as of March 24, 2005, as such agreement may have
been or may be amended from time to time (the “Agreement”), among the Company
and the persons named therein, and [as a Permitted Transferee shall be fully
bound by, and subject to, all of the covenants, terms and conditions of the
Agreement that were applicable to the undersigned’s transferor,]* [shall be
fully bound by, and subject to, the provisions of the Agreement that are
applicable to — Describe and list exceptions, if applicable,]** as though an
original party thereto and shall be deemed a [GW Stockholder] [AB Stockholder]
[RD Stockholder] [Management Stockholder] [Additional Stockholder] [OEP Stockholder]
for purposes thereof.

 

	
   

  	
  TRANSFEREE:

  
	
   

  	
   

  
	
   

  	
  Address:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  

 

*             
Include if transferee
is a Permitted Transferee.

**           Describe.Exhibit
10.3

 

EXECUTION
VERSION

 

AGREEMENT
AND PLAN OF MERGER

 

BY AND
AMONG

 

PROGRESS
RAIL SERVICES HOLDINGS CORP.,

 

PRSC
ACQUISITION CORP.,

 

PMRC
ACQUISITION CO.,

 

PROGRESS
RAIL SERVICES CORPORATION,

 

PROGRESS
METAL RECLAMATION COMPANY,

 

PROGRESS
FUELS CORPORATION

 

AND

 

PROGRESS
ENERGY, INC. 

(WITH RESPECT TO ARTICLES III, VI, VIII AND IX)

 

FEBRUARY
17, 2005

 

 

TABLE OF
CONTENTS

 

	
  ARTICLE I

  	
  DEFINITIONS

  	
  1

  
	
   

  	
   

  	
   

  
	
   

  	
  1.1

  	
  Abatement

  	
  2

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.2

  	
  ABCA

  	
  2

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.3

  	
  Action

  	
  2

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.4

  	
  Adjustment Amount

  	
  2

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.5

  	
  Affiliate

  	
  2

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.6

  	
  Agreement

  	
  2

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.7

  	
  Applicable Lease
  Agreements

  	
  2

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.8

  	
  Asbestos

  	
  2

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.9

  	
  Asbestos Abatement

  	
  2

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.10

  	
  Asbestos Abatement
  Proposal

  	
  2

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.11

  	
  Asbestos Laws

  	
  2

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.12

  	
  Asbestos Matters

  	
  3

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.13

  	
  Audited Statements

  	
  3

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.14

  	
  Basket

  	
  3

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.15

  	
  Benefit Plan

  	
  3

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.16

  	
  Business

  	
  3

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.17

  	
  Business Combination

  	
  3

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.18

  	
  Canadian Benefit Plan

  	
  4

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.19

  	
  Canadian Pacific
  Earnout

  	
  4

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.20

  	
  Claim

  	
  4

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.21

  	
  Closing

  	
  4

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.22

  	
  Closing Date

  	
  4

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.23

  	
  Closing Financial
  Statements

  	
  4

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.24

  	
  Closing Working Capital

  	
  4

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.25

  	
  Code

  	
  4

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.26

  	
  Companies

  	
  4

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.27

  	
  Company Transaction
  Expenses

  	
  4

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.28

  	
  Consolidated
  Subsidiaries

  	
  5

  

 

i

 

	
   

  	
  1.29

  	
  Contracts

  	
  5

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.30

  	
  Current Property

  	
  5

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.31

  	
  Dispute Notification

  	
  5

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.32

  	
  DOJ

  	
  5

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.33

  	
  Effective Time

  	
  5

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.34

  	
  Environmental Claim

  	
  5

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.35

  	
  Environmental Laws

  	
  5

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.36

  	
  Environmental Matters

  	
  5

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.37

  	
  Environmental Response
  Action

  	
  6

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.38

  	
  Environmental Response
  Action Proposal

  	
  6

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.39

  	
  ERISA

  	
  6

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.40

  	
  Final Determination

  	
  6

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.41

  	
  Financial Statements

  	
  7

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.42

  	
  FTC

  	
  7

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.43

  	
  GAAP

  	
  7

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.44

  	
  Georgetown Steel
  Bankruptcy

  	
  7

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.45

  	
  Governmental Authority

  	
  7

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.46

  	
  Hazardous Materials

  	
  7

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.47

  	
  Holdings

  	
  7

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.48

  	
  Holdings Claim

  	
  7

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.49

  	
  Holdings Claim Notice

  	
  7

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.50

  	
  Holdings Controlled
  Environmental Response Action

  	
  7

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.51

  	
  HSR Act

  	
  7

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.52

  	
  Incentive Plan

  	
  7

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.53

  	
  Indebtedness

  	
  8

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.54

  	
  Independent Accountants

  	
  8

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.55

  	
  Initial Written Notice

  	
  8

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.56

  	
  Intellectual Property

  	
  8

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.57

  	
  IRS

  	
  8

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.58

  	
  KBCA

  	
  8

  

 

ii

 

	
   

  	
  1.59

  	
  Knowledge of the
  Companies

  	
  8

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.60

  	
  Laws

  	
  8

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.61

  	
  Leased Real Property

  	
  8

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.62

  	
  Least Stringent
  Abatement Remedy

  	
  9

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.63

  	
  Least Stringent
  Standard

  	
  9

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.64

  	
  Liabilities

  	
  9

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.65

  	
  Licensed Rights

  	
  9

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.66

  	
  Liens

  	
  9

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.67

  	
  Losses

  	
  9

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.68

  	
  Material Adverse Effect

  	
  9

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.69

  	
  Mergers

  	
  9

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.70

  	
  Merger Consideration

  	
  9

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.71

  	
  Merger Subs

  	
  9

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.72

  	
  Notice of Disagreement

  	
  9

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.73

  	
  Open Source License

  	
  9

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.74

  	
  Option

  	
  10

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.75

  	
  Ordinary Rework

  	
  10

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.76

  	
  Other Antitrust
  Regulations

  	
  10

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.77

  	
  Other Tax Returns

  	
  10

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.78

  	
  Owned Real Property

  	
  10

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.79

  	
  PBO

  	
  10

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.80

  	
  Pension Plan

  	
  10

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.81

  	
  Permits

  	
  10

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.82

  	
  Permitted Liens

  	
  10

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.83

  	
  Person

  	
  10

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.84

  	
  Plan

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.85

  	
  Plan Funding Statement

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.86

  	
  Post-Closing Period

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.87

  	
  Pre-Closing Period

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.88

  	
  Progress Controlled
  Environmental Response Action

  	
  11

  

 

iii

 

	
   

  	
  1.89

  	
  Progress Energy

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.90

  	
  Progress Fuels

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.91

  	
  Progress Fuels Claim

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.92

  	
  Progress Fuels Claim
  Notice

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.93

  	
  Progress Fuels Group

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.94

  	
  Progress Metal

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.95

  	
  Progress Metal Articles
  of Merger

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.96

  	
  Progress Metal Merger

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.97

  	
  Progress Metal Merger
  Consideration

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.98

  	
  Progress Metal Merger
  Sub

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.99

  	
  Progress Metal Plan

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.100

  	
  Progress Metal Shares

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.101

  	
  Progress Metal
  Surviving Corporation

  	
  12

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.102

  	
  Progress Rail

  	
  12

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.103

  	
  Progress Rail Articles
  of Merger

  	
  12

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.104

  	
  Progress Rail Merger

  	
  12

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.105

  	
  Progress Rail Merger
  Consideration

  	
  12

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.106

  	
  Progress Rail Merger
  Sub

  	
  12

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.107

  	
  Progress Rail Surviving
  Corporation

  	
  12

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.108

  	
  RCL

  	
  12

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.109

  	
  Real Property

  	
  12

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.110

  	
  Real Property Leases

  	
  12

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.111

  	
  Release

  	
  12

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.112

  	
  Relevant Group

  	
  12

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.113

  	
  Required Consents

  	
  12

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.114

  	
  Retained Leasing Assets

  	
  12

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.115

  	
  Retained Leasing
  Liabilities

  	
  12

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.116

  	
  Retained Real Property

  	
  13

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.117

  	
  Retention Plan

  	
  13

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.118

  	
  Shares

  	
  13

  

 

iv

 

	
   

  	
  1.119

  	
  Software

  	
  13

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.120

  	
  State Income Tax

  	
  13

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.121

  	
  Subsidiary

  	
  13

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.122

  	
  Surviving Corporations

  	
  13

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.123

  	
  Target Working Capital

  	
  13

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.124

  	
  Tax Claim

  	
  13

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.125

  	
  Tax Indemnitee

  	
  13

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.126

  	
  Tax Returns

  	
  13

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.127

  	
  Taxes

  	
  14

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.128

  	
  Taxing Authority

  	
  14

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.129

  	
  Trade Secrets

  	
  14

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.130

  	
  Transfer Taxes

  	
  14

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.131

  	
  Unfunded PBO

  	
  14

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.132

  	
  WARN Act

  	
  14

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.133

  	
  Warranty Obligation

  	
  14

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.134

  	
  Working Capital

  	
  14

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
  THE MERGERS

  	
  15

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.1

  	
  The Mergers

  	
  15

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.2

  	
  Merger Consideration

  	
  15

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.3

  	
  Deliveries at Closing

  	
  15

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.4

  	
  Effective Time

  	
  16

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.5

  	
  Effects of the Mergers

  	
  16

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.6

  	
  Effect on Capital Stock

  	
  17

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.7

  	
  Adjustment Amount and
  Payment

  	
  18

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.8

  	
  Adjustment Procedure

  	
  18

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.9

  	
  Further Assurances

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
  REPRESENTATIONS AND
  WARRANTIES OF PROGRESS ENERGY AND PROGRESS FUELS

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.1

  	
  Ownership of the Shares

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.2

  	
  Organization

  	
  19

  

 

v

 

	
   

  	
  3.3

  	
  Authorization;
  Execution and Delivery; Enforceability

  	
  20

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.4

  	
  No Violation or
  Conflict; Consents

  	
  20

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
  ADDITIONAL
  REPRESENTATIONS AND WARRANTIES OF PROGRESS FUELS CONCERNING THE COMPANIES AND
  THE SUBSIDIARIES

  	
  20

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.1

  	
  Organization;
  Capitalization of the Companies; Authorization; Execution and Delivery;
  Enforceability

  	
  20

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.2

  	
  Subsidiaries

  	
  21

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.3

  	
  No Violation or
  Conflict; Consents

  	
  22

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.4

  	
  Financial Statements

  	
  22

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.5

  	
  Absence of Change

  	
  23

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.6

  	
  Assets

  	
  23

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.7

  	
  Intellectual Property

  	
  25

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.8

  	
  Compliance with Law

  	
  27

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.9

  	
  Contracts, Agreements,
  etc

  	
  27

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.10

  	
  Litigation

  	
  29

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.11

  	
  Insurance

  	
  29

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.12

  	
  Employee Benefits

  	
  30

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.13

  	
  Employment Matters

  	
  32

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.14

  	
  Taxes

  	
  33

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.15

  	
  Transactions With
  Affiliates

  	
  35

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.16

  	
  Accounts Receivable;
  Accounts Payable

  	
  35

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.17

  	
  Environmental and
  Asbestos

  	
  36

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.18

  	
  Books and Records

  	
  38

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.19

  	
  Real Property

  	
  38

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.20

  	
  Substantial Customers
  and Suppliers

  	
  39

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.21

  	
  Entire Business

  	
  40

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.22

  	
  Warranty Obligations

  	
  40

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.23

  	
  Inventory

  	
  40

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.24

  	
  Foreign Corrupt
  Practices Act

  	
  40

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.25

  	
  No Broker

  	
  40

  

 

vi

 

	
   

  	
  4.26

  	
  Bank Accounts

  	
  41

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
  REPRESENTATIONS AND
  WARRANTIES OF HOLDINGS AND THE MERGER SUBS

  	
  41

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.1

  	
  Organization

  	
  41

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.2

  	
  Authorization;
  Execution and Delivery; Enforceability

  	
  41

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.3

  	
  No Violation or
  Conflict; Consents

  	
  42

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.4

  	
  No Broker

  	
  42

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.5

  	
  Purchase for Investment

  	
  42

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
  PRE-CLOSING COVENANTS

  	
  42

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.1

  	
  Conduct of Business

  	
  42

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.2

  	
  Employee Benefits
  Matters

  	
  44

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.3

  	
  Access to Information

  	
  45

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.4

  	
  Further Assurances;
  Consents; Waiver of Notices

  	
  45

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.5

  	
  Publicity

  	
  45

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.6

  	
  Confidentiality

  	
  46

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.7

  	
  No Solicitations

  	
  46

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.8

  	
  Estoppel Certificates;
  Landlord Lien Waivers; Contract Notices; Termination of Liens

  	
  46

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.9

  	
  Cooperation with Debt
  Financing

  	
  47

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.10

  	
  Insurance

  	
  47

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.11

  	
  Company Transaction
  Expenses

  	
  47

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.12

  	
  Antitrust Matters

  	
  47

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.13

  	
  Available Cash

  	
  48

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.14

  	
  Title Insurance
  Affidavits, Indemnities and Information

  	
  48

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VII

  	
  CONDITIONS PRECEDENT TO
  CONSUMMATION OF THE MERGERS

  	
  48

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.1

  	
  Conditions Precedent to
  Each Party’s Obligations to Effect the Mergers

  	
  48

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.2

  	
  Conditions Precedent to
  Obligations of Holdings to Effect the Mergers

  	
  49

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.3

  	
  Conditions Precedent to Obligations of Progress
  Fuels, Progress Rail and Progress Metal to Effect the Mergers

  	
  51

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  	
  POST-CLOSING COVENANTS

  	
  51

  

 

vii

 

	
   

  	
  8.1

  	
  Access to Books and
  Records

  	
  52

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.2

  	
  Tax Matters

  	
  52

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.3

  	
  Employee Benefits

  	
  63

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.4

  	
  WARN Act

  	
  65

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.5

  	
  Nonsolicitation;
  Noncompetition; Nondisclosure

  	
  65

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.6

  	
  Insurance

  	
  66

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.7

  	
  Directors’ and
  Officers’ Insurance

  	
  67

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.8

  	
  Recoveries

  	
  67

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IX

  	
  SURVIVAL;
  INDEMNIFICATION

  	
  67

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.1

  	
  Limitation on and
  Survival of Representations and Warranties

  	
  67

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.2

  	
  Indemnification by
  Progress Energy and Progress Fuels

  	
  68

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.3

  	
  Indemnification by
  Holdings

  	
  71

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.4

  	
  Limitation of Liability

  	
  72

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.5

  	
  Indemnity Amounts to be
  Computed on After Tax Basis

  	
  73

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.6

  	
  Exclusive Remedy

  	
  73

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.7

  	
  Procedures for
  Environmental Response Action

  	
  74

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.8

  	
  Standards for
  Environmental Response Actions

  	
  80

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.9

  	
  Insurance Proceeds

  	
  81

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.10

  	
  Procedures and
  Standards for Asbestos Abatement

  	
  81

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE X

  	
  TERMINATION

  	
  83

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.1

  	
  Termination

  	
  83

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.2

  	
  Effect of Termination

  	
  84

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XI

  	
  MISCELLANEOUS

  	
  84

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.1

  	
  Entire Agreement

  	
  84

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.2

  	
  Expenses

  	
  84

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.3

  	
  Amendment

  	
  84

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.4

  	
  Extension; Waiver

  	
  85

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.5

  	
  Governing Law

  	
  85

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.6

  	
  Assignment

  	
  85

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.7

  	
  Notices

  	
  85

  

 

viii

 

	
   

  	
  11.8

  	
  Counterparts; Headings

  	
  86

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.9

  	
  Specific Performance

  	
  86

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.10

  	
  Interpretation

  	
  86

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.11

  	
  Severability

  	
  86

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.12

  	
  No Reliance

  	
  86

  

 

ix

 

EXHIBITS

 

	
  Exhibit 6.8(a)

  	
   

  	
  Form of Collateral Access Agreement

  	
   

  
	
  Exhibit 7.2(e)

  	
   

  	
  Form of Secretary’s Certificate

  	
   

  
	
  Exhibit 7.2(g)

  	
   

  	
  Form of Opinion of Counsel of Progress Fuels and the
  Companies

  	
   

  
	
  Exhibit 7.2(m)

  	
   

  	
  Form of Employee Lease Agreement

  	
   

  
	
  Exhibit 7.3(e)

  	
   

  	
  Form of Opinion of Counsel of Holdings and the
  Merger Subs

  	
   

  
	
  Exhibit 7.3(g)

  	
   

  	
  Trademark Coexistence Agreement

  	
   

  

 

i

 

SCHEDULES

 

	
  Schedule 1.81

  	
   

  	
  Permits

  
	
  Schedule 1.114

  	
   

  	
  Retained Leasing Assets

  
	
  Schedule 1.115

  	
   

  	
  Exceptions to Retained Leasing Liabilities

  
	
  Schedule 1.116

  	
   

  	
  Retained Real Property

  
	
  Schedule 2.8

  	
   

  	
  Working Capital

  
	
  Schedule 3.1

  	
   

  	
  Ownership of Shares

  
	
  Schedule 4.1

  	
   

  	
  Organization

  
	
  Schedule 4.2(a)

  	
   

  	
  Subsidiaries; Ownership; Capitalization

  
	
  Schedule 4.2(b)

  	
   

  	
  Subsidiaries; Organization

  
	
  Schedule 4.3

  	
   

  	
  Required Consents

  
	
  Schedule 4.4

  	
   

  	
  Exceptions to Financial Statements

  
	
  Schedule 4.5

  	
   

  	
  Absence of Change

  
	
  Schedule 4.7

  	
   

  	
  Intellectual Property

  
	
  Schedule 4.8

  	
   

  	
  Compliance with Law

  
	
  Schedule 4.9

  	
   

  	
  Contracts, Agreements, etc.

  
	
  Schedule 4.10

  	
   

  	
  Litigation

  
	
  Schedule 4.11

  	
   

  	
  Insurance

  
	
  Schedule 4.12

  	
   

  	
  Employee Benefits

  
	
  Schedule 4.13

  	
   

  	
  Employment Matters

  
	
  Schedule 4.14

  	
   

  	
  Taxes

  
	
  Schedule 4.15

  	
   

  	
  Transactions With Affiliates

  
	
  Schedule 4.16

  	
   

  	
  Accounts Receivable; Accounts Payable

  
	
  Schedule 4.17

  	
   

  	
  Environmental and Asbestos

  
	
  Schedule 4.19(a)

  	
   

  	
  Owned Real Property

  
	
  Schedule 4.19(b)

  	
   

  	
  Condemnation Proceedings

  
	
  Schedule 4.19(c)

  	
   

  	
  Real Property Leases

  
	
  Schedule 4.20

  	
   

  	
  Substantial Customers and Suppliers

  
	
  Schedule 4.21

  	
   

  	
  Entire Business

  
	
  Schedule 4.22

  	
   

  	
  Warranty Obligations

  
	
  Schedule 4.26

  	
   

  	
  Bank Accounts

  
	
  Schedule 6.1(ix)

  	
   

  	
  Capital Expenditure Budget

  
	
  Schedule 6.2(c)

  	
   

  	
  Management Plans

  
	
  Schedule 7.2(j)

  	
   

  	
  Debt Financing

  

 

ii

 

AGREEMENT
AND PLAN OF MERGER

 

This Agreement and Plan of Merger (“Agreement”) is
made as of February 17, 2005 by and among Progress Rail Services Holdings
Corp., a Delaware corporation (“Holdings”), PRSC Acquisition Corp., an Alabama
corporation (“Progress Rail Merger Sub”), PMRC Acquisition Co., a Kentucky
corporation (“Progress Metal Merger Sub” and, together with Progress Rail
Merger Sub, the “Merger Subs”), Progress Rail Services Corporation, an Alabama corporation
(“Progress Rail”), Progress Metal Reclamation Company, a Kentucky corporation
(“Progress Metal” and, together with Progress Rail, the “Companies”), Progress
Fuels Corporation, a Florida corporation (“Progress Fuels”), and Progress
Energy, Inc., a North Carolina corporation (“Progress Energy”), with respect to
Articles III, VI, VIII and IX.

 

RECITALS

 

WHEREAS, Holdings (as the sole shareholder of
each of Progress Rail Merger Sub and Progress Metal Merger Sub), the Boards of
Directors of each of Progress Rail Merger Sub and Progress Metal Merger Sub and
the Boards of Directors of each of the Companies have approved and declared
advisable this Agreement and the transactions contemplated hereby, pursuant to
which Holdings will acquire (i) Progress Rail by means of a merger of Progress
Rail Merger Sub with and into Progress Rail and (ii) Progress Metal by means of
a merger of Progress Metal Merger Sub with and into Progress Metal, in each
case upon the terms and subject to the conditions set forth herein;

 

WHEREAS, concurrently with the execution hereof,
Progress Fuels, the sole holder of (i) all of the outstanding shares of common
stock, par value $1.00 per share, of Progress Rail (the “Progress Rail Shares”)
and (ii) all of the outstanding shares of common stock, no par value per share,
of Progress Metal (the “Progress Metal Shares” and, together with the Progress
Rail Shares, the “Shares”), has executed a written consent approving and
adopting this Agreement; and

 

WHEREAS, the parties hereto desire to make
certain representations, warranties, covenants and agreements in connection
with the Mergers and also to prescribe various conditions to the Mergers.

 

NOW, THEREFORE, in consideration of the foregoing
premises and the respective representations, warranties, covenants and
agreements contained herein, and intending to be legally bound hereby, the
parties hereto agree as follows:

 

ARTICLE I

DEFINITIONS

 

When used in this Agreement, the following terms shall
have the meanings specified:

 

1

 

1.1          
Abatement.  “Abatement”
when used with respect to Asbestos or an Asbestos Abatement shall include any
action to remove, abate or encapsulate the Asbestos and mitigate or eliminate
any risks associated with the Asbestos.

 

1.2          
ABCA.  “ABCA” shall
have the meaning given in Schedule 2.1.

 

1.3          
Action.  “Action” shall
mean any action, claim, suit, litigation, proceeding, arbitration or
governmental investigation or audit.

 

1.4          
Adjustment
Amount.  “Adjustment Amount” shall have the meaning given in Section
2.7.

 

1.5          
Affiliate.  “Affiliate”
shall mean (i) any director, partner, officer, agent or employee of any of the
Companies, any Subsidiary or Progress Fuels, (ii) any Person, firm or
corporation that directly or indirectly controls, is controlled by or is under
common control with any of the Companies, any Subsidiary or Progress Fuels or
(iii) any other Person that owns or controls (A) 5% or more of any class of
equity securities of that Person or any of its Affiliates or (B) 5% or more of
any class of equity securities (including any equity securities issuable upon
the exercise of any option or convertible security) of that Person or any of
its Affiliates. For purposes of this definition, “control” (including with
correlative meanings, the terms “controlling”, “controlled by”, and “under
common control with”) as applied to any Person, means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of that Person, whether through ownership of voting securities or
by contract or otherwise.  Where the term “Affiliate” is used herein with
respect to Holdings, it shall have the meaning set forth above, except that
“Holdings” shall be substituted for “any of the Companies, any Subsidiary or
Progress Fuels.”

 

1.6          
Agreement.  “Agreement”
shall mean this Agreement, together with the Exhibits and Schedules attached
hereto and the certificates delivered in connection herewith, as the same may
be amended from time to time in accordance with the terms hereof.

 

1.7          
Applicable
Lease Agreements.  “Applicable Lease Agreements” shall mean any leases
in effect as of the Closing Date pursuant to which the Companies or the
Subsidiaries lease Leased Real Property.

 

1.8          
Asbestos.  “Asbestos”
shall mean any asbestos and any asbestos-containing material or
asbestos-containing product.

 

1.9          
Asbestos
Abatement.  “Asbestos Abatement” shall have the meaning given
in Section 9.9(a).

 

1.10        
Asbestos
Abatement Proposal.  “Asbestos Abatement Proposal” shall have the
meaning given in Section 9.9(c).

 

1.11        
Asbestos
Laws.  “Asbestos Laws” shall mean all federal, national, provincial,
state or local statutes, laws, codes, common law rules (including, without
limitation, personal injury claims, premises liability claims and product
liability claims), regulations, ordinances, orders, standards, permits,
licenses or requirements (including consent decrees, judicial decisions 

 

2

 

and
administrative orders) pertaining to Asbestos, including, without limitation,
those relating to the protection, preservation, conservation or regulation of
the environment, the disposal, abatement, encapsulation, handling,
transportation, removal, storage, disturbance, dismantling, Release or exposure
to Asbestos or imposing requirements relating to public or employee health and
safety, including without limitation, any Environmental Laws to the extent that
they regulate, apply to or pertain to Asbestos.

 

1.12       
Asbestos Matters.  “Asbestos Matters” shall mean any and all Losses
(including, without limitation, any actual or alleged personal injury
(including death) or property damage) relating to, incurred in connection with
or arising out of:  (i) the actual or alleged manufacture, processing,
marketing, distribution, sale, assembly, treatment, storage, transportation,
disposal, installation, removal, disturbance, dismantling, handling or use of
Asbestos as of or prior to the Closing Date, by or on behalf of the Companies,
any of their current or former Subsidiaries or Affiliates or any of their
respective predecessors, in each case regardless of when such actual or alleged
exposure, damage or injury occurs or occurred, when any such actual or alleged
Losses become or became known or manifest or when any claim accrues; or (ii)
the actual or alleged presence of or exposure of any Person to any Asbestos as
of or prior to the Closing Date at any real property currently owned, operated,
leased or occupied by the Companies, any of their current or former
Subsidiaries or Affiliates or any of their respective predecessors or the
actual or alleged presence of or exposure of any person to Asbestos prior to,
as of, or after the Closing Date with respect to any real property formerly
owned, operated, leased or occupied by the Companies, any of their current or
former Subsidiaries or Affiliates or any of their respective predecessors, in
each case regardless of when such actual or alleged exposure, damage or injury occurs
or occurred, when any such actual or alleged Losses become or became known or
manifest or when any claim accrues; provided, however, Asbestos
Matters shall not include any costs associated with the Abatement of any
Asbestos contained in any building materials or any other alleged property
damage relating to Asbestos at any real property currently owned, operated,
leased or occupied by the Companies or any Subsidiaries to the extent such
Asbestos is in compliance with applicable Asbestos Laws as of the Closing Date.

 

1.13        
Audited
Statements.  “Audited Statements” shall have the meaning given
in Section 7.2(p).

 

1.14        
Basket.  “Basket” shall
have the meaning given in Section 9.4.

 

1.15        
Benefit
Plan.  “Benefit Plan” shall have the meaning given in Section
4.12(a).

 

1.16        
Business.  “Business”
shall mean the business of, directly or indirectly, providing products and
services or advice with respect to rail, railcar or transit systems, including,
without limitation, railcar and locomotive repair, trackwork, rail parts
reconditioning and sales, scrap metal recycling, railcar leasing and other
rail-related products or services currently provided by any of the Companies or
the Subsidiaries.

 

1.17        
Business
Combination.  “Business Combination” shall mean, with respect to
any Person, (i) any merger, consolidation or combination to which such Person
is a party, (ii) any sale, dividend, split or other disposition of any
capital stock or other equity interests of such Person, (iii) any tender
offer (including, without limitation, a self-tender), exchange offer, 

 

3

 

recapitalization,
liquidation, dissolution or similar transaction, (iv) any sale, dividend
or other disposition of all or a material portion of the assets and properties
of such Person or (v) the entering into of any agreement or understanding, or
the granting of any rights or options, with respect to any of the foregoing.

 

1.18        
Canadian
Benefit Plan.  “Canadian Benefit Plan” shall have the meaning
given in Section 4.12(a).

 

1.19        
Canadian
Pacific Earnout.  “Canadian Pacific Earnout” shall mean the amounts
payable by Chemetron-Railway Products, Inc. to Canadian Pacific Railway Company
pursuant to that Conditional Sales Agreement, dated December 15, 1999, by and
between Canadian Pacific Railway Company and Chemetron-Railway Products, Inc.

 

1.20        
Claim.  “Claim” shall
mean with respect to any Person, any and all suits, sanctions, legal
proceedings, claims, assessments, judgments, damages, penalties, fines,
assessments, awards, settlements or compromises related thereto, liabilities
(whether accrued, absolute, contingent, unliquidated or otherwise),
obligations, demands, payments, out-of-pocket costs, reasonable out-of-pocket
expenses of whatever kind (including reasonable attorneys’ and consultants’
fees and expenses and disbursements in connection therewith) and losses
incurred or sustained by or against such Person.

 

1.21        
Closing.  “Closing”
shall mean the consummation of the Mergers contemplated herein which shall
occur at 10:00 a.m., local time, on the Closing Date, at the offices of Morgan,
Lewis & Bockius LLP, New York, New York or at such other time and place as
shall be agreed by Progress Fuels and Holdings.

 

1.22        
Closing
Date.  “Closing Date” shall mean the date that the Closing actually
occurs, which shall be (i) the third business day in each of the State of
Alabama and the State of Kentucky after the satisfaction or waiver of the
closing conditions set forth in Article VII, or (ii) such other date as
Progress Fuels and Holdings may mutually agree in writing.

 

1.23        
Closing
Financial Statements.  “Closing Financial Statements” shall have the
meaning given in Section 2.8(b).

 

1.24        
Closing
Working Capital.  “Closing Working Capital” shall have the meaning
given in Section 2.8(b).

 

1.25        
Code.  “Code” shall
mean the Internal Revenue Code of 1986, as amended.

 

1.26        
Companies.  “Companies”
shall have the meaning given in the preamble to this Agreement.

 

1.27        
Company
Transaction Expenses.  “Company Transaction Expenses” shall mean any costs
and expenses, other than Taxes, of the Companies or any of the Subsidiaries
relating to the transactions contemplated by this Agreement incurred at or
prior to the Closing, including, without limitation, (i) any costs and expenses
of any agent, broker, finder, investment banker, consultant, financial,
accounting or legal advisor or other similar Person which relate to the
transactions contemplated by this Agreement, (ii) the costs of any
surveys, whether updates or 

 

4

 

otherwise,
with respect to Owned Real Property and the costs of accountants’ comfort
letters required by Holdings’ financing sources but excluding other costs, if
any, payable by the Companies pursuant to any agreement entered into with
Holdings’ debt financing sources, or (iii) any payments which become due and
payable as a result of the transactions contemplated by this Agreement.

 

1.28        
Consolidated
Subsidiaries.  “Consolidated Subsidiaries” shall have the meaning
given in Section 8.2(a).

 

1.29        
Contracts.  “Contracts”
shall have the meaning given in Section 4.9.

 

1.30        
Current
Property.  “Current Property” shall have the meaning given in Section 1.36.

 

1.31        
Dispute
Notification.  “Dispute Notification” shall have the meaning given
in Section 9.7(c).

 

1.32        
DOJ.  “DOJ” shall
have the meaning given in Section 6.13(a).

 

1.33        
Effective
Time.  “Effective Time” shall have the meaning given in Section 2.2.

 

1.34        
Environmental
Claim.  “Environmental Claim” shall mean any Claim under any
Environmental Law.

 

1.35        
Environmental Laws.  “Environmental Laws” shall mean all federal,
national, provincial, state or local statutes, laws, codes, common law rules,
regulations, ordinances, orders, standards, permits, licenses or requirements
(including consent decrees, judicial decisions and administrative orders)
pertaining to the protection, preservation, conservation or regulation of the
environment, the disposal, Release or exposure to Hazardous Materials; or
imposing requirements relating to public or employee health and safety,
including without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. § 9601 et seq., the Resource
Conservation and Recovery Act of 1976, 42 U.S.C. § 6901 et seq., the Emergency
Planning and Community Right to Know Act, 42 U.S.C. § 11001 et seq., the Clean
Air Act, 42 U.S.C. § 7401 et seq., the Federal Water Pollution Control Act, 33
U.S.C. § 1251 et seq., the Toxic Substances Control Act, 15 U.S.C. § 2601 et
seq., the Safe Drinking Water Act, 42 U.S.C. § 300F et seq., and the
Occupational Safety and Health Act, 29 U.S.C. § 651 et seq., and any statutory,
regulatory or common law doctrine related to the contamination or remediation
of property (including, without limitation, contribution, strict liability,
negligence, trespass and nuisance).  Environmental Laws shall not include
the applicability of the foregoing to Asbestos other than when the term
“Environmental Laws” is used in the definition of Asbestos Laws.

 

1.36        
Environmental
Matters.  “Environmental Matters” shall mean:  (i) the presence,
Release, threatened Release or migration of any Hazardous Materials existing or
occurring at levels, concentrations, amounts or under conditions or
circumstances that exceed or do not satisfy the requirements or criteria of the
Least Stringent Standard (as described by Section 9.8(a)) as of or prior
to the Closing Date at, from, in, to, on, or under any real property owned,
operated, occupied or leased as of the Closing Date by the Companies or the
Subsidiaries 

 

5

 

(“Current
Property”) but not to the extent of any Losses that result from any negligent
affirmative actions after the Closing Date by Holdings, or anyone acting at the
direction of Holdings, that exacerbate or worsen any such condition; (ii) any
Environmental Claim (including, without limitation, any Environmental Claim
relating to any Applicable Lease Agreement) arising out of or relating to the
presence, Release, threatened Release or migration of any Hazardous Materials
existing or occurring as of or prior to the Closing Date at, from, in, to, on,
or under any Current Property but not to the extent of any Losses that result
from any negligent affirmative actions after the Closing Date by Holdings, or
anyone acting at the direction of Holdings, that exacerbate or worsen any such
condition giving rise to the Environmental Claim; (iii) any violation of any
Environmental Law or Permit required pursuant to Environmental Laws as of or
prior to the Closing Date by the Companies or the Subsidiaries or any of their
respective actual or alleged corporate predecessors or other Persons for whom
the Companies or the Subsidiaries are held responsible; (iv) the exposure or
alleged exposure of any Person as of or prior to the Closing Date to any
Hazardous Materials present or Released at, from, in, to, on, or under any
Current Property; (v) any Environmental Claim arising out of products or
services provided or operations conducted by or on behalf of the Companies, the
Subsidiaries, any former Affiliates or any of their respective corporate
predecessors on or prior to the Closing Date; and (vi) the actual or alleged transportation,
treatment, storage, handling, or disposal or arrangement for transportation,
treatment, storage, handling or disposal of any Hazardous Materials by or on
behalf of the Companies, the Subsidiaries, any current or former Affiliates, or
any of their respective actual or alleged corporate predecessors (or any other
Persons for whom the Companies or the Subsidiaries are held responsible) as of
or prior to the Closing Date (“Off-Site Disposal Activities”), any Releases of
Hazardous Materials related to such Off-Site Disposal Activities or the
exposure or alleged exposure of any Person to any Hazardous Materials related
to any such Off-Site Disposal Activities.  Environmental Matters shall not
include Asbestos Matters which are the subject of Section 9.2(a)(vii) or
matters covered by the indemnities provided in Sections 9.2(a)(iv)
or (vi)(A) which shall be covered by the indemnities in those sections.

