EXHIBIT 10-A
PURCHASE AND SALE AGREEMENT
BY AND BETWEEN
DELMARVA POWER & LIGHT COMPANY
AND
NRG ENERGY, INC.
DATED AS OF JANUARY 18, 2000
(DP&L - WHOLLY OWNED STATIONS)
LIST OF EXHIBITS AND SCHEDULES
EXHIBITS
Exhibit A Form of Access Agreement
Exhibit B Form of Assignment and Assumption Agreement
Exhibit C Form of ▇▇▇▇ of Sale
Exhibit D Form of FIRPTA Affidavit
Exhibit E Form of Interconnection Agreement
Exhibit F Form of Limited Warranty Deed
Exhibit G Term Sheet for Power Purchase Agreement
Exhibit H Form of Transition Services Agreement
Exhibit I Form of Seller's Legal Opinion
Exhibit J Form of Buyer's Legal Opinion
SCHEDULES
1.1(23) Capital Expenditures
1.1(42) Description of Dorchester Property
1.1(76) Description of the Indian River Station
1.1(96) Permitted Encumbrances
1.1(130) Target Adjustment Amount Methodology
1.1(137) Transferable Permits
1.1(147) Description of Vienna Station
2.1(c) Electrical Transmission Facilities/Information Technology/
Communications Assets
2.1(f) Emission Allowances to be Transferred to Buyer
2.1(g) Excess Emission Allowances
2.4(n) Certain Environmental Conditions
2.6 Inventories
4.3(a) Seller's Defaults and Violations
4.3(b) Seller's Consents and Approvals
4.4 Insurance Exceptions
4.6 Environmental Matters
4.7 Labor Matter Exceptions
4.8(a) Benefit Plans
4.8(b) Benefit Plans; ERISA Exceptions
4.9 Real Property
4.11(a) Seller's Agreements
4.12 Legal Proceedings
5.3(a) Buyer's Defaults and Violations
5.3(b) Buyer's Consents and Approvals
5.10 Environmental Site Assessments
6.1 Conduct of Business Exceptions
6.8(c) Collective Bargaining Agreements
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6.8(h) Transferred Non-Union Employee Severance Benefits
6.10 Certain Tax-Exempt Bonds
6.12(b)(i) Prorated SO2 Allowances
6.12(b)(ii) Prorated NOx Emission Allowances
7.1(c) Buyer's Required Regulatory Approvals
7.2(c) Seller's Required Regulatory Approvals
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TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
1.1 Definitions...................................................1
1.2 Certain Interpretive Matters.................................15
1.3 U.S. Dollars.................................................15
ARTICLE II
PURCHASE AND SALE
2.1 Transfer of Assets...........................................15
2.2 Excluded Assets..............................................17
2.3 Assumed Liabilities..........................................19
2.4 Excluded Liabilities.........................................20
2.5 Control of Litigation........................................22
2.6 Inventories..................................................22
ARTICLE III
THE CLOSING
3.1 Closing......................................................23
3.2 Payment of Purchase Price....................................23
3.3 Adjustment to Purchase Price.................................24
3.4 Tax Reporting and Allocation of Purchase Price...............25
3.5 Prorations...................................................25
3.6 Deliveries by Seller.........................................26
3.7 Deliveries by Buyer..........................................27
3.8 Post-Closing Excluded Asset Deliveries.......................28
3.9 Relationship of this Agreement and Related Purchase
Agreements.................................................28
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
4.1 Organization; Qualification..................................29
4.2 Authority....................................................29
4.3 Consents and Approvals; No Violation.........................30
4.4 Insurance....................................................30
4.5 Title and Related Matters....................................31
4.6 Environmental Matters........................................31
4.7 Labor Matters................................................31
4.8 Benefit Plans; ERISA.........................................32
4.9 Real Property................................................32
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4.10 Condemnation.................................................32
4.11 Contracts and Leases.........................................32
4.12 Legal Proceedings............................................33
4.13 Permits......................................................33
4.14 Year 2000....................................................33
4.15 Assets Used in Operation of the Wholly Owned Stations........33
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
5.1 Organization; Qualification..................................34
5.2 Authority....................................................34
5.3 Consents and Approvals; No Violation.........................34
5.4 Buyer's Permits..............................................35
5.5 Availability of Funds........................................35
5.6 Financial Statements.........................................35
5.7 Legal Proceedings............................................36
5.8 Qualified Buyer..............................................36
5.9 Inspections..................................................36
5.10 WARN Act.....................................................36
5.11 Regulation as a Utility......................................36
ARTICLE VI
COVENANTS OF THE PARTIES
6.1 Conduct of Business Relating to the Purchased Assets.........36
6.2 Access to Information........................................37
6.3 Public Statements............................................38
6.4 Further Assurances...........................................39
6.5 Consents and Approvals.......................................40
6.6 Certain Tax Matters..........................................41
6.7 Advice of Changes............................................42
6.8 Employees....................................................43
6.9 Risk of Loss.................................................47
6.10 Certain Tax-Exempt Bonds.....................................48
6.11 PJM; MAAC....................................................48
6.12 Emission Allowances..........................................48
6.13 Insurance Claims.............................................52
6.14 Reimbursement of Certain Metering Expenses...................52
ARTICLE VII
CONDITION
7.1 Conditions to Obligation of Buyer............................52
7.2 Conditions to Obligation of Seller...........................54
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ARTICLE VIII
INDEMNIFICATION AND ARBITRATION
8.1 Indemnification..............................................55
8.2 Defense of Claims............................................57
8.3 Arbitration..................................................58
8.4 Remediation of Matters Covered in Sections 2.4(g)and 2.4(n)..59
ARTICLE IX
TERMINATION
9.1 Termination..................................................60
9.2 Effect of Termination........................................62
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 Amendment and Modification...................................62
10.2 Expenses.....................................................62
10.3 Fees and Commissions.........................................62
10.4 Bulk Sales Laws..............................................63
10.5 Waiver of Compliance; Consents.............................63
10.6 No Survival..................................................63
10.7 Disclaimers..................................................63
10.8 Notices......................................................64
10.9 Assignment...................................................65
10.10 Governing Law; Forum; Service of Process.....................66
10.11 Counterparts.................................................66
10.12 Interpretation...............................................66
10.13 Schedules and Exhibits.......................................66
10.14 Entire Agreement.............................................66
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PURCHASE AND SALE AGREEMENT
PURCHASE AND SALE AGREEMENT, dated as of January 18, 2000 (this
"Agreement"), by and between Delmarva Power & Light Company, a Delaware and
Virginia corporation ("DP&L" or "Seller"), and NRG Energy, Inc., a Delaware
corporation ("Buyer"). Seller and Buyer may each be referred to herein
individually as a "Party," and collectively as the "Parties."
W I T N E S S E T H
WHEREAS, Seller owns two fossil fuel-fired electric generating
stations (the "Wholly Owned Stations"), and certain properties and assets
associated therewith and ancillary thereto; and
WHEREAS, Seller owns a developmental site consisting of
approximately 247 acres of land located in Dorchester County, Maryland
(referred to herein as the "Dorchester Property"), and certain properties
and assets associated therewith and ancillary thereto; and
WHEREAS, Seller possesses certain Emission Allowances (as defined
below); and
WHEREAS, Buyer desires to purchase and assume, and Seller desires
to sell and assign, or cause to be sold and assigned, the Purchased Assets
(as defined below) and certain associated Liabilities (as defined below),
upon the terms and conditions hereinafter set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants, representations, warranties and agreements set forth herein, and
intending to be legally bound hereby, the Parties hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. As used in this Agreement, the following
capitalized terms have the meanings specified in this Section 1.1.
(1) "Access Agreement" means the easement and license agreement
between Buyer and Seller, or any Affiliate thereof, to be delivered at the
Closing, substantially in the form of Exhibit A hereto, pursuant to which
Buyer will provide Seller, or an Affiliate thereof, with access rights with
respect to certain of the Purchased Assets transferred to Buyer and to
certain Excluded Assets retained by Seller.
(2) "ACE" means Atlantic City Electric Company, a New Jersey
corporation.
(3) "ACE Related Purchase Agreements" means (i) the separate
Purchase and Sale Agreement, dated as of the date hereof, entered into by
ACE and Buyer, relating to the purchase and sale of the ▇.▇. ▇▇▇▇▇▇▇
Station, the Deepwater Station, certain interests in the ▇▇▇▇▇▇▇ Creek
Reservoir, certain SO2 Allowances and NOx Emission Allowances, and certain
related properties and assets, and (ii) the separate Purchase and Sale
Agreement, dated as of the date hereof, entered into by Seller and Buyer,
relating to the purchase and sale of ACE's undivided 2.47% interest as
tenant in common in the Keystone Station, Seller's undivided 3.83% interest
as tenant in common in the Conemaugh Station and certain related properties
and assets.
(4) "Additional Agreements" means the Interconnection Agreement,
the Power Purchase Agreement, the Transition Services Agreement, the Access
Agreement, the Limited Warranty Deeds, the Assignment and Assumption
Agreements and the ▇▇▇▇ of Sale.
(5) "Affiliate" has the meaning set forth in Rule 12b-2 of the
General Rules and Regulations promulgated under the Exchange Act.
(6) "Agreement" means this Purchase Agreement together with the
Schedules and Exhibits hereto.
(7) "Assignment and Assumption Agreements" means the assignment and
assumption agreements between Seller and Buyer, to be delivered at the
Closing, substantially in the form of Exhibit B hereto, pursuant to which
Seller shall assign the Seller's Agreements, certain intangible assets and
certain other Purchased Assets to Buyer, and Buyer shall accept such
assignment and assume the Assumed Liabilities.
(8) "Assumed Liabilities" has the meaning set forth in Section 2.3.
(9) "▇.▇. ▇▇▇▇▇▇▇ Station" means the generating station known as
▇.▇. ▇▇▇▇▇▇▇ Station, located in the town of ▇▇▇▇▇▇▇'▇ Point, County of
Cape May, State of New Jersey, and related properties and assets.
(10) "Benefit Plans" has the meaning set forth in Section 4.8(a).
(11) "▇▇▇▇ of Sale" means the ▇▇▇▇ of sale of Seller, to be
delivered at the Closing, substantially in the form of Exhibit C hereto.
(12) "Business Day" means any day other than Saturday, Sunday and
any day on which banking institutions in the State of New York are
authorized or required by law or other governmental action to close.
(13) "Buyer" has the meaning set forth in the preamble to this
Agreement.
(14) "Buyer Material Adverse Effect" has the meaning set forth in
Section 5.3(a).
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(15) "Buyer's Benefit Plans" has the meaning set forth in Section
6.8(e)(iv).
(16) "Buyer's Financial Statements" has the meaning set forth in
Section 5.6.
(17) "Buyer's Indemnitee" has the meaning set forth in Section
8.1(b).
(18) "Buyer's Pension Plan" has the meaning set forth in Section
6.8(f).
(19) "Buyer's Permits" has the meaning set forth in Section 5.4.
(20) "Buyer's Required Regulatory Approvals" has the meaning set
forth in Section 5.3(b).
(21) "Buyer's Savings Plan" has the meaning set forth in Section
6.8(g).
(22) "Buyer's Welfare Plans" has the meaning set forth in Section
6.8(e)(iv).