 

1.37        
Environmental
Response Action.  “Environmental Response Action” shall have the
meaning given in Section 9.7(a). 

 

1.38        
Environmental
Response Action Proposal.  “Environmental Response Action Proposal”
shall have the meaning given in Section 9.7(d).

 

1.39        
ERISA.  “ERISA” shall
mean the Employee Retirement Income Security Act of 1974, as amended.

 

1.40        
Final
Determination.  “Final Determination” shall mean (i) a decision,
judgment, decree or other order by any court of competent jurisdiction, which
decision, judgment, decree or other order has become final after all allowable
appeals by either party to the action have been exhausted or the time for
filing such appeals has expired and is not subject to further review or
modification, (ii) a closing agreement entered into under Section 7121 of the
Code or any other settlement or other final agreement entered into in
connection with an administrative or judicial proceeding, (iii) execution
of an Internal Revenue Service Form 870-AD or (iv) the expiration of the time
for instituting suit with respect to a claimed deficiency.

 

6

 

1.41        
Financial
Statements.  “Financial Statements” shall mean the combined
audited balance sheets of the Companies as of each of November 30, 2002 and
2003 and the combined unaudited balance sheet of the Companies as of November
30, 2004 and, in each case, the notes thereto and the related combined
statements of operations, shareholders’ equity and cash flows of the Companies
for the years then ended, all as previously provided to Holdings.

 

1.42        
FTC.  “FTC” shall
have the meaning given in Section 6.13(a).

 

1.43        
GAAP.  “GAAP” shall
mean generally accepted accounting principles as in effect in the United States
of America at the time of the preparation of the subject financial statements,
consistently applied.

 

1.44        
Georgetown
Steel Bankruptcy.  “Georgetown Steel Bankruptcy” shall mean the
proceeding, In re Georgetown Steel Company, LLC, United States Bankruptcy
Court, District of South Carolina, Case No. 03-13156.

 

1.45        
Governmental
Authority.  “Governmental Authority” shall mean any federal,
national, state, provincial, municipal or other governmental department,
commission, board, bureau, agency or instrumentality or any court or tribunal,
in each case whether of the United States, any of its possessions or
territories or of any foreign nation.

 

1.46        
Hazardous
Materials.  “Hazardous Materials” shall mean any chemicals,
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 substances,” “restricted hazardous
wastes,” “toxic substances,” “solid wastes,” “pollutants” or “contaminants” or
words or similar meaning or
regulatory effect, or any other chemical, material or substances, exposure to
which is prohibited, limited or regulated by any applicable Environmental Law,
including petroleum, petroleum hydrocarbons or petroleum products, petroleum
by-products, radioactive materials, radon, urea formaldehyde, lead or lead-containing
materials and polychlorinated biphenyls.

 

1.47        
Holdings.  “Holdings”
shall have the meaning given in the preamble to this Agreement.

 

1.48        
Holdings
Claim.  “Holdings Claim” shall have the meaning given in Section
9.2(a).

 

1.49        
Holdings
Claim Notice.  “Holdings Claim Notice” shall have the meaning
given in Section 9.2(b).

 

1.50        
Holdings
Controlled Environmental Response Action.  “Holdings Controlled
Environmental Response Action” shall have the meaning given in Section 9.7(l)(i).

 

1.51        
HSR
Act.  “HSR Act” shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (15 U.S.C. § 18a), as amended.

 

1.52        
Incentive
Plan.  “Incentive Plan” shall have the meaning given in Section
6.2(c).  

 

7

 

1.53        
Indebtedness.  “Indebtedness”
of any Person shall mean all obligations of such Person (i) for borrowed money,
(ii) evidenced by notes, bonds, debentures or similar instruments, (iii) for
reimbursement with respect to letters or credit, banker’s acceptances and
surety bonds, (iv) for the deferred revenue of goods or services (other
than trade payables or accruals incurred in the ordinary course of business),
(v) under capital leases, (vi) arising under conditional sale or title retention
agreements with respect to property acquired by such Person, (vii) for deferred
rental expenses and (viii) in the nature of guarantees of the obligations
described in clauses (i) through (vii) above of any other Person.

 

1.54        
Independent
Accountants.  “Independent Accountants” shall have the meaning
given in Section 2.8(d).

 

1.55        
Initial
Written Notice.  “Initial Written Notice” shall have the meaning
given in Section 9.7(b).

 

1.56        
Intellectual
Property.  “Intellectual Property” shall mean all United
States and foreign (i) patents and patent applications, patent disclosures
awaiting filing determination and patents subsequently issuing from patent
applications and design rights, (ii) trademarks, service marks, trade names,
corporate names, trade dress and domain names, including logos and slogans, and
registrations and applications for registrations for the foregoing and all
goodwill of the Companies and all Subsidiaries associated therewith, (iii)
registered copyrights and registrations, renewals and applications, (iv)
Software, (v) Trade Secrets, (vi) in connection with the foregoing clauses (i)
through (v) above, causes of action (including past infringement), damages and
remedies relating thereto and rights of protection of any interest therein
under the laws of all jurisdictions and (vii) copies and tangible embodiments
thereof (in whatever form or medium, including electronic media).

 

1.57        
IRS.  “IRS” shall
have the meaning given in Section 4.12(b).

 

1.58        
KBCA.  “KBCA” shall
have the meaning given in Section 2.1.

 

1.59        
Knowledge
of the Companies.  “Knowledge of the Companies” shall mean the actual
knowledge or awareness of the following Persons and, with respect to all of the
following Persons except Donald K. Davis, David B. Fountain, Carol
Nelson and David J. Hatcher, matters which such Person should have known
after due inquiry:  William P. Ainsworth, David R. Klementz,
John R. Grace, Jackie A. Nesmith, David R. Roeder, J. Duane
Cantrell, Jimmy Lawley, Michael Vanden Bergh, Glen Lehmann, Edward A.
O’Neal, Thomas R. Sullivan, Laine H. Spruiell, Gary Pickett,
H. Michael Smith, Matthew I. Hart, Donald K. Davis,
David B. Fountain, Carol Nelson and David J. Hatcher.

 

1.60        
Laws.  “Laws” shall
mean any national, federal, state, provincial, local or other law or
governmental requirement of any kind, and the rules, regulations and orders
promulgated thereunder.

 

1.61        
Leased
Real Property.  “Leased Real Property” shall have the meaning given
in Section 4.19(c). 

 

8

 

1.62        
Least
Stringent Abatement Remedy.  “Least Stringent Abatement
Remedy” shall have the meaning given in Section 9.9(d).

 

1.63        
Least
Stringent Standard.  “Least Stringent Standard” shall have the meaning
given in Section 9.8(a).

 

1.64        
Liabilities. “Liabilities” shall
mean any and all contingencies, liabilities and obligations of any kind,
character or description whatsoever, known or unknown, contingent, fixed or
otherwise, due or to become due, asserted or unasserted. 

 

1.65        
Licensed
Rights.  “Licensed Rights” shall have the meaning given in Section 4.7(a).

 

1.66        
Liens.  “Liens” shall
mean any and all liens, encumbrances, assignments, claims, title and survey
matters, mortgages, charges, deeds of trust, leases, possessory rights,
options, rights of first refusal, easements, rights of way, claims,
restrictions, pledges, security interests, impositions and any other
encumbrance of any kind or character.

 

1.67        
Losses.  “Losses” shall
have the meaning given in Section 9.2(a).

 

1.68        
Material
Adverse Effect.  “Material Adverse Effect” or “Material Adverse
Change” shall mean (i) with respect to any entity or group of entities, a
material adverse effect on or change in (or any development which, insofar as
reasonably can be foreseen, is reasonably likely to have a material adverse
effect on or change in) the business, operations, assets, Liabilities,
financial condition or results of operations of such entity or group of
entities taken as a whole, other than any change, circumstance or effect (A)
relating to the economy or securities markets in general or (B) relating
generally to the industries in which such entity or group of entities operates
and not specifically relating to it, in each case, which do not and will not
have a materially disproportionate effect on the Business or the Companies; or
(ii) a material adverse impairment of the ability of Progress Energy, Progress
Fuels or either of the Companies to perform its obligations under this
Agreement and the other agreements contemplated hereby.

 

1.69        
Mergers.  “Mergers”
shall have the meaning given in Section 2.1.

 

1.70        
Merger
Consideration.  “Merger Consideration” shall have the meaning given
in Section 2.2.

 

1.71        
Merger
Subs.  “Merger Subs” shall have the meaning given in the preamble to
this Agreement.

 

1.72        
Notice
of Disagreement.  “Notice of Disagreement” shall have the meaning
given in Section 8.3(b).

 

1.73        
Open
Source License.  “Open Source License” shall mean the Companies’ and
the Subsidiaries’ license of any Software from a third party in accordance with
the terms and conditions of any version of the GNU General Public License, GNU
Lesser General Public License or any similar license (generally on a “point and
click” download basis from the World Wide Web) pursuant to which the licensee
is permitted, on a royalty-free basis, to freely 

 

9

 

distribute,
modify, create derivative works of or otherwise incorporate all or any portion
of the relevant Software into the Intellectual Property.

 

1.74        
Option.  “Option” shall
mean, with respect to any Person, 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 interests of such Person or any security of any kind convertible into or
exchangeable or exercisable for any shares of capital stock or other equity
interests of such Person or (ii) receive any benefits or rights similar to any
rights enjoyed by or accruing to the holder of shares of capital stock or other
equity interests of such Person, including, without limitation, any rights to
participate in the equity, income or election of directors or officers of such
Person.

 

1.75        
Ordinary
Rework.  “Ordinary Rework” shall mean ordinary reworking of product in
connection with all or any part of a product shipment returned by a customer
within 90 days from the shipping date or the subject of a notice of
dissatisfaction received within 90 days from the shipping date where the
aggregate cost to the Companies and the Subsidiaries of such reworking is less
than an aggregate of two hundred fifty thousand dollars ($250,000) with respect
to the entire shipment.

 

1.76        
Other
Antitrust Regulations.  “Other Antitrust Regulations” shall mean any
foreign antitrust or competition laws.

 

1.77        
Other
Tax Returns.  “Other Tax Returns” shall have the meaning given in
Section 8.2(f)(i).

 

1.78        
Owned
Real Property.  “Owned Real Property” shall have the meaning given
in Section 4.19(a).

 

1.79        
PBO.  “PBO” shall
have the meaning given in Section 8.3(b).

 

1.80        
Pension
Plan.  “Pension Plan” shall have the meaning given in Section
8.3(b).

 

1.81        
Permits.  “Permits”
shall mean all written permits, licenses and governmental authorizations,
registrations and approvals required, as of the date hereof, to be obtained in
the conduct of the business of the Companies or the Subsidiaries, including,
without limitation, those Permits listed on Schedule 1.81.

 

1.82        
Permitted
Liens.  “Permitted Liens” shall mean (i) liens for Taxes not yet due
and payable and (ii) title defects that do not materially interfere with the
existing use or enjoyment of the assets of the Companies or any Subsidiary
subject thereto or affected thereby, do not, individually or in the aggregate,
materially detract from the value of the assets subject thereto or affected
thereby, and do not materially and adversely affect the marketability thereof
or render title to any real property unmarketable.

 

1.83        
Person.  “Person” shall
mean any natural person, corporation, general partnership, limited partnership,
limited liability company or partnership, proprietorship, other business
organization, trust, union, association or governmental or regulatory
authority.

 

10

 

1.84        
Plan.  “Plan” shall
have the meaning given in Section 4.12(a).

 

1.85        
Plan
Funding Statement.  “Plan Funding Statement” shall have the meaning
given in Section 8.3(b).

 

1.86        
Post-Closing
Period.  “Post-Closing Period” shall have the meaning given in Section
8.2(g)(iii)(b).

 

1.87        
Pre-Closing
Period.  “Pre-Closing Period” shall have the meaning given in Section
8.2(g)(iii)(b).

 

1.88        
Progress
Controlled Environmental Response Action.  “Progress Controlled
Environmental Response Action” shall have the meaning given in Section 9.7(a).

 

1.89        
Progress
Energy.  “Progress Energy” shall have the meaning given in the preamble
to this Agreement.

 

1.90        
Progress
Fuels.  “Progress Fuels” shall have the meaning given in the preamble
to this Agreement.

 

1.91        
Progress
Fuels Claim.  “Progress Fuels Claim” shall have the meaning given
in Section 9.3(a).

 

1.92        
Progress
Fuels Claim Notice.  “Progress Fuels Claim Notice” shall have the
meaning given in Section 9.3(b).

 

1.93        
Progress
Fuels Group.  “Progress Fuels Group” shall have the meaning given
in Section 8.2(a).

 

1.94        
Progress
Metal.  “Progress Metal” shall have the meaning given in the preamble
of to this Agreement.

 

1.95        
Progress
Metal Articles of Merger.  “Progress Metal Articles of Merger” shall
have the meaning given in Section 2.4.

 

1.96        
Progress
Metal Merger.  “Progress Metal Merger” shall have the meaning
given in Section 2.1. 

 

1.97        
Progress
Metal Merger Consideration.  “Progress Metal Merger
Consideration” shall have the meaning given in Section 2.2.

 

1.98        
Progress
Metal Merger Sub.  “Progress Metal Merger Sub” shall have the meaning
given in the preamble to this Agreement.

 

1.99        
Progress
Metal Plan.  “Progress Metal Plan” shall have the meaning given
in Section 8.3(b).

 

1.100      
Progress
Metal Shares.  “Progress Metal Shares” shall have the meaning
given in the Recitals to this Agreement.

 

11

 

1.101      
Progress
Metal Surviving Corporation.  “Progress Metal Surviving
Corporation” shall have the meaning given in Section 2.1.

 

1.102      
Progress
Rail.  “Progress Rail” shall have the meaning given in the preamble to
this Agreement.

 

1.103      
Progress
Rail Articles of Merger.  “Progress Rail Articles of Merger” shall
have the meaning given in Section 2.4.

 

1.104      
Progress
Rail Merger.  “Progress Rail Merger” shall have the meaning given
in Section 2.1.

 

1.105      
Progress
Rail Merger Consideration.  “Progress Rail Merger Consideration” shall
have the meaning given in Section 2.2.

 

1.106      
Progress
Rail Merger Sub.  “Progress Rail Merger Sub” shall have the meaning
given in the preamble to this Agreement.

 

1.107      
Progress
Rail Surviving Corporation.  “Progress Rail Surviving
Corporation” shall have the meaning given in Section 2.1.

 

1.108      
RCL.  “RCL” shall
mean Railcar, Ltd., a Georgia corporation.

 

1.109      
Real
Property.  “Real Property” shall have the meaning given in Section
4.19(c).

 

1.110      
Real
Property Leases.  “Real Property Leases” shall have the meaning given
in Section 4.9(c).

 

1.111      
Release.  “Release”
shall mean any spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching, dumping or disposing of Hazardous
Materials into the environment.

 

1.112      
Relevant
Group.  “Relevant Group” shall mean any affiliated, combined,
consolidated, unitary or similar group of which any of the Companies or any of
their Subsidiaries is or was a member.

 

1.113      
Required
Consents.  “Required Consents” shall mean those consents
required from parties to the Contracts and Permits that are necessary or
required in order to give effect to the transactions contemplated herein and
that are specifically identified on Schedule 4.3 attached hereto.

 

1.114      
Retained
Leasing Assets.  “Retained Leasing Assets” shall mean those assets
which are set forth in Schedule 1.114 attached hereto.

 

1.115      
Retained
Leasing Liabilities.  “Retained Leasing Liabilities” shall mean any and
all Liabilities, including, without limitation, those Liabilities, whenever
asserted, arising out of events occurring or facts existing prior to the
Closing which, directly or indirectly, relate to or

 

12

 

arise
from RCL or otherwise from the railcar leasing business of Progress Rail and
excluding those specified Liabilities which are set forth in Schedule 1.115
attached hereto.

 

1.116      
Retained
Real Property.  “Retained Real Property” shall mean each of the
following parcels of real property owned by the Companies or the
Subsidiaries:  (i) real property located in Augusta, Georgia,
(ii) real property located in Louisville, Kentucky, and (iii) real
property located in Lake City, Pennsylvania, in each case as more fully
described on Schedule 1.116 attached hereto. 

 

1.117      
Retention
Plan.  “Retention Plan” shall have the meaning given in Section
6.2(c).

 

1.118      
Shares.  “Shares” shall
have the meaning given in the Recitals to this Agreement.

 

1.119      
Software.  “Software”
shall mean all computer software owned, licensed, leased or otherwise used by
the Companies and the Subsidiaries, of any nature whatsoever (including system
software, application software, utility software, web sites, security software,
programming software, middleware and firmware, modules, data files and upload
software), in object and/or source code form as applicable, including, without
limitation, the software described on Schedule 4.7.

 

1.120      
State
Income Tax.  “State Income Tax” shall have the meaning given in Section 8.2(b)(i).

 

1.121      
Subsidiary.  “Subsidiary”
shall mean, with respect to any Company, any corporation or other entity of
which more than fifty percent (50%) of the total voting power of shares of
capital stock entitled to vote in the election of directors or others
performing similar functions is at the time owned or controlled, directly or
indirectly, by such Company or a Subsidiary thereof.

 

1.122      
Surviving
Corporations.  “Surviving Corporations” shall have the meaning
given in Section 2.1.

 

1.123      
Target
Working Capital.  “Target Working Capital” shall be two hundred
twenty one million dollars ($221,000,000).

 

1.124      
Tax
Claim.  “Tax Claim” shall mean any written notice or claim made by any
Taxing Authority or other Person with respect to Taxes or examination of any
Tax Return, that if pursued successfully, could serve as the basis for a claim
for indemnification of a Tax Indemnitee or Progress Fuels under this Agreement.

 

1.125      
Tax
Indemnitee.  “Tax Indemnitee” shall mean Holdings and its
Subsidiaries and Affiliates (including, following the Closing, the Companies
and the Subsidiaries of the Companies).

 

1.126      
Tax
Returns.  “Tax Returns” shall mean any report, return, amended return,
refund claim, information statement, payee statement or other information
provided or required to be provided to any Governmental Authority (including
any schedule or attachment thereto, 

 

13

 

and
any amendment thereof), with respect to Taxes, including any return of an
affiliated, combined or unitary group.

 

1.127      
Taxes.  “Taxes” shall
mean any and all federal, state, local, or foreign net or gross income, gross
receipts, net proceeds, sales, use, ad valorem, value added, franchise,
bank shares, withholding, payroll, employment, excise, property, deed, stamp,
alternative or add-on minimum, environmental, profits, windfall profits,
transaction, license, lease, service, service use, occupation, severance,
energy, unemployment, social security, worker’s compensation, capital, premium
and other taxes, levies, imposts, duties, assessments, charges and withholdings
of any nature whatever, whether disputed or not, imposed or required to be
collected by or paid over to a Governmental Authority including any interest,
penalties, fines, assessments or additions imposed in respect of the foregoing,
or in respect of any failure to comply with any requirement regarding Tax
Returns.

 

1.128      
Taxing
Authority.  “Taxing Authority” shall mean any Governmental
Authority having jurisdiction with respect to any Tax.

 

1.129      
Trade
Secrets.  “Trade Secrets” shall mean confidential information including
trade secrets, designs, business processes, customer lists, sales and profit
figures, distribution and sales methods, financial and marketing plans,
supplier lists, technology rights and licenses, specifications and other
technical information, data, process technology, processes, proposals, plans,
formulae, innovations, inventions (whether patentable or unpatenable and
whether or not reduced to practice), discoveries, ideas, databases and all other
proprietary information, in each case to the extent confidential or protectable
as a trade secret to the extent protectable under the laws of the relevant
jurisdiction.

 

1.130      
Transfer
Taxes.  “Transfer Taxes” shall mean sales, use, transfer, real property
transfer, recording, documentary, stamp, registration and stock transfer Taxes
and fees.

 

1.131      
Unfunded
PBO.  “Unfunded PBO” shall have the meaning given in Section
8.3(b).

 

1.132      
WARN
Act.  “WARN Act” shall mean the Worker Adjustment and Retraining
Notification Act, 29 U.S.C. § 2101 et seq.

 

1.133      
Warranty
Obligation.  “Warranty Obligation” shall have the meaning given
in Section 4.22.

 

1.134      
Working
Capital.  “Working Capital” shall have the meaning given in Section 2.8(a).

 

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; (v) the
phrases “ordinary course of business” and “ordinary course of business consistent
with past practice” refer to the practice of the Business; (vi) the phrase
“including” shall mean “including, without limitation”; (vii) the word “or”
shall 

 

14

 

not be
exclusive; (viii) all references to “$” shall be deemed to mean United States
dollars; (ix) all accounting terms used herein and not expressly defined herein
shall have the meanings given to them under GAAP; and (x) the phrases “the
transactions contemplated hereby” or “the transactions contemplated by this
Agreement” when used in Articles III and IV, Section 7.2(l)
and (except as explicitly provided otherwise) Section 8.2 shall not
include the debt financings contemplated by Holdings to finance the Mergers.

 

ARTICLE II

THE MERGERS

 

2.1          
The
Mergers.  Upon the terms and subject to the satisfaction or waiver of the
conditions of this Agreement and (a) in accordance with the Alabama Business
Corporation Act (the “ABCA”), at the Effective Time, Progress Rail Merger Sub
shall be merged with and into Progress Rail and the separate corporate
existence of Progress Rail Merger Sub shall thereupon cease (the “Progress Rail
Merger”) and (b) in accordance with the Kentucky Business Corporation Act (the
“KBCA”), at the Effective Time, Progress Metal Merger Sub shall be merged with and
into Progress Metal and the separate corporate existence of Progress Metal
Merger Sub shall thereupon cease (the “Progress Metal Merger” and, together
with the Progress Rail Merger, the “Mergers”).  As a result of the
Progress Rail Merger, (i) the outstanding shares of capital stock of Progress
Rail Merger Sub and Progress Rail shall be converted or canceled in the manner
provided in Section 2.6, the separate corporate existence of Progress
Rail Merger Sub shall cease and Progress Rail shall be the surviving
corporation following the Progress Rail Merger and (ii) the outstanding shares
of capital stock of Progress Metal Merger Sub and Progress Metal shall be
converted or canceled in the manner provided in Section 2.6, the
separate corporate existence of Progress Metal Merger Sub shall cease and
Progress Metal shall be the surviving corporation following the Progress Metal
Merger.  Progress Rail as the surviving corporation following the Progress
Rail Merger is sometimes referred to herein as the “Progress Rail Surviving
Corporation” and Progress Metal as the surviving corporation following the
Progress Metal Merger is sometimes referred to herein as the “Progress Metal
Surviving Corporation” or, together with the Progress Rail Surviving
Corporation, the “Surviving Corporations.”

 

2.2          
Merger
Consideration. The
aggregate merger consideration (the “Merger Consideration”) shall be four
hundred five million dollars ($405,000,000).  The merger consideration for
the Progress Metal Shares (the “Progress Metal Merger Consideration”) shall be
an amount not less than twenty million dollars ($20,000,000) and not more than
thirty million dollars ($30,000,000) and the merger consideration for the
Progress Rail Shares (the “Progress Rail Merger Consideration”) shall be an
amount equal to the Merger Consideration minus the Progress Metal Merger
Consideration.  At least three (3) days prior to the Closing, Holdings
shall determine the amount of the Progress Metal Merger Consideration and shall
provide notice to Progress Fuels of the amount so determined.  The Merger
Consideration shall be increased or decreased by the Adjustment Amount in
accordance with Sections 2.7 and 2.8.

 

2.3          
Deliveries
at Closing.  At the Effective Time, in addition to the deliveries
required to be made at or prior to the Closing pursuant to Article VII
hereof, (a) Progress Fuels shall deliver to Holdings certificates which
represented the Shares immediately prior to the Effective 

 

15

 

Time
and (b) Holdings shall deliver, or cause to be delivered, to Progress Fuels the
Merger Consideration in immediately available funds by wire transfer to an
account specified by Progress Fuels.

 

2.4          
Effective
Time.  Subject to the provisions of this Agreement, as soon as
practicable on the Closing Date, (a) Progress Rail shall file the articles of
merger (the “Progress Rail Articles of Merger”), including a plan of merger,
executed in accordance with the relevant provisions of the ABCA with the
Secretary of State of Alabama and, as soon as practicable on or after the
Closing Date, shall make all other filings or recordings required under the
ABCA and (b) Progress Metal shall file the articles of merger (the “Progress
Metal Articles of Merger”), including a plan of merger, executed in accordance
with the relevant provisions of the KBCA with the Secretary of State of the
State of Kentucky and, as soon as practicable on or after the Closing Date,
shall make all other filings or recordings required under the KBCA.  The
Progress Rail Merger shall become effective at such time as is set forth in the
Progress Rail Articles of Merger and the Progress Metal Merger shall become
effective at such time as is set forth in the Progress Metal Articles of
Merger, which designated times with respect to Progress Rail and Progress Metal
shall be the same and which time is hereinafter referred to as the “Effective
Time.”

 

2.5          
Effects
of the Mergers.

 

(a)          
At
and after the Effective Time, the Mergers shall have the effects set forth in
Section 10-2B-11.06 of the ABCA and Section 271B.11-060(1) of the KBCA, as
applicable.

 

(b)          
At
the Effective Time, (i) the Articles of Incorporation of Progress Rail as the
Progress Rail Surviving Corporation shall be amended and restated in its entirety
to be identical to the Articles of Incorporation of Progress Rail Merger Sub as
in effect immediately prior to the Effective Time, except Article First of the
Articles of Incorporation of the Progress Rail Surviving Corporation shall read
as follows:  “The name of the corporation is Progress Rail Services
Corporation (the “Corporation”).”, and (ii) the Articles of Incorporation of
Progress Metal as the Progress Metal Surviving Corporation shall be amended and
restated in its entirety to be identical to the Articles of Incorporation of
Progress Metal Merger Sub as in effect immediately prior to the Effective Time,
except Article 1 of the Articles of Incorporation of the Progress Rail
Surviving Corporation shall read as follows:  “The Corporation’s name
shall be Progress Metal Reclamation Company.”, in each case until amended
thereafter in accordance with applicable Law.

 

(c)          
At
the Effective Time, (i) the Bylaws of Progress Rail as the Progress Rail
Surviving Corporation shall be amended and restated in their entirety to be
identical to the Bylaws of Progress Rail Merger Sub as in effect immediately
prior to the Effective Time, except that all references to “Progress Rail
Merger Sub” in the Bylaws of the Progress Rail Surviving Corporation shall be
changed to refer to “Progress Rail Services Corporation”, and (ii) the Bylaws
of Progress Metal as the Progress Metal Surviving Corporation shall be amended
and restated in their entirety to be identical to the Bylaws of Progress Metal
Merger Sub as in effect immediately prior to the Effective Time, except that
all references to “Progress Metal Merger Sub” in the Bylaws of the Progress
Metal Surviving Corporation shall be changed to refer to 

 

16

 

“Progress
Metal Reclamation Company”, in each case until amended thereafter in accordance
with applicable Law.

 

(d)          
At
the Effective Time, (i) the directors and officers of Progress Rail Merger Sub
immediately prior to the Effective Time shall be the directors and officers of
the Progress Rail Surviving Corporation, each to hold office until their
respective death, permanent disability, resignation or removal or until their
respective successors are duly elected and qualified, all in accordance with
the Articles of Incorporation and Bylaws of the Progress Rail Surviving
Corporation and applicable Law, and (ii) the directors and officers of Progress
Metal Merger Sub immediately prior to the Effective Time shall be the directors
and officers of the Progress Metal Surviving Corporation, each to hold office
until their respective death, permanent disability, resignation or removal or
until their respective successors are duly elected and qualified, all in
accordance with the Articles of Incorporation and Bylaws of the Progress Metal
Surviving Corporation and applicable Law.

 

2.6          
Effect
on Capital Stock.  At the Effective Time, by virtue of the Mergers and
without any action on the part of Holdings, Progress Rail Merger Sub, Progress
Metal Merger Sub, Progress Rail, Progress Metal or Progress Fuels, the
following shall occur:

 

(a)          
The
Progress Rail Shares shall be converted into the right to receive and become
exchangeable for the Progress Rail Merger Consideration in cash, without
interest thereon, subject to adjustment as provided in Section 2.7. 
All such Progress Rail Shares shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and Progress
Fuels, as the sole shareholder of the Progress Rail Shares, shall cease to have
any rights with respect thereto except the right to receive the Progress Rail
Merger Consideration, as set forth herein.

 

(b)          
The
Progress Metal Shares shall be converted into the right to receive and become
exchangeable for the Progress Metal Merger Consideration in cash, without
interest thereon, subject to adjustment as provided in Section 2.7. 
All such Progress Metal Shares shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and Progress
Fuels, as the sole shareholder of the Progress Metal Shares, shall cease to
have any rights with respect thereto except the right to receive the Progress
Metal Merger Consideration, as set forth herein.

 

(c)          
Each
share of capital stock of Progress Rail and Progress Metal that is owned by
Progress Rail and Progress Metal, respectively, as treasury stock, if any, and
any such shares of capital stock owned by any direct or indirect subsidiary of
Progress Fuels, if any, shall be canceled and retired and shall cease to exist
and no cash, securities or other consideration shall be delivered in exchange
therefor.

 

(d)          
(i)
Each share of common stock, par value $1.00 per share, of Progress Rail Merger
Sub issued and outstanding immediately prior to the Effective Time shall be
converted into and become one fully paid and nonassessable share of common
stock of the Progress Rail Surviving Corporation, and (ii) each share of common
stock, no par value per share, of Progress Metal Merger Sub issued and outstanding
immediately prior to the Effective Time shall be 

 

17

 

converted
into and become one fully paid and nonassessable share of common stock of the
Progress Metal Surviving Corporation.

 

2.7          
Adjustment
Amount and Payment.  The “Adjustment Amount” (which may be a positive or
negative number) will be equal to the amount determined by subtracting the
Target Working Capital from the Closing Working Capital.  The Adjustment
Amount shall be paid by wire transfer by Progress Fuels to an account specified
by Holdings (if the Adjustment Amount is negative) or wire transfer by Holdings
to an account specified by Progress Fuels (if the Adjustment Amount is
positive).  All such payments shall be made together with interest at the
rate of three percent (3%) per annum, which interest shall begin accruing on
the Closing Date and end on the date the payment is made.  Within three
(3) business days after the calculation of the Closing Working Capital becomes
binding and conclusive on the parties pursuant to Section 2.8 of this
Agreement, Progress Fuels or Holdings, as the case may be, shall make the wire
transfer payment provided for in this Section 2.7.  Progress Fuels
and Holdings shall mutually agree upon the allocation of the Adjustment Amount
between the Progress Rail Merger Consideration and the Progress Metal Merger
Consideration.  If Progress Fuels and Holdings cannot reach agreement,
then they shall submit the dispute to the Independent Accountants for
resolution in accordance with the procedures set forth in Section 2.8.

 

2.8          
Adjustment
Procedure.

 

(a)          
“Working
Capital” as of a given date shall mean the amount calculated in accordance with
Schedule 2.8.

 

(b)          
Holdings
shall prepare, or cause to be prepared, a combined balance sheet (the “Closing
Financial Statements”) of the Companies as of the Closing Date on the same
basis and applying the accounting principles, policies and practices set forth
in Schedule 2.8.  Holdings shall then determine the Working Capital
as of the Closing Date (the “Closing Working Capital”) based on the Closing
Financial Statements and using the same methodology as was used to calculate
the Target Working Capital as described on Schedule 2.8, which Schedule
2.8 shall also describe any differences between such principles, policies
and practices and GAAP.  Holdings shall deliver the Closing Financial
Statements and its determination of the Closing Working Capital to Progress
Fuels within seventy five (75) days following the Closing Date.

 

(c)          
If
within thirty (30) business days following delivery of the Closing Financial
Statements and the Closing Working Capital calculation, Progress Fuels has not
given Holdings written notice of its objection to the Closing Working Capital
calculation (which notice must state the basis of Progress Fuels’ objection in
reasonable detail and include supporting documentation for such objection),
then the Closing Working Capital calculated by Holdings shall be binding and
conclusive on the parties and be used in computing the Adjustment Amount.

 

(d)          
If
Progress Fuels duly gives Holdings such notice of objection, and if Progress
Fuels and Holdings fail to resolve the issues outstanding with respect to the
Closing Financial Statements and the calculations of the Closing Working
Capital within thirty (30) days of Holdings’ receipt of Progress Fuels’
objection notice, Progress Fuels and Holdings shall submit the issues remaining
in dispute to KPMG, certified public accountants (the “Independent Accountants”),
for resolution applying the principles, policies and practices described on 

 

18

 

Schedule
2.8.  If issues remaining in dispute are submitted to the Independent
Accountants for resolution, (i) Progress Fuels and Holdings shall promptly
furnish or cause to be furnished to the Independent Accountants such work
papers and other documents and information relating to the disputed issues as
the Independent Accountants may request and are available to that party or its
agents and shall be afforded the opportunity to present to the Independent
Accountants any material relating to the disputed issues and to discuss the
issues with the Independent Accountants; (ii) the Independent Accountants may
only make a determination with respect to the disputed items by deciding that
the position of Progress Fuels or Holdings or a position in between (but not
higher or lower) is correct, and the determination by the Independent
Accountants, as set forth in a notice to be delivered to both Progress Fuels
and Holdings within sixty (60) days of the submission to the Independent
Accountants of the issues remaining in dispute, shall be final, binding and
conclusive on the parties and shall be used in the calculation of the Closing
Working Capital; and (iii) Progress Fuels and Holdings will each bear fifty
percent (50%) of the fees and costs of the Independent Accountants for such
determination.