(23) "Capital Expenditures" means the total amount of funds paid,
or Liabilities incurred, by Seller (other than such as constitute Assumed
Liabilities) for one or more of the projects listed on Schedule 1.1(23)
during the period commencing on September 1, 1999 and ending on the Closing
Date.
(24) "CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended from time to time.
(25) "Closing" has the meaning set forth in Section 3.1.
(26) "Closing Adjustment Amount" means an amount, calculated in a
manner consistent with the calculation of the Target Adjustment Amount,
equal to the sum, as of the Closing Date, of (a) the Net Book Value of
Seller's right, title and interest in and to the Inventories plus (b)
Capital Expenditures.
(27) "Closing Date" has the meaning set forth in Section 3.1.
(28) "Closing Date Benefits" has the meaning set forth in Section
6.8(f).
(29) "Closing Payment" has the meaning set forth in Section 3.2(c).
(30) "Closing Statement" has the meaning set forth in Section
3.3(a).
(31) "COBRA" means Sections 601 through 608 of ERISA and Section
4980B of the Code.
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(32) "Code" means the Internal Revenue Code of 1986, as amended
from time to time.
(33) "Commercial Arbitration Rules" has the meaning set forth in
Section 8.3(c).
(34) "Commercially Reasonable Efforts" means efforts which are
reasonably within the contemplation of the Parties at the time of entering
into this Agreement and which do not require the performing Party to expend
funds other than expenditures which are customary and reasonable in
transactions of the kind and nature contemplated by this Agreement in order
for the performing Party to satisfy its obligations hereunder.
(35) "Computer Systems" has the meaning set forth in Section 4.14.
(36) "Conemaugh Station" means the generating station known as
Conemaugh Station, located in the County of Indiana, Commonwealth of
Pennsylvania, and related properties and assets.
(37) "Confidentiality Agreement" means the Confidentiality
Agreement, dated July 21, 1999, between Conectiv, a Delaware corporation,
and Buyer.
(38) "Courts" has the meaning set forth in Section 10.10.
(39) "Deepwater Station" means the generating station known as
Deepwater Station, located in the Town of Pennsville, County of Salem,
State of New Jersey, and related properties and assets.
(40) "Direct Claim" has the meaning set forth in Section 8.2(c).
(41) "DNREC" means the Delaware Department of Natural Resources and
Environmental Control, and any successor agency thereto.
(42) "Dorchester Property" means the approximately 247-acre site
owned by DP&L located in the County of Dorchester, State of Maryland, and
related properties and assets, all as more fully identified on Schedule
1.1(42) attached hereto.
(43) "DP&L" has the meaning set forth in the preamble to this
Agreement.
(44) "DP&L Related Purchase Agreement" means the separate Purchase
and Sale Agreement, dated as of the date hereof, entered into by Seller and
Buyer, relating to the purchase and sale of Seller's undivided 3.70%
interest as tenant in common in the Keystone Station, Seller's undivided
3.72% interest as tenant in common in the Conemaugh Station, and certain
related properties and assets.
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(45) "DPSC" means the Delaware Public Service Commission, and any
successor agency thereto.
(46) "Easements" means, collectively, all easements, licenses,
rights of way and other access rights to be granted by Buyer to Seller, or
any Affiliate thereof, pursuant to the Access Agreement, and the easements,
licenses, rights of way and other access rights reserved by Seller, or any
Affiliate thereof, in the Limited Warranty Deeds, including such as
authorize access, use, maintenance, construction, repair, replacement and
other activities by Seller, or any Affiliate thereof, or otherwise
necessary for Seller, or any Affiliate thereof, to operate its electrical
transmission and distribution facilities, or information technology and
telecommunications assets, or fulfill legal requirements applicable
thereto.
(47) "Emission Allowances" means Emission Reduction Credits, NOx
Emission Allowances and SO2 Allowances.
(48) "Emission Reduction Credits" means credits, in units that are
established by the Governmental Authority with jurisdiction over the
relevant Site that has obtained the credits, resulting from reductions in
the emissions of air pollutants from an emitting source or facility
(including and to the extent allowable under applicable Law, reductions
resulting from shutdowns or control of emissions beyond that required by
applicable Law) that have been certified by any applicable Governmental
Authority as complying with the Law and regulations governing the
establishment of such credits (including certification that such emissions
reductions are enforceable, permanent, quantifiable and surplus), including
air emissions reductions as described above that have been approved by the
applicable Governmental Authority and are awaiting USEPA approval. The term
also includes certified air emissions reductions, as described above,
regardless as to whether the Governmental Authority certifying such
reductions designates such certified air emissions reductions by a name
other than "emission reduction credits."
(49) "Employees" has the meaning set forth in Section 6.8(e).
(50) "Encumbrances" means any and all mortgages, pledges, liens,
claims, security interests, agreements, easements, activity and use
limitations, restrictions, defects of title or encumbrances of any kind.
(51) "Environmental Claims" has the meaning set forth in Section
8.1(c).
(52) "Environmental Condition" means the presence or Release to the
environment, whether at the Sites or otherwise, of Hazardous Substances,
including any migration of Hazardous Substances through air, soil or
groundwater at, to or from the Sites or at, to or from any Off-Site
Location, regardless of when such presence or Release occurred or is
discovered.
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(53) "Environmental Laws" means all (a) Laws, in each case, as
amended from time to time, relating to pollution or protection of the
environment, natural resources or human health and safety, including Laws
relating to Releases or threatened Releases of Hazardous Substances or
otherwise relating to the manufacture, formulation, generation, processing,
distribution, use, treatment, storage, Release, transport, Remediation,
abatement, cleanup or handling of Hazardous Substances, (b) Laws with
regard to recordkeeping, notification, disclosure and reporting
requirements respecting Hazardous Substances and (c) Laws relating to the
management or use of natural resources.