 

2.9          
Further
Assurances.  If, at any time after the Effective Time, either of
the Surviving Corporations shall consider or be advised that any deeds, bills
of sale, assignments or assurances or any other acts or things are necessary,
desirable or proper (a) to vest, perfect or confirm, of record or otherwise, in
such Surviving Corporation its right, title and interest in, to or under any of
the rights, privileges, powers, franchises, properties or assets of either of
the constituent corporations, or (b) otherwise to carry out the purposes of
this Agreement, such Surviving Corporation and its proper officers and
directors or their designees shall be authorized to execute and deliver, in the
name and on behalf of either constituent corporation, all such deeds, bills of
sale, assignments and assurances and to do, in the name and on behalf of either
constituent corporation, all such other acts and things as may be necessary,
desirable or proper to vest, perfect or confirm such Surviving Corporation’s
right, title and interest in, to and under any of the rights, privileges,
powers, franchises, properties or assets of such constituent corporation and
otherwise to carry out the purposes of this Agreement.

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF

PROGRESS ENERGY AND PROGRESS FUELS

 

Progress Energy and Progress Fuels, jointly and
severally, hereby represent and warrant to Holdings and the Merger Subs that:

 

3.1          
Ownership of the
Shares. 
Progress Fuels owns of record and beneficially the Shares, free and clear of
any and all Liens.  Schedule 3.1 sets forth the number of Shares.

 

3.2          
Organization.  Progress Energy is duly
incorporated, validly existing and in good standing under the laws of the State
of North Carolina and has all requisite power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated
herein.  Progress Fuels is duly incorporated, validly existing and in good
standing under the laws of the State of Florida and has all requisite power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated herein.  Each of Progress Energy and Progress
Fuels is duly qualified as a foreign corporation in good standing in each
jurisdiction in which the 

 

19

 

conduct
of its business requires such qualification, except where the failure to be so
qualified would not prevent or materially delay consummation of the
transactions contemplated hereby.

 

3.3          
Authorization;
Execution and Delivery; Enforceability.  Each of Progress Energy and Progress Fuels has
full corporate power and authority to enter into, deliver and perform this
Agreement, and each agreement or instrument (to which it is a party) executed
in connection herewith or delivered pursuant hereto and to consummate the
transactions contemplated hereby.  Each of Progress Energy’s and Progress
Fuels’ execution, delivery and performance of this Agreement and all agreements
and instruments executed in connection herewith or delivered pursuant hereto
and the transactions contemplated hereby have been duly authorized by all
requisite corporate action.  This Agreement and all agreements or
instruments executed by Progress Energy and Progress Fuels in connection
herewith or delivered by Progress Energy and Progress Fuels pursuant hereto
have been duly executed and delivered thereby, and this Agreement and all
agreements and instruments executed by Progress Energy and Progress Fuels in
connection herewith or delivered thereby pursuant hereto constitute the legal,
valid and binding obligations thereof, enforceable in accordance with their
respective terms except to the extent that enforcement may be affected by
applicable bankruptcy, reorganization, insolvency and similar laws affecting
creditors’ rights and remedies generally and by general principles of equity
(regardless of whether enforcement is sought at law or in equity).

 

3.4          
No Violation or
Conflict; Consents. 
The execution, delivery and performance by Progress Energy and Progress Fuels
of this Agreement and all of the other documents and instruments contemplated
hereby and the consummation of the transactions contemplated herein do not and
will not conflict with, violate or breach any Laws, judgment, order or decree
binding on Progress Energy or Progress Fuels or their respective properties, or
the articles of incorporation or bylaws of Progress Energy or Progress Fuels. 
Except for such filings and consents as may be required pursuant to the HSR Act
or any Other Antitrust Regulations, all of which will have been made or
obtained, as the case may be, prior to the Closing, no consent of any other
Person, and no notice to, filing or registration with, or authorization,
consent or approval of, any governmental, regulatory or self-regulatory agency
is necessary or is required to be made or obtained by Progress Energy or
Progress Fuels in connection with the execution and delivery of this Agreement
or the consummation of the transactions contemplated hereby.

 

ARTICLE IV

ADDITIONAL REPRESENTATIONS AND WARRANTIES OF PROGRESS FUELS CONCERNING THE
COMPANIES AND THE SUBSIDIARIES

 

Progress Fuels hereby represents and warrants to
Holdings and the Merger Subs that:

 

4.1          
Organization;
Capitalization of the Companies; Authorization; Execution and Delivery;
Enforceability.

 

(a)          
Organization.  Progress Rail
is duly organized, validly existing and in good standing under the laws of the
State of Alabama.  Progress Metal is duly organized, validly existing and
in good standing under the laws of the State of Kentucky.  The Companies
have full corporate power and authority to conduct their businesses as they are
now being conducted and 

 

20

 

to
own their properties and to lease those properties leased by them.  The
Companies are duly qualified, licensed or admitted to do business as foreign
corporations and are in good standing in each jurisdiction in which such qualification,
license or admission is necessary under applicable law as a result of the
conduct of their business or the ownership of their properties, except where
the failure to be so qualified, licensed or admitted and in good standing would
not have a Material Adverse Effect on the Companies and the Subsidiaries, taken
as a whole.  Each of the jurisdictions in which each of the Companies is
qualified, licensed or admitted to do business as a foreign corporation is
listed on Schedule 4.1.  Progress Fuels has delivered to Holdings
true, correct and complete copies of the Companies’ Articles of Incorporation
and Bylaws (in each case, as amended to date).  The Companies are not in
default under or in violation of any provisions of their Articles of Incorporation
or Bylaws.

 

(b)          
Capitalization.  The authorized
capital stock of Progress Rail consists of 7,500 shares of common stock, $1.00
par value per share, of which 1,000 shares are issued and outstanding as of the
date hereof.  The authorized capital stock of Progress Metal consists of
1,000 shares of common stock, no par value, of which 1,000 shares are issued
and outstanding as of the date hereof.  All of the outstanding Shares have
been duly and validly authorized and issued, are fully paid and nonassessable,
and were not issued in violation of any Laws or the preemptive rights of any
shareholder.  Except for the Shares, no shares of capital stock of the
Companies have been issued, are held in treasury or are reserved for
issuance.  There are no outstanding Options with respect to the Companies
or agreements, arrangements or understandings to issue Options with respect to
the Companies and there are no preemptive rights or agreements, arrangements or
understandings to issue preemptive rights with respect to the issuance or sale
of the Companies’ capital stock.  There are no shareholder agreements,
voting trusts, proxies or other agreements or understandings with respect to or
concerning the capital stock of any of the Companies.

 

(c)          
Authorization;
Execution and Delivery; Enforceability.  Each of the Companies has
full corporate power and authority to enter into, deliver and perform this
Agreement, and each agreement or instrument (to which it is a party) executed
in connection herewith or delivered pursuant hereto and to consummate the
transactions contemplated hereby.  Each of the Companies’ execution,
delivery and performance of this Agreement and all agreements and instruments
executed in connection herewith or delivered pursuant hereto and the
transactions contemplated hereby have been duly authorized by all requisite
corporate action.  This Agreement and all agreements or instruments
executed by the Companies in connection herewith or delivered by the Companies
pursuant hereto have been duly executed and delivered thereby, and this
Agreement and all agreements and instruments executed by the Companies in
connection herewith or delivered thereby pursuant hereto constitute the legal,
valid and binding obligations thereof, enforceable in accordance with their
respective terms except to the extent that enforcement may be affected by
applicable bankruptcy, reorganization, insolvency and similar laws affecting
creditors’ rights and remedies generally and by general principles of equity
(regardless of whether enforcement is sought at law or in equity).

 

4.2          
Subsidiaries.

 

(a)          
Ownership;
Capitalization.  Each Subsidiary of the Companies is set forth in Schedule
4.2(a) attached hereto.  Except as set forth in Schedule 4.2(a),
the Companies have no 

 

21

 

equity
investments or other similar interests, including any interest that would be
required to be consolidated with either of the Companies under FASB
Interpretation No. 46, Consolidation of
Variable Interest Entities, in any other Person. Except as set forth
in Schedule 4.2(a), the Companies are the direct, indirect or beneficial
owners of all of the outstanding shares of capital stock or other equity
interests of any kind of each of their respective Subsidiaries, in each case,
free and clear of any and all Liens.  The authorized, issued and
outstanding capital stock, and the record ownership of all such shares of
capital stock, of each Subsidiary of the Companies are as set forth in Schedule
4.2(a).  All of the shares of capital stock of each Subsidiary of the
Companies have been duly and validly authorized and issued, are fully paid and
nonassessable, and were not issued in violation of any Laws or the preemptive
rights of any shareholder.  Except as set forth in Schedule 4.2(a),
(i) no capital stock of any Subsidiary of the Companies is outstanding, (ii)
there are no outstanding Options with respect to any Subsidiary of the
Companies or agreements, arrangements or understandings to issue Options with
respect to any Subsidiary of the Companies and (iii) there are no preemptive
rights or agreements, arrangements or understandings to issue preemptive rights
with respect to the issuance or sale of any Subsidiary of the Companies’
capital stock.  There are no shareholder agreements, voting trusts,
proxies or other agreements or understandings with respect to or concerning the
capital stock of any Subsidiary of the Companies.

 

(b)          
Organization.   Each
Subsidiary of the Companies is duly organized, validly existing and in good
standing under the laws of its respective state jurisdiction of incorporation
or organization and has full corporate or other power and authority to conduct
its business as it is presently being conducted and to own its properties and
lease those properties leased by it.  Each Subsidiary of the Companies is
duly qualified, licensed or admitted to do business as a foreign corporation or
business entity and is in good standing in each jurisdiction in which such
qualification, license or admission is necessary under applicable law as a
result of the conduct of its business or the ownership of its properties,
except where the failure to be so qualified, licensed or admitted and in good
standing would not have a Material Adverse Effect on the Companies and the
Subsidiaries, taken as a whole.  Each jurisdiction in which each
Subsidiary of the Companies is qualified, licensed or admitted to do business
as a foreign corporation or other business entity is listed on Schedule
4.2(b).  Progress Fuels has delivered to Holdings true, correct and
complete copies of the certificate or articles of incorporation or organization
and bylaws or operating agreements (in each case, as amended to the date
hereof) of each Subsidiary of the Companies.  No Subsidiary of the Companies
is in default under or in violation of any provisions of its certificate or
articles of incorporation or organization and bylaws or operating agreements.

 

4.3          
No
Violation or Conflict; Consents.  Except as set forth in Schedule
4.3, the execution, delivery and performance of this Agreement and all of
the other documents and instruments contemplated hereby to which the Companies
or any of the Subsidiaries are a party and the consummation of the transactions
contemplated hereby and thereby do not and will not (a) conflict with, violate
or breach any Laws, judgment, order or decree binding on the Companies or any
of the Subsidiaries or their respective properties or the articles of
incorporation or bylaws of the Companies or any of the Subsidiaries, or (b)(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) result in or
give any Person any right of termination, cancellation, acceleration or
modification in or with respect to, (iv) result in or give any Person any
additional rights or 

 

22

 

entitlement
to increased, additional, accelerated or guaranteed payments under, or (v)
result in the creation or imposition of any Lien upon the Companies or any of
the Subsidiaries or any of their respective properties under, any material
contract, Real Property Lease or other agreement to which the Companies or any
of the Subsidiaries is a party or by which they or any of their respective
properties is bound.  Except for the Required Consents which are set forth
in Schedule 4.3, and such filings and consents as may be required
pursuant to the HSR Act or any Other Antitrust Regulations, all of which will
have been made or obtained, as the case may be, prior to the Closing, no
consent of any other Person, and no notice to, filing or registration with, or
authorization, consent or approval of, any governmental, regulatory or
self-regulatory agency is necessary or is required to be made or obtained by
the Companies or any of the Subsidiaries in connection with the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby, except where the failure to get such consent of any other Person would
not have a Material Adverse Effect on the Companies and the Subsidiaries, taken
as a whole, and would not prevent or materially delay consummation of the
transactions contemplated hereby.

 

4.4          
Financial
Statements.

 

(a)          
Progress
Fuels has delivered to Holdings copies of the Financial Statements.  The
Financial Statements present fairly in all material respects the combined
financial condition, results of operations and cash flows of the Companies and
the Subsidiaries, taken as a whole, as of the dates and for the periods
indicated, and have been prepared in accordance with GAAP applied on a basis
consistent with past practice (subject, in the case of unaudited financial
statements, to footnotes and normal year end audit adjustments).  Except
for the potential impact of the matter described in Schedule 4.4 (in the
amount described in Schedule 4.4), all intercompany activity has been
eliminated in the Financial Statements.

 

(b)          
The
Companies and the Subsidiaries do not have any Liabilities except Liabilities
(i) reflected on or accrued or reserved against in the combined balance
sheet included in the Financial Statements, or reflected in the notes thereto,
(ii) set forth in Schedule 4.4, or (iii) pursuant to contracts
disclosed on Schedule 4.9 or entered into in the ordinary course of
business and consistent with past practices, in each case, other than for tort
or breach of contract (with notice, lapse of time or both), (iv) pursuant to
any Benefit Plan disclosed on Schedule 4.12, (v) with respect to Taxes,
(vi) for which indemnification is available pursuant to Section 9.2(a),
or (vii) pursuant to litigation, claims or environmental matters disclosed on Schedules
4.8, 4.10 or 4.17.

 

4.5          
Absence
of Change.  Except as set forth in Schedule 4.5, since
December 1, 2004, the Companies and the Subsidiaries have conducted their
business only in the ordinary course of business consistent with past practice,
and have not suffered any change in business, financial condition or results of
operations that has had or, insofar as can reasonably be foreseen, is likely to
have a Material Adverse Effect on the Companies and the Subsidiaries, taken as
a whole.  None of the other representations or warranties set forth in
this Agreement shall be deemed to limit the foregoing.  In addition,
without limiting the foregoing, except as expressly contemplated hereby and
except as set forth in Schedule 4.5, there has not occurred since
December 1, 2004:

 

23

 

 

(a)           any declaration, setting aside or payment
of any dividend or other distribution in respect of the capital stock (or
equity interests) of the Companies, or any direct or indirect redemption,
purchase or other acquisition by the Companies of any such capital stock (or
equity interests) of the Companies;

 

(b)           any authorization, issuance, sale or
other disposition by the Companies of any shares of capital stock (or equity
interests) of the Companies, or any modification or amendment of any right of
any holder of any outstanding shares of capital stock (or equity interests) of
the Companies;

 

(c)           (i)  any increase of more than five
percent (5%) (A) in salary of any current or former officer, director,
stockholder, employee or consultant of the Companies or the Business with
salary of greater than $125,000 in the fiscal year ended November 30, 2004
with respect to any period beginning after November 30, 2004 or (B) in the
aggregate salaries for all current or former officers, directors, stockholders,
employees or consultants of the Companies or the Business with respect to any
period beginning after November 30, 2004; (ii) any payment of consideration of
any nature whatsoever (other than salary, commissions or consulting fees paid
to any current or former officer, director, stockholder, employee or consultant
of the Companies or the Business) to any current or former officer, director,
stockholder, employee or consultant of the Companies or the Business; (iii) any
establishment or modification of (A) targets, goals, pools or similar
provisions under any benefit plan, employment contract or other employee
compensation arrangement or (B) salary ranges, increase guidelines or similar
provisions in respect of any benefit plan, employment contract or other
employee compensation arrangement; or (iv) any adoption, entering into,
amendment, modification or termination (partial or complete) of any Benefit
Plan, except as necessary to comply with changes in applicable Law and with the
written consent of Holdings, not to be unreasonably withheld;

 

(d)           (i) any incurrence by the Companies
or any Subsidiary of Indebtedness, other than Indebtedness incurred in the
ordinary course of business consistent with past practice, or (ii) any voluntary
purchase, cancellation, prepayment or complete or partial discharge in advance
of a scheduled payment date with respect to, or waiver of any right of the
Companies under any Indebtedness of or owing to the Companies or of any
Subsidiary under any Indebtedness of or owing to such Person with respect to
the conduct of the Business;

 

(e)           any physical damage, destruction or other
casualty loss (whether or not covered by insurance) affecting any of the Real
Property, personal property or equipment of the Companies or of any Subsidiary
used or held for use in the conduct of the Business in an aggregate amount
exceeding $1,000,000;

 

(f)            other than in the ordinary course of
business consistent with past practice, any material change in (i) any
investment, accounting, financial reporting, inventory, credit, allowance or
tax practice or policy of the Companies or the Business or (ii) any method of
calculating any bad debt, contingency or other reserve of the Companies or the
Business for accounting, financial reporting or tax purposes;

 

 

24

 

(g)           any entering into, any material amendment
or modification or termination (partial or complete) or granting of a waiver
under or giving any material consent with respect to (i) any contract which is
required (or had it been in effect on the date hereof would have been required)
to be disclosed pursuant to Section 4.9, (ii) any license held by
the Companies or any Subsidiary used or held for use in connection with the
Business or (iii) any Intellectual Property;

 

(h)           any commencement or termination by the
Companies of any line of business;

 

(i)            any settlement or consent to the entry of
judgement with respect to any proceeding involving a material amount of Taxes of
either of the Companies or any of the Subsidiaries; or

 

(j)            any entering into of an agreement to do
or engage in any of the foregoing, including, without limitation, with respect
to any Business Combination not otherwise restricted by the foregoing
paragraphs.

 

4.6          
Assets.

 

(a)          
The
Companies and the Subsidiaries have good title to, or sufficient leasehold
interest in, all their properties and assets, whether tangible or intangible,
real, personal or mixed, to permit the operation of their businesses as
currently conducted, free and clear of all Liens, except for Permitted
Liens.  Any such leasehold interest is pursuant to a lease that is (i)
valid, binding, and enforceable in accordance with its terms (subject to any
applicable bankruptcy, insolvency, reorganization, moratorium, or other laws
affecting creditors’ rights generally, and subject to general equitable
principles), and (ii) in full force and effect.

 

(b)          
Subject
to ordinary wear and tear and to scheduled or necessary repairs in the ordinary
course of business, all tangible capital assets of the Companies and the
Subsidiaries necessary to conduct their businesses as currently conducted are
in operating condition and repair consistent with prudent industry practice in
businesses similar to the Business.

 

4.7          
Intellectual
Property.

 

(a)          
Schedule
4.7 attached hereto contains a complete and accurate list of all the
Intellectual Property described in clauses (i) through (iv) of Section 1.56,
owned or licensed by and used in the business of the Companies or such
Subsidiary.  As to the Intellectual Property, the Companies or a
Subsidiary either (i) own the entire rights, title, and interest thereto, or
(ii) hold such Intellectual Property pursuant to a valid, subsisting and
enforceable license (“Licensed Rights”).  All Intellectual Property is
owned free and clear of any Lien and is valid, subsisting, and
enforceable.  All registered Intellectual Property owned by the Companies
or such Subsidiary remain in good standing with all fees and filings due as of
the Closing Date paid in full.  Except as set forth in Schedule 4.7,
no Intellectual Property has been cancelled or abandoned since November 30,
2004.  The Companies or such Subsidiary have taken commercially reasonable
actions to maintain and protect the Intellectual Property.

 

25

 

(b)          
Except
as set forth in Schedule 4.7 or Schedule 4.10, there are no
claims, demands or proceedings instituted, pending or, to the Knowledge of the
Companies, proposed or threatened by any third party pertaining to, or
challenging the Companies’ or such Subsidiary’s use of or right to use, any of
the Intellectual Property.  Except as set forth in Schedule 4.7, to
the Knowledge of the Companies, the conduct of the business of the Companies
and the Subsidiaries does not infringe upon, misappropriate, dilute or violate
any intellectual property owned or controlled by any third party.  Except
as set forth in Schedule 4.7, to the Knowledge of the Companies, no
third party is misappropriating, infringing, diluting or violating any
Intellectual Property owned or used by the Companies and such
Subsidiaries.  Except as set forth in Schedule 4.7, to the
Knowledge of the Companies, none of the Intellectual Property is subject to any
outstanding judgment restricting the use thereof by the Companies and such
Subsidiaries.

 

(c)          
Except
as disclosed in Schedule 4.7, the Companies and such Subsidiaries use
commercially reasonable measures to protect the Trade Secrets, no such Trade
Secrets have been disclosed or permitted to be disclosed to any person (except
in the ordinary and normal course of business and under an obligation of
confidence), and all such information held outside the Companies and such Subsidiaries
is subject to contractual confidentiality obligations to which one or more of
the Companies and such Subsidiaries are party and able to enforce.

 

(d)          
All
licenses, sublicenses or other rights of use under the Licensed Rights are
valid and authorized by the terms under which the Companies and such
Subsidiaries license or otherwise use such Licensed Rights and no such license,
sublicense or other Licensed Rights shall terminate or be forfeited as a result
of the execution and performance of this Agreement.  To the Knowledge of
the Companies and such Subsidiaries, the licensors of any Intellectual Property
licensed to the Companies and such Subsidiaries own and are entitled to license
the subject matter of such licenses.

 

(e)          
All
Software used internally by the Companies and such Subsidiaries is owned by the
Companies and such Subsidiaries or used pursuant to a valid license or other
enforceable right and is not a “bootleg” version or copy.  The Companies
and such Subsidiaries possess such working copies of all of the Software,
including, object and source codes and all related manuals, licenses and other
documentation, as are necessary for the current conduct of the business of the
Companies and such Subsidiaries consistent with prudent business practices in
businesses similar to the Business. The Software and other information
technology used to operate the business, to the Knowledge of the Companies and
consistent with prudent business practices in businesses similar to the Business,
(i) are in satisfactory working order and are scalable to meet current and
reasonably anticipated capacity; (ii) have appropriate security, back ups,
disaster recovery arrangements and hardware and software support and
maintenance to minimize the risk of material error, breakdown, failure or
security breach occurring and to ensure if such event does occur it does not
cause a material disruption to the business of the Companies or such
Subsidiary; (iii) are configured and maintained to minimize the effects of
viruses and do not contain trojan horses and other malicious code; and (iv)
have not suffered any material error, breakdown, failure or security breach in
the last twelve months which has caused disruption or damage to the business of
any of the Companies or such Subsidiary.

 

(f)           
All
open source Software used by the Companies and the Subsidiaries, including that
set forth in Schedule 4.7, is fully segregable and independent from the
Companies’ and the 

 

26

 

Subsidiaries’
proprietary software and no open source code, including any general public
license source code, is or has been incorporated or otherwise integrated into,
aggregated or compiled with the Companies’ and the Subsidiaries’ proprietary
software.  Except as set forth in Schedule 4.7, the Companies and
the Subsidiaries have not made any improvements or changes to any such open
source code, including any general public license source code, that would
constitute improvements that the Companies and the Subsidiaries would be obligated
to share with the open source community under any applicable Open Source
License, nor have the Companies and the relevant Subsidiaries based any
proprietary software on open source software.

 

4.8          
Compliance
with Law.  Except as reflected on Schedule 4.8 and Schedule
4.17 attached hereto, each of the Companies and the Subsidiaries have
obtained all Permits required under, and is in compliance with, all applicable
Laws and Permits, except where absence of or noncompliance with would not,
individually or in the aggregate, have a Material Adverse Effect on the
Companies and the Subsidiaries, taken as a whole.

 

4.9          
Contracts,
Agreements, etc.  Schedule 4.9 attached hereto contains a
correct and complete list of the following contracts, agreements, or
arrangements to which the Companies or any Subsidiary are a party (not
including “Benefit Plans” described in Section 4.12) (the “Contracts”):

 

(a)          
notes,
mortgages, indentures, loan or credit agreements, security agreements each of
which secures Indebtedness, and other agreements and instruments reflecting
obligations for borrowed money or other monetary Indebtedness or otherwise
relating to the borrowing of money by, or the extension of credit to the
Companies or any Subsidiary, in each case creating an actual or potential
obligation of the Companies or any Subsidiary of not less than $1,000,000, or
commitments to enter into any such agreements or commitments;

 

(b)          
management,
consulting and employment agreements and written agreements, commitments,
representations, promises or communications to enter into the same other than
as previously approved by Holdings where such agreement is terminable upon not
more than sixty (60) days’ prior notice without further Liability of the
Companies or the Subsidiaries thereunder;

 

(c)          
(i)
with respect to real property, option agreements, purchase and sale agreements,
lease agreements or other agreements involving any real property (the “Real
Property Leases”), and (ii) with respect to equipment, machinery, personal
property or other assets, tangible or intangible, option agreements, purchase
and sale agreements, lease agreements or other agreements involving amounts
payable by or to the Companies or any Subsidiary of $1,000,000 or more;

 

(d)          
agreements
and purchase orders for the purchase or sale of goods, services, supplies or
capital assets that have continuing obligations to perform and (i) have terms
of more than one year, are subject to automatic renewal or are indefinite and
(ii) involved an annual payment of more than $2,500,000 during at least one of
the last three fiscal years or, to the Knowledge of the Companies, would
reasonably be expected to involve the payment of more than $2,500,000 during
any fiscal year in the future;

 

27

 

(e)          
partnership,
joint venture, stockholders’ or other similar agreements with any Person;

 

(f)           
contracts
or agreements between or among the Companies or any Subsidiary or Affiliate
thereof, on the one hand, and any current or former director, officer or
Affiliate of the Companies or any Subsidiary, on the other hand, with respect
to the Business except for contracts and agreements between the Companies and
Subsidiaries;

 

(g)          
outstanding
guarantees, subordination agreements, indemnity agreements and other similar
types of agreements, whether or not entered into in the ordinary course of
business, which the Companies or any Subsidiary is or may become liable for or
obligated to discharge, or any asset of the Companies or any Subsidiary is or
may become subject to the satisfaction of, any Indebtedness, obligation,
performance or undertaking of any other Person, except for (i) indemnification
agreements contained in any of the instruments listed in the Schedules hereto
or any other customary indemnity provisions included in agreements for the
purchase or sale of goods, services or supplies and (ii) any of the foregoing
in which, in each case, the aggregate obligation of either Company or any
Subsidiary thereunder is less than $1,000,000;

 

(h)          
contracts,
orders, decrees or judgments preventing or restricting the Companies or any
Subsidiary from carrying on any business activity or competing with any Person
or prohibiting or limiting disclosure of confidential or proprietary
information;

 

(i)           
agreements,
contracts or commitments relating to the acquisition by the Companies or any
Subsidiary of the outstanding capital stock or equity interest of any business
enterprise or the disposition of any assets or properties of the Companies or
any Subsidiary (excluding dispositions of real property) within the last five
fiscal years;

 

(j)           
agreements,
contracts or commitments with independent contractors, distributors, dealers,
manufacturers’ representatives or sales agencies that involved the payment of
commissions during at least one of the last three fiscal years of more than
$1,000,000 or, to the Knowledge of the Companies, would reasonably be expected
to involve the payment of more than $1,000,000 during any fiscal year in the
future;

 

(k)          
all
contracts that (i) limit or contain restrictions on the ability of the
Companies or any Subsidiary to declare or pay dividends on, to make any other
distribution in respect of or to issue or purchase, redeem or otherwise acquire
its capital stock, to incur Indebtedness, to incur or suffer to exist any Lien,
to purchase or sell any assets or properties, to change the lines of business
in which it participates or engages or to engage in any Business Combination,
or (ii) require the Companies or any Subsidiary to maintain specified financial
ratios or levels of net worth or other indicia of financial condition;

 

(l)           
all
agreements, contracts or commitments to which a Governmental Authority is a
party under which any obligations are still outstanding and that involved 

 

28

 

the
payment during at least one of the last three fiscal years of more than
$1,000,000 or, to the Knowledge of the Companies, would reasonably be expected
to involve the payment of more than $1,000,000 during any fiscal year in the
future; and

 

(m)         
contracts,
commitments or obligations not made in the ordinary course of business and
having unexpired terms in excess of one year or requiring aggregate future
payments or receipts in excess of $1,000,000 or otherwise material to the
business or operations of the Companies or any Subsidiary.

 

Progress Fuels has provided Holdings with access to
true and complete copies of all Contracts, including all amendments,
modifications, waivers and elections applicable thereto.

 

Except as set forth in Schedule 4.9, as to the
Companies and the Subsidiaries, such Contracts are valid and binding
obligations of the identified Company or Subsidiary, subject to no Liens,
except Permitted Liens, enforceable in accordance with their respective terms
(subject to any applicable bankruptcy, insolvency, reorganization, moratorium
or other laws affecting generally the enforcement of creditors’ rights and
subject to general principles of equity), and are in full force and effect.
Except as set forth in Schedule 4.9, there are no contracts, agreements
or arrangements which would have been required to be disclosed under Section
4.9(d) but were terminated or expired by their terms since December 1,
2003.  Except as disclosed in Schedule 4.9, there is not under any
such Contract any existing material breach or material default (or event or
condition, which after notice or lapse of time, or both, would constitute a
material breach or material default) by the Companies or any Subsidiary with
respect thereto and neither of the Companies nor any Subsidiary has received
written notice of any such breach or default.  The identified Company or
Subsidiary has performed, and, to the Knowledge of the Companies, every other
party has performed, each material term, covenant and condition of each of the
Contracts that is to be performed at or before the date hereof.  No event
has occurred that would, with the passage of time or compliance with any
applicable notice requirements or both, constitute a default by the identified
Company or Subsidiary or, to the Knowledge of the Companies, any other party
under any of the Contracts and, to the Knowledge of the Companies, no party to
any of the Contracts intends or has a reasonable basis upon which to cancel or
terminate any of such Contracts.

 

4.10        
Litigation.  Except as set
forth in Schedule 4.10 or Schedule 4.8, there is no claim, legal
action, suit, litigation, arbitration, dispute or investigation, judicial,
administrative or otherwise, or any order, decree or judgment, now pending or
in effect, or, to the Knowledge of the Companies, threatened or contemplated
against the Companies or the Subsidiaries.

 

4.11        
Insurance.  Attached hereto
as Schedule 4.11 is a list of all insurance policies now or ever held
for the benefit of the Companies and the Subsidiaries showing for each the
policy limits and coverages and the expiration dates of each such policy. 
The premiums due thereon have been timely paid.  Except as set forth in Schedule
4.11, such policies are in such amounts, against such risks and losses, and
on such terms and conditions as are consistent with industry practice in the
business of the Companies and its Subsidiaries.  Neither Progress Energy,
Progress Fuels nor the Companies or any Subsidiary has received any written
notice or cancellation or termination in respect of any such policies, is in
default thereunder nor knows of any reason or state of facts that could lead to
the cancellation of such policies. None of Progress 

 

29

 

Fuels,
the Companies or the Subsidiaries have received (and have no knowledge of) any
written notice or request from any insurance company or the Board of Fire
Underwriters (or organization exercising functions similar thereto) requiring
the performance of any work or alteration or canceling or threatening to cancel
any of said policies if such work is not performed.  Except as set forth
in Schedule 4.11,  none of the Progress Fuels, the Companies or the
Subsidiaries have made any claims under any casualty insurance policy during
the past five (5) years.  Progress Fuels has not received any reservation
of rights or declination of coverage from insurers on any claim.  With
respect to any casualty that has occurred, all claims have been reported to the
appropriate insurance carrier in connection with the policies listed on Schedule
4.11.

 

4.12        
Employee
Benefits.

 

(a)          
Progress
Fuels has made available to Holdings true and complete copies of each plan,
agreement or arrangement providing for compensation or benefits, including any
employee benefit plan within the meaning of Section 3(3) of ERISA (whether or
not subject to ERISA), and each pension, retirement, supplemental pension, savings,
retirement savings, profit-sharing, bonus, incentive, deferred compensation,
severance pay, stock option, stock bonus, or other stock-based compensation
plan, change of control, life insurance, medical, hospital, dental care, vision
care, drug, sick leave, short-term or long-term disability, salary
continuation, unemployment benefits, vacation, incentive, compensation or other
employee benefit plan, program, arrangement, policy or practice, formal or
informal, funded or unfunded, registered or unregistered, insured or
self-insured (any of the foregoing, a “Plan”) that covers any current or former
employee of the Companies or any of the Subsidiaries (individually, a “Benefit
Plan” and, collectively, the “Benefit Plans”).  All Benefit Plans are set
forth in Schedule 4.12, and are sponsored or maintained solely by the
Companies or any of the Subsidiaries.