(54) "Environmental Permits" means all permits, certificates,
licenses and authorizations of all Governmental Authorities under
Environmental Laws.
(55) "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
(56) "ERISA Affiliate" has the meaning set forth in Section 2.4(k).
(57) "ERISA Affiliate Plans" has the meaning set forth in Section
2.4(k).
(58) "Estimated Adjustment Amount" has the meaning set forth in
Section 3.2(b).
(59) "Excess Emission Allowances" has the meaning set forth in
Section 2.1(h).
(60) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, and the rules and regulations promulgated
thereunder from time to time.
(61) "Excluded Assets" has the meaning set forth in Section 2.2.
(62) "Excluded Liabilities" has the meaning set forth in Section
2.4.
(63) "FERC" means the United States Federal Energy Regulatory
Commission, and any successor agency thereto.
(64) "FIRPTA Affidavit" means the Foreign Investment in Real
Property Tax Act Certification and Affidavit of Seller, to be delivered at
the Closing, substantially in the form of Exhibit D hereto.
(65) "Good Utility Practices" means any of the practices, methods
and acts engaged in or approved by a significant portion of the electric
utility industry during the relevant time period, or any of the practices,
methods or acts which, in the exercise of reasonable judgment in light of
the facts known at the time the decision was made, would have been expected
to accomplish the desired result at a reasonable cost consistent with good
business practices, reliability, safety and expedition.
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(66) "Governmental Authority" means any executive, legislative,
judicial, regulatory or administrative agency, body, commission,
department, board, court, tribunal, arbitrating body or authority of the
United States or any foreign country, or any state, local or other
governmental subdivision thereof.
(67) "Hazardous Substances" means (a) any petrochemical or
petroleum products, oil or coal ash, radioactive materials, radon gas,
asbestos in any form that is or could become friable, urea formaldehyde
foam insulation and transformers or other equipment that contain dielectric
fluid which may contain polychlorinated biphenyls, (b) any chemicals,
materials or substances defined as or included in the definition of
"hazardous substances," "hazardous wastes," "hazardous materials,"
"hazardous constituents," "restricted hazardous materials," "extremely
hazardous substances," "toxic substances," "contaminants," "pollutants,"
"toxic pollutants" or words of similar meaning and regulatory effect under
any applicable Environmental Law and (c) any other chemical, material or
substance, exposure to which is prohibited, limited or regulated by any
applicable Environmental Law.
(68) "HSR Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements
Act of 1976, as amended from time to time.
(69) "IBEW" means Local 1307 of the International Brotherhood of
Electrical Workers.
(70) "IBEW Collective Bargaining Agreements" has the meaning set
forth in Section 6.8(c).
(71) "Income Tax" means any Tax imposed by any Governmental
Authority (a) based upon, measured by or calculated with respect to net
income, profits or receipts (including capital gains Taxes and minimum
Taxes) or (b) based upon, measured by or calculated with respect to
multiple bases (including corporate franchise taxes) if one or more of such
bases is described in clause (a), in each case, together with any interest,
penalties or additions attributable thereto.
(72) "Indemnifiable Loss" has the meaning set forth in Section
8.1(a).
(73) "Indemnifying Party" has the meaning set forth in Section
8.1(e).
(74) "Indemnitee" has the meaning set forth in Section 8.1(b).
(75) "Independent Accounting Firm" means such nationally
recognized, independent accounting firm as is mutually appointed by Seller
and Buyer for purposes of this Agreement.
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(76) "Indian River Station" means the generating station known as
Indian River Power Plant, located in the town of Millsboro, County of
Sussex, State of Delaware, and related properties and assets, all as more
fully identified on Schedule 1.1(76) attached hereto.
(77) "Inspection" means all tests, reviews, examinations,
inspections, investigations, verifications, samplings and similar
activities conducted by Buyer or its Representatives with respect to the
Purchased Assets prior to the Closing.
(78) "Interconnection Agreement" means the interconnection
agreement, between Seller, or an Affiliate thereof, and Buyer, to be
delivered at the Closing, substantially in the form of Exhibit E hereto.
(79) "Inventories" means coal, oil, tire-derived fuel and other
fuel inventories, limestone, materials, spare parts, capital spare parts,
consumable supplies and chemical and gas inventories (together with related
freight, commodity and handling (other than on-site handling)) which are
located at or in transit to the Wholly Owned Stations relating to the
operation of the Wholly Owned Stations.
(80) "Keystone Station" means the generating station known as
Keystone Station located in Plumcreek Township, County of ▇▇▇▇▇▇▇▇▇,
Commonwealth of Pennsylvania, and related properties and assets.
(81) "Knowledge" means the actual knowledge of the directors and
executive officers of the specified Person, which directors and executive
officers are charged with responsibility for the particular function as of
the date of this Agreement, or, with respect to any certificate delivered
pursuant to this Agreement, the date of delivery of such certificate.
(82) "Laws" means all laws, statutes, rules, regulations and
ordinances of any Governmental Authority.
(83) "Liability" or "Liabilities" means any liability or obligation
(whether known or unknown, whether asserted or unasserted, whether absolute
or contingent, whether accrued or unaccrued, whether liquidated or
unliquidated and whether due or to become due), including any liability for
Taxes.
(84) "Like-Kind Exchange" has the meaning set forth in Section
6.6(e).
(85) "Limited Warranty Deeds" means the Limited Warranty Deeds, to
be delivered at the Closing, substantially in the form of Exhibit F hereto,
pursuant to which Seller will convey the Real Property to Buyer.
(86) "MAAC" means the Mid-Atlantic Area Council.