 

(b)          
Except
as set forth in Schedule 4.12, (i) each Benefit Plan that is an
“employee pension benefit plan” within the meaning of Section 3(2) of ERISA
that is intended to qualify under Section 401(a) of the Code or other
applicable Law has at all times within the past six (6) years been so qualified
and has received a favorable determination letter from the Internal Revenue
Service (the “IRS”), or it is being requested or the remedial amendment period
for requesting such determination letter has not expired, or if required under
other Law is otherwise duly registered with the relevant Governmental
Authority; (ii) all required employer contributions or premiums to each Benefit
Plan have been made when due (or, in the case of contributions not yet due, as
of the date hereof have been accrued on the Companies’ and the Subsidiaries’
financial statements and records to the extent required by GAAP or the
generally accepted accounting principles applicable in the country under which
the financial statements and records are prepared); (iii) Progress Fuels has
made available to Holdings as to each Benefit Plan, if applicable, a true and
correct copy of (A) the most recent annual report (Form 5500) filed with the
IRS, if applicable, or with any other applicable Governmental Authority, (B)
the most recent actuarial valuation report and the most recent accounting and
certified financial statement, if applicable, of each Benefit Plan for which
such statement is made (it being understood that, to the Knowledge of the
Companies, there has been no event or occurrence which could affect, to any
material extent, the information described in (A) and (B)), (C) each current
plan document, trust agreement, group annuity contract and insurance contract,
if any, relating to such Benefit Plan, (D) the most recent summary plan
description, (E) the most recent forms filed with the PBGC, DOL or IRS (other
than for premium payments), or other relevant non-US Governmental 

 

30

 

Authority,
(F) the most recent determination letter issued by the IRS, (G) any Form 5310
or Form 5330 filed with the IRS, and (H) the most recent nondiscrimination
tests performed under ERISA and the Code (including 401(k) and 401(m) tests);
(iv) each Benefit Plan has been administered in substantial compliance with the
applicable provisions of ERISA and the Code or of the applicable Laws and the
terms of such Benefit Plan; (v) there are no pending or, to the Knowledge of
the Companies, threatened investigations or claims by the Internal Revenue
Service, Department of Labor, Pension Benefit Guaranty Corporation or any other
Governmental Authority, relating to any of the Benefit Plans; (vi) there are no
pending or, to the Knowledge of the Companies, threatened termination
proceedings, pending claims (except claims for benefits payable in the normal
operation of the Benefit Plans), suits or proceedings against or involving any
Benefit Plan or asserting any rights to or claims for benefits under any
Benefit Plan and, to the Knowledge of the Companies, there are not any facts
that could reasonably be expected to give rise to any such investigation,
claim, suit or proceeding; (vii) no Benefit Plan is, or has been within the
past 6 years, a “multiemployer plan” within the meaning of Section 3(37) of
ERISA, or of any applicable Law, or is a multiemployer pension or benefit plan
in Canada, is described in Section 401(a)(1) of ERISA, or provides post
retirement, or health or death benefit coverage beyond the termination of an
employee’s employment, except as required by Part 6 of Subtitle B of Title I of
ERISA or Section 4980B of the Code or any state or other applicable Laws
requiring continuation of benefits coverage following termination of
employment; (viii) with respect to each Benefit Plan that is an “employee
benefit pension plan” within the meaning of Section 3(2) of ERISA, the
Companies have not incurred any “accumulated funding deficiency” within the
meaning of Section 302 of ERISA or Section 412 of the Code, and no “reportable
event” (within the meaning of Section 4043 of ERISA) has occurred that is
reasonably likely to result in a material liability to the Companies or the
Subsidiaries; (ix) the tax deductibility of any amount paid or payable as
compensation or under any Benefit Plan as a result of the transactions
contemplated by this Agreement, whether alone or in combination with any other
event (e.g., termination of employment), will not be limited by operation of
Section 280G of the Code; (x) no liability for any tax imposed under Section
4971 through 4980G of the Code, under Section 502(i) or (l) of ERISA, or under
Title IV of ERISA, has been imposed against the Companies or the Subsidiaries
and, to the Knowledge of the Companies, no circumstances exist which could give
rise to any such liability; (xi) neither the Companies nor the Subsidiaries
participate in any Benefit Plan that is sponsored or maintained by Progress
Fuels or any Affiliate of Progress Fuels (other than the Companies or the
Subsidiaries) and each Benefit Plan covers only employees or former employees
of the Companies or the Subsidiaries; (xii) the only Benefit Plan that provides
benefits to employees located in Canada (a “Canadian Benefit Plan”) that is a
registered pension plan as defined under the applicable pension Laws of Canada
(a “Canadian Pension Plan”) is a defined contribution plan; (xiii) no promises
or commitments have been made by any of the Companies or the Subsidiaries to amend
any Canadian Benefit Plan, to provide increased benefits thereunder or to
establish any new benefit plan, except as required by applicable Law; and (xiv)
to the Knowledge of the Companies, no event has occurred and there has been no
failure to act on the part of either Progress Fuels, the Companies or any
Subsidiary that could reasonably be expected to subject the Companies or the
Subsidiaries, the Canadian Pension Plan or any successor plan to the imposition
of any tax, penalty, penalty tax or other liability, whether by way of
indemnity or otherwise.

 

(c)          
Except
as set forth in Schedule 4.12, no employee of the Companies or the
Subsidiaries will be entitled to any additional benefits or any acceleration of
the time of payment 

 

31

 

or
vesting of any benefits under any Benefit Plan or agreement as a result of the
transactions contemplated by this Agreement either alone or in conjunction with
another event (e.g. termination of employment).

 

(d)          
Neither
Company nor any Subsidiary is subject to any liability with respect to any
employee benefit plan, program or arrangement sponsored or contributed to by
Progress Fuels or any of its Affiliates (other than the Companies and the
Subsidiaries).

 

4.13        
Employment
Matters.

 

(a)          
Except
as set forth in Schedule 4.13(a), all directors, employees, contractors
and consultants of the Companies and their Subsidiaries may be terminated by
the Companies or the relevant Subsidiary at any time with or without cause and
without any severance or other Liability to the Companies or such Subsidiary,
except for those directors, employees, contractors or consultants who are
employed or engaged on an indefinite basis in Canada requiring notice of
termination or severance pay under applicable Laws.

 

(b)          
Except
as set forth in Schedule 4.13(b):

 

(i)           
No
Company or Subsidiary is party to, bound by, or negotiating in respect of any
collective bargaining agreement or any other agreement with any labor union,
association or other employee group.  No Company or Subsidiary is a party
to or has any obligation under any white paper or side agreement with any labor
union or organization, or any obligation to recognize or deal with any labor
union or organization, and there are no such contracts, white papers or side
agreements pertaining to or which determine the terms or conditions of
employment of any employee of the Companies or its Subsidiaries, nor, is any
employee of the Companies or the Subsidiaries represented by any labor union or
similar association.

 

(ii)          
No
labor union or employee organization has been certified or recognized as the
collective bargaining representative of any employees of the Companies or the
Subsidiaries.

 

(iii)         
To
the Knowledge of the Companies, there are no pending union organizing campaigns
or representation proceedings underway or threatened with respect to any
employees of the Companies or the Subsidiaries nor are there any existing or
threatened labor strikes, lockouts, work stoppages, slowdowns, disputes,
grievances, unfair labor practice charges, labor arbitration proceedings or
other disturbances affecting any employee of the Companies or the Subsidiaries.

 

(iv)         
Each
Company and Subsidiary has paid or properly accrued in the ordinary course of
business all wages and compensation due to employees, including all vacations
or vacation pay, holiday or holiday pay, sick days or sick pay, and bonuses.

 

(v)          
As
of November 30, 2004, there are no outstanding assessments, penalties, fines,
levies, charges, surcharges or other amounts due or owing pursuant to any
applicable workers’ compensation and employment Laws in respect of the Business
or of the employee, in each case, which are in excess of the amounts reserved
for on the unaudited balance sheet of the Companies dated November 30, 2004
included in the Financial Statements and, to the Knowledge of the 

 

32

 

Companies,
there are no audits currently being performed pursuant to any applicable
workers’ compensation and employment Laws.

 

4.14        
Taxes.  Except as set
forth in Schedule 4.14:

 

(a)          
All
Tax Returns required to have been filed by or with respect to any of the
Companies or the Subsidiaries or a Relevant Group have been duly and timely
filed, taking into account valid extensions (or, if due between the date hereof
and the Closing Date, will be duly and timely filed, taking into account valid
extensions), and each such Tax Return correctly reflects or will, upon timely
filing, correctly reflect, in all material respects, liability for Taxes and
all other information required to be reported thereon.  All material
amounts of Taxes owed by any of the Companies or the Subsidiaries (whether or
not shown on any Tax Return) have been timely paid (or, if due between the date
hereof and the Closing Date, will be duly and timely paid).  The Companies
and the Subsidiaries have adequately provided for, in their books of account
and related records, liability for all current Taxes not yet due and payable.

 

(b)          
There
is no action or audit now pending or, to the Knowledge of the Companies,
proposed or threatened against, or with respect to, the Companies or any
Subsidiary in respect of any Taxes.  Neither Company nor any Subsidiary is
the beneficiary of any current extension of time within which to file any Tax
Return, nor has either Company or any Subsidiary made (or had made on their
behalf) any requests for such extensions, other than extensions of time with
respect to the filing of federal income Tax Returns, State Income Tax Returns,
state franchise Tax Returns or foreign income Tax Returns due after the date of
this Agreement.  No claim has ever been made by a Taxing Authority in a
jurisdiction where either Company or any Subsidiary does not file Tax Returns
that any of them is or may be subject to taxation by that jurisdiction or that
any of them must file Tax Returns in that jurisdiction.  There are no
Liens (except Permitted Liens) on any of the stock or assets of any the
Companies and the Subsidiaries with respect to Taxes.

 

(c)          
Each
of the Companies and the Subsidiaries (i) has withheld and timely paid all
material amounts of Taxes required to have been withheld and paid, (ii) will,
as of the Closing, have withheld all material amounts of Taxes required to have
been withheld as of Closing and have paid all material amounts of withholding
Taxes required to have been paid as of Closing, (iii) has complied in all
material respects with all information reporting and backup withholding
requirements, including maintenance of required records with respect thereto
and (iv) will, as of the Closing, have complied in all material respects with
all information reporting and backup withholding requirements, including
maintenance of required records with respect thereto.

 

(d)          
There
is no dispute or claim concerning any liability for Taxes with respect to
either Company or any Subsidiary for which written notice has been provided, or
which is asserted or threatened in writing, or which is otherwise known to
Progress Fuels or the Companies or any Subsidiary.  No issues have been
raised in any examination relating to Taxes with respect to either Companies or
any Subsidiary which, by application of similar principles, reasonably could be
expected to result in liability for Taxes for any other period not so
examined.  Schedule 4.14 (i) lists all federal, state, local, and
foreign income Tax Returns filed with respect to the Companies and the
Subsidiaries for taxable periods ended on or after January 1, 2001, and (ii)
indicates those Tax Returns that have been audited.  Progress Fuels has 

 

33

 

delivered
or made available in a reasonable manner to Holdings correct and complete
copies of all federal income Tax Returns, examination reports, and statements
of deficiencies assessed against or agreed to by any the Companies and the
Subsidiaries since January 1, 2000.  Neither Company nor any Subsidiary
has waived (or is subject to a waiver of) any statute of limitations in respect
of Taxes or has agreed to (or is subject to) any extension of time with respect
to a Tax assessment or deficiency.

 

(e)          
None
of the assets or properties of any of the Companies or the Subsidiaries
constitutes tax-exempt bond financed property or tax-exempt use property within
the meaning of the Section 168 of the Code.  Neither Company nor any
Subsidiary is a party to any “safe harbor lease” within the meaning of Section
168(f)(8) of the Code, as in effect prior to amendment by the Tax Equity and
Fiscal Responsibility Act of 1982, or to any “long-term contract” within the
meaning of Section 460(f) of the Code.  No foreign Subsidiary holds a
“United States real property interest” within the meaning of Section 897(c)(1)
of the Code.  Progress Fuels is not a “foreign person” within the meaning
of Section 1445 of the Code. Neither Company nor any Subsidiary has
participated in or cooperated with an international boycott as defined in
Section 999 of the Code.

 

(f)           
Neither
Company nor any Subsidiary has agreed to or is required to make by reason of a
change in accounting method or otherwise, or reasonably could be required to
make by reason of a proposed or threatened change in accounting method or
otherwise, any adjustment under Section 481(a) of the Code.  Neither
Company nor any Subsidiary has been the “distributing corporation” (within the
meaning of Section 355(c)(2) of the Code) with respect to a transaction
described in Section 355 of the Code within the five-year period ending as of
the date of this Agreement.  Neither Company nor any Subsidiary has
received (or is subject to) any ruling from any Taxing Authority that will be
effective at any time after the Closing or has entered into (or is subject to)
any agreement with a Taxing Authority that will be effective at any time after
the Closing.  Each of the Companies and the Subsidiaries has disclosed on
its federal income Tax Returns all positions taken therein that reasonably
could give rise to a substantial understatement of federal income Tax within
the meaning of Section 6662 of the Code.

 

(g)          
Neither
Company nor any Subsidiary is a party to any Tax allocation or sharing
agreement with any Person other than a Company, a Subsidiary or member of a
group of which Progress Fuels is a member.  Neither Company nor any
Subsidiary has any liability for the Taxes (excluding property taxes payable
pursuant to a lease or similar contract) of any Person, other than under
Section 1.1502-6 of the Treasury regulations (or any similar provision of state,
local, or foreign law) with respect to any Relevant Group of which such Company
or Subsidiary currently is a member, (i) as a transferee or successor, (ii) by
contract, (iii) to the Knowledge of the Companies under Section 1.1502-6 of the
Treasury regulations (or any similar provision of state, local or foreign law),
or (iv) otherwise.  Neither Company nor any Subsidiary is a party to any
joint venture, partnership or other arrangement that is treated as a
partnership for federal income Tax purposes.

 

(h)          
Except
as specifically so identified on the Closing Financial Statements, neither the
Company nor any Subsidiary will be required to include any item of income in,
or exclude any item of deduction from, taxable income for any taxable period beginning
after the Closing Date or (under the principles of Section 8.2(g)(iii))
the portion following the Closing Date of any 

 

34

 

taxable
period that includes but does not end on the Closing Date as a result of any:
(i) intercompany transactions or excess loss accounts described in Treasury
regulations under Section 1502 of the Code (or any similar provision of state,
local, or foreign Tax law) and occurring or arising prior to the Closing Date,
(ii) installment sale or open transaction disposition made on or prior to the
Closing Date or (iii) prepaid amount received on or prior to the Closing Date.

 

(i)           
Neither
Company nor any Subsidiary has net operating losses or other tax attributes
presently subject to limitation under Sections 279, 382, 383, or 384 of the
Code, or the federal consolidated return regulations.

 

(j)           
No
Subsidiary of either Company that is incorporated in a non-U.S. jurisdiction
has an investment in “United States property” within the meaning of Section
956(c) of the Code.  No Subsidiary of either Company is, or at any time
has been, a passive foreign investment company within the meaning of Section
1297 of the Code and neither Company nor any Subsidiary is a shareholder,
directly or indirectly, in a passive foreign investment company.  No
Subsidiary of either Company that is incorporated in a non-U.S. jurisdiction is
engaged in the conduct of a trade or business within the United States, or
considered under applicable law to be so engaged.

 

(k)          
Neither
Company nor any Subsidiary is, as a matter of fact, subject to (i) the dual
consolidated loss provisions of Section 1503(d) of the Code, (ii) the overall
foreign loss provisions of Section 904(f) of the Code or (iii) the
recharacterization provisions of Section 952(c)(2) of the Code.

 

(l)           
The
Progress Rail Shares, the Progress Metal Shares and the stock of each
Subsidiary that is a domestic corporation (for federal income Tax purposes) and
is owned by a Company or another such Subsidiary constitutes, in each case,
stock meeting the requirements of Section 1504(a)(2) of the Code.

 

4.15        
Transactions
With Affiliates.  Except as set forth in Schedule 4.15,
since December 1, 2004, the Companies and the Subsidiaries have not, in the
ordinary course of business or otherwise, purchased, leased or otherwise
acquired any material property or assets or obtained any material services
from, or sold, leased or otherwise disposed of any material property or assets
or provided any material services to (except with respect to remuneration for
services rendered as a director, officer or employee of the Companies and the
Subsidiaries) any Affiliate.  Except as set forth in Schedule 4.9
or 4.16(f), (a) the Contracts do not include any obligation or commitment
between the Companies or the Subsidiaries and any Affiliate, and (b) the assets
of the Companies or the Subsidiaries do not include any receivable or other
obligation or commitment from an Affiliate of the Companies or the
Subsidiaries.

 

4.16        
Accounts
Receivable; Accounts Payable.  Except as set forth in Schedule
4.16, the accounts of the Companies and the Business reflected on the
combining statement of assets and liabilities included in the Financial
Statements and all accounts arising subsequent to December 1, 2004, (a) arose
from bona  fide sales transactions in the ordinary course of
business consistent with past practice and are payable on ordinary trade terms,
(b) are legal, valid and binding obligations of the respective debtors
enforceable in accordance with their respective 

 

35

 

terms
(subject to any applicable bankruptcy, insolvency, reorganization, moratorium
or other laws affecting generally the enforcement of creditor’s rights and
subject to general principles of equity), (c) are not subject to any valid
set-off, counterclaim defense or material dispute or any Liens (other than
Permitted Liens), (d) do not represent obligations for goods, licenses or
other provision of products or services sold on consignment, on approval or on a
sale-or-return basis, (e) are collectible in the ordinary course of business
consistent with past practice (including past practice regarding maintenance of
customer relationships and goodwill) in the aggregate recorded amounts thereof,
net of any applicable reserve reflected on the combining statement of assets
and liabilities included in the Financial Statements, (f) do not arise
from a sale to an Affiliate, and (g) are not evidenced by a note,
instrument or chattel paper.  All of the accounts and notes payable and
accrued expenses of the Companies and the Subsidiaries arising after November
30, 2004 have been incurred or have arisen in bona fide transactions.

 

4.17        
Environmental
and Asbestos.

 

(a)          
Except
as set forth in Schedule 4.17:

 

(i)           
the
Companies and the Subsidiaries comply and have complied with all applicable
Environmental Laws and Asbestos Laws except for any past non-compliance for
which there are no remaining obligations or liabilities;

 

(ii)          
each
Company and each Subsidiary has obtained all Permits required pursuant to
Environmental Laws and Asbestos Laws for the conduct of its business, all such
Permits are in full force and effect, and the applicable Company or Subsidiary
is and has been in material compliance with the terms and conditions of the
Permits except for any past non-compliance or failure to hold such Permits for
which there are no remaining obligations or liabilities;

 

(iii)         
to
the Knowledge of Companies, neither of the Companies, any Subsidiary nor any of
their respective corporate predecessors has received any notice of present or
past Environmental Claim for which there are remaining obligations or
liabilities asserting that:  (A) any of the Companies or Subsidiaries
is currently not in compliance with, has liability under or is in violation of,
any Environmental Laws, Asbestos Laws or Permits required thereunder;
(B) any currently existing circumstances are likely to result in a failure
of any of the Companies or Subsidiaries to comply with or constitute a
violation of or liability under any Environmental Laws, Asbestos Laws or
Permits required thereunder by or with respect to any Company or Subsidiary or
any of their respective corporate predecessors; (C) it has liability or potential
liability based upon (i) any actual or claimed transportation, treatment,
storage, handling or disposal of a Hazardous Material or Asbestos;
(ii) the actual or claimed arrangement for transportation, treatment,
storage, handling or disposal of a Hazardous Material or Asbestos; or
(iii) the Release of any Hazardous Material or Asbestos by or on behalf of
either Company, any Subsidiary or any of their respective corporate
predecessors, including with respect to any past or present operations or properties
currently owned, leased, occupied or operated or formerly owned, operated,
leased or occupied or by either of the Companies, any Subsidiary or any of
their respective corporate predecessors; or (D) any material unfulfilled
remedial obligations or ongoing monitoring and reporting obligations exist;

 

36

 

(iv)         
to
the Knowledge of the Companies, neither of the Companies nor any Subsidiary nor
any of their respective corporate predecessors owns, operates, occupies or
leases or formerly owned, operated, occupied or leased any real property at
which any Hazardous Materials or Asbestos are present or have been Released
(with respect to formerly owned, operated, occupied or leased, during or prior
to such period of ownership, operation, occupancy or lease) from, to, on, in,
at, around or under in concentrations, levels, conditions, circumstances or
amounts that could give rise to any liability or requirements under any
Environmental Laws or Asbestos Laws (such as a regulatory requirement for investigation,
abatement, remediation, sampling, testing, monitoring, modeling or other
affirmative requirements arising out of the presence or Release of any
Hazardous Materials or Asbestos) or an Environmental Claim or Claim with
respect to Asbestos; nor is either Company, any Subsidiary or any of their
respective corporate predecessors liable or potentially liable for any such
Release or condition off-site by virtue of Releases or conditions arising on
real property currently or formerly owned, operated, occupied or leased by
either Company, any Subsidiary or any of their respective corporate
predecessors (other than real property currently owned, operated, occupied or
leased by any such corporate predecessors); nor has either Company, any
Subsidiary or any of their respective corporate predecessors engaged in any
activity that has caused or contributed to any such condition at any other
location; nor is either Company or any Subsidiary aware of any pending or
contemplated future investigation that would lead to such an Environmental
Claim as described by this Subsection against the Companies, its Subsidiaries
or any Person with respect to which the Companies or the Subsidiaries has
responsibility;

 

(v)          
to
the Knowledge of the Companies, the Companies and the Subsidiaries have
furnished to Holdings all material environmental and Asbestos safety and health
investigations, studies, audits, tests and other analyses of currently owned,
operated and leased properties in the respective possession of Progress Fuels,
Progress Energy, the Companies or the Subsidiaries or their respective
Affiliates or in the possession of their representatives, insurers, lenders or
consultants;

 

(vi)         
to the Knowledge of the Companies, no real property currently or formerly
owned, operated, occupied or leased by the Companies, the Subsidiaries or any
of their respective predecessors is listed or proposed for listing on the
National Priorities List, the Comprehensive Environmental Response,
Compensation and Liability Information System or on any similar state list of
sites requiring investigation or cleanup;

 

(vii)        
to the Knowledge of the Companies, there are no (A) underground storage tanks
(active or abandoned); (B) polychlorinated biphenyl containing equipment; or
(C) Asbestos located at real property owned, operated, occupied or leased by
the Companies or the Subsidiaries, in each case, other than such tanks,
equipment or materials that are in compliance with applicable Environmental
Laws or Asbestos Laws, respectively;

 

(viii)       
neither
the Companies nor its Subsidiaries (or any of their respective predecessors)
has, either expressly or by operation of law, assumed or undertaken, or agreed
to assume or undertake, responsibility for any liability or obligation of any
other 

 

37

 

Person,
arising under or relating to Environmental Laws or Asbestos Laws, including,
without limitation, any obligation for investigation, corrective or remedial
action; and

 

(ix)          
to
the Knowledge of Companies, no Persons have been exposed to any Hazardous
Materials or Asbestos at, from, in, to, on, or under any real property
currently or formerly owned, operated, occupied or leased by the Companies, any
Subsidiaries, any former Affiliates or any of their respective corporate
predecessors or at any other location at which the foregoing entities have
conducted operations or provided services or arranged for the treatment,
storage, transportation, handling or disposal of a Hazardous Material or
Asbestos, in each case, that could give rise to an Environmental Claim or a
Claim with respect to Asbestos against the Companies, its Subsidiaries or any
Person with respect to which the Companies or the Subsidiaries has
responsibility.

 

(b)          
This
Section 4.17 contains the sole and exclusive representation and warranty
of Progress Fuels with respect to Environmental Laws and Asbestos Laws.

 

4.18        
Books
and Records.  The books and records of the Companies have been
made available to Holdings prior to the execution of this Agreement, are
complete and correct in all material respects and have been maintained in
accordance with sound business practices.  The minute books contain a true
and complete record, in all material respects, of all action taken at all meetings
and by all written consents in lieu of meetings of directors, stockholders,
subcommittees and committees of the boards of directors of the Companies.

 

4.19        
Real
Property.

 

(a)          
Schedule
4.19(a) contains a true, correct and complete list (including, without
limitation, legal descriptions) of all real property owned by the Companies or
the Subsidiaries (together with all buildings, improvements and structures
thereon and all easements, rights of way and appurtenances relating thereto,
the “Owned Real Property”).  The applicable Company or its Subsidiary owns
good and marketable title to the Owned Real Property in fee subject to no Liens
except the Permitted Liens.  Neither of the Companies nor the Subsidiaries
currently lease all or any part of any Owned Real Property.

 

(b)          
The
Companies and the Subsidiaries are not in default with respect to any monies
owed to any contractor, subcontractor or materialman for labor or materials
performed, rendered or supplied to or in connection with any parcel of Real
Property for which such person could claim a lien.  Each parcel of Real
Property, including, without limitation, all buildings, building systems,
structural components, roofs, and building equipment, is in condition and
repair consistent with prudent industry practice in the Business, suitable for
its intended purposes and the operation of the business of the applicable
Company or its Subsidiaries thereon, and there exist no material defects in the
same.  Private utilities located within each parcel of Real Property or
public utilities adequately serve all utility requirements of each parcel of
Real Property and such public utilities enter directly through adjoining public
streets or enter through adjoining private lands under appurtenant perpetual
easements benefiting the applicable Real Property (which easements (i) did
not impose material obligations on the owner of such Real Property and are
(ii) reasonable in form and substance for the operation and ownership of
such Real Property).  To the Knowledge of the Companies, there are no
unrecorded easements affecting the Real 

 

38

 

Property. 
Neither the Companies nor the Subsidiaries have assigned, pledged, mortgaged,
hypothecated or otherwise transferred any such easement.  Neither the
Companies nor the Subsidiaries are in default under the terms of such
easements.  No building or other improvement not included in a parcel of
Real Property relies on any part of the same to fulfill any zoning, building
code or other municipal or governmental requirement or for structural support
or the furnishing to such building or improvement of access, any essential
building systems, facilities or utilities, except, with respect to such
structural support, such access or such systems, facilities or utilities which
rely upon such Real Property pursuant to an agreement terminable upon not more
than 30 days’ prior notice without further Liability of the Companies or
Subsidiaries thereunder.  Except as set forth in Schedule 4.19(b),
there are no condemnation or appropriation proceedings, lawsuits or
administrative actions pending or threatened against any parcel of Owned Real
Property and, to the Knowledge of the Companies, Leased Real Property. 
Each parcel of Real Property has adequate rights of ingress and egress.

 

(c)          
Subject
to the terms of the respective Real Property Leases, the applicable Company or
Subsidiary (if the tenant) has a valid and subsisting leasehold estate in and
the right to quiet enjoyment to each parcel of real property demised under a
Real Property Lease (the “Leased Real Property” and, together with the Owned
Real Property but excluding the Retained Real Property, the “Real Property”)
for the full term of the respective Real Property Lease.  True and correct
copies of each Real Property Lease have been delivered to Holdings.  Each
Real Property Lease was negotiated at arms length and neither Progress Fuels,
the Companies nor the Subsidiaries are affiliated with any landlord or tenant,
as the case may be, under any Real Property Lease.  Neither the Companies
nor the Subsidiaries have assigned, pledged, mortgaged, hypothecated or
otherwise transferred any Real Property Lease or sublet all or any portion of
any Leased Real Property.  The applicable Company or Subsidiary is in possession
of the Leased Real Property.  Except as set forth in Schedule 4.19(c),
no security deposit has been used and no penalties are accrued and unpaid under
any Real Property Lease and no landlord or tenant under any Real Property Lease
has exercised any option or right to cancel or terminate such Real Property
Lease or shorten the term thereof, lease additional premises, reduce or
relocate the premises demised by such Real Property Lease or purchase any
property.  Except as set forth in Schedule 4.19(c), neither the
Companies nor the Subsidiaries are a party to any oral lease of real property
(which oral leases (i) do not impose material obligations on the Companies or
the Subsidiaries and (ii) are terminable upon not more than thirty (30) days’
prior notice without further Liability of the Companies or the Subsidiaries
thereunder).

 

(d)          
With
respect to the Retained Real Property, the aggregate fair market value of such
Retained Real Property does not exceed $2,500,000.

 

4.20        
Substantial
Customers and Suppliers.  Schedule 4.20 lists the fifteen (15)
largest customers of the Business on the basis of revenues for goods sold or
services provided for the most recent fiscal year. Schedule 4.20 lists
the fifteen (15) largest suppliers of the Business on the basis of cost of
goods or services purchased for the most recent fiscal year.  Except as
set forth in Schedule 4.20, no such customer or supplier which is party
to an agreement or purchase order (i) with a term of more than one year, are subject
to automatic renewal or indefinite and (ii) that involved an annual payment of
more than $2,500,000 during at least one of the last three fiscal years or, to
the Knowledge of the Companies, would have reasonably been expected to involve
the payment of more than $2,500,000 during any fiscal year in the future, has
ceased its 

 

39

 

purchases
from or sales or provision of services to the Business since December 1, 2004,
or, to the Knowledge of the Companies, have threatened to cease such purchases or
sales or provision of services after the date hereof.  Except as disclosed
in Schedule 4.20, to the Knowledge of the Companies, no such customer or
supplier is the subject of bankruptcy or insolvency proceedings.

 

4.21        
Entire
Business.  The Mergers consummated pursuant to this Agreement
will effectively convey to Holdings the entire Business and all of the assets
and properties (other than the Retained Real Property) used by the Companies
and the Subsidiaries (whether owned, leased or held under license by the
Companies, any Subsidiary, by any of their respective Affiliates or by others)
in connection with the conduct of the Business as heretofore conducted by
Progress Energy and Progress Fuels.  Except as disclosed in Schedule
4.21, there are no shared facilities or services which are used in
connection with any business or other operations of the Companies, any
Subsidiary or any of their respective Affiliates other than the Business.

 

4.22        
Warranty
Obligations.  Schedule 4.22 sets forth (a) copies of all
written general warranty policies given by the Companies or any Subsidiary with
respect to the Business, which are currently in effect or may hereinafter
become effective (the “Warranty Obligations”), and the duration of each such
Warranty Obligation, and (b) each of the Warranty Obligations (or warranty
obligations contained in purchase orders or other agreements for the sale of
goods or services) which is subject to any material dispute or, to the best of
the Knowledge of the Companies, threatened material dispute.

 

4.23        
Inventory.  All inventory
of the Companies and any Subsidiary consists of a quality and quantity usable
and salable in the ordinary course of business consistent with past practice,
subject to the allowances contained in the Financial Statements for damage and
outdated items.  All items included in such inventory are the property of
the Companies or the Subsidiaries, free and clear of any Liens, have not been
pledged as collateral, are not held by the Companies or any Subsidiary on
consignment from others and conform in all material respects to all standards
applicable to such inventory or its use or sale imposed by Governmental
Authorities.

 

4.24        
Foreign
Corrupt Practices Act.  Neither the Companies, any Subsidiary, any
director or officer of the Companies or any Subsidiary nor, to the Knowledge of
the Companies, any agent, employee or other Person associated with or acting on
behalf of the Companies or any Subsidiary, or the Business has, directly or indirectly,
used any corporate funds for unlawful contributions, gifts, entertainment, or
other unlawful expenses relating to political activity, made any unlawful
payment to foreign or domestic government officials or employees or to foreign
or domestic political parties or campaigns from corporate funds, violated any
provision of the Foreign Corrupt Practices Act of 1977, as amended, or made any
bribe, rebate, payoff, influence payment, kickback, or other unlawful payment.

 

4.25        
No
Broker.  None of Progress Energy, Progress Fuels nor either of the
Companies or any Subsidiary (i) have had any dealings, negotiations or
communications with or retained any broker or other intermediary in connection
with the transactions contemplated by this Agreement or (ii) is committed to
any Liability for any brokers’ or finders’ fees or any similar fees in
connection with the transactions contemplated by this Agreement, other than
Morgan Stanley 

 

40

 

and
Co., Incorporated, whose fees and expenses that are unpaid as of the Closing
shall be paid by Progress Fuels.

 

4.26        
Bank
Accounts.  Schedule 4.26 sets forth (a) a true and
complete list of the names and locations of all banks, trust companies,
securities brokers and other financial institutions at which the Companies or
the Subsidiaries (to the extent related to the Business) have an account or
safe deposit box or maintains a banking, custodial, trading or other similar
relationship; and (b) a true and complete list and description of each
such account, box and relationship, indicating in each case the account number
and the names of the respective officers, employees, agents or other similar
representatives of the Companies or the Subsidiaries having signatory power
with respect thereto.

 

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF HOLDINGS AND THE MERGER SUBS

 

Holdings hereby represents and warrants to Progress
Fuels:

 

5.1          
Organization.  Holdings and
the Merger Subs are duly incorporated, validly existing and in good standing
under the laws of its respective jurisdiction of incorporation and has the
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated herein.  Each of Holdings
and the Merger Subs are duly qualified as a foreign corporation in good
standing in each jurisdiction in which the conduct of its business requires
such qualification, except where the failure to be so qualified would not
prevent or materially delay consummation of the transactions contemplated hereby.

 

5.2          
Authorization;
Execution and Delivery; Enforceability.  Each of Holdings and the
Merger Subs has full corporate power and authority to enter into, deliver and
perform this Agreement, and each agreement or instrument (to which it is a party)
executed in connection herewith or delivered pursuant hereto and to consummate
the transactions contemplated hereby. The execution, delivery and performance
of this Agreement by each of Holdings and the Merger Subs and all agreements
and instruments executed in connection herewith or delivered pursuant hereto by
each of Holdings and the Merger Subs and the transactions contemplated hereby
have been duly authorized by all requisite corporate action on the part of each
of Holdings and the Merger Subs.  This Agreement and all agreements or
instruments executed by each of Holdings and the Merger Subs in connection
herewith or delivered by each of Holdings and the Merger Subs pursuant hereto
have been duly executed and delivered by each of Holdings and the Merger Subs,
as the case may be, and this Agreement and all agreements and instruments
executed by each of Holdings and the Merger Subs in connection herewith or
delivered by each of Holdings and the Merger Subs pursuant hereto constitute
the legal, valid and binding obligations of by each of Holdings and the Merger
Subs, enforceable against Holdings and the Merger Subs, as the case may be, in
accordance with their respective terms except to the extent that enforcement
may be affected by applicable bankruptcy, reorganization, insolvency and
similar laws affecting creditors’ rights and remedies generally and by general
principles of equity (regardless of whether enforcement is sought at law or in
equity).

 

41

 

5.3          
No
Violation or Conflict; Consents.  The execution, delivery and
performance by each of Holdings and the Merger Subs of this Agreement and all
of the other documents and instruments contemplated hereby and the consummation
of the transactions contemplated herein do not and will not conflict with,
violate or breach any Laws, judgment, order or decree binding on Holdings or
the Merger Subs, as the case may be, or the respective articles of
incorporation or bylaws of each of Holdings and the Merger Subs.  Except
for such filings and consents as may be required pursuant to the HSR Act or any
Other Antitrust Regulations, all of which will have been made or obtained, as
the case may be, prior to the Closing, no consent of any other Person, and no
notice to, filing or registration with, or authorization, consent or approval
of, any governmental, regulatory or self-regulatory agency is necessary or is
required to be made or obtained by Holdings or the Merger Subs, as the case may
be, in connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby.