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(87) "Material Adverse Effect" means any change in or effect on the
Purchased Assets or the operation of the Purchased Assets after the date
hereof that is materially adverse to the operation or condition (financial
or otherwise) of the Purchased Assets, taken as a whole, other than (i) any
change or effect affecting the international, national, regional or local
electric industry as a whole and not specific and exclusive to the
Purchased Assets, (ii) any change or effect resulting from changes in the
international, national, regional or local wholesale or retail markets for
electricity, including any change in or effect on the structure, operating
agreements, operations or procedures of Pennsylvania-New Jersey-Maryland
Interconnection L.L.C. or its control area, (iii) any change or effect
resulting from changes in the international, national, regional or local
markets for any fuel used at each of the Wholly Owned Stations, (iv) any
change or effect resulting from changes in the North American, national,
regional or local electricity transmission systems or operations thereof,
(v) changes in Law, or any judgments, orders or decrees that apply
generally to similarly situated Persons, (vi) any change or effect to the
extent constituting or involving an Excluded Asset or an Excluded Liability
and (vii) any change in or effect on the Purchased Assets which is cured
(including by payment of money) before the earlier of the Closing and the
termination of this Agreement pursuant to Section 9.1.
(88) "MDE" means the Maryland Department of the Environment, and
any successor agency thereto.
(89) "Net Book Value" means, as of any date, original cost
(including related freight, commodity and handling (other than on-site
handling)) less applicable depreciation and amortization, as reflected on
Seller's books and records through such date in accordance with United
States generally accepted accounting principles as applied by Seller on
August 31, 1999.
(90) "Non-Union Employees" has the meaning as set forth in Section
6.8(e).
(91) "NOx" means oxides of nitrogen.
(92) "NOx Budget Program" means Nitrogen Oxides Budget Program,
which is a statutory or regulatory program promulgated by the United States
or a state pursuant to which the United States or state provides for a
limit on the oxides of nitrogen that can be emitted by all sources covered
by the program and establishes allowances or authorizations, which in total
are equal to the amount of oxides of nitrogen allowed by the limit, where
each allowance or authorization represents a "right" to emit a unit of
oxides of nitrogen, as the means for ensuring compliance with the limit.
(93) "NOx Emission Allowance" means (a) an authorization by the
DNREC under its NOx Budget Program authorizing the emission of one ton of
NOx during the ozone season, as such season is defined by the DNREC; (b) an
authorization by the MDE under any future NOx Budget Program authorizing
the emission of one ton of NOx during the ozone season, as such
9
season is defined by the MDE; or (c) an authorization by the USEPA under any
future NOx Budget Program promulgated by the USEPA, including any future program
implemented in lieu of a state NOx Budget Program, authorizing the emission of
one ton of NOx during the ozone season, as such season is defined by the USEPA.
(94) "Off-Site Location" means any real property other than the
Sites.
(95) "Party" and "Parties" have the respective meanings set forth
in the preamble to this Agreement.
(96) "Permitted Encumbrances" means: (a) the Easements; (b) those
exceptions to title to the Purchased Assets listed on Schedule 1.1(96); (c)
statutory liens for Taxes or other charges or assessments of Governmental
Authorities not yet due or delinquent, or which are being contested in good
faith by appropriate proceedings; (d) mechanics', carriers', workers',
repairers' and other similar liens arising or incurred in the ordinary
course of business to the extent that they secure payment of obligations
which are not in arrears or otherwise due and which have been incurred
under Good Utility Practices; (e) zoning, entitlement, conservation
restriction and other land use and environmental regulations by
Governmental Authorities; and (f) with respect to any Station, such
non-monetary Encumbrances as do not materially detract from the value of
the Purchased Assets located at such Station, taken as a whole, as
currently used, or materially interfere with the present use of the
Purchased Assets located at such Station, taken as a whole.
(97) "Person" means any individual, partnership, limited liability
company, joint venture, corporation, trust, unincorporated organization,
other business association or Governmental Authority.
(98) "PJM" means the Pennsylvania-New Jersey-Maryland Power Pool,
as established and administered by Pennsylvania-New Jersey-Maryland
Interconnection L.L.C.
(99) "PJM Agreement" means the Operating Agreement dated June 2,
1997 of Pennsylvania-New Jersey-Maryland Interconnection L.L.C., as amended
from time to time.
(100) "Power Purchase Agreement" means the power purchase agreement
between Buyer and Seller, to be delivered at the Closing, substantially to
the effect of the term sheet set forth as Exhibit G hereto.
(101) "Prime Rate" has the meaning set forth in Section 3.3(c).
(102) "Proprietary Information" of a Party means all information
about any Party or its properties or operations furnished to the other
Party or its Representatives by such Party or its Representatives, after
the date hereof, regardless of the manner or medium in which it is
furnished. Proprietary Information does not include information that: (a)
is or becomes
10
generally available to the public, other than as a result of a disclosure by the
other Party or its Representatives; (b) was available to the other Party on a
non-confidential basis prior to its disclosure by the Party or its
Representatives; (c) is or becomes available to the other Party on a non-
confidential basis from a source other than such Party, provided that the source
of such information was not known by such Party or its Representatives, after
reasonable investigation, to be bound by a confidentiality agreement with or
other contractual, legal or fiduciary obligation of confidentiality to such
Party or any of its Representatives with respect to such material; (d) is
independently developed by the other Party; or (e) was disclosed pursuant to the
Confidentiality Agreement and remains subject to the terms and conditions of the
Confidentiality Agreement.
(103) "PUHCA" means the Public Utility Holding Company Act of 1935,
as amended from time to time, and the rules and regulations promulgated
thereunder from time to time.
(104) "Purchase Price" has the meaning set forth in Section 3.2(a).
(105) "Purchased Assets" has the meaning set forth in Section 2.1.
(106) "Qualified Offer" has the meaning set forth in Section
6.8(e).
(107) "Qualifying Use" has the meaning set forth in Section 6.11.
(108) "Real Property" has the meaning set forth in Section 2.1(a).