 

5.4          
No
Broker.  Neither Holdings nor the Merger Subs has had any dealings,
negotiations or communications with any broker or other intermediary in
connection with the transactions contemplated by this Agreement and is not
committed to any Liability for any brokers’ or finders’ fees or any similar
fees in connection with the transactions contemplated by this Agreement.

 

5.5          
Purchase
for Investment.  Holdings is acquiring the Shares for its own
account for the purpose of investment and not with a view to or for sale in
connection with any distribution thereof, except in accordance with applicable
federal and state securities laws.

 

ARTICLE VI

PRE-CLOSING COVENANTS

 

6.1          
Conduct
of Business.  Except as provided in this Agreement, Progress
Energy and Progress Fuels shall (a) cause each of the Companies and each of the
Subsidiaries to conduct its business in the ordinary course and use its
reasonable efforts to preserve its properties, business and relationships with
its employees, suppliers and customers, including maintaining in full force and
effect until the Closing substantially the same levels of coverage of the
insurance policies currently maintained by each of the Companies and each of
the Subsidiaries, and (b) cause the Companies and the Subsidiaries to advise
Holdings promptly in writing of any development that has or could reasonably be
expected to have a Material Adverse Effect on the Companies and the Subsidiaries,
taken as a whole.  Without limiting the generality of the foregoing, until
the Closing, except as provided in this Agreement, Progress Energy and Progress
Fuels shall cause the Companies and the Subsidiaries to not and Progress Energy
and Progress Fuels shall not, as agent for either of the Companies or a
Subsidiary, without the written consent of Holdings, not be unreasonably
withheld:

 

(i)           
declare,
set aside or pay any non-cash dividend or other non-cash distribution with
respect to its capital stock;

 

(ii)          
except
for transactions in the ordinary course of business and consistent with its
past practice, (A) create, incur or assume any Indebtedness (other than any
Indebtedness described in clause (iv) of the definition thereof) for borrowed
money, 

 

42

 

except
pursuant to credit agreements in existence on the date of this Agreement, (B)
mortgage, pledge or otherwise encumber any of its properties or assets (other
than Real Property), except for Permitted Liens or (C) create or assume any
other Indebtedness except accounts payable and other Liabilities incurred in
the ordinary course of business;

 

(iii)         
issue
any shares of capital stock of any class or grant any warrants, options or
rights to subscribe for any shares of capital stock of any class or securities
convertible into or exchangeable for, or which otherwise confer on the holder
any right to acquire, any shares of capital stock of any class, or split,
combine or reclassify any shares of its capital stock;

 

(iv)         
fail
to comply, in all material respects with all applicable Laws and Permits and
with all orders of any court or of any federal, state, municipal or other
governmental department, non-compliance with which could cause a Material
Adverse Change in its assets or properties or a material impairment to its
business;

 

(v)          
amend
their Articles or Certificates of Incorporation, Bylaws or other organizational
documents, or merge or consolidate with or into any other corporation;

 

(vi)         
acquire
or dispose of any assets or properties used or held for use in the conduct of
the Business, other than in the ordinary course of business consistent with
past practice, or creating or incurring any Lien, other than a Permitted Lien,
on any assets or properties used or held for use in the conduct of the
Business;

 

(vii)        
engage
with any Person in any Business Combination;

 

(viii)       
engage
in any transaction with respect to the Business with any officer, director or
Affiliate of the Companies or any Subsidiary, or any associate of any such
officer, director or Affiliate, either outside the ordinary course of business
consistent with past practice or other than on an arm’s-length basis;

 

(ix)          
make
capital expenditures or commitments for additions to property, plant or
equipment constituting capital assets on behalf of the Business in an aggregate
amount exceeding $1,000,000 which were not approved under the capital
expenditure budget set forth in Schedule 6.1(ix);

 

(x)           
with
respect to Real Property, (A) exercise any right or option under any Real
Property Lease or extend or renew any Real Property Lease; (B) waive any
rights or grant any material consent under, mortgage or hypothecate any Real
Property Lease or sublet or encumber all or any portion of any Leased Real
Property; (C) sell, dispose of, lease, transfer, mortgage, hypothecate or
encumber all or any portion of the Owned Real Property; (D) demolish or make
any material alteration (other than as permitted under the capital expenditure
budget set forth in Schedule 6.1(ix)) to any Real Property; (E) fail to
operate, repair and maintain the Real Property in the ordinary course of
business; and (F) fail to perform all covenants and obligations under the Real
Property Leases, Permits and Permitted Liens;

 

43

 

(xi)          
make
(except as consistent with past practice) or rescind any material election
relating to Taxes, change any material method of accounting for Tax purposes or
settle or consent to the entry of judgment with respect to any proceeding
relating to Taxes of either of the Companies or any of the Subsidiaries,
except, in each such case, where such act would not increase the Tax liability
of a Company or any of the Subsidiaries (or any consolidated, unitary or
similar Tax group that includes a Company or any of the Subsidiaries) for any
Post-Closing Period; or

 

(xii)         
enter
into any agreement to do or engage in any of the foregoing or take other action
which would cause the representations and warranties in Article IV
to be untrue.

 

6.2          
Employee
Benefits Matters.

 

(a)          
Contracts.  Except as set
forth in Schedule 4.12, or with Holdings’ written consent, the Companies
and the Subsidiaries will not enter into, amend, modify, renew or terminate any
employment, consulting, severance or similar contracts with any director,
officer, or employee of the Companies and the Subsidiaries, or grant any
salary, wage or other increase or increase any employee benefit, except (i) for
changes that are required by applicable law, (ii) to satisfy Contracts existing
on the date hereof or to deliver the intended benefits thereunder, or (iii) for
merit-based or annual salary increases in the ordinary course of business and
in accordance with past practice.

 

(b)           Plans.  Except as set forth in Schedule 4.12,
or with Holdings’ written consent, the Companies and the Subsidiaries will not
enter into, establish, adopt, amend, modify or terminate any pension,
retirement, stock option, stock purchase, savings, profit sharing, employee
stock ownership, deferred compensation, consulting, bonus, group insurance or
other employee benefit, incentive or welfare contract, plan or arrangement, or
any trust agreement (or similar arrangement) related thereto, in respect of any
current or former director, officer, or employee, of the Companies and the
Subsidiaries (or any dependent or beneficiary of any of the foregoing Persons),
including taking any action that accelerates the vesting or exercisability of
or the payment or distribution with respect to, stock options, restricted stock
or other compensation or benefits payable thereunder, except in each such case,
(i) as may be required by applicable law, (ii) to satisfy Contracts or Benefit
Plans existing on the date hereof or to deliver the intended benefit
thereunder, (iii) to establish separate, but substantially similar plans for
the Companies’ and the Subsidiaries’ employees who currently participate in any
benefit plans of Progress Fuels or (iv)
to renew any such insurance or administrative services contract relating to any
of the above mentioned benefit plans if such renewal term comes due in the
ordinary course of business.

 

(c)           Certain Agreements. Prior to the Closing, Progress Fuels
shall assume the obligations of the Companies under the Companies Change of
Control Retention Plan (the “Retention Plan”) related to the transactions
contemplated by this Agreement and the Progress Rail Services Corporation
Management Incentive Compensation Plan (the “Incentive Plan”) with respect to
bonuses accrued as of the Closing Date as detailed in Schedule 6.2(c),
and Progress Fuels agrees to (i) amend the Retention Plan to provide for an
additional $1.65 million in benefits, and (ii) to satisfy those obligations in
accordance with their terms and, other than as 

 

44

 

permitted
in Section 6.2(c)(i), without further amendment or modification. 
Other than as described in this Section 6.2(c), Holdings will assume the
obligations under the Retention Plan and the Incentive Plan.

 

6.3          
Access
to Information.  As of the Closing Date, any books, records,
contracts, information and documents of either of the Companies or any of the
Subsidiaries or relating to the real properties currently owned, operated,
leased or occupied by the Companies or the Subsidiaries, including with respect
to Tax Returns, only Tax Returns (excluding federal income Tax Returns, State
Income Tax Returns, and state franchise Tax Returns) filed after January 1,
2001, true and complete copies of federal income tax Returns, State Income Tax
Returns and state franchise Tax Returns filed after January 1, 2004 (or pro
formas for the Companies or the Subsidiaries, in the case of Tax Returns
prepared on a consolidated or similar basis with Progress Fuels or other
Progress Fuels Affiliates other than the Companies and the Subsidiaries) and
associated workpapers (or true and complete copies thereof) and environmental
reports which are not located on the premises of either the Companies or the
Subsidiaries shall be relocated to such premises.  Prior to the Closing
Date, at Holdings’ expense, Holdings and its authorized agents, officers and
representatives shall have reasonable access to the properties, books, records,
contracts, information and documents of the Companies and each of the
Subsidiaries or relating to the real properties currently owned, operated,
leased or occupied by the Companies or the Subsidiaries, whether held by the
Companies, the Subsidiaries, Progress Fuels, Progress Energy or their
respective Affiliates, to conduct such examinations and investigations of the
Companies and the Subsidiaries as Holdings deems necessary; provided, however,
that such examinations and investigations: (a) shall be conducted during the
normal business hours of the Companies and the Subsidiaries, (b) shall not
unreasonably interfere with the operations and activities of the Companies or
any of the Subsidiaries, and (c) shall be subject to the prior approval of the
Companies and the Subsidiaries or Progress Fuels if the information or
documents requested are, in the reasonable opinion of the Companies, the
Subsidiaries or Progress Fuels, of a nature which may materially compromise the
competitive position of the Companies or any of the Subsidiaries.  The
Companies shall cooperate, and shall cause each of the Subsidiaries to
cooperate, in all reasonable respects with Holdings’ examinations and
investigations.

 

6.4          
Further
Assurances; Consents; Waiver of Notices.  Each of the parties hereto
hereby agrees to (a) use all commercially reasonable efforts to obtain,
and to cause the Companies and the Subsidiaries to obtain, any and all
approvals of Governmental Authorities and third party consents, approvals,
notations and authorizations required in connection with the consummation of
the transactions contemplated by this Agreement, (b)  comply, and cause
the Companies and the Subsidiaries to comply, with all conditions and covenants
applicable or related to it as contemplated by this Agreement and (c) 
take all such commercially reasonable other actions as are necessary or
advisable in order to cause the consummation of the transactions contemplated
hereby.

 

6.5          
Publicity.  All general
notices, releases, statements and communications to employees, suppliers,
distributors and customers of the Companies and to the general public and the
press relating to the transactions covered by this Agreement shall be made only
at such times and in such manner as may be agreed upon in advance by Progress
Fuels and Holdings; provided, however, that any party hereto
shall be entitled to make a public announcement of the foregoing if, in the
opinion of its legal counsel, such announcement is required to comply with 

 

45

 

Laws
or any listing agreement with any national securities exchange or inter-dealer
quotation system and if it first gives prior written notice to the other
parties hereto of its intention to make such public announcement.

 

6.6          
Confidentiality. 
Notwithstanding any other provision of this Agreement to the contrary, Holdings
agrees that unless and until the transactions contemplated herein are
consummated, Holdings shall remain subject to all of the terms and conditions
of the Confidentiality Agreement, dated May 6, 2004, by and between
Progress Energy and Holdings, the terms of which Confidentiality Agreement are
incorporated herein by reference; provided, however, the
provisions of the Confidentiality Agreement shall be waived as and to the
extent necessary to permit public announcements to the extent provided in Section
6.5 hereof.   Further, at or prior to the Closing, Progress
Energy shall assign to Holdings all confidentiality agreements executed for the
benefit of Progress Energy, Progress Fuels, the Companies or any Subsidiary
with respect to the Business in connection with the proposed sale of the
Companies.

 

6.7          
No
Solicitations.  Neither Progress Energy nor Progress Fuels will
take, nor will they permit the Companies or any Affiliate of Progress Energy or
Progress Fuels (or authorize or permit any investment banker, financial
advisor, attorney, accountant or other Person retained by or acting for or on
behalf of Progress Fuels, the Companies or any such Affiliate) to take,
directly or indirectly, any action to initiate, assist, solicit, receive,
negotiate, encourage or accept any offer or inquiry from any Person (a) to
reach any agreement or understanding (whether or not such agreement or
understanding is absolute, revocable, contingent or conditional) for, or otherwise
attempt to consummate, a Business Combination with respect to the Business (or
any part thereof), the Companies or the Subsidiaries with any Person other than
Holdings or its Affiliates or (b) to furnish or cause to be furnished any
information with respect to the Business or any of the Companies or
Subsidiaries to any Person (other than Holdings or its Affiliates) who Progress
Energy, Progress Fuels, the Companies or such Affiliate (or any such Person
acting for or on their behalf) knows or has reason to believe is in the process
of considering any Business Combination with respect to the Business (or any
part thereof), any of the Companies or Subsidiaries.  If Progress Energy,
Progress Fuels, the Companies or any such Affiliate (or any such Person acting
for or on their behalf) receives from any Person (other than Holdings or its
Affiliates) any offer, inquiry or informational request referred to above,
Progress Fuels will promptly advise such Person, by written notice, of the
terms of this Section 6.8 and will promptly, orally and in writing,
advise Holdings of such offer, inquiry or request and deliver a copy of such
notice to Holdings.

 

6.8          
Estoppel
Certificates; Landlord Lien Waivers; Contract Notices; Termination of Liens.  As soon as
practicable after execution of this Agreement, Progress Fuels shall (a) 
use all commercially reasonable efforts to cause the Companies to obtain from
each of the other parties under a Real Property Lease and each tenant under a
Company Lease if either of the Companies or any Subsidiary has leased any of
its Real Property to others estoppel certificates and landlord lien waivers, in
each case pursuant to a Collateral Access Agreement substantially in the form
attached as Exhibit 6.8(a); provided; however, that such
commercially reasonable efforts shall not include payment to such other parties
or tenants of any sums of money; (b) cause the Companies to promptly deliver to
Holdings a copy of any notice sent or received under any Contract; and (c)
cause the Companies to take all necessary actions to cause the termination, 

 

46

 

release
and removal of record, on or prior to the Closing Date, of all Liens other than
Permitted Liens.

 

6.9          
Cooperation
with Debt Financing.  In addition to the other obligations set forth in
this Agreement, Progress Energy, Progress Fuels, the Companies and the
Subsidiaries will cooperate with Holdings in connection with its arrangement
of, and negotiation of agreements with respect to, the debt financing
contemplated by Holdings, including (a) by making available to Holdings
and such financing sources and their representatives, personnel (including for
participation in road shows), documents and information of the Companies and
the Subsidiaries as may reasonably be requested by Holdings or such financing
sources, (b) by instructing the independent accountants of the Companies
to deliver a comfort letter in customary form in connection with any public
debt, and (c) if applicable, by similarly cooperating with financing sources
in connection with the offering and/or syndication of any such financing. 
In connection with any such debt financing, Holdings will notify its financing
sources that neither Progress Energy nor Progress Fuels is making any
representations or warranties in connection with such financing or otherwise
taking responsibility for the information presented.

 

6.10        
Insurance.  Progress
Energy and Progress Fuels shall keep, or cause to be kept, all material
insurance policies that provide coverage for the Companies and the Subsidiaries
in full force and effect through the close of business on the Closing Date, and
shall provide for the renewal of all such policies that are expiring by their
own terms prior to such date.

 

6.11        
Company
Transaction Expenses.  At or prior to the Closing, Progress Fuels shall,
or shall cause the Companies or the Subsidiaries to, pay all Company
Transaction Expenses.

 

6.12        
Antitrust
Matters.

 

(a)          
Progress
Fuels and Holdings shall, as promptly as practicable and before the expiration
of any relevant legal deadline, but in no event later than ten (10) days
following the execution and delivery of this Agreement, file with (i) the
United States Federal Trade Commission (the “FTC”) and the United States
Department of Justice (“DOJ”), the notification and report form required
for the transactions contemplated hereby and any supplemental information
requested in connection therewith pursuant to the HSR Act, which forms shall
specifically request any early termination of the waiting period prescribed by
the HSR Act and (ii) any other
Governmental Authority, any other filings, reports, requests for advance
ruling, information and documentation required for the transactions
contemplated hereby pursuant to any Other Antitrust Regulations.  Each of
Progress Fuels and Holdings shall furnish to each other’s counsel such
necessary information and reasonable assistance as the other may request in
connection with its preparation of any filing or submission that is necessary
under the HSR Act and any Other Antitrust Regulations.

 

(b)          
Progress
Fuels and Holdings shall use their commercially reasonable efforts to promptly
obtain any clearance required under the HSR Act and any Other Antitrust
Regulations for the consummation of this Agreement and the transactions
contemplated hereby and shall keep each other apprised of the status of any
communications with, and any inquiries or requests for additional information
from, the FTC and the DOJ and other Governmental Authorities and shall comply
promptly with any such inquiry or request; provided, however,
that Progress Fuels 

 

47

 

and
Holdings shall both promptly respond to the DOJ, the FTC or any other
Governmental Authority to a Request for Additional Information.

 

(c)          
The
parties hereto commit to instruct their respective counsel to cooperate with
each other and use commercially reasonable efforts to facilitate and expedite
the identification and resolution of any such issues and, consequently, the
expiration of the applicable HSR Act waiting period and the waiting periods
under any Other Antitrust Regulations at the earliest practicable dates. 
Said commercially reasonable efforts and cooperation include, but are not
limited to, counsel’s undertaking (i) to keep each other appropriately informed
of communications from and to personnel of the reviewing antitrust authority,
and (ii) to confer with each other regarding appropriate contacts with and
response to personnel of said antitrust authority.

 

6.13        
Available
Cash.  At the Closing, the Companies will have available net cash on
hand in excess of any undrawn checks and other amounts that can be drawn from
the respective bank accounts of the Companies and the Subsidiaries of not less
than $1,000,000 in the aggregate. 

 

6.14        
Title
Insurance Affidavits, Indemnities and Information.  Prior to the
Closing, Progress Fuels shall have delivered to Holdings and Holdings’ title
insurance company such affidavits, indemnities and information as Holdings’
title insurance company shall reasonably require in order to insure Holdings’
title to the Real Property in accordance with this Agreement (including,
without limitation, an affidavit that the Real Property is not subject to
leases, occupancy agreements, possessory rights, options or rights of first
refusal and a non-imputation affidavit and indemnity).

 

ARTICLE VII

CONDITIONS PRECEDENT TO CONSUMMATION OF THE MERGERS

 

7.1          
Conditions
Precedent to Each Party’s Obligations to Effect the Mergers.  The respective
obligations of each party to consummate the transactions contemplated by this
Agreement on the Closing Date are subject to the satisfaction at or prior to
the Closing of the following conditions precedent:

 

(a)          
no
order, decree, injunction or Law shall have been enacted, entered, promulgated,
enforced or shall be in effect by any court of competent jurisdiction or any
Governmental Authority which prohibits or makes illegal the consummation of the
transactions contemplated by this Agreement; provided, however,
that the parties hereto shall use their reasonable best efforts to have any
such order, decree or injunction vacated or reversed;

 

(b)          
all
applicable requirements under state securities or takeover laws shall have been
satisfied; and

 

(c)          
(i)
all applicable waiting periods under the HSR Act or Other Antitrust Regulations
have expired or been terminated or waived or the required approvals have been
otherwise obtained and the terms and conditions, if any, attached to such
approval 

 

48

 

shall
not have a material effect on the affairs, operations, liabilities or prospects
of Holdings after the consummation of the transactions contemplated by this
Agreement and (ii) neither the Federal Trade Commission nor the Department of
Justice nor any other Governmental Authority shall have advised the parties
hereto that it opposes any of the transactions contemplated by this Agreement
or any material part thereof or have instituted, or threatened to institute,
either before or after the expiration of such waiting period, a proceeding
concerning this Agreement or the consummation of the transactions contemplated
hereby.

 

7.2          
Conditions
Precedent to Obligations of Holdings to Effect the Mergers.  The obligation
of Holdings to consummate the transactions contemplated by this Agreement on
the Closing Date is subject to the satisfaction or waiver at or prior to the
Closing of the following conditions precedent:

 

(a)          
there
shall have occurred no Material Adverse Change in the financial condition or
results of operations of the Companies and the Subsidiaries, taken as a whole,
from December 1, 2004 to the Closing Date;

 

(b)          
the
representations and warranties of Progress Energy and Progress Fuels contained
in Article III and Article IV shall be true and correct in all
material respects (when read without exception for materiality or Material
Adverse Effect) at and as of the Closing Date with the same force and effect as
if those representations and warranties had been made at and as of such time
(with such exceptions, if any, necessary to give effect to events or
transactions expressly permitted in Sections 7.2(n) and 7.2(o));

 

(c)          
there
shall have been obtained all consents, approvals and authorizations, including
the Required Consents, reasonably satisfactory in form and substance to
Holdings, there shall have been given all notices and there shall have been
made all registrations and filings under all laws, statutes, rules, regulations,
judgments, orders, injunctions, contracts or other instruments to which a
Company or Subsidiary is a party or by which it or any of its properties are
bound or subject, in each case that are required to permit the consummation of
the transactions contemplated by this Agreement without contravention,
violation or breach by such Company or Subsidiary, of any of the terms thereof,
except where the failure to obtain or make any such consent approval,
authorization, notice, registration or filing would not have a Material Adverse
Effect on the Companies and Subsidiaries, taken as a whole, following the
Closing;

 

(d)          
Progress
Energy, Progress Fuels and the Companies shall have performed, in all material
respects, all obligations and complied with all covenants contained herein that
are necessary to be performed or complied with by it on or before the Closing
Date;

 

(e)          
Holdings
shall have received certificates, dated the Closing Date, from authorized
officers of Progress Energy, Progress Fuels and the Companies certifying the
satisfaction of the conditions set forth in this Section 7.2 (other than
Section 7.2(j)) and certificates, dated the Closing Date, from the
Secretary or Assistant Secretary of Progress Energy, Progress Fuels and the
Companies, substantially in the form and to the effect of Exhibit 7.2(e);

 

49

 

(f)           
Holdings
shall have received the resignations (effective as of the Closing Date) of all
of the directors of the Companies and the Subsidiaries;

 

(g)          
Holdings
shall have received an opinion of counsel to Progress Energy and Progress
Fuels, dated the Closing Date, substantially in the form and to the effect of Exhibit
7.2(g);

 

(h)          
Holdings
shall have received all of the books, records and other materials of the
Companies and the Subsidiaries required under Section 6.3, including all
stock registers, corporate seals and related materials;

 

(i)           
all
proceedings, corporate or other, to be taken by Progress Fuels in connection with
the transactions contemplated by this Agreement, and all documents incident
thereto, shall be reasonably satisfactory in form and substance to Holdings and
Holdings’ counsel;

 

(j)           
Holdings
shall have received the proceeds of, or shall otherwise have available for
immediate borrowing the entire principal amount of, all debt financings as
described in Schedule 7.2(j) (which, for purposes of clarity, with
respect to the senior secured debt facility, means that there will be borrowing
base sufficient to access the entire committed amount);

 

(k)          
(i)
all Indebtedness of the Companies and the Subsidiaries shall have been paid in
full (other than the Canadian Pacific Earnout and any Indebtedness described in
clause (iv) of the definition thereof) and the Companies or the Subsidiaries,
as the case may be, shall have received on or prior to the Closing Date all
pay-off letters from all holders of Indebtedness to be paid and discharged at
the Closing and all recordable form lien releases, canceled notes, trademark
and patent assignments and other documents reasonably requested by Holdings,
and shall have provided to Holdings copies thereof and (ii) there shall be no
Indebtedness owing from any of the Companies or the Subsidiaries to Progress Energy,
Progress Fuels or any of their Affiliates (other than the Companies or the
Subsidiaries);

 

(l)           
Progress
Fuels shall have delivered to Holdings such other documents and instruments as
Holdings may reasonably request to facilitate the consummation or performance
of the transactions contemplated by this Agreement;

 

(m)         
Progress
Fuels shall have executed the Employee Lease Agreement, dated the Closing Date,
substantially in the form and to the effect of Exhibit 7.2(m);

 

(n)          
the
Retained Real Property shall have been transferred to Progress Fuels or its
designee at Progress Fuels’ cost and expense and in a manner reasonably
acceptable to Holdings with none of the Companies or Subsidiaries having any
further Liability in connection with the Retained Real Property;

 

(o)          
3079936
Nova Scotia Company shall have been dissolved or, if such dissolution has not
occurred, the Companies shall have distributed all of the shares of 3079936
Nova Scotia Company to Progress Fuels or its designee; and

 

50

 

(p)          
Progress
Fuels shall have delivered to Holdings no later than March 4, 2005 the final
audited and combined unaudited balance sheets of the Companies and related
combined statements of operations, shareholders’ equity and cash flows for the
fiscal year 2004 (the “Audited Statements”) and the combined unaudited balance
sheets of the Companies and related combined statements of operations,
shareholders’ equity and cash flows for the fiscal year 2004 shall be the same
in all material respects to the Audited Statements.

 

7.3          
Conditions
Precedent to Obligations of Progress Fuels, Progress Rail and Progress Metal to
Effect the Mergers.  The obligation of Progress Fuels to consummate the
transactions contemplated by this Agreement on the Closing Date is subject to
the satisfaction or waiver at or prior to the Closing of the following
conditions precedent:

 

(a)          
the
representations and warranties of Holdings and the Merger Subs contained in Article
V shall be true and correct in all material respects (when read without
exception for materiality) at and as of the Closing Date with the same force
and effect as if those representations and warranties had been made at and as
of such time;

 

(b)          
Holdings
shall have performed, in all material respects, all obligations and complied
with all covenants contemplated herein that are necessary to be performed or
complied with by it on or before the Closing Date;

 

(c)          
there
shall have been obtained all consents, approvals and authorizations reasonably
satisfactory in form and substance to Progress Fuels, there shall have been
given all notices and there shall have been made all registrations and filings
under all laws, statutes, rules, regulations, judgments, orders, injunctions,
contracts or other instruments to which Holdings is a party or by either is
bound or subject, in each case that are required to permit the consummation of
the transactions contemplated by this Agreement without contravention,
violation or breach by Holdings, or of any of the terms thereof;

 

(d)          
Progress
Fuels shall have received a certificate, dated the Closing Date, from an
authorized officer of Holdings certifying the satisfaction of the conditions
set forth in this Section 7.3;

 

(e)          
Progress
Fuels shall have received an opinion of counsel to Holdings and the Merger
Subs, dated the Closing Date, substantially in the form and effect of Exhibit 7.3(e);

 

(f)           
all
proceedings, corporate or other, to be taken by Holdings in connection with the
transactions contemplated by this Agreement, and all documents incident
thereto, shall be reasonably satisfactory in form and substance to the
Companies and Progress Fuels’ counsel; and

 

(g)          
the
Companies shall have executed a Trademark Coexistence Agreement with Progress
Energy substantially in the form attached hereto as Exhibit 7.3(g), to
which Holdings will acknowledge its consent.

 

51

 

 

 

ARTICLE VIII

POST-CLOSING COVENANTS

 

8.1          
Access
to Books and Records.  At Progress Fuels’ expense, Progress Fuels and
their authorized agents, officers and representatives shall have reasonable
access after the Closing Date to the properties, books, records, contracts,
information and documents of the Companies and each of the Subsidiaries for any
reasonable business purpose, including, without limitation, matters relating to
Taxes; provided, however, such access by Progress Fuels (a) shall
be conducted during the normal business hours of the Companies and the
Subsidiaries and (b) shall not unreasonably interfere with the operations and
activities of the Companies or any of the Subsidiaries.  Holdings and the
Companies shall cooperate, and the Companies shall cause each of the
Subsidiaries to cooperate, in all reasonable respects with Progress Fuels’
review of such information, including, without limitation, retaining all such
information until Progress Fuels has notified Holdings in writing that all tax
years (including any portion of a tax year) ending prior to or including the
Closing Date have been closed or for seven (7) years, whichever is
longer.  Commencing seven (7) years after the Closing Date, Holdings may
request that Progress Fuels inform Holdings in writing whether all tax years
(including any portion of a tax year) ending prior to or including the Closing
Date have been closed.  Progress Fuels shall respond in writing to any
such request within ninety (90) days of receipt thereof.

 

8.2          
Tax
Matters.

 

(a)          
Federal
Income Taxes in General.  The income and other Tax items (including
any deferred income from intercompany transactions triggered into income by
Section 1.1502-13 of the Treasury regulations and any excess loss accounts
taken into income under Section 1.1502-19 of the Treasury regulations) of the
Companies and of those Subsidiaries that are included in the same consolidated
federal income Tax Return as Progress Fuels (“Consolidated Subsidiaries”) for
periods ending on or before the Closing Date shall be included in the
consolidated federal income Tax Return of the affiliated group, within the
meaning of Section 1504(a) of the Code, of which Progress Fuels is a member
(the “Progress Fuels Group”) for all such periods and Progress Fuels will pay
or cause to be paid any federal income Taxes on such income.  Progress
Fuels will take no position on such Tax Returns that relate to the Companies or
the Subsidiaries that could adversely affect the Companies or the Subsidiaries
after the Closing Date, except as may be required by applicable Tax Law, may be
required to be consistent with past practice for Tax Returns filed for prior
periods by such entity or group with respect to such Tax or may be consented to
by Holdings, with such consent not to be unreasonably withheld.  
Progress Fuels shall provide Holdings with a copy of pro formas for the
Companies and the Subsidiaries included on Tax Returns filed under this Section
8.2(a) and copies of the associated workpapers for such pro formas. 
Information provided pursuant to the preceding sentence may be provided in an
electronic format, so long as the recipient is able to access and copy the
information without unreasonable hardship or expense.  Except as otherwise
provided in this Section 8.2, Progress Fuels shall be entitled to
any reductions or refunds of Taxes (including interest), for Pre-Closing
Periods with respect to the consolidated federal income Tax Return of the
Progress Fuels Group, except to the extent that such refund is attributable to
a carryback of a Tax item of a Company or one of the Subsidiaries arising in a
Post-Closing Period.  If Holdings or any of the Companies or the
Consolidated Subsidiaries receives any such refund (other than a refund attributable
to a carryback permitted by 

 

52

 

Section
8.2(d)(vi) of a Tax item of a Company or one of the Subsidiaries
arising in a Post-Closing Period), Holdings shall promptly pay (or cause such
Company or Consolidated Subsidiary to pay) the entire amount of the refund
(including interest received) to Progress Fuels.  Holdings shall be
entitled to any reduction in and refunds of Taxes (including interest) for
Post-Closing Periods with respect to federal income Taxes of any of the
Companies or the Subsidiaries and any refunds for Pre-Closing Periods
attributable by a carryback permitted by Section 8.2(d)(vi) of a Tax
item of a Company or one of the Subsidiaries arising in a Post-Closing
Period.  If Progress Fuels or any of its Affiliates receive any such
refund or any refund for a Pre-Closing Period that is attributable to a
carryback permitted by Section 8.2(d)(vi) of a Tax item of a Company or
one of the Subsidiaries arising in a Post-Closing Period, Progress Fuels shall
promptly pay (or cause such Affiliate to pay) the entire amount of the refund
(including interest received) to Holdings.

 

(b)          
State
Income Taxes in General.

 

(i)           
For
purposes of this Agreement, the term “State Income Tax” means any Tax, imposed
by a state or political subdivision of a state in the United States or by the
District of Columbia, that is based on or measured by net income or for which
at least one of two or more alternative bases is measured by or based on net
income.  Progress Fuels shall be responsible for preparing and filing the
State Income Tax Returns of the Companies and the Consolidated Subsidiaries for
all taxable periods ending on or before the Closing Date and will pay or cause
to be paid any State Income Taxes on the taxable income of the Companies and
the Consolidated Subsidiaries for such periods (including any deferred income
from intercompany transactions triggered into income by Section 1.1502-13
of the Treasury regulations and any excess loss accounts taken into income
under Section 1.1502-19 of the Treasury regulations, including comparable
provisions under state or local Tax Law).  Progress Fuels will take no
position on such Tax Returns that relate to the Companies or the Subsidiaries
that could adversely affect the Companies or the Subsidiaries after the Closing
Date, except as may be required by applicable Tax Law, may be required to be
consistent with past practice for Tax Returns filed for prior periods by such
entity or group with respect to such Tax or may be consented to by Holdings, with
such consent not to be unreasonably withheld.  Progress Fuels shall
provide Holdings with the Tax Returns or, in the case of a consolidated,
combined or similar Tax Return, copies of pro formas for the Companies and the
Subsidiaries included on Tax Returns filed under this Section 8.2(b) and
copies of the associated workpapers for such pro formas.  Information
provided pursuant to the preceding sentence may be provided in an electronic
format, so long as the recipient is able to access and copy the information
without unreasonable hardship or expense.  Except as otherwise provided in
this Section 8.2, Progress Fuels shall be entitled to any
reductions in and refunds of State Income Taxes (including interest received)
for Pre-Closing Periods (other than a refund attributable to a carryback
permitted by Section 8.2(d)(vi) of a Tax item of a Company or one of the
Subsidiaries arising in a Post-Closing Period).  If Holdings or any of the
Companies or the Consolidated Subsidiaries receives any such refund (other than
any refund for a Pre-Closing Period that is attributable to a carryback
permitted by Section 8.2(d)(vi) of a Tax item of a Company or one of the
Subsidiaries arising in a Post-Closing Period), Holdings shall promptly pay (or
cause such Company or Consolidated Subsidiary to pay) the entire amount of such
refund 

 

53

 

(including
interest received) to Progress Fuels.  Holdings shall be entitled to any
reduction in and refunds of State Income Taxes (including interest) for
Post-Closing Periods with respect to State Income Taxes of any of the Companies
or the Subsidiaries.  If Progress Fuels or any of its Affiliates receive
any such refund or any refund for a Pre-Closing Period that is attributable to
a carryback permitted by Section 8.2(d)(vi) of a Tax item of a Company
or one of the Subsidiaries arising in a Post-Closing Period, Progress Fuels
shall promptly pay (or cause such Affiliate to pay) the entire amount of the
refund (including interest received) to Holdings.