(109) "Related Purchase Agreements" means, collectively, the ACE
Related Purchase Agreements and the DP&L Related Purchase Agreement.
(110) "Release" means any release, spill, leak, discharge, disposal
of, pumping, pouring, emitting, emptying, injecting, leaching, dumping or
allowing to escape into or through the environment.
(111) "Remediation" means an action of any kind to address an
Environmental Condition or a Release of Hazardous Substances or the
presence of Hazardous Substances at the Sites or an Off-Site Location,
including the following activities to the extent they relate to, result
from or arise out of the presence of a Hazardous Substance at the Sites or
an Off-Site Location: (a) monitoring, investigation, assessment, treatment,
cleanup, containment, removal, mitigation, response or restoration work;
(b) obtaining any permits, consents, approvals or authorizations of any
Governmental Authority necessary to conduct any such activity; (c)
preparing and implementing any plans or studies for any such activity; (d)
obtaining a written notice from a Governmental Authority with jurisdiction
over the Sites or an Off-Site Location under Environmental Laws that no
material additional work is required by such Governmental Authority; (e)
the use, implementation, application, installation, operation or
maintenance of removal actions on the Sites or an Off-Site Location,
remedial technologies applied to the surface or subsurface soils,
excavation and treatment or disposal of soils at an Off-Site Location,
systems for long-term
11
treatment of surface water or groundwater, engineering controls or institutional
controls; and (f) any other activities reasonably determined by a Party to be
necessary or appropriate or required under Environmental Laws to address an
Environmental Condition or a Release of Hazardous Substances or the presence of
Hazardous Substances at the Sites or an Off-Site Location.
(112) "Remediation Standard" means a numerical standard (whether
resulting from an enacted statute, promulgated regulation, guidance or
policy document issued by a regulatory agency, or developed on a
case-by-case basis through a risk assessment or other methodology
authorized pursuant to an applicable Environmental Law) that defines the
concentrations of Hazardous Substances that may be permitted to remain in
any environmental media after a Remediation.
(113) "Representatives" of a Person means, collectively, such
Person's Affiliates and its and their respective directors, officers,
partners, members, employees, representatives, agents, advisors (including
accountants, legal counsel, environmental consultants, engineering
consultants and financial advisors), parent entities and other controlling
Persons.
(114) "SEC" means the United States Securities and Exchange
Commission, and any successor agency thereto.
(115) "Securities Act" means the Securities Act of 1933, as amended
from time to time, and the rules and regulations promulgated thereunder
from time to time.
(116) "Seller" has the meaning set forth in the preamble to this
Agreement.
(117) "Seller's Agreements" means, collectively, (i) the contracts,
agreements, arrangements, licenses and leases of any nature to which, as of
the date hereof, Seller is a party, or by or to which Seller or the
Purchased Assets is bound or subject, and (ii) those contracts, agreements,
arrangements, licenses and leases of any nature entered into by Seller on
or after the date of this Agreement consistent with the terms of Section
6.1(iii), in each case, relating to the ownership, lease, maintenance or
operation of the Purchased Assets, but excluding Benefit Plans.
(118) "Seller's Indemnitee" has the meaning set forth in Section
8.1(a).
(119) "Seller's Pension Plan" has the meaning set forth in Section
6.8(f).
(120) "Seller's Permits" has the meaning set forth in Section 4.13.
(121) "Seller's Required Regulatory Approvals" has the meaning set
forth in Section 4.3(b).
(122) "Seller's Savings Plans" has the meaning set forth in Section
6.8(g).
12
(123) "Sites" means the Real Property, forming a part, or used or
usable in connection with the operation, of the Wholly Owned Stations and
the Dorchester Property, including any real property used for the disposal
of solid or hazardous waste that is included in the Real Property. Any
reference to the Sites shall include the surface and subsurface elements,
to the extent owned by or subject to any interest of Seller, including the
soil and groundwater present at the Sites, and any reference to materials
or conditions "at the Sites", including Hazardous Substances and
Environmental Conditions, shall include all materials and conditions "at,
on, in, upon, over, across, under or within" the Sites.
(124) "SO2" means sulfur dioxide.
(125) "SO2 Allowance" means an authorization by the Administrator
of the USEPA under the Clean Air Act, 42 ▇.▇.▇.▇▇. 7401, et seq., to emit
one ton of sulfur dioxide during or after a specified calendar year.
(126) "Statement" has the meaning set forth in Section 6.15(c).
(127) "Stations" means, together, the Indian River Station, the
Vienna Station and the Dorchester Property.
(128) "Subsidiary", when used in reference to any Person, means any
entity of which outstanding securities or interests having ordinary voting
power to elect a majority of the board of directors or other governing body
performing similar functions of such entity are owned directly or
indirectly by such Person.
(129) "Tangible Personal Property" has the meaning set forth in
Section 2.1(d).
(130) "Target Adjustment Amount" means $17,828,000, which
represents the Net Book Value, as of August 31, 1999, of Seller's right,
title and interest in and to the Inventories, as calculated in the manner
set forth on Schedule 1.1(130).
(131) "Tax" or "Taxes" means all taxes, charges, fees, levies,
penalties and other assessments imposed by any Governmental Authority,
including income, gross receipts, excise, property, sales, transfer, use,
franchise, payroll, withholding, social security and other taxes, together
with any interest, penalties or additions attributable thereto.
(132) "Tax Return" means any return, report, information return or
other document, together with all amendments and supplements thereto
(including any related or supporting information), required to be supplied
to any Governmental Authority responsible for the administration of Laws
governing Taxes.
(133) "Third-Party Claim" has the meaning set forth in Section
8.2(a).