 

(ii)          
If
any of the Companies and the Consolidated Subsidiaries is required to file any
State Income Tax Return for a taxable period covering days before and after the
Closing Date, Holdings shall cause such Tax Return to be filed and shall be
responsible for the payment of any Tax for such period.  However, Progress
Fuels shall pay to Holdings or Holdings shall pay to Progress Fuels, as
appropriate and as an adjustment to the Purchase Price, the amount by which the
State Income Tax attributable to the period through the Closing Date exceeds or
is less than the amount of such Tax paid (including payments of estimated Tax
with respect to such Tax) on or before the Closing Date.  The Tax
attributable to the period through the Closing Date shall be determined
(A) as if that period were a separate taxable year, and (B) except as
otherwise required by Law, pursuant to Section 8.2(g)(iii) and using the
Tax accounting methods and Tax elections used by such Company or Consolidated
Subsidiary before the Closing Date.  Holdings shall compute the amount of
the Tax attributable to the period through the Closing Date and shall notify
Progress Fuels of such amount in writing no later than thirty (30) days
following the filing of any such State Income Tax Return.  Within
forty-five (45) days after the date of such notification, Progress Fuels shall
pay to Holdings or Holdings shall pay to Progress Fuels, as appropriate, the
difference between (i) the amount of Tax attributable to the portion of
the period through the Closing Date, and (ii) the amount of the Tax for
the taxable period paid (including payments of estimated Tax) on or before the
Closing Date, unless within forty-five (45) days after such notification date,
Progress Fuels notifies Holdings in writing that Progress Fuels disagrees with
the computation of any such amount, including any disagreement based on the
manner in which such Tax Return was prepared.  In that case, Progress
Fuels and Holdings shall proceed in good faith to determine the correct amount.
If the parties cannot reach agreement within thirty (30) days of Progress
Fuels’ notification of its disagreement, then the parties shall submit the
dispute to KPMG for resolution in accordance with the procedures set forth in Section
2.8(d) hereof.  Progress Fuels’ payment to Holdings, or Holdings’
payment to Progress Fuels shall be due the later of (1) the time specified
in the third preceding sentence or (2) ten (10) days after the resolution
of such disagreement.

 

(c)          
Section
338 Elections.

 

(i)           
The
parties agree that no election under Section 338(h)(10) of the Code or any
corresponding provision of state, local or foreign Tax Law will be made with
respect to the acquisition of the Shares provided for herein.

 

(ii)          
Notwithstanding
any other provision of this Agreement, the parties agree that, if an election
under Section 338 or any corresponding provision of state, local or foreign Law
is made by Holdings with respect to any of the Companies or its Subsidiaries,
Holdings shall prepare and file the returns for, be responsible for the payment
of, indemnify and hold Progress 

 

54

 

Fuels
and its Affiliates harmless from, and be entitled to any refund (excluding any
refund resulting from carrying back a loss or other Tax item to a period ending
on or before the Closing Date) of any Taxes resulting from the elections. 
In addition, no such election shall be made by Holdings or any of its
Affiliates (including, after the Closing, the Companies and the Subsidiaries)
with respect to a Subsidiary that is not a Consolidated Subsidiary without
Progress Fuels’ express written consent, which may be withheld in Progress
Fuels’ absolute discretion.

 

(d)          
Cooperation.

 

(i)           
Holdings
agrees to cooperate and to cause the Companies and the Consolidated
Subsidiaries to cooperate with Progress Fuels to the extent reasonably required
after the Closing Date in connection with (A) the filing, amendment,
preparation and execution of all federal income and State Income Tax Returns
with respect to any taxable period of any of the Companies and the Consolidated
Subsidiaries ending on or before the Closing Date or including but not ending
on the Closing Date, (B) contests concerning the federal or State Income
Tax due for any such period and (C) audits and other proceedings relating
to income Taxes with respect to any such period.

 

(ii)          
If
any Taxing Authority or other Person asserts a Tax Claim, then the party hereto
first receiving notice of such Tax Claim promptly shall provide written notice
of such Tax Claim to the other party hereto; provided that the failure
of a party to give such prompt notice to the other party of any such Tax Claim
shall not relieve such other party of any of its obligations under this Section
8.2, except to the extent of actual prejudice.  Such notice shall
specify in reasonable detail the basis for such Tax Claim and shall include a
copy of any relevant correspondence received from the Taxing Authority or other
Person, to the extent such correspondence relates to the Companies or
Subsidiaries.

 

(iii)         
Except
as provided in Section 8.2(d)(iv) and in the this Section 8.2(d)(iii),
Progress Fuels shall have the right to control, defend or prosecute, at its
sole cost, expense and risk those Tax Claims solely with respect to Taxes set
forth in Section 8.2(g)(i).  Progress Fuels shall not, without the
prior written consent of Holdings, enter into any compromise or settlement of
such Tax Claim that would result in any Tax detriment to any Tax Indemnitee,
unless Progress Fuels agrees to indemnify such Tax Indemnitee for such
detriment.  Progress Fuels shall inform Holdings of all material
developments and events relating to such Tax Claim (including, without
limitation, providing to Holdings copies of all written materials relating to
such Tax Claim, to the extent they relate to the Companies or Subsidiaries),
and Holdings or its authorized representatives shall be entitled, at the
expense of Holdings, to attend, but not participate in or control, all
conferences, meetings and proceedings relating to such Tax Claim, to the extent
they relate to the Companies or Subsidiaries. Except as provided in Section
8.2(d)(iv) or as may be reasonably determined to be required by applicable
law or by a Taxing Authority, Holdings and its representatives shall not take,
or cause any of the Companies or the Subsidiaries to take, any action with
respect to any Tax Claim or portion of a proceeding that Progress Fuels is
entitled to control, defend or prosecute hereunder that is inconsistent with
such control, defense or prosecution without Progress Fuel’s prior written
consent.  Except as may reasonably be determined to be required by
applicable law or by a Taxing Authority, Progress Energy, Progress Fuels and
their representatives shall not take, or cause any of their Affiliates to take,
any action with respect to any Tax Claim or portion of a proceeding that
Progress Fuels is not given the 

 

55

 

right
to control, defend or prosecute hereunder that is inconsistent with the right
of Holdings and its Affiliates to control, defend or prosecute such Tax Claim
or portion of proceeding without Holdings’ prior written consent.  Except
as required by law, it shall be considered inconsistent with a party’s right to
control, defend or prosecute for the other party or its Affiliates to provide
to any Taxing Authority any document or other writing relating to the merits of
any issue and not publicly available without the prior consent of the other
party, such consent not to be unreasonably withheld or delayed.

 

(iv)         
If,
at any time unsecured indebtedness of Progress Energy has a rating from S&P
or any successor to S&P that is below “BB+” (or any equivalent successor
rating) and a rating from Moody’s or any successor to Moody’s that is below
“Ba1” (or any equivalent successor rating), then Holdings, upon making a
reasonable, written determination that Progress Fuels is not pursuing with
reasonable diligence any Tax Claim that it is entitled to control under Section
8.2(d)(iii), or any portion of a Tax proceeding that Progress Fuels is
entitled to control pursuant to Section  8.2(d)(v), despite at
least twenty (20) days having passed since Holdings gave Progress Fuels written
notice (setting forth the basis for such belief) that Holdings believes Progress
Fuels is not pursuing such Tax Claim with reasonable diligence, Holdings shall
be entitled to assume control over such Tax Claim or such portion of a Tax
proceeding, subject to the limitation that Holdings may not settle or consent
to the entry of judgement with respect to such Tax Claim or such portion of a
Tax proceeding without the prior consent of Progress Fuels, which consent may
not be unreasonably withheld or delayed; provided, however, that
Holdings shall not be entitled to assume control if (A) Progress Fuels deposits
into escrow, under an agreement reasonably acceptable to the Progress Fuels and
Holdings, an amount sufficient to cover at least 75 percent of the amount of
such Tax Claim within twenty (20) days after receipt of the written determination
from Holdings or (B) Progress Fuels has paid or deposited, or within twenty
(20) days after receipt of the written determination from Holdings, pays or
deposits the amount of such Tax Claim to the relevant Taxing Authority and,
under applicable Law, such payment or deposit cannot be recovered prior to a
favorable determination that (i) is not appealable or has ceased to be
appealable and (ii) is not subject to reversal or has ceased to be subject to
reversal.  After the date on which Holdings comes to control a Tax Claim
under this Section 8.2(d)(iv), Holdings shall inform Progress Fuels of
all material developments and events relating to such Tax Claim (including,
without limitation, providing to Progress Fuels copies of all written materials
relating to such Tax Claim, to the extent that they relate to the Companies or
Subsidiaries), and Progress Fuels or its authorized representatives shall be
entitled, at the expense of Progress Fuels, to attend, but not participate in
or control, all conferences, meetings and proceedings relating to such Tax
Claim, to the extent they relate to the Companies or Subsidiaries.  This Section
8.2(d)(iv) shall not apply to any Tax Claim or portion of a Tax proceeding
with respect to income Taxes for periods where the Company or Subsidiary whose
Tax liability is at issue filed income Tax Returns on a consolidated, combined,
unitary or similar basis with Progress Energy or any of its Subsidiaries (other
than Tax Returns that include only the Companies and their Subsidiaries).

 

(v)          
Where
an audit or other proceeding involves Taxes other than Taxes set forth in Section
8.2(g)(i), then Holdings and Progress Fuels agree that they shall each
take, and cause their respective Affiliates to take, reasonable steps to have
the portion of such audit or proceeding that relates solely to Taxes set forth
in Section 8.2(g)(i) bifurcated from the rest of such proceeding. 
Pending or in the absence of such bifurcation, Progress Fuels shall control 

 

56

 

such
audit or proceeding to the extent that it relates to Taxes set forth in Section
8.2(g)(i) and Holdings shall control the remaining portion of such audit or
proceeding, provided, however, that neither Holdings nor Progress
Fuels shall be permitted to take a position in connection with their respective
portions of such audit or proceeding, or settle or compromise a matter in
connection with such portion, that adversely affects the position of the other
party with respect to its portion of such audit or proceeding, without the
consent of the other party, with such consent not to be unreasonably withheld
or delayed.  Both Holdings and Progress Fuels shall keep the other party
informed of all material developments with respect to such audit or proceeding
and allow the other party to attend all conferences, meetings or similar events
relating to such audit or proceeding.

 

(vi)         
Progress
Fuels agrees to make available to Holdings, the Companies and the Subsidiaries
records in the custody of Progress Fuels or of any member of Progress Fuels
Group or any subsidiary of Progress Fuels, to furnish other information and
otherwise to cooperate to the extent reasonably required for the preparation or
filing of Tax Returns relating to either of the Companies or any of the
Subsidiaries for which Holdings, either of the Companies or any of the
Subsidiaries is responsible under this Section 8.2 or for the defense or
conduct of any audit, action or similar proceeding.  Progress Energy and
Progress Fuels shall provide Holdings or one or more Affiliates of Holdings
designated by Holdings, within a reasonable time following receipt of a request
thereof, copies of any Tax Return of or that includes or relates to a Company
or any of the Subsidiaries, together with the related workpapers; provided,
that, in the case of such a Tax Return that was filed prior to 2001,
information on such Tax Return (or the related workpapers) is relevant to the
preparation and filing of a Tax Return due after the Closing Date (or a Tax
Return due on or prior to the Closing Date that was not filed on or prior to
the Closing Date) or the conduct of an audit, action or similar proceeding
taking place after the Closing Date.  References to “Tax Returns” in the
preceding sentence shall, in the case of income Tax Returns that a Company or a
Subsidiary filed on a consolidated or similar basis with an Affiliate of
Progress Energy other than a Company or a Subsidiary, a pro forma for such
Company or Subsidiary.  Information provided pursuant to the second
preceding sentence may be provided in an electronic format, so long as the
recipient is able to access and copy the information without unreasonable
hardship or expense. However, no loss, credit or other item of any of the
Companies or the Subsidiaries may be carried back from a Post-Closing Period
without Progress Fuels’ written consent, which Progress Fuels may withhold in
its absolute discretion, to a taxable period for which (A) any of the Companies
and the Subsidiaries and (B) Progress Fuels or any entity affiliated with
Progress Fuels filed a consolidated, unitary, combined or similar Tax
Return.  Progress Energy and Progress Fuels will not dispose of any books,
records (including Tax Returns) or contracts relating to income Tax attributes
of either Company or any of the Subsidiaries prior to the date specified in the
second sentence of Section 8.1(a) without the prior written consent of
Holdings, which shall not be unreasonably withheld or delayed.

 

(vii)         Progress Fuels agrees
to cooperate with Holdings, and Holdings agrees to cooperate (and cause the
Companies to cooperate) with Progress Fuels, to the extent reasonably necessary
in connection with the preparation and filing of any Tax Return relating to
Holdings’ acquisition of the Companies.

 

(e)          
Termination
of Tax-Sharing Agreement.  As of the Closing, this Section 8.2
shall supersede any and all Tax-sharing or similar agreements to which
(i) any of the Companies and 

 

57

 

the
Subsidiaries, on the one hand, and (ii) Progress Fuels or any affiliated
entity, on the other hand, are parties.  Neither the Companies, the
Subsidiaries, Progress Fuels nor any such affiliated entity shall have any
obligation or right with respect to each other under any such prior agreement
from and after the Closing.

 

(f)           
Other
Tax Returns and Taxes.  The Companies and Subsidiaries (and not
Progress Fuels) shall be responsible for preparing and filing all Tax Returns
of the Companies and the Subsidiaries other than those income Tax Returns to
which Sections 8.2(a) through 8.2(c) apply (“Other Tax Returns”).
The preceding sentence shall not affect any liability that Progress Energy or
Progress Fuels may otherwise have hereunder.  Except as otherwise required
by Law or expressly agreed in writing by Progress Fuels and Holdings (with such
agreement not to be unreasonably withheld or delayed), (i) each Other Tax
Return filed after the Closing Date for any period ending on or before or
including the Closing Date shall be based on the same accounting methods and
Tax elections as used for the same type of Other Tax Return filed most recently
before the Closing Date, and (ii) no amended Other Tax Return may be filed
for a period ending on or before or including the Closing Date.  Holdings
shall, at least 30 days prior to the due date for such Tax Returns, provide or
cause to be provided to Progress Fuels drafts of all foreign income Tax Returns
of the Companies or any of the Subsidiaries that are for a taxable period that
is or includes a Pre-Closing Period and are due (taking into account any
applicable extensions) more than 90 days after the Closing Date and shall
consider in good faith any comments raised by Progress Fuels in a timely
fashion with respect to any such drafts.  If Progress Fuels, within 10
days of receipt of such a draft, provides notice in writing to Holdings that
either such draft is inconsistent with the requirements of applicable foreign
Tax Law or violates any provision of this Section 8.2(f) and Holdings
and Progress Fuels are unable to resolve such dispute within 4 business days,
the parties shall submit such dispute to KPMG for resolution, except as set
forth herein, in accordance with the procedures set forth in Section 2.8(d)
hereof; provided, that KPMG shall be required to resolve such dispute at
least three business days before the due date for such Tax Return.  In
resolving such dispute, KPMG shall adopt Holdings’ position except to the
extent that it is not permitted by applicable foreign Tax Law or violates any
provision of this Section 8.2(f).  Holdings shall make good faith
reasonable efforts to provide to Progress Fuels drafts of foreign income Tax
Returns of the Companies or any of the Subsidiaries that are for a taxable
period that is or includes a Pre-Closing Period and are due (taking into
account any applicable extensions) less than 91 days after the Closing Date
prior to filing such Tax Returns and shall consider in good faith any comments
raised by Progress Fuels with respect to such drafts.

 

(g)          
Tax
Indemnification.

 

(i)           
Except
as provided in Section 8.2(d)(ii) above or Section  8.2(g)(ii)(B)
below, from and after the Closing Date, Progress Fuels and Progress Energy, on
a joint and several basis, shall be responsible for, shall pay or cause to be
paid, and shall indemnify, defend and hold harmless each Tax Indemnitee
against, and reimburse such Tax Indemnitee for:

 

(A)          any federal income Tax, State Income Tax
or (to the extent in excess of the amount of such foreign income Tax actually
taken into account as a liability in determining Closing Working Capital, after
first subtracting the amount of any payments, credits or rights to refunds or
credits with respect to such foreign income Tax actually 

 

58

 

taken into account as an asset in determining Closing
Working Capital) foreign income Tax imposed, including, in each case, any
liability for interest, penalties, fines, assessments or additions related to
such federal, state, local or foreign Tax liability and any liability for
interest, penalties, fines, assessments or additions resulting from a failure
to comply with a requirement regarding a related Tax Return, on or relating to
any of the Companies or the Subsidiaries with respect to any Pre-Closing
Period;

 

(B)           any federal income Tax, State Income Tax
or (to the extent in excess of the amount of such foreign income Tax actually
taken into account as a liability in determining Closing Working Capital, after
first subtracting the amount of any payments, credits or rights to refunds or
credits with respect to such foreign income Tax actually taken into account as
an asset in determining Closing Working Capital) foreign income Tax imposed,
including, in each case, any liability for interest, penalties, fines,
assessments or additions related to such federal, state, local or foreign Tax
liability and any liability for interest, penalties, fines, assessments or
additions resulting from a failure to comply with a requirement regarding a
related Tax Return, upon or relating to any Relevant Group of which the
Companies or any Subsidiary (or any predecessor) is or was a member prior to
the Closing pursuant to Section 1.1502-6 of the Treasury regulations (or any
similar provision of state, local, or foreign Law); provided, that this
clause (B) shall not apply with respect to a Relevant Group for any Tax
liability arising with respect to a taxable period following the Closing during
which such Relevant Group does not include Progress Fuels, Progress Energy or
any of their Affiliates;

 

(C) all Taxes incurred as a result of any action taken
by Progress Energy, Progress Fuels or any of their Affiliates or
representatives in violation of Section 8.2(d)(iii); and

 

(D) all liabilities that may be determined in, arise
out of or in connection with any examination, disputes, claims or similar
proceedings referred to on Schedule 4.14(b) or the portion of Schedule
4.14(d) titled “Open Disputes/Claims” and relating to Taxes imposed by
Canada or any political subdivision thereof.

 

(ii)          
From
and after the Closing Date, Holdings shall be responsible for, shall pay or
cause to be paid, and shall indemnify, defend and hold harmless Progress Fuels
and its Affiliates against, and reimburse Progress Fuels and its Affiliates
for:

 

(A)          any Tax with respect to either Company or
any Subsidiary for which Progress Fuels and Progress Energy are not responsible
under this Section 8.2, except to the extent Progress Fuels would be
required to indemnify against such Tax pursuant to Article IX hereof were such
Tax paid by Holdings or the Companies (as determined without regard to any
limitations relating to the Basket or Progress Fuel’s maximum indemnity
liability); and

 

(B)           any federal income Tax or State Income
Tax incurred as a result of any action taken by Holdings or its Affiliates
(including, after the Closing, the Companies and the Subsidiaries) (i) in
violation of Section 8.2(d)(iii), or (ii) outside the ordinary course of
business after the Closing and on the Closing Date other than actions contemplated
by this Agreement (including borrowings by, and use of borrowed funds 

 

59

 

by, Progress Rail Merger Sub, Progress Metal Merger
Sub, Progress Rail or Progress Metal to fund the Merger Consideration, but
excluding the effects of any guarantee, borrowing, coborrowing or pledge by any
Subsidiary or any pledge of the shares of any Subsidiary) or actions by either
of the Companies or any of the Subsidiaries pursuant to agreements entered into
by those entities prior to the Closing.

 

(iii)         
Allocation
of Certain Taxes.

 

(A)          If the Companies and the Subsidiaries are
permitted but not required under applicable state, local, or foreign income Tax
Laws to treat the Closing Date as the last day of a taxable period, then the
parties shall treat that day as the last day of a taxable period.

 

(B)           In the case of Taxes arising in a taxable
period of either Company or any Subsidiary that includes, but does not end on,
the Closing Date, except as provided in Section 8.2(g)(iii)(C), the
allocation of such Taxes between the Pre-Closing Period and the Post-Closing
Period shall be made on the basis of an interim closing of the books as of the
end of the Closing Date (and for this purpose, each entity in which either of
the Companies or any Subsidiary has a direct or indirect interest and that is
treated as a partnership for Tax purposes shall be treated as having its
taxable period close at the end of the Closing Date).  “Post-Closing
Period” means any taxable period or portion thereof beginning after the Closing
Date.  If a taxable period begins on or prior to the Closing Date and ends
after the Closing Date, then the portion of the taxable period that begins on
the day following the Closing Date shall constitute a Post-Closing Period. 
“Pre-Closing Period” means any taxable period or portion thereof that is not a
Post-Closing Period. For the avoidance of doubt, for purposes of this Section
8.2(g)(iii)(B), any Tax resulting from the transactions contemplated by
this Agreement (including the distribution and dissolution provided for in Section
7.2(o) and the transfer of the Retained Real Property provided for in Section
7.2(n)) and any Tax resulting from the departure of either Company or any
Subsidiary from a Relevant Group as a result of the transactions provided for
in this Agreement (including any Tax resulting from the triggering into income
of items from deferred intercompany transactions under Section 1.1502-13
of the Treasury regulations or excess loss accounts under Section 1.1502-19
of the Treasury regulations or similar provision of Law) is attributable to the
Pre-Closing Period, and any Tax resulting from any action of either Company or
any Subsidiary outside the ordinary course of business after the Closing and on
the Closing Date, other than actions contemplated by this Agreement, or actions
by either of the Companies or any of the Subsidiaries pursuant to agreements
entered into by those entities prior to the Closing (Taxes resulting from such
actions shall be treated for purposes of this Agreement as attributable to
Pre-Closing Periods), is attributable to the Post-Closing Period. For the
avoidance of doubt, (x) any interest, penalties, fines, assessments or
additions related to a Tax liability that is attributable to a Pre-Closing Period
other than, in the case of a taxable period beginning before and ending after
the Closing Date, any such amount attributable to an action or inaction by
Holdings or its Affiliates after the Closing and (y) any interest, penalties,
fines, assessments or additions attributable to a failure to comply with any
requirement regarding Tax Returns due (with regard to applicable extensions) on
or prior to the Closing Date or for which Progress Fuels is responsible under 

 

60

 

Section 8.2 hereof shall
be treated as attributable to a Pre-Closing Period.  For the avoidance of
doubt, (i) any interest, penalties, fines, assessments or additions related to
a Tax liability attributable to a Post-Closing Period or, in the case of a
taxable period beginning before and ending after the Closing Date, attributable
to an action or inaction of Holdings or its Affiliates after the Closing and
(ii) any interest, penalties, fines, assessments or additions attributable to a
failure to comply with any requirement regarding Tax Returns (other than Tax
Returns due (with regard to applicable extensions) on or prior to the Closing
Date or Tax Returns which Progress Fuels is responsible for filing under Section
8.2 hereof)) shall be treated as attributable to a Post-Closing Period.

 

(C)           In the case of any Taxes that are imposed
on a periodic basis and are payable for a taxable period that includes, but
does not end on, the Closing Date, the portion of such Tax which relates to the
portion of such taxable period ending on the Closing Date shall (i) in the case
of any Taxes other than Taxes based upon or related to income, sales or
receipts, or franchise Taxes, or Taxes based on capitalization, debt or shares
of stock authorized, issued or outstanding, be deemed to be the amount of such
Tax for the entire taxable period multiplied by a fraction, the numerator of
which is the number of days in the taxable period ending on the Closing Date
and the denominator of which is the number of days in the entire taxable
period, and (ii) in the case of any Tax based upon or related to income, sales
or receipts, or franchise Taxes, or Taxes based on capitalization, debt or
shares of stock authorized, issued or outstanding, be deemed equal to the
amount which would be payable if the relevant taxable period ended as of the
end of the Closing Date. All determinations necessary to give effect to the
foregoing allocations shall be made in a manner consistent with the prior
practice of the Companies and their Subsidiaries.

 

(D)          For the avoidance of doubt, all Taxes
attributable to borrowings to fund the Merger Consideration that are arranged
by Holdings or its Affiliates, and the use of those borrowed funds to fund the
Merger Consideration, other than federal income Taxes or State Income Taxes
that may be imposed on Progress Rail, Progress Metal or their Affiliates (other
than the Subsidiaries) as a result of such borrowings by Progress Rail Merger
Sub, Progress Metal Merger Sub, Progress Rail or Progress Metal or use of those
borrowed funds to fund the Merger Consideration (as determined without regard
to the effect of any guarantees, borrowings, coborrowings or pledges by any
Subsidiary and the pledges of any shares of any Subsidiary), shall be treated
as Taxes attributable to a Post-Closing Period.

 

(iv)         
Except
as otherwise required by applicable Law, the parties shall treat any
indemnification payment made hereunder as an adjustment to Purchase Price.

 

(h)          
Payment
of Transfer Taxes and Fees.  Progress Fuels shall pay all
Transfer Taxes arising out of the transactions effected pursuant to this
Agreement or contemplated by Sections 7.2(n) and 7.2(o), and
shall indemnify, defend, and hold harmless Holdings, and Holdings’ Affiliates
including, following the Closing, the Companies and the Subsidiaries with
respect to such Transfer Taxes.  Progress Fuels shall file all necessary
documentation and Tax Returns with respect to such Transfer Taxes.  All
Transfer Taxes arising out of the borrowings to fund the 

 

61

 

Merger
Consideration that are arranged by Holdings or its Affiliates, and the use of
those borrowed funds to fund the Merger Consideration, shall be paid by
Holdings.

 

(i)           
FIRPTA
Certificates.  Progress Fuels shall deliver to Holdings on the
Closing Date a duly completed and executed certification, in form reasonably
satisfactory to Holdings, establishing that Progress Fuels is not a foreign
person for purposes of Section 1445 of the Code.

 

(j)           
Relationship
of Section 8.2 to Article IX.  Any conditions or
limitations set forth in Article IX with respect to monetary amount of
claims or liability shall not apply to any claim or liability to which this Section 8.2
applies or to any breach of any obligation under this Section 8.2. 
In the event of any inconsistency between provisions of Article IX and Section
8.2, this Section 8.2 shall control.  Progress Fuels shall have
no liability under this Agreement for any Taxes of any of the Companies and the
Subsidiaries except as otherwise expressly provided in Section 8.2 or
Article IX.

 

(k)          
Survival. 
Notwithstanding any other provision of this Agreement, the covenants and
obligations set forth in this Section 8.2 shall survive until, and
any claim for indemnification with respect thereto must be made prior to, sixty
days following the expiration of the applicable statute of limitations with
respect to the underlying Tax claim (including any valid extensions).

 

(l)           
Indemnity
Amounts to be Computed On After-Tax Basis.  The amount of any indemnity
payable under Section 8.2(g) shall be (i) net of any federal, foreign,
or state income Tax benefit realized and the then present value (based on a
discount rate of five percent (5%)) of any such income Tax benefit to be
realized, after taking into account the provisions of this Agreement relating
to the allocation of rights and responsibilities with respect to Tax items, by
such indemnified party (and, where Holdings is the indemnified party, any of
the Companies or the Subsidiaries), or the consolidated or similar group that
includes such indemnified party, by reason of the facts and circumstances
giving rise to the indemnification, and (ii) increased by the amount of any
federal, foreign or state income Tax required to be paid by the indemnified
party (and, where Holdings is the indemnified party, any of the Companies or
the Subsidiaries), or the consolidated or similar group that includes such
indemnified party, on the accrual or receipt of the indemnification payment
(including any amount payable pursuant to this clause (ii)).  For purposes
of the preceding sentence, the amount of any state income Tax benefit or cost
shall take into account the federal income Tax effect of such benefit or
cost.  In addition, the extent not covered by the first sentence of this Section
8.2(l), the amount of any indemnity payment under Section 8.2(g)(i)
shall be reduced, but not below zero) by the amount, after first subtracting
the amount of any net Tax cost resulting from the receipt or the accrual of
such refund, of any refunds of foreign income taxes with respect to Pre-Closing
Periods received, whether through a crediting against Tax liability or
otherwise, by any of the Companies or Subsidiaries after the Closing, except
any such refunds reflected in the Closing Working Capital or attributable to a
carryback from a Post-Closing Period.

 

(m)  The parties agree that they shall treat and
shall cause their Affiliates to treat the payment of the Merger Consideration
as a redemption of Shares for income Tax purposes to the extent the Merger
Consideration is funded by borrowings by Progress Rail Merger Sub, Progress
Metal Merger Sub, Progress Rail or Progress Metal.

 

62

 

8.3          
Employee
Benefits.

 

(a)          
Benefit
Plans.  Holdings agrees to permit or cause the Companies and the
Subsidiaries to take appropriate action to honor all Benefit Plans in
accordance with their terms.  Holdings agrees that, except as otherwise
specifically provided, all Benefit Plans maintained by the Companies and the
Subsidiaries as of the date hereof, will continue at a level of benefits not
less than the level currently provided under such Benefit Plans for the period
following the Closing until and including November 30, 2005.  If employees
of the Companies and the Subsidiaries become participants in any welfare or
pension plan or program maintained by Holdings or its Affiliates, such plan or
program shall take into account for purposes of eligibility and vesting
thereunder, but not for purposes of benefit accrual (other than for vacation
accruals), the service of such employees with the Companies and the
Subsidiaries as if such service were with Holdings, to the same extent that
such service was credited under a comparable plan of the Companies and the
Subsidiaries.  If applicable, employees of the Companies and the
Subsidiaries as of the Closing Date shall not be subject to any waiting periods
or pre-existing condition limitations, and shall receive credit for all
payments to satisfy deductibles, contributions, and co-payments under the
medical, dental and health plans of Holdings or its Affiliates in which they
may be eligible to participate.  Employees of the Companies and the
Subsidiaries will retain credit for unused sick leave and vacation pay which
has been accrued as of the Closing Date and for purposes of determining the
entitlement of such employees to sick leave and vacation pay following the
Closing Date, the service of such employees with the Companies and the
Subsidiaries shall be treated as if such service was with Holdings or its
Affiliates.

 

(b)          
Plan
Funding Statement. Unless Progress Fuels provides written notice to Holdings
on or before the thirtieth (30th) day following the Closing Date that Progress
Fuels has elected to assume, effective as of the Closing Date, sponsorship of,
and all Liabilities of the Pension Plan for Salaried, Non-Bargaining Unit
Employees and Bargaining Unit Employees of Chemetron Railway Products, Inc.
with respect to benefits accrued as of the Closing Date, then the Unfunded PBO
with respect to any Pension Plan not so assumed shall be treated as a current
liability for purposes of calculating the Closing Working Capital.  The
Unfunded PBO with respect to any Pension Plan not so assumed will be set forth
in a Plan Funding Statement delivered by Progress Fuels to Holdings within
thirty (30) days following the Closing Date. Upon receipt of the Plan Funding
Statement, Holdings shall have the right to review and confirm the accuracy of
the calculations.  Holdings shall deliver a Notice of Disagreement to
Progress Fuels within thirty (30) calendar days after receiving the Plan
Funding Statement if Holdings disagrees with Progress Fuels calculation of
Unfunded PBO, which Notice of Disagreement will initiate the Dispute Resolution
Process set forth in Section 8.3(c).  If the Plan Funding Statement
cannot be delivered prior to the time the Closing Working Capital is determined
pursuant to Section 2.8, or is delayed on account of the Dispute
Resolution Process and thus cannot be finalized until after the Closing Working
Capital is determined pursuant to Section 2.8, then the amount of the
Unfunded PBO shall be paid by Progress Fuels to Holdings in immediately
available funds by wire transfer to an account specified by Holdings within sixty
(60) days from the delivery of the Plan Funding Statement or the completion of
the Dispute Resolution Process, as the case may be.  Holdings shall
provide, or shall cause the Companies or the Subsidiaries to provide to
Progress Fuels, such information as Progress Fuels reasonably requests to
assist Progress Fuels in the administration of any assumed Pension Plan.

 

63

 

For
purposes of Sections 8.3(b) and (c) : (i) “Pension Plan” shall
mean each Benefit Plan that is subject to Title IV of ERISA; (ii) “Plan Funding
Statement” shall mean a statement prepared by a nationally recognized actuarial
firm engaged by Progress Fuels setting forth the amount of the Unfunded PBO, if
any, with respect to each Pension Plan that is not to be assumed by Progress
Fuels, as well as all the data (and supporting calculations) used to determine
these amounts;  (iii) “PBO” shall mean the projected benefit obligation,
within the meaning of Financial Accounting Statement 87, under each Pension
Plan as of the Closing Date; (iv) “Unfunded PBO” shall mean the excess, if any,
of the PBO for each Pension Plan over the fair value of the assets of such
Pension Plan as of the Closing Date where the PBO shall be determined using the
actuarial assumptions and methods contained in The Retirement Plan for
Employees of Progress Metal Reclamation Company D/B/A Mansbach Metal Company,
Actuarial Report for FAS 87 & 132, Fiscal Year Ending December 31, 2004 and
Financial Accounting Standards Board Statements 87 and 132, Pension Expense Valuation
for Chemetron Railway Products, Inc. Group Annuity Policy GA-60045, Disclosures
for the Fiscal Year December 1, 2003 to November 30,  2004, except that
the discount rate for the Pension Plans shall be the Moody’s Corporate AA bond
rate in effect at the Closing Date; and (v) “Notice of Disagreement” shall mean
a written statement setting forth in reasonable detail the basis for a dispute.

 

(c)           Dispute Resolution Process.   During the ten (10) calendar
day period immediately following the delivery of a Notice of Disagreement,
Holdings and Progress Fuels shall seek in good faith to resolve any differences
that they may have with respect to any matter specified in the Notice of
Disagreement.  If at the end of such ten (10) calendar day period Holdings
and Progress Fuels have been unable to agree upon a Plan Funding Statement,
then Holdings and Progress Fuels shall submit to a nationally recognized,
independent actuarial firm (selected by the parties) for review and resolution
any and all matters that remain in dispute with respect to the Notice of
Disagreement.  Holdings and Progress Fuels shall cause the independent
actuarial firm to use commercially reasonable efforts to make a final (which
determination shall be binding on the parties hereto) Plan Funding Statement
within twenty (20) calendar days from such submission, and such final
determination shall be the Plan Funding Statement.  The cost of the
independent actuarial firm’s review and determination shall be split equally
between and paid by Holdings and Progress Fuels.  During the twenty (20)
calendar day review by the independent actuarial firm, Holdings and Progress
Fuels will each make available to the independent actuarial firm such
individuals and such information, books and records as may be reasonably
required by the independent actuarial firm to make its final determination.