13
(134) "Title Commitments" means (i) the Title Commitment provided
by Lawyers Title Insurance Corporation, dated October 5, 1999, relating to
the Indian River Station; (ii) the Title Commitment provided by Lawyers
Title Insurance Corporation, dated October 11, 1999, relating to the Vienna
Station; and (iii) the Title Commitment provided by Lawyers Title Insurance
Corporation, dated October 11, 1999, relating to the Dorchester Property.
(135) "Total Cash Compensation" has the meaning set forth in
Section 6.8(e)(ii).
(136) "Transfer Taxes" has the meaning set forth in Section 6.6(a).
(137) "Transferable Permits" means those Permits and Environmental
Permits (and all applications pertaining thereto) which are transferable
under applicable Laws by Seller to Buyer (with or without a filing with,
notice to, consent or approval of any Governmental Authority), as set forth
on Schedule 1.1(137).
(138) "Transferred Employee Records" means records of Seller that
relate to Transferred Employees, but only to the extent that such records
pertain to: (i) skill and development training, (ii) seniority histories,
(iii) salary and benefit information, (iv) Occupational, Safety and Health
Administration reports and (v) active medical restriction forms.
(139) "Transferred Employees" has the meaning set forth in Section
6.8(e).
(140) "Transferred Non-Union Employee" has the meaning set forth in
Section 6.8(e).
(141) "Transferred Savings Employees" has the meaning set forth in
Section 6.8(g).
(142) "Transferred Union Employee" has the meaning set forth in
Section 6.8(a).
(143) "Transition Services Agreement" means the Transition Services
Agreement between Seller and Buyer, to be delivered at the Closing,
substantially in the form of Exhibit H attached hereto.
(144) "Transmission Assets" has the meaning set forth in Section
2.2(a).
(145) "Union Employees" has the meaning set forth in Section
6.8(a).
(146) "USEPA" means the United States Environmental Protection
Agency, and any successor agency thereto.
(147) "Vienna Station" means the generating station known as Vienna
Power Plant, located in the town of Vienna, County of Dorchester, State of
Maryland, and related properties and assets, all as more fully identified
on Schedule 1.1(147) attached hereto.
14
(148) "WARN Act" means the Worker Adjustment Retraining and
Notification Act of 1988, as amended.
(149) "Wholly Owned Stations" means, collectively, the Indian River
Station and the Vienna Station.
(150) "Year 2000 Compliance" has the meaning set forth in Section
4.14.
1.2 Certain Interpretive Matters. In this Agreement, unless the
context otherwise requires, the singular words include the plural, the
masculine includes the feminine and neuter, and vice versa. In this
Agreement, the term "includes" or "including" shall be deemed followed by
the words "including without limitation." References herein to a section,
article, Exhibit or Schedule mean a section, article, Exhibit or Schedule
of this Agreement, and reference to a given agreement or instrument
constitutes a reference to that agreement or instrument as modified,
amended, supplemented and restated through the date as of which such
reference is made.
1.3 U.S. Dollars. When used herein, the term "dollars" and the
symbol "$" refer to the lawful currency of the United States of America.
ARTICLE II
PURCHASE AND SALE
2.1 Transfer of Assets. Upon the terms and subject to the
conditions set forth in this Agreement, at the Closing, Seller shall sell,
assign, convey, transfer and deliver to Buyer, and Buyer shall purchase,
assume and acquire from Seller, free and clear of all Encumbrances, except
for the Permitted Encumbrances, all of Seller's right, title and interest
in, to and under the following assets and properties, except as otherwise
provided in Section 2.2, each as of the Closing Date (collectively, the
"Purchased Assets"):
(a) The real property (including all buildings and other
improvements thereon and all appurtenances thereto) described on Schedule
4.9 (the "Real Property");
(b) The Inventories;
(c) Machinery, equipment, vehicles, furniture and other
personal property owned by Seller, located on the Real Property on the
Closing Date (collectively, "Tangible Personal Property"), including the
electrical transmission facilities (as opposed to generation facilities)
and information technology and telecommunications assets set forth on
Schedule 2.1(c);
15
(d) The Seller's Agreements;
(e) Subject to the receipt of necessary consents and
approvals, the Transferable Permits;
(f) The Emission Allowances identified on Schedule 2.1(f);
(g) Such of the Emission Allowances of Seller as are
identified on Schedule 2.1(g) (the "Excess Emission Allowances");
(h) The names "Indian River Power Plant" and "Vienna Power
Plant"; provided, however, that Buyer expressly acknowledges and agrees
that the Purchased Assets do not include any right, title or interest in or
to the names "Delmarva Power & Light Company", "DP&L" or any derivation
thereof, as well as any related or similar name, or any other trade names,
trademarks, service marks, corporate names and logos or any part,
derivation, colorable imitation or combination thereof;
(i) To the extent permitted by applicable Law, the
Transferred Employee Records;
(j) All books, operating records, operating, safety and
maintenance manuals, engineering design plans, blueprints and as-built
plans, specifications, procedures, and similar items relating specifically
to the Wholly Owned Stations (subject to the right of Seller to retain
copies of same for its use), other than such items as are proprietary to
third parties and accounting records; and
(k) Other than those relating to the generator rotor failure
at the Indian River Station, the rights of Seller in, to and under all
causes of action against third parties with respect to, arising out of or
in connection with Seller's rights, title and interest in and to the
Purchased Assets or the Assumed Liabilities, or any portion thereof,
whether accruing prior to, on or after the Closing Date, other than any
such causes of action as constitute Excluded Assets or Excluded
Liabilities, whether received as payment or credit against future
liabilities.
2.2 Excluded Assets. Notwithstanding anything to the contrary in
this Agreement, nothing in this Agreement shall constitute or be construed
as requiring Seller to sell, assign, convey, transfer or deliver, and Buyer
shall not be entitled to purchase or acquire, any right, title or interest
in, to or under any properties, assets, business, operation or division of
Seller, or any Affiliate thereof, not expressly set forth in Section 2.1,
including the following assets and properties which are hereby specifically
excluded from the definition of Purchased Assets (collectively, the
"Excluded Assets"):
(a) The right, title and interest of Seller and its
successors, assigns and Representatives in, to and under all electrical
transmission or distribution facilities (as opposed to
16
generation facilities) or information technology and communications assets of
Seller or any of its Affiliates located at or forming a part of either of the
Wholly Owned Stations (whether or not regarded as a "transmission" or
"generation" asset for regulatory or accounting purposes), including all
switchyard facilities, substation facilities and support equipment, as well as
all permits, contracts and warranties, to the extent they relate to such
transmission and distribution assets or information technology and
communications assets (other than the electrical transmission facilities and
information technology and telecommunications assets identified on Schedule
2.1(c), all of which are included as Purchased Assets) (collectively, the
"Transmission Assets");
(b) The right, title and interest of Seller and its
successors, assigns and Representatives in, to and under certain switches
and meters, gas facilities, revenue meters and remote testing units,
drainage pipes and systems, pumping equipment and associated piping, in
each case, located at or forming a part of the Wholly Owned Stations, as
identified in the Access Agreement;
(c) All certificates of deposit, shares of stock,
securities, bonds, debentures, evidences of indebtedness, and interests in
joint ventures, partnerships, limited liability companies and other
entities;
(d) All cash, cash equivalents, bank deposits, accounts and
notes receivable (trade or otherwise), prepaid expenses relating to the
operation of the Purchased Assets and any income, sales, payroll or other
Tax receivables (in each case, whether held by Seller or any third party);
(e) The right, title and interest of Seller and its
successors, assigns and Representatives in, to and under all intellectual
property, including the names "Delmarva Power & Light Company", "DP&L" or
any derivation thereof, as well as any related or similar name, or any
other trade names, trademarks, service marks, corporate names and logos, or
any part, derivation, colorable imitation or combination thereof;
(f) All tariffs, agreements and arrangements to which Seller
or its Representatives is a party for the purchase or sale of electric
capacity or energy, or for the purchase of transmission, distribution or
ancillary services;
(g) Subject to Section 6.13, the rights of Seller and its
successors, assigns and Representatives in, to and under all causes of
action against third parties relating to any Excluded Assets or Excluded
Liabilities, if any, whether accruing prior to, on or after the Closing
Date, including all claims for refunds, prepayments, offsets, recoupment,
insurance proceeds, insurance distributions, dividends or other proceeds,
condemnation awards, judgments and the like, whether received as payment or
credit against future Liabilities, in each case, relating to any period
prior to the Closing Date;
17
(h) All Tax refunds or credits (including refunds or credits
of real property Taxes paid or due with respect to the Wholly Owned
Stations, the Dorchester Property or any related Real Property), which
refunds or credits are with respect to periods prior to the Closing Date,
whether directly or indirectly, regardless of when actually paid;
(i) All employment agreements and personnel records of
Seller and their respective successors, assigns and Representatives, other
than, to the extent permitted by applicable Law, Transferred Employee
Records;
(j) The minute books, stock transfer books, corporate seal
and other corporate records of Seller and its successors, assigns and
Representatives;
(k) The right, title and interest of Seller and its
successors, assigns and Representatives in, to and under all contracts,
agreements, arrangements, licenses and leases of any nature, other than the
Seller's Agreements;
(l) Except as set forth in Section 6.8(g), all assets and
properties owned or held by any Benefit Plan;
(m) All insurance policies relating to the ownership, lease,
maintenance or operation of the Purchased Assets;
(n) All other assets and properties owned or leased by
Seller or its successors, assigns and Representatives which are not used in
the operation of the Wholly Owned Stations;
(o) The right, title and interest of Seller and its
successors, assigns and Representatives under this Agreement and the
Additional Agreements; and
(p) The right, title and interest of Seller and its
successors, assigns and Representatives in, to and under all Emission
Allowances of Seller or any of its Affiliates (other than the Emission
Allowances identified on Schedule 2.1(f) and the Excess Emission Allowances
identified on Schedule 2.1(g)).
2.3 Assumed Liabilities. On the Closing Date, Buyer shall assume
and agree to pay, perform and otherwise discharge, without recourse to
Seller or its Affiliates, all of the Liabilities of Seller and its
Affiliates, successors, assigns or Representatives which relate, directly
or indirectly, to the Purchased Assets, other than Excluded Liabilities
(collectively, the "Assumed Liabilities"), including the following such
Liabilities:
(a) All Liabilities of Seller under the Seller's Agreements
and the Transferable Permits in accordance with the terms thereof,
including the contracts, agreements, arrangements, licenses and leases of
whatever nature entered into by Seller with respect to the Purchased Assets
on or after the date hereof consistent with the terms of Section 6.1(iii),
except, in each case, to
18
the extent such Liabilities, but for a breach or default by Seller, would have
been paid, performed or otherwise discharged prior to the Closing Date;
(b) All Liabilities of Seller which relate to the Purchased
Assets in respect of Taxes for which Buyer is liable pursuant to Section
3.5 or 6.6;
(c) All Liabilities of Seller which relate to the
Transferred Employees for which Buyer is responsible on or after the
Closing Date pursuant to Section 6.8;
(d) All Liabilities of Seller arising under or relating to
Environmental Laws or relating to any claim in respect of Environmental
Conditions or Hazardous Substances, whether based on common law or
Environmental Laws, whether relating to the Sites or any Off-Site Location,
including (i) any violation or alleged violation of Environmental Laws,
whether prior to, on or after the Closing Date, with respect to the
ownership, lease, maintenance or operation of any of the Purchased Assets,
including any fines or penalties that arise in connection with the
ownership, lease