 

8.4          
WARN
Act.  Holdings shall be responsible for, and shall indemnify Progress
Fuels against, all expense and Liability, including attorneys’ fees, if applicable,
incurred under the WARN Act or any other Law requiring notice prior to
termination of employment or the payment of severance pay, wages or benefits
with respect to any employee who experiences a layoff, employment termination,
reduction in hours or other employment related loss after the Closing. 
Progress Fuels shall be responsible for, and shall indemnify Holdings against,
all expense and Liability, including attorneys’ fees, if applicable, incurred
under the WARN Act or any other Law requiring notice prior to termination of
employment or the payment of severance pay, wages or benefits with respect to
any employee who experiences a layoff, employment termination, reduction in
hours or other employment related loss prior to the Closing.

 

64

 

8.5          
Nonsolicitation;
Noncompetition; Nondisclosure.

 

(a)          
Progress
Energy and Progress Fuels will, for a period of two (2) years from the Closing
Date, refrain from, either alone or in conjunction with any other Person, or
directly or indirectly through its present or future Affiliates:

 

(i)            employing, engaging or seeking to employ
or engage any Person who within the prior twenty-four (24) months had been an
employee of the Companies or any Subsidiary; provided, however,
that nothing herein shall preclude Progress Energy or Progress Fuels from
hiring employees (i) who respond to general advertisements in the media or
(ii) who are independently presented to Progress Energy or Progress Fuels by an
employment agency;

 

(ii)           causing or attempting to cause (A) any
client, customer or supplier of the Business to terminate or materially reduce
its business with the Companies or any Subsidiary or (B) any officer, employee
or consultant of the Companies or any Subsidiary to resign or sever a
relationship with the Companies or any Subsidiary; or

 

(iii)          disclosing (unless compelled by judicial
or administrative process) or using any proprietary confidential or secret
information relating to the Companies or any Subsidiary, or any client,
customer or supplier of the Companies or any Subsidiary; or

 

(b)          
Progress
Energy and Progress Fuels will, for a period of five (5) years from the Closing
Date, refrain from, either along or in conjunction with any other Person, or
directly or indirectly through its present or future Affiliates participating
or engaging in (other than through the ownership of 5% or less of any class of
securities registered under the Securities Exchange Act of 1934, as amended),
or otherwise lending financial assistance to any Person participating or
engaged in, any of the lines of business which comprised the Business on the
Closing Date other than any line of business consisting of the provision of
energy or telecommunications products and services in the United States, Canada
or Mexico; provided, however, that nothing in this Section 8.5(a)(iv)
shall prohibit (A) Progress Energy or Progress Fuels from such activities if
Progress Energy or Progress Fuels, as the case may be, is acquired by an entity
which conducted such activities in the normal course of business prior to the
acquisition of Progress Energy or Progress Fuels, as the case may be, or (B)
Progress Energy or Progress Fuels from acquiring any entity, or merging in a
“merger of equals” with any entity, which conducts such activities unless such
entity’s annual revenue from such activities neither exceeds $100 million nor
accounts for more than twenty-five percent (25%) of such entity’s annual
revenue in the aggregate, in each case, during the fiscal year prior to any
such acquisition.  In the event that the conditions in the preceding
clause (B) are not satisfied, Progress Energy or Progress Fuels, as the case
may be, may acquire such entity but shall be required to either (i) divest
itself of such entity’s competing business during the twelve-month period
following such acquisition or (ii) pay to Holdings no later than the end of
such twelve-month period $10,000,000 in cash.

 

(c)           The parties hereto recognize that the
Laws and public policies of the various states of the United States may differ
as to the validity and enforceability of covenants similar to those set forth
in this Section 8.5.  It is the intention of the parties that the
provisions of this Section 8.5 be enforced to the fullest extent
permissible under the Laws and policies of each 

 

65

 

jurisdiction
in which enforcement may be sought, and that the unenforceability (or the
modification to conform to such Laws or policies) of any provisions of this Section
8.5 shall not render unenforceable, or impair, the remainder of the
provisions of this Section 8.5.  Accordingly, if any provision of
this Section 8.5 shall be determined to be invalid or unenforceable,
such invalidity or unenforceability shall be deemed to apply only with respect
to the operation of such provision in the particular jurisdiction in which such
determination is made and not with respect to any other provision or
jurisdiction.

 

(d)           The parties hereto acknowledge and agree
that any remedy at Law for any breach of the provisions of this Section 8.5
would be inadequate, and Progress Energy and Progress Fuels hereby consent to
the granting by any court of an injunction or other equitable relief, without
the necessity of actual monetary loss being proved, in order that the breach or
threatened breach of such provisions may be effectively restrained.

 

8.6          
Insurance.

 

(a)          
In
the event that, on or after the Closing Date, any of Progress Energy, Progress
Fuels or their Affiliates terminates any insurance coverage relating to the
Companies or the Subsidiaries or any of their respective predecessors, or any
real property currently or formerly owned, operated, leased or occupied by the
Companies, the Subsidiaries or any of their respective predecessors under the
general corporate policies of insurance of Progress Energy or Progress Fuels
for the benefit of all of the Companies and the Subsidiaries, Progress Energy
and Progress Fuels shall ensure that (i) no such termination of any “occurrence”
policy in force as of the Closing Date shall be effected so as to prevent
either Company or any Subsidiary from recovering under such policies for losses
from events, damages or conditions occurring prior to the Closing Date; and
(ii) no such termination of any “claims-made” policy in force as of the Closing
Date shall be effected so as to prevent either Company or any Subsidiary from
recovering under such policies for losses from events, damages or conditions
occurring prior to the Closing Date to the extent the insurance company or
third party claims administrator shall have received written notice of claims
per the terms and conditions of said policy.

 

(b)          
With
respect to all insurance claims of the Companies or any Subsidiary filed prior
to the Closing and for those claims of the Companies or any Subsidiary which
have not yet been filed but relate to losses from events or damages occurring
prior to the Closing Date, Progress Energy and/or Progress Fuels shall be
solely responsible for the payment of deductibles, self-insured retentions,
claims adjusting expenses, loss conversion factor expenses, retro-active
premium adjustments, collateral requirements and associated costs, uninsured
losses, legal expenses, audits and any other costs that become due and payable
under the terms of the applicable policy, with respect to such claims
subsequent to the Closing.

 

(c)          
Holdings,
the Companies and the Subsidiaries shall have rights under, and neither
Progress Energy nor Progress Fuels shall take any action to prevent Holdings,
the Companies or the Subsidiaries from recovering under, any and all historic
insurance policies (including, without limitation, “occurrence-based” policies)
that may provide coverage for losses arising from or related to occurrences,
events, damages or conditions occurring or arising on or prior to the Closing
Date with respect to the Companies, the Subsidiaries, any of their respective
predecessors, any of their respective operations or any real property currently
or formerly owned, 

 

66

 

operated,
leased or occupied by the Companies, the Subsidiaries or any of their
respective predecessors, Progress Energy and Progress Fuels shall provide
access to such policies for such losses and shall cooperate with Holdings, the
Companies and the Subsidiaries in making and prosecuting claims under such
policies in connection with such losses, and shall promptly remit any
recoveries to Holdings.  Holdings, the Companies and the Subsidiaries will
be responsible for compliance with the terms of such insurance policies
regarding timing and adequacy of required notices and other claims requirements
following the Closing.

 

8.7          
Directors’
and Officers’ Insurance.  To the extent that it can do so at no
additional cost and so long as it remains with its current insurance carrier,
for a period of six years after the Closing Date, Progress Energy shall
maintain, at its expense, directors and offices, and fiduciary liability
insurance policies which provide coverage in scope and amount equivalent to
those maintained by any Person on behalf of the Companies and the Subsidiaries
prior to the Closing Date for the benefit of those persons who are currently
covered by such policies on terms no less favorable than the terms of such
current insurance coverage.

 

8.8          
Recoveries.  Holdings will
deliver to Progress Fuels promptly after receipt by any of the Companies or
Subsidiaries, an amount equal to all cash or other property (net of any
out-of-pocket expenses and good faith estimates (which shall be submitted to
Progress Fuels for review) of taxes incurred or to be incurred as a result of
the receipt of, or accrual of the right to, such cash or other property), if
any, received by them after the Closing Date (a) on account of the rights
arising from the Retained Leasing Assets or (b) on account of the claims held
by the Companies and the Subsidiaries in connection with the Georgetown Steel
Bankruptcy; provided, however, that, prior to the Closing, either
of the Companies or any Subsidiary may assign the rights or claims arising from
the Retained Leasing Assets or the claims held by such Company or such
Subsidiary, as the case may be, in connection with the Georgetown Steel
Bankruptcy to Progress Fuels or its designee(s).

 

ARTICLE IX

SURVIVAL; INDEMNIFICATION

 

9.1          
Limitation
on and Survival of Representations and Warranties.

 

(a)          
Holdings
acknowledges and agrees that no representations or warranties have been made by
Progress Energy or Progress Fuels in connection with the transactions
contemplated by this Agreement, except for those representations and warranties
made in Article III and Article IV hereof.

 

(b)          
Subject
to paragraph (a) of this Section 9.1, all representations and warranties
contained in this Agreement, or in any agreements or instruments executed in
connection herewith or delivered pursuant hereto, shall survive the Closing for
a period of two years beginning on the Closing Date, but not longer; provided,
however, that (i) the representations and warranties contained in Section
4.14 (Taxes), the covenant set forth in Section 6.1(xi) and the agreement
to indemnify set forth in Section 9.2(a)(xi) hereof shall survive until sixty
(60) calendar days after the expiration of the applicable statute of
limitations (including any valid extensions, whether automatic or permissive)
for the matter giving rise to a claim hereunder,

 

67

 

(ii) the
representations and warranties contained in Section 4.12 (Employee
Benefits) and Section 4.17 (Environmental and Asbestos) shall survive
the Closing for a period of seven years beginning on the Closing Date and
(iii) the representations and warranties contained in the following
sections shall survive indefinitely:  Section 3.1 (Ownership of the
Shares), Section 3.2 (Organization), Section 3.3 (Authorization;
Execution and Delivery; Enforceability) and Section 3.4 (No Violation or
Conflict; Consents); Section 4.1 (Organization; Capitalization of the
Companies), Section 4.2 (Subsidiaries), Section 4.3 (No Violation
or Conflict; Consents), Section 4.15 (Transactions with Affiliates), Section
4.21 (Entire Business), and Section 4.26 (No Broker); and Section
5.1 (Organization), Section 5.2 (Authorization; Execution and
Delivery; Enforceability), Section 5.3 (No Violation or Conflict;
Consents), and Section 5.4 (No Broker).  Such representations and
warranties shall only be effective with respect to any breach or claim when
notice of such breach or claim shall have been given in writing to the other
party in breach or against whom indemnification is sought within such
period.  Any claim for indemnification for which notice (including an
Initial Written Notice under Section 9.7) has been given within the
prescribed period shall be prosecuted to conclusion notwithstanding the
subsequent expiration of such period.  Notwithstanding any right of
Holdings and its Affiliates (whether or not exercised) to investigate the
affairs of the Companies and the Subsidiaries or any right of any party
(whether or not exercised) to investigate the accuracy of the representations
and warranties of the other party contained in this Agreement or the waiver of
any provision hereof, Progress Energy and Progress Fuels, on the one hand, and
Holdings, on the other hand, have the right to rely fully upon the
representations, warranties, covenants and agreements of the other contained in
this Agreement.

 

9.2          
Indemnification
by Progress Energy and Progress Fuels.

 

(a)          
Subject
to the limitations set forth in Sections 9.1 and 9.4,
Progress Energy and Progress Fuels, jointly and severally, hereby agree to
indemnify and hold harmless Holdings and its stockholders, officers, directors,
employees, agents and the respective Affiliates thereof from and against any
and all claims, demands, suits, proceedings, judgments, losses, Liabilities,
damages, costs and expenses (including, without limitation, reasonable
attorneys’ fees and out-of-pocket expenses, whether incurred before or after
the date of this Agreement, and, in particular, with respect to Holdings and
its Affiliates, those third-party fees and expenses and other out-of-pocket
expenses incurred over the past three years which did not exceed
$2 million as of November 30, 2004) (collectively, “Losses”) imposed
upon or incurred by Holdings or any such other indemnified person (any and all
such losses by Holdings, a “Holdings Claim”), whether or not involving a third
party claim, as a result of or in connection with any of the following:

 

(i)           
any
inaccuracy or breach of a representation or warranty made by Progress Energy or
Progress Fuels under Article III or by Progress Fuels under Article
IV of this Agreement (provided that for any representation or warranty that
is limited by materiality, Material Adverse Effect, Material Adverse Change,
Knowledge or similar terms, an inaccuracy or breach shall be determined as if
such terms were not included therein);

 

(ii)          
the
breach of, or default in the performance by Progress Energy or Progress Fuels
of, any covenant, agreement or obligation to be performed by Progress 

 

68

 

Energy
or Progress Fuels pursuant to this Agreement or any agreement or instrument
executed in connection herewith or pursuant hereto;

 

(iii)         
(A) the
Retained Leasing Liabilities, (B) the Retained Real Property, (C) the
Retained Leasing Assets and (D) 3079936 Nova Scotia Company, including,
without limitation, any Losses arising in connection with such Subsidiary’s
dissolution;

 

(iv)         
any
Losses not arising in connection with the Business or arising from or in
connection with any assets, businesses or properties formerly owned, formerly
operated, formerly occupied or formerly leased by the Companies, the
Subsidiaries, current or former Affiliates or their respective predecessors,
including, without limitation, relating to or arising under Environmental Laws
or any indemnification obligations or retained liabilities under purchase or
similar agreements executed in connection with the sale of such assets,
businesses or properties;

 

(v)          
any
Company Transaction Expenses which shall not have been paid by Progress Energy
or Progress Fuels and any Indebtedness of the Companies or the Subsidiaries;

 

(vi)         
(A) any
actual or potential litigation or claims set forth in Schedule 4.10
or litigation or claims based upon facts asserted in the litigation or claims
set forth in Schedule 4.10; and (B) the provision of products or
services prior to the Closing, including, without limitation, warranty claims
and claims of nonconformity with specifications or requirements or similar
claims (including, for purposes of clarity, any litigation or claim arising
from any warranty dispute regarding the lining of the railcars leased pursuant
to the Lease of Railroad Equipment dated November 1, 2000 by and between
American Rock Salt Company LLC, as agent for the Livingston County Industrial
Development Agency and Railcar Amrock Trust and all related Lease Supplements)
but excluding Ordinary Rework and matters subject to Sections 9.2(a)(vi)(A),
(vii) or (x) which shall be subject to the indemnities in those
respective Sections;

 

(vii)        
any
Asbestos Matters;

 

(viii)       
(A) 
arising from or relating to any Plan that is not a Benefit Plan; and (B)
arising from or relating to the use of any surplus of any Canadian Benefit
Plans by Progress Fuels, including any contribution holidays;

 

(ix)          
arising
from the failure to obtain any consent, approval or authorization or make any
registration or filing required under Section 7.2(c);

 

(x)           
Environmental
Matters, including, without limitation, matters set forth in Schedule 4.17
(other than any matters set forth in Schedule 4.17 that are subject to
other indemnities under Section 9.2(a)); provided that any
voluntary investigation, testing, sampling or other similar action performed by
Holdings on the Current Property prior to such time as an indemnification
obligation arises under this Section 9.2(a) shall be at the sole
expense of Holdings;

 

69

 

(xi)          
all
liability imposed on the Companies or any of the Subsidiaries for Taxes, other
than income Taxes, attributable (under the principles of Section 8.2(g)(iii)
hereof) to Pre-Closing Periods to the extent that the aggregate amount of such
liability (net of the after-tax benefit of any refunds or credits with respect
to such Taxes for Pre-Closing Periods received (whether in the form of a credit
or otherwise) and retained (taking into account any payments required by this
Agreement) by Holdings or its Affiliates after Closing which were not actually
taken into account as an asset in determining Closing Working Capital and which
are not attributable to operations of Holdings and its Affiliates after the
Closing) is in excess of the amount of such Taxes actually taken into account
as a liability in determining Closing Working Capital, after first subtracting
the amount of any payments, credits or rights to refunds or credits with
respect to such Taxes actually taken into account as an asset in determining
Closing Working Capital; and

 

(xii)         
either
of the Companies or any Subsidiary not owning good and marketable fee title to
the Owned Real Property subject to no Liens, except for Permitted Liens, or the
lack of a title policy or real property survey covering the Owned Real Property
as of the Closing Date in a commercially customary amount, form and substance; provided,
however, that, with respect to any Owned Real Property, the provisions
of this Section 9.2(a)(xii) shall terminate with respect to such Owned
Real Property at such time that Holdings receives a title policy covering such
Owned Real Property in a commercially customary amount, form and substance.

 

(b)          
Promptly
after receipt by Holdings of notice of an Action or other event giving rise to
a Holdings Claim with respect to which Holdings may be entitled to
indemnification under this Section 9.2, Holdings shall notify Progress
Energy in writing of the commencement of such Action or the assertion of such
Holdings Claim (the “Holdings Claim Notice”); provided, however,
that failure to give such notice shall not affect the right to indemnification
hereunder except to the extent of actual prejudice.  Progress Energy shall
have the option, and shall notify Holdings in writing within ten business days
after the date of the Holdings Claim Notice of its election either:  (i)
to participate (at the expense of Progress Energy) in the defense of such
Action or Holdings Claim (in which case the defense of such Action or Holdings
Claim shall be controlled by Holdings) or (ii) to take charge of and control
the defense of such Action or Holdings Claim (at the expense of Progress
Energy); provided, however, that where an Action or Holdings
Claim relates to Taxes and involves Taxes other than Taxes for which Holdings
or its Affiliates is entitled to indemnification under this Agreement, Progress
Energy shall only take charge of and control the portion of such proceeding
that relates to Taxes for which Holdings or its Affiliates is entitled to
indemnification under this Agreement and Holdings shall control the remainder
of such proceeding relating to Taxes.  As permitted herein, if Progress
Energy elects to control the defense, it will not compromise or settle the
Action or Holdings Claim if (A) the amount to be paid in settlement exceeds the
Maximum Indemnity Amount or (B) the settlement does not include a provision
releasing Holdings from all Liabilities with respect thereto and, further,
Progress Energy may only compromise or settle a third party claim (other than
such third party claim in which criminal conduct is alleged) without Holdings’
consent if such settlement or compromise (1) constitutes a complete and
unconditional discharge and release of Holdings, and (2) provides for no relief
other than the payment of monetary damages and such monetary damages are paid
in full by Progress Energy.  Where an Action of Holdings Claim involves 

 

70

 

Taxes,
Progress Energy may compromise or settle such claim only with the prior written
consent of Holdings, which consent may not be unreasonably withheld.  If
Progress Energy fails to notify Holdings of its election within the applicable
response period, then Progress Energy shall be deemed to have elected not to
control the defense of such Action or Holdings Claim.  If Progress Energy
elects to assume the defense of any Action or Holdings Claim, Holdings shall
have the right to employ separate counsel and participate in the defense of
such Action or Holdings Claim, but the fees and expenses of such counsel shall
be at the expense of Holdings unless:  (x) the named parties in such
Action or Holdings Claim (including any impleaded parties) include both
Holdings and an indemnifying party and Holdings shall have been advised by such
counsel that there may be one or more legal defenses available to it that are
different from or additional to those available to the indemnifying party, or
(y) Holdings has reasonably determined that losses which may be incurred may
exceed either individually, or when aggregated with other Holdings Claims, the
Maximum Indemnity Amount (in which case Progress Energy shall not have the
right to control the defense of such Action or Holdings Claim on behalf of
Holdings, it being understood, however, that Holdings shall not, in connection
with such Action or Claim be liable for the fees and expenses of more than one
separate firm of attorneys (in addition to any local counsel) and that all such
fees and expenses shall be reimbursed as they are incurred).  The parties
will provide each other with reasonable access to business records and
personnel as may be reasonably necessary to defend any Action or Holdings Claim
involving any third party claim.

 

(c)          
The
parties acknowledge that, upon the Closing, Progress Energy will take charge of
and control the defense of all matters set forth in Schedule 4.10 as
contemplated by Section 9.2(b)(ii) and that Holdings shall be deemed to
have provided a Holdings Claim Notice with respect thereto.  The Companies
and the Subsidiaries will provide reasonable assistance in connection with the
transition of the defense of the matters set forth in Schedule 4.10.

 

(d)          
If
Progress Energy does not control the defense of any Action or Holdings Claim,
then Holdings may settle such Action or Holdings Claim with the written consent
of Progress Energy (not to be unreasonably withheld).

 

9.3          
Indemnification
by Holdings.

 

(a)          
Subject
to the limitations set forth in Section 9.4, Holdings hereby agrees to
indemnify and hold Progress Fuels harmless from and against any and all Losses
imposed upon or incurred by Progress Fuels (any of such Losses by Progress
Fuels, a “Progress Fuels Claim”), as a result of or in connection with any of
the following:

 

(i)           
any
inaccuracy or breach of a representation or warranty made by Holdings in this
Agreement or in any agreement or instrument executed in connection herewith or
pursuant hereto; or

 

(ii)          
the
breach of or default in the performance by Holdings of any covenant, agreement
or obligation to be performed by Holdings pursuant to this Agreement or any
agreement or instrument executed in connection herewith or pursuant hereto.

 

(b)          
Promptly
after receipt by Progress Fuels of notice of the commencement of an Action or
other event giving rise to a Progress Fuels Claim with respect to which
Progress Fuels 

 

71

 

is
entitled to indemnification, the party receiving such notice shall notify
Holdings in writing of the commencement of such Action or the assertion of such
Progress Fuels Claim (the “Progress Fuels Claim Notice”); provided, that
failure to give such notice shall not affect the right to indemnification
hereunder except to the extent of actual prejudice.  Holdings shall have
the option, and shall notify each indemnified party in writing within ten
business days after the date of the Progress Fuels Claim of its election
either: (i) to participate (at its own expense) in the defense of the Action or
Progress Fuels Claim (in which case the defense of such Action or Holdings
Claim shall be controlled by the indemnified party) or (ii) to take charge of
and control defense of such Action or Progress Fuels Claim (at its own
expense).  If Holdings fails to notify the indemnified party of its
election within the applicable response period, then Holdings shall be deemed
to have elected not to control the defense of such Action or Progress Fuels
Claim.  If Holdings elects to assume the defense of any Action or Progress
Fuels Claim, each indemnified party shall have the right to employ separate
counsel and participate in the defense of any such Action or Progress Fuels
Claim, but the fees and expenses of such counsel shall be at the expense of the
indemnified party unless: the named parties in such Action or Progress Fuels
Claim (including any impleaded parties) include both the indemnified party and
Holdings and the indemnified party shall have been advised by such counsel that
there may be one or more legal defenses available to it that are different from
or additional to those available to Holdings (in which case Holdings shall not
have the right to assume the defense of such Action or Progress Fuels Claim on
behalf of the indemnified party, it being understood, however, that Holdings
shall not, in connection with such Action or Progress Fuels Claim be liable for
the fees and expenses or more than one separate firm of attorneys (in
additional to any local counsel) and that such fees and expenses shall be
reimbursed as they are incurred). The parties will provide each other with reasonable
access to business records and personnel as may be reasonably necessary to
defend any Action or Progress Fuels Claim involving any third party claim.

 

(c)          
If
Holdings does not control the defense of any Action or Progress Fuels Claim,
then the indemnified party or parties may settle such Action or Progress Fuels
Claim with the written consent of Holdings (not to be unreasonably withheld).

 

9.4          
Limitation
of Liability.  Notwithstanding the foregoing, (a) neither
Progress Energy nor Progress Fuels shall be obligated to indemnify Holdings,
and Holdings shall not be obligated to indemnify Progress Fuels pursuant to
this Article IX unless and until the amount of all Losses incurred by
Holdings, or by Progress Fuels, as the case may be, taken as a group, exceeds
two million five hundred thousand dollars ($2,500,000) in the aggregate (the
“Basket”), in which event the party seeking indemnity may recover all Losses
incurred from the first dollar, (b) Progress Fuels’ maximum liability for Losses
under Section 9.2 and Holdings’ maximum liability for Losses under Section
9.3 shall be, in each case, one hundred one million two hundred fifty
thousand dollars ($101,250,000); provided, however, that Progress
Energy’s and Progress Fuels’ liability under Sections 3.1, 4.2(a),
4.10, 4.14 (with respect to income Taxes and only if Section
8.2 applies), 9.2(a)(ii), (iii), (iv), (v), (vi)(A),
(vii), (viii), (ix) and (xii) and Holdings’
liability under Section 9.3(a)(ii) shall not be subject to the Basket
and shall be unlimited; provided, further, that Progress Energy
and Progress Fuels’ obligations under Sections 9.2(a)(vi)(B) and (x)
shall survive the Closing for a period of seven years beginning on the Closing
Date, with Progress Energy and Progress Fuels remaining obligated thereunder
for any claim for which notice (including, without limitation, an Initial
Written Notice under Section 9.7) has been given within the
seven-year period notwithstanding the subsequent 

 

72

 

expiration
of such period (and with respect to Section 9.2(a)(x) and Section 9.2(a)(i),
Progress Energy and Progress Fuels have an indemnification obligation that does
not cease after the seven year anniversary of the Closing Date if the
requirements of Section 9.8(b) are not met for any Environmental
Response Actions or if any other indemnification or other obligations remain
with respect to an Environmental Matter for which the required notice was given
during the seven-year period, (c) neither Progress Energy nor Progress Fuels
shall be obligated to indemnify pursuant to Section 9.2(a)(vi)(B)
unless and until the amount of all Losses incurred by Holdings exceeds two
hundred fifty thousand dollars ($250,000) in the aggregate in any twelve-month
period beginning on the Closing Date; and (d) neither Progress Energy nor
Progress Fuels shall be obligated to indemnify pursuant to Section 9.2(a)
with respect to any liability to the extent it is reflected in the Closing
Working Capital.

 

9.5          
Indemnity
Amounts to be Computed on After Tax Basis.  The amount of any
indemnification payable under any of the provisions of this Article IX shall be
(i) net of any federal, foreign or state income Tax benefit realized or
the then present value (based on a discount rate of five percent (5%)) of any
such income Tax benefit to be realized by such indemnified party (and, where
Holdings is the indemnified party, any of the Companies and the Subsidiaries)
or any consolidated or similar group that includes the indemnified party by
reason of the facts and circumstances giving rise to the indemnification after
taking into account the provisions of this Agreement relating to the allocation
of rights and responsibilities with respect to Tax items, and
(ii) increased by the amount of any federal, foreign or state income Tax
required to be paid by the indemnified party (and, where Holdings is the
indemnified party, any of the Companies and the Subsidiaries) or any
consolidated or similar group that includes the indemnified party on the
accrual or receipt of the indemnification payment (including any amount payable
pursuant to this clause (ii)).  For purposes of the preceding sentence,
the amount of any state income Tax benefit or cost shall take into account the
federal income Tax effect of such benefit or cost.

 

9.6          
Exclusive
Remedy.  After the Closing, the parties’ sole and exclusive recourse
against each other for any Loss or claim of Losses arising out of or relating
to this Agreement shall be expressly limited to the provisions of Sections 8.2
and 8.5 and this Article IX.  Notwithstanding anything
contained in this Agreement or any other agreement to the contrary, after the
Closing neither Progress Energy, Progress Fuels nor any Affiliate of Progress
Energy or Progress Fuels shall be entitled to any damages, indemnification,
right of contribution or other right of recovery from the Companies or any
Subsidiary in connection with any matter or thing whatsoever, including,
without limitation, in connection with any claim made by or which could be made
against Progress Energy or Progress Fuels or with respect to which either
Company or any Subsidiary could be liable for, all of which are irrevocably
waived and released by Progress Energy or Progress Fuels.  In furtherance
and not in limitation of the foregoing, Progress Energy and Progress Fuels, on
behalf of themselves, and their successors and assigns, as of the Closing,
hereby release and forever discharge the Companies and the Subsidiaries for and
from any Actions, Losses, Contracts (other than those three Contracts listed in
Schedule 4.9(f) with respect to performance after the Closing),
Liabilities or Indebtedness which Progress Energy or Progress Fuels ever had,
now has, or hereafter can, shall or may have against either Company or any
Subsidiary for, upon or by reason of any matter, cause or thing whatsoever from
the beginning of time through the Closing Date.

 

73

 

9.7          
Procedures
for Environmental Response Actions.

 

(a)          
Notwithstanding
anything in this Agreement to the contrary, including, but not limited to, any
contrary provisions in Section 9.2(b), Progress Energy shall have
the right to control, conduct and implement all investigations, studies, tests,
abatement, monitoring, cleanup, removal, remediation, restoration or other
response actions (“Environmental Response Action”) for which Progress Energy or
Progress Fuels has an indemnification obligation under Sections 9.2(a)(i)
and 9.2(a)(x) and any Environmental Response Actions which are included
in the Basket as described by Section 9.4(i) that arise under or
relate to Environmental Laws in effect as of the Closing Date with respect to
any Current Property (a “Progress Controlled Environmental Response
Action”).  Progress Energy and Holdings shall comply with the requirements
and procedures contained in this Section 9.7 with respect to
Environmental Response Actions at any Current Property for which Progress
Energy or Progress Fuels has an indemnification obligation under Sections 9.2(a)(i)
or 9.2(a)(x); provided, however, the failure to comply
with the requirements of this Section 9.7 shall not affect the right to
indemnification hereunder except to the extent of actual prejudice to Progress
Energy, and provided further, with respect to any Leased Real Property,
Progress Energy shall comply with any and all requirements, obligations,
procedures and/or time frames set forth in the relevant Applicable Lease
Agreement to the extent such procedures, requirements, obligations or
requirements in the Applicable Lease Agreement are more stringent than or
otherwise are inconsistent with those set forth herein and are required
pursuant to an Environmental Claim brought by a Person with rights under an
Applicable Lease Agreement (after the exhaustion of any administrative remedies
or litigation appeals that Progress Energy chooses to pursue at its sole cost
and expense).  Progress Energy and Holdings shall comply with the
requirements and procedures set forth in Section 9.7 for all
Environmental Response Actions that are subject to the Basket as described by Section 9.4(i)
(other than with respect to payment obligations).  Holdings shall promptly
reimburse Progress Energy for reasonable costs incurred by Progress Energy
arising out of an Environmental Response Action for which Holdings has provided
an Approval Notification pursuant to Section 9.7(g) or other
written approval from Holdings or pursuant to the last sentence in Section 9.7(g)
that are subject to the Basket and are the responsibility of Holdings under Section 9.4. 
Progress Energy shall have the right to split soil or groundwater samples to be
voluntarily taken by Holdings on any Current Property concerning which an
indemnification obligation could potentially arise.  Holdings agrees to
notify Progress Energy reasonably in advance of the sampling event to allow
Progress Energy to exercise this option and Holdings will provide Progress
Energy with the date and time of the sampling event and access to the relevant
Current Property at that time; provided, however, that the failure
to give such notice shall not affect the right to indemnification hereunder
except to the extent of actual prejudice to Progress Energy.  Progress
Energy shall not interfere with Holdings’ conduct of the sampling event.

 

(b)          
With
respect to any Progress Controlled Environmental Response Action, Holdings
shall provide initial written notice to Progress Energy, setting forth with
reasonable particularity (to the extent then known) the nature of the condition
or event giving rise to the Environmental Response Action for which Progress
Energy has or may have an indemnification obligation under Section 9.2(a)
(each such notice, an “Initial Written Notice”).  Holdings shall provide
Progress Energy with copies of sampling data, environmental reports, proposals
and correspondence in the possession of Holdings relevant to the subject matter
of the Initial Written Notice; provided, however, that failure to
give such information shall not affect the right to 

 

74

 

indemnification
hereunder except to the extent of actual prejudice to Progress Energy. 
The Initial Written Notice shall be sent by Holdings as soon as practicable
after discovery of the condition or event giving rise to the indemnification
obligation and, to the extent commercially reasonable, prior to any relevant
reporting requirement under applicable Environmental Laws (other than with
respect to any reporting requirements that first arose prior to the Closing
Date, even if such reporting requirements continue after the Closing Date); provided,
however, that failure to give such information shall not affect the
right to indemnification hereunder except to the extent of actual prejudice to
Progress Energy.  Progress Energy shall not be responsible for penalties
assessed by a Governmental Authority that arise out of Holdings’ failure to use
commercially reasonable efforts to provide the Initial Written Notice within
the time frame set forth in this Section 9.7(b) (other than with
respect to any reporting requirements that first arose prior to the Closing
Date, even if such reporting requirements continue after the Closing Date); provided,
however, failure to give the notice within the time frame set forth in
this Section 9.7(b) shall not affect the right to indemnification
hereunder except to the extent of actual prejudice to Progress Energy. 
Should it become necessary for Holdings to contact a Government Authority in
writing prior to issuance of the Initial Written Notice, to the extent
practicable, Holdings shall provide Progress Energy a draft of that
correspondence and an opportunity to promptly respond with comments before it
is submitted; provided, however, failure to provide the draft
shall not affect the right to indemnification hereunder except to the extent of
actual prejudice to Progress Energy.

 

(c)          
Upon
receipt of an Initial Written Notice pursuant to Section 9.7(b)
that relates to the presence or Release of Hazardous Materials in soil and/or
groundwater at any Current Property, Progress Energy shall have the option
of:  (i) promptly developing and implementing an appropriate
Environmental Response Action in accordance with the procedures and time frames
set forth in Section 9.7(d)-(m); or (ii) delaying the development
and implementation of an Environmental Response Action until such time as the
development and implementation of an Environmental Response Action for which
Progress Energy has an indemnification obligation under Section 9.2(a)(x)
or 9.2(a)(i) is required by an Environmental Law, a Governmental
Authority (after the exhaustion of any administrative remedies that Progress
Energy may choose to pursue at its sole cost and expense) or an Environmental
Claim (including, without limitation, an Environmental Claim relating to an
Applicable Lease Agreement) (after the exhaustion of any administrative
remedies or litigation appeals that Progress Energy may choose to pursue at its
sole cost and expense).  Progress Energy and Progress Fuels shall be
solely responsible for any and all Losses incurred by Holdings associated with
Progress Energy’s decision to pursue the option described in this Section 9.7(c)(ii). 
An Initial Written Notice shall be deemed to be notice of a claim for
indemnification by Holdings for purposes of the seven-year survival period set
forth in Section 9.4 (with respect to Section 9.2(a)(x))
and Section 9.1(b) regardless of whether Progress Energy and/or
Progress Fuels has elected to promptly develop and implement an Environmental
Response Action or delay the development and implementation of an Environmental
Response Action pursuant to this Section 9.7(c) and Progress Energy
and Progress Fuels’ obligations under Section 9.2(a)(x) and Section 9.2(a)(i)
shall continue until the requirements of Sections 9.8(b) and 9.2(a)
have been satisfied.

 

(d)          
As
soon as practicable, but no later than forty-five (45) days after receipt of
the Initial Written Notice, Progress Energy will provide Holdings with a
written response that provides the following information: 
(1) whether Progress Energy intends to promptly develop 

 

75

 

and
implement an Environmental Response Action or delay the development and
implementation of an Environmental Response Action in accordance with the
options and requirements in Section 9.7(c); and (2) if
Progress Energy intends to promptly develop and implement an Environmental
Response Action, the following information should be provided with reasonable
particularity (to the extent reasonable particularity is feasible based upon
the information provided in the Initial Written Notice):  (i) the
nature of the activities proposed to be undertaken, taking into consideration
any means of minimizing significant impacts on the use and operations of
Holdings on the relevant Current Property as well as the costs of the Environmental
Response Action alternatives; (ii) the identity of the environmental
professional proposed to undertake the action; (iii) the proposed time
frame for undertaking the proposed action (including interim milestones to the
extent appropriate); and (iv) the estimated cost associated with such
action (to the extent then estimable) (each such notice, an “Environmental
Response Action Proposal”).

 

(e)          
Holdings
shall promptly provide Progress Energy with a copy of any and all written
notices received from a Governmental Authority or third party requiring an
Environmental Response Action or issuing or asserting an Environmental Claim
with respect to any matter for which an Initial Written Notice was issued; provided,
however, that failure to give such information shall not affect the
right to indemnification hereunder except to the extent of actual prejudice to
Progress Energy.  In the event that Progress Energy has elected to delay
development and implementation of an Environmental Response Action pursuant to Section 9.7(c)(ii),
Progress Energy will promptly address any subsequent requirement of an
Environmental Law, a Governmental Authority (after the exhaustion of any
administrative remedies or litigation appeals that Progress Energy chooses to
pursue at its sole cost and expense) of which it has knowledge, or
Environmental Claims (after the exhaustion of any administrative remedies or
litigation appeals that Progress Energy chooses to pursue at its sole cost and
expense) of which it has knowledge, by preparing and implementing an
Environmental Response Action Proposal in accordance with the provisions of Sections 9.7(d)(2)-9.7(n). 
The Environmental Response Action Proposal shall be submitted to Holdings as
soon as practicable, but no later than forty-five (45) days after receipt of
any written notice from Holdings or earlier to the extent required by an
Applicable Agreement relevant to a requirement of an Environmental Law, a
Governmental Authority or Environmental Claim.  Should Progress Energy
need to comply with requirements of an Environmental Law, a Governmental
Authority, or an Environmental Claim prior to submittal of the Environmental
Response Action Proposal to Holdings, Holdings agrees to reasonably cooperate
with Progress so as to facilitate and not impede Progress Energy from
fulfilling those requirements; provided, however, any failure to
cooperate shall not affect the right to indemnification hereunder, except to
the extent of actual prejudice to Progress Energy.

 

(f)           
All
Progress Controlled Environmental Response Actions shall be performed by an
environmental professional reasonably acceptable to Holdings and Progress
Energy.  At Holdings’ request, Progress shall provide Holdings with
information concerning the certifications, education, professional licensure,
experience, and any other relevant qualifications of the environmental
professional chosen by Progress Energy within fifteen (15) days of receipt of
the Environmental Response Action Proposal.  Holdings agrees that it will
not unreasonably object to the environmental professional chosen by Progress
Energy.  Any consultant retained by Progress Energy to conduct work
pursuant to a Progress Controlled Environmental Response 

 

76

 

Action
must hold and maintain insurance of the types and amounts that are customary in
the industry and Holdings, the Companies and Subsidiaries shall be added as
additional named insureds on such policies.

 

(g)          
Holdings
shall, as soon as practicable, but no later than forty-five (45) days after receipt
of the Environmental Response Action Proposal, notify Progress Energy, in
writing, that Holdings, in whole or in part, approves of (“Approval
Notification”) or objects to (“Dispute Notification”) such Environmental
Response Action Proposal, including the selection of the environmental
professional.  Issuance of such Approval Notification shall grant Progress
Energy, its representatives and consultants necessary reasonable rights of
access to the relevant Current Property to conduct activities in conjunction
with the Environmental Response Action Proposal, unless otherwise stated in the
Approval Notification or thereafter; provided, however, that
Progress Energy shall provide reasonable prior notice of any dates or times
Progress Energy or its consultants or representatives plan to access the
relevant Current Property and shall accommodate Holdings’ schedule to the
extent practicable.  In the event Holdings objects, in whole or in part,
to an Environmental Response Action Proposal, Holdings shall notify Progress
Energy, in writing, of its specific disagreement regarding such Environmental
Response Action Proposal and provide an alternative proposal in the Dispute
Notification.  Holdings agrees that its approval of an Environmental
Response Action Proposal shall not be unreasonably withheld.  In the event
Holdings fails to approve or object to the Environmental Response Action
Proposal within forty-five (45) days after its receipt thereof (unless a longer
period of time is mutually agreed upon by the Parties), the Environmental
Response Action Proposal shall be deemed approved.  Nothing in this Section 9.7(g)
shall prevent Holdings or Progress Energy from complying with applicable
reporting or notification requirements pursuant to Environmental Laws with respect
to the subject matter of an Environmental Response Action Proposal or Initial
Written Notice.  In the case of a Progress Controlled Environmental
Response Action, Holdings agrees to reasonably cooperate with Progress Energy,
after the issuance of an Initial Notification and prior to receipt of an
Approval Notification or Dispute Notification under this Section, so as to
facilitate and not impede Progress Energy from fulfilling any such requirements
under Environmental Laws or imposed by a Governmental Authority that must be
addressed and/or satisfied sooner than the forty-five (45) day time period in
this Subsection; provided, however, any failure to cooperate
shall not affect the right to indemnification hereunder, except to the extent
of actual prejudice to Progress Energy.

 

(h)          
In
the event Holdings objects to an Environmental Response Action Proposal or any
portion thereof under the previous paragraph, Holdings and Progress Energy
shall thereafter negotiate in good faith in an attempt to reach agreement as to
the disputed Environmental Response Action Proposal.  In the event Holdings and Progress
Energy are unable to resolve the dispute within a reasonable period of time,
the parties shall resolve the dispute in accordance with their rights under
this Agreement and applicable Law.

 

(i)           
With
respect to any such Progress Controlled Environmental Response Action, Progress
Energy agrees to provide Holdings with the following:  (i) copies of
all work plans, test results, sampling data, surveys and other data generated
by Progress Energy and its representatives, promptly upon the availability
thereof, but in any event, prior to submitting the same to any Governmental
Authority; (ii) copies of all material draft reports and final reports,
plans and other documents developed with respect to the Environmental Response
Action, 

 

77

 

including
any such materials to be submitted to any Governmental Authority prior to any
such submission; (iii) an opportunity to meet with Progress Energy and/or
its representatives prior to and following any substantive communications or
meetings with any Governmental Authority, (iv) the opportunity to
participate in substantive communications or meetings with Governmental
Authorities; and (v) an opportunity to timely comment upon the foregoing
and any other proposed material determinations or actions relating to
investigative, testing and remedial actions and the reporting of the same to
any Governmental Authority.

 

(j)           
In
the event Holdings (or its respective Affiliates, consultants or
representatives) have information or documentation relevant to the matter
giving rise to an Initial Written Notice, Holdings shall reasonably cooperate
with Progress Energy with respect to such matter, including, without
limitation:  (i) providing copies of relevant information and
documents to Holdings reasonably requested by Progress Energy; and
(ii) providing reasonable access to personnel and outside representatives
and consultants of Holdings (or their respective Affiliates) that may be
knowledgeable about the specific matter.

 

(k)          
Progress
Energy agrees to diligently perform (or direct its consultants to perform) the
Progress Controlled Environmental Response Action in a good and workman-like
manner in accordance with accepted industry practices and standards in
compliance with applicable Environmental Laws and shall comply with any of the
Companies’ or the Subsidiaries’ site-specific health and safety requirements or
policies (which shall be provided to Progress Energy prior to accessing the
relevant Current Property).  Progress Energy will follow the proposed
schedule provided in the Environmental Response Action in all material
respects.  Should material changes be necessary to the proposed schedule,
Progress Energy shall promptly provide a revised schedule to Holdings. 
Holdings shall have the opportunity to dispute the revised schedule by
providing a Dispute Notification and following the procedures in
Subsections (e) and (f) of this Subpart.

 

(l)           
Circumstances
in which Holdings Shall Temporarily or Permanently Control the Environmental
Response Action:

 

(i)           
Progress
Energy may opt out of controlling, conducting and implementing the
Environmental Response Action.  To the extent Progress Energy declines to
exercise its ability under this Section 9.7 to control, conduct and
implement any Environmental Response Action, Holdings shall have the right to
control, conduct and implement the relevant Environmental Response Action provided
the procedures in this Section 9.7 shall be complied with, substituting
in each case (other than payment obligations), Holdings for Progress Energy and
vice versa (a “Holdings Controlled Environmental Response Action”). 
Should Progress Energy exercise this option, it shall provide timely written
notification of its decision to relinquish control.  In no circumstances
will Progress Energy exercise this option in a manner that would jeopardize
Holdings’ ability to comply with a deadline imposed by a Governmental Authority
or Environmental Laws with respect to the Environmental Response Action
activities.

 

(ii)          
If
Holdings has an interest in controlling, conducting and/or implementing a
particular Environmental Response Action, it may submit a written request to
Progress Energy to control, conduct and/or implement the Environmental Response
Action.  

 

78

 

Progress
Energy shall promptly respond to the request in writing.  If Progress
Energy waives its ability to control, conduct and/or implement the
Environmental Response Action, Holdings may institute a Holdings Controlled
Environmental Response Action.

 

(iii)         
If
Environmental Response Action activities must be performed within forty-eight
(48) hours of discovery of the event giving rise to the indemnity obligation
pursuant to a deadline imposed by a Governmental Authority or an Environmental
Law, Holdings may temporarily control, conduct and implement the relevant
Environmental Response Action activities.  The procedures in Section 9.7(b)-(n)
continue to apply in this circumstance, and Progress Energy will retain control
over the Environmental Response Action upon receipt of the Initial Written
Notice by Holdings.

 

(iv)         
If
Progress has failed to diligently undertake or implement the Environmental
Response Action in a good and workman-like manner in accordance with accepted
industry practices and standards or follow the proposed or revised schedule
provided in the Environmental Response Action in material respects, Holdings shall
notify Progress Energy, in writing, including a description of the basis for
its contention and a proposal to cure the alleged deficiencies, including a
proposed, reasonable time frame for correction.  Progress shall have the
opportunity to cure any deficiencies in its performance within Holdings’
proposed time frame for correction or within (30) days of receipt of the
notification of Holdings, whichever is later, unless a shorter time frame is
set by an Environmental Law or Governmental Authority, in which case the
shorter time frame specified by the Environmental Law or Governmental Authority
shall apply.  If the deficiencies are not timely cured, Holdings shall
have the right to institute a Holdings Controlled Environmental Response
Action.

 

(v)          
Progress
Energy and/or Progress Fuels shall promptly reimburse Holdings for any and all
Losses incurred by Holdings with respect to any actions undertaken by Holdings
pursuant to this Section 9.7(l) for which Progress Energy or Progress
Fuels have an indemnification obligation under Section 9.2(a).

 

(m)         
All
notices under this subpart shall comply with requirements of Section 11.7.

 

(n)          
Notwithstanding
anything to the contrary in Sections 9.7 and 9.8, to the
extent practicable, Progress Energy will develop and implement the relevant
Environmental Response Actions in a manner that does not materially interfere
with Holdings’, the Companies’ or the Subsidiaries’ operations at the relevant
Current Real Property.

 

9.8          
Standards
for Environmental Response Actions.

 

(a)          
Notwithstanding
anything in this Agreement to the contrary, the Parties agree that the
applicable remediation standard with respect to any Environmental Response
Action at any Current Property for which Progress Energy and Progress Fuels
have an indemnification obligation under Section 9.2(a)(x) and Section 9.2(a)(i),
shall be the least costly or least stringent standard that: 
(1) complies with applicable Environmental Laws in effect as of the
Closing Date; (2) complies with applicable Permits required pursuant to
Environmental Laws in effect as of the Closing Date; (3) complies with and
is consistent with (i) settlements, Environmental Claims 

 

79

 

(including
any Environmental Claims relating to Applicable Lease Agreements), after
exhaustion of any administrative remedies or litigation appeals that Progress
Energy may choose to pursue at its sole cost and expense, and other agreements
entered into with third parties or Governmental Authorities with respect to a
Progress Controlled Environmental Response Action or Holdings Controlled
Environmental Response Action, as the case may be, at any Current Property for
which Progress Energy or Progress Fuels have an indemnification obligation
under Section 9.2(a)(x) or 9.2(a)(i); (ii) consent
decrees, consent agreements, consent orders or other orders issued by or
entered into with Governmental Authorities with respect to an Environmental
Response Action at any Current Property for which Progress Energy or Progress
Fuels have an indemnification obligation under Section 9.2(a)(x) or
9.2(a)(i); and (4) is consistent with Holdings’, the Companies’ or
the Subsidiaries’ industrial use of the relevant Current Property (the “Least
Stringent Standard”); provided, however, Progress Energy and
Progress Fuels shall comply with a standard that is more stringent than the
Least Stringent Standard in the event required by an Environmental Claim (after
the exhaustion of any administrative remedies or litigation appeals that Progress
Energy chooses to pursue at Progress Energy’s sole cost and expense) brought by
a Person with rights under an Applicable Lease Agreement.

 

(i)           
To
the extent that Holdings desires that the Environmental Response Action achieve
a remediation standard that exceeds or is more costly than the Least Stringent
Standard, the parties shall negotiate, in good faith, a separate set of
site-specific procedures with respect thereto, and Holdings shall bear the
additional costs associated with pursuing the more stringent or costly remedy
(other than where the more stringent or costly remedy is required by this Section 9.8(a)).

 

(ii)          
The
“Least Stringent Standard” for the purposes of Section 1.36(i)
(definition of Environmental Matters) may differ from the “Least Stringent
Standard” for purposes of Section 9.8(b).

 

(b)          
Progress
Energy’s and Progress Fuels’ indemnification obligations under Section 9.2(a)(x)
and Section 9.2(a)(i) with respect to an Environmental Response
Action at any Current Property for which an Initial Written Notice has been
provided by Holdings prior to the seventh anniversary of the Closing Date,
shall be deemed complete (i) upon receipt of a “no further action” letter
or the equivalent thereof with respect to such Environmental Response Action
from an appropriate Governmental Authority with jurisdiction over the relevant
Current Property and Environmental Response Action, or (ii) if it is a
type of Environmental Response Action for which a “no further action” letter or
the equivalent thereof is not typically issued, the receipt of a certification
from an environmental consultant approved by Holdings and Progress Energy (such
approval not to be unreasonably withheld) that the requirements of the Least
Stringent Standard have been achieved; and (iii) with respect to a Leased
Real Property where an Environmental Claim brought by a Person with rights
under an Applicable Lease Agreement (after the exhaustion of any administrative
remedies or litigation appeals that Progress Energy may choose to pursue at its
sole cost and expense) requires an Environmental Response Action that is more
stringent than the Least Stringent Standard (A) upon completion of the
implementation of the required more stringent Environmental Response Action,
and (B) to the extent requested by Holdings, upon receipt of written
confirmation from the owner of the Real Property (or other Person with rights
under the Applicable Lease Agreement) that the obligations under the Applicable
Lease Agreement with respect to the Environmental Response Action have 

 

80

 

been
satisfied (except to the extent that such written confirmation cannot be
obtained after Progress Energy has used best efforts to obtain such written
confirmation).

 

(c)          
Notwithstanding
anything to the contrary in Section 9.7 and 9.8, Progress Energy
shall not be responsible for any obligations or requirements contained in any
Applicable Lease Agreements arising out of an Environmental Response Action at
any Leased Real Property that would not have been required but for changes in
applicable Environmental Laws after the Closing Date.

 

9.9          
Insurance
Proceeds.  Each party agrees that it will use commercially
reasonable efforts to obtain insurance proceeds under existing policies and the
amount of indemnification under Article IX shall be reduced by the
amount of insurance proceeds actually received by the indemnified party (net of
any expenses incurred relating to such insurance claim), and if the
indemnification payment has already been made by the indemnifying party, then
the indemnified party shall pay over the insurance proceeds to the extent the
insurance proceeds received do not exceed the indemnification payment plus the
amount of other Losses with respect to which no indemnification payment has
been made; provided, further, that this Section 9.9 shall
not relieve any indemnifying party of its obligations hereunder.

 

9.10        
Procedures
and Standards for Asbestos Abatement.

 

(a)          
Notwithstanding
anything in this Agreement to the contrary, these provisions shall govern the
procedures and standards for Abatement of Asbestos (“Asbestos Abatement”) at
any Current Property for which Progress Energy and/or Progress Fuels has an
indemnity obligation under Section 9.2.

 

(b)          
For
any Asbestos located at any Current Property for which Progress Energy and/or
Progress Fuels has an indemnification obligation under Section 9.2,
Holdings shall submit an Initial Written Notification to Progress Energy in the
same manner described by Section 9.7(c) along with (i) copies
of any inspections, surveys, testing data, reports and other documentation in
the possession of Holdings relevant to the subject matter of the Initial
Written Notice; (ii) the nature of the activities proposed to be
undertaken; (iii) the identity of the asbestos professional proposed to
undertake the action; and (iv) the estimated cost associated with such
action (to the extent then estimable) (an “Asbestos Abatement Proposal”). 
Any such Asbestos Abatement Proposal shall be exchanged, handled and
implemented as between Holdings and Progress Energy, consistent (to the extent
practicable) with the procedures for implementing a Holdings Controlled
Environmental Response Action under Section 9.7 of this
Agreement.  Progress Energy shall have an opportunity to promptly verify
the information forming the basis of the claimed indemnity obligation at its
own expense.  Holdings shall reasonably cooperate and facilitate such
verification to the extent that Progress Energy needs reasonable access to the
relevant Current Property to conduct a verification investigation.

 

(c)          
Notwithstanding anything in this Agreement to the contrary, the Parties agree
that the applicable standard with respect to any Asbestos Abatement at any
Current Property for which Progress Energy and Progress Fuel have an
indemnification obligation under Section 9.2(a)(vii) and Section
9.2(a)(i) shall be the least costly or least stringent standard that: 
(1) complies with applicable Asbestos Laws in effect as of the Closing Date;
(2) complies with 

 

81

 

applicable
Permits required pursuant to Asbestos Laws in effect as of the Closing Date;
(3) complies with and is consistent with (i) settlements, Claims (including any
such Claims relating to Applicable Lease Agreements) after exhaustion of any
administrative remedies or litigation appeals that Progress Energy may choose
to pursue at its sole cost and expense and other agreements entered into with
third parties or Governmental Authorities with respect to an Asbestos Abatement
at any Current Property; or (ii) consent decrees, consent agreements or orders
issued by Governmental Authorities with respect to an Asbestos Abatement at any
Current Property; and (4) is consistent with Holdings’, the Companies’ or the
Subsidiaries’ industrial use of the relevant Current Property (the “Least
Stringent Abatement Remedy”); provided, however, Progress Energy
and Progress Fuels shall comply with a standard that is more stringent than the
Least Stringent Abatement Remedy in the event required by an Environmental
Claim (after the exhaustion of any administrative remedies or litigation
appeals that Progress Energy chooses to pursue and Progress Energy’s sole cost
and expense) brought by a Person with rights under an Applicable Lease
Agreement.  Except as required by the preceding sentence, in the event
that Holdings desires that the Asbestos Abatement achieve a standard that
exceeds or is more costly than the Least Stringent Abatement Remedy, the parties
agree to negotiate, in good faith, a separate set of site-specific procedures
with respect thereto, and Holdings shall bear the additional costs associated
with pursuing the more stringent or costly remedy.

 

(d)          
Progress
Energy and/or Progress Fuels shall promptly reimburse Holdings for any and all
Losses incurred by Holdings with respect to any actions undertaken by Holdings
with respect to any Asbestos Abatement at any Current Property for which
Progress Energy and/or Progress Fuels has an indemnification obligation under Section 9.2(a).

 

(e)          
Progress
Energy’s and Progress Fuels’ indemnification obligations under this Agreement
with respect to an Asbestos Abatement at any Current Property shall be deemed
complete (i) upon receipt of a “no further action” letter or the
equivalent thereof with respect to such Asbestos Abatement from an appropriate
Governmental Authority with jurisdiction over the relevant Current Property and
Asbestos Abatement, or (ii) if it is a type of Asbestos Abatement for
which a “no further action” letter or the equivalent thereof is not typically
issued, the receipt of a certification from an asbestos professional that the
requirements of the Least Stringent Abatement Remedy have been achieved; and
(iii) with respect to a Leased Real Property where a Claim with respect to
an Asbestos Abatement brought by a Person with rights under an Applicable Lease
Agreement (after the exhaustion of any administrative remedies or litigation
appeals that Progress Energy may choose to pursue at its sole cost and
expense), requires an Asbestos Abatement that is more stringent than the Least
Stringent Abatement Remedy (A) upon completion of the implementation of
the required more stringent Asbestos Abatement, and (B) to the extent
requested by Holdings, upon receipt of written confirmation from the owner of
the Real Property (or other Person with rights under the Applicable Lease
Agreement) that the obligations under the Applicable Lease Agreement with
respect to the Asbestos Abatement have been satisfied (except to the extent
that such written confirmation cannot be obtained after Progress Energy has
used best efforts to obtain such written confirmation).

 

(f)           
Notwithstanding
anything to the contrary in Section 9.10, Progress Energy shall not be
responsible for any obligations or requirements contained in any Applicable
Lease 

 

82

 

Agreements
arising out of an Asbestos Abatement at any Leased Real Property that would not
have been required but for changes in applicable Asbestos Laws after the
Closing Date.

 

ARTICLE X

TERMINATION

 

10.1        
Termination.  This Agreement
may be terminated and the transactions contemplated by this Agreement may be
abandoned at any time, but prior to the Closing Date only as follows:

 

(a)          
by
mutual written consent of Holdings and Progress Fuels;

 

(b)          
by
Holdings or Progress Fuels if the Closing Date shall not have occurred on or
before June 17, 2005 (provided that the right to terminate this Agreement under
this Section 10.1(b) shall not be available to any party whose failure
to fulfill any obligation under this Agreement has been the cause of, or has
resulted in, the failure of the Closing Date to occur on or before such date);

 

(c)          
by
Holdings or Progress Fuels, if any court of competent jurisdiction in the
United States or other United States governmental body shall have issued an
order, decree or ruling or taken any other action restraining, enjoining or
otherwise prohibiting the transactions contemplated hereby and such order,
decree, ruling or other action shall have become final and nonappealable;

 

(d)          
by
Progress Fuels, if (i) any of the representations and warranties of Holdings
and the Merger Subs contained in Article V shall fail to be true and
correct such that the condition set forth in Section 7.3(a) with respect
to representations and warranties would not be satisfied or (ii) Holdings and
the Merger Subs shall have breached or failed to comply with any of their
respective obligations under this Agreement such that the condition set forth
in Section 7.3(b) with respect to agreements and conditions would not be
satisfied (in either case other than as a result of a material breach by
Progress Energy, Progress Fuels or either Company of any of its obligations
under this Agreement) and such failure or breach with respect to any such
representation, warranty or obligation cannot be cured or, if curable, shall
continue unremedied for a period of forty-five days after Holdings has received
written notice from Progress Fuels of the occurrence of such failure or breach
(provided that in no event shall such forty-five day period extend beyond the
second day preceding the date contained in Section 10.1(b)); or

 

(e)          
by
Holdings or the Merger Subs, if (i) any of the representations and warranties
of Progress Energy and Progress Fuels contained in Article III and Article
IV shall fail to be true and correct such that the condition set forth in Section
7.2(b) with respect to representations and warranties would not be
satisfied or (ii) Progress Energy, Progress Fuels or either of the Companies
shall have breached or failed to comply with any of their respective
obligations under this Agreement such that the condition set forth in Section
7.2(d) with respect to agreements and conditions would not be satisfied (in
either case other than as a result of a material breach by Holdings or either
Merger Sub of any of their respective obligations under this Agreement) and
such failure or breach with 

 

83

 

respect
to any such representation, warranty or obligation cannot be cured or, if
curable, shall continue unremedied for a period of forty-five days after
Progress Energy, Progress Fuels or either Company has received written notice
from Holdings of the occurrence of such failure or breach (provided that in no
event shall such forty-five day period extend beyond the second day preceding
the date contained in Section 10.1(b)).

 

10.2        
Effect
of Termination.  If this Agreement is terminated pursuant to Section
10.1 and the transactions contemplated by this Agreement are not
consummated, all further obligations of the parties under or pursuant to this
Agreement shall terminate without further liability of either party to the
other; provided, however, the obligations contained in this Section
10.2, Section 6.5, Section 6.7, Article IX and Article
XI of this Agreement shall survive any such termination.  Nothing
contained in this Section 10.2 shall relieve any party from liability
for any breach of this Agreement.

 

ARTICLE XI

MISCELLANEOUS

 

11.1         Entire Agreement.  This Agreement
and the documents referred to herein and to be delivered pursuant hereto
constitute the entire agreement between the parties pertaining to the subject
matter hereof, and supersede all prior and contemporaneous agreements,
understandings, negotiations and discussions of the parties, whether oral or
written, and there are no warranties, representations or other agreements
between the parties in connection with the subject matter hereof, except as
specifically set forth herein or therein.

 

11.2        
Expenses.  Whether or not
the transactions contemplated by this Agreement are consummated, each of the
parties hereto shall pay the fees and expenses of their respective counsel,
investment bankers, financial advisors, accountants and other experts and the
other expenses incident to the negotiation and preparation of this Agreement
and consummation of the transactions contemplated hereby.

 

11.3        
Amendment.  This Agreement
may not be amended except by an instrument in writing signed by all of the
parties.

 

11.4        
Extension;
Waiver.  At any time prior to the Closing Date, the parties may (a)
extend the time for the performance of any of the obligations or other acts of
the other parties hereto, (b) waive any inaccuracies in the representations and
warranties contained herein or in any document, certificate or writing
delivered pursuant hereto or (c) waive compliance with any of the agreements or
conditions contained herein.  Any agreement on the part of any party to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party.

 

11.5        
Governing
Law.  This Agreement shall be construed and interpreted according to
the laws of the State of New York without regard to the conflicts of law rules
thereof, other than the provisions of Section 5-1401 of the New York General
Obligations Laws, except, in so far as (a) the consummation of the Progress Rail
Merger, which shall be construed and interpreted in accordance with the ABCA
and (b) the consummation of the Progress Metal Merger, which shall be construed
and interpreted in accordance with the KBCA.

 

84

 

11.6        
Assignment.  This Agreement
and each party’s respective rights hereunder may not be assigned at any time
except (i) by Holdings to any lenders as collateral in connection with the
transactions contemplated hereby or to any future buyer of the Companies, any
of the Subsidiaries or any portion of the Business or (ii) as expressly set
forth herein without the prior written consent of the other parties.

 

11.7        
Notices.  All
communications, notices and disclosures required or permitted by this Agreement
shall be in writing and shall be deemed to have been given when delivered
personally or by messenger or by overnight delivery service, or when mailed by
registered or certified United States mail, postage prepaid, return receipt
requested, or when received via telecopy, telex or other electronic
transmission, in all cases addressed to the Person for whom it is intended at
his address set forth below or to such other address as a party shall have
designated by notice in writing to the other party in the manner provided by
this Section 11.7:

 

	
  If to Progress Fuels or
  Progress Energy:

  	
   

  	
  Progress Energy, Inc.

  
	
   

  	
   

  	
  410 South Wilmington Street

  
	
   

  	
   

  	
  Raleigh, North Carolina 27601

  
	
   

  	
   

  	
  Attention:

  	
  Mr. Don K. Davis

  
	
   

  	
   

  	
   

  	
  Executive Vice President

  
	
   

  	
   

  	
   

  	
  - Rail and Telecom

  
	
   

  	
   

  	
  Telecopy: (919) 546-2405

  
	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
  Progress Energy Service Company, LLC

  
	
   

  	
   

  	
  410 South Wilmington Street

  
	
   

  	
   

  	
  Raleigh, North Carolina 27601

  
	
   

  	
   

  	
  Attention:

  	
  Mr. David B. Fountain

  
	
   

  	
   

  	
   

  	
  Deputy General Counsel

  
	
   

  	
   

  	
  Telecopy: (919) 546-2920

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  and

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Hunton & Williams

  
	
   

  	
   

  	
  One Hannover Square

  
	
   

  	
   

  	
  Suite 1400

  
	
   

  	
   

  	
  Fayetteville Street Mall

  
	
   

  	
   

  	
  Raleigh, North Carolina 27601

  
	
   

  	
   

  	
  Attention:  Timothy S. Goettel, Esq.

  
	
   

  	
   

  	
  Telecopy:  (919) 833-6352

  
	
   

  	
   

  	
   

  
	
  If to Holdings:

  	
   

  	
  c/o One Equity Partners LLC

  
	
   

  	
   

  	
  One Bank One Plaza, 14th Floor

  
	
   

  	
   

  	
  Chicago, Illinois 60670-0610

  
	
   

  	
   

  	
  Attention:  Thomas J. Kichler

  
	
   

  	
   

  	
  Telecopy:  (312) 732-7495

  

 

85

 

	
  With a copy to:

  	
   

  	
  Morgan, Lewis & Bockius LLP

  
	
   

  	
   

  	
  101 Park Avenue

  
	
   

  	
   

  	
  New York, New York 10178

  
	
   

  	
   

  	
  Attention: Ira White

  
	
   

  	
   

  	
  Telecopy: (212) 309-6001

  

 

11.8        
Counterparts;
Headings.  This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but such counterparts
shall together constitute but one and the same Agreement.  The Table of
Contents and Article and Section headings in this Agreement are inserted for
convenience of reference only and shall not constitute a part hereof.

 

11.9        
Specific
Performance.  The parties hereto agree that irreparable damage
would occur in the event any of the provisions of this Agreement were not
performed in accordance with the terms hereof and that the parties , including
Progress Fuels with respect to Section 8.3, shall be entitled to
specific performance of the terms hereof, in addition to any other remedy at
law or equity.

 

11.10      
Interpretation.  Unless the
context requires otherwise, all words used in this Agreement in the singular
number shall extend to and include the plural, all words in the plural number
shall extend to and include the singular and all words in any gender shall
extend to and include all genders.

 

11.11      
Severability.  If any
provision, clause or part of this Agreement, or the application thereof under
certain circumstances, is held invalid, the remainder of this Agreement, or the
application of such provision, clause or part under other circumstances, shall
not be affected thereby.

 

11.12      
No
Reliance.  No third party is entitled to rely on any of the
representations, warranties and agreements contained in this Agreement, and
Progress Fuels and Holdings assume no liability to any third party because of
any reliance on the representations, warranties and agreements of Progress
Fuels and Holdings contained in this Agreement, other than persons entitled to
indemnification under Article VIII or Article IX.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

86

 

IN WITNESS WHEREOF, the parties have caused this
Agreement and Plan of Merger to be duly executed as of the day and year first above
written.

 

	
   

  	
  PROGRESS RAIL SERVICES HOLDINGS

  CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Thomas J. Kichler

  	
   

  
	
   

  	
  Name:

  	
    Thomas J. Kichler

  	
   

  
	
   

  	
  Title:

  	
    Treasurer

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PRSC ACQUISITION CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Thomas J. Kichler

  	
   

  
	
   

  	
  Name:

  	
    Thomas J. Kichler

  	
   

  
	
   

  	
  Title:

  	
    Treasurer

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PMRC ACQUISITION CO.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Thomas J. Kichler

  	
   

  
	
   

  	
  Name:

  	
    Thomas J. Kichler

  	
   

  
	
   

  	
  Title:

  	
    Treasurer

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

87

 

	
   

  	
  PROGRESS RAIL SERVICES CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ William P. Ainsworth

  	
   

  
	
   

  	
  Name:

  	
    William P. Ainsworth

  	
   

  
	
   

  	
  Title:

  	
    President and Chief Executive Officer

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PROGRESS METAL RECLAMATION COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ David R. Klementz

  	
   

  
	
   

  	
  Name:

  	
    David R. Klementz

  	
   

  
	
   

  	
  Title:

  	
    Treasurer

  	
   

  
	
   

  	
   

  
	
   

  	
  PROGRESS FUELS CORPORATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Tom D. Kilgore

  	
   

  
	
   

  	
  Name:

  	
    Tom D. Kilgore

  	
   

  
	
   

  	
  Title:

  	
    President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PROGRESS ENERGY, INC., with respect
  to Articles III, VI, VIII and IX

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Geoffrey S. Chatas

  	
   

  
	
   

  	
  Name:

  	
    Geoffrey S. Chatas

  	
   

  
	
   

  	
  Title:

  	
    Executive Vice President

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

88

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00100-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00100-of-00352.parquet"}]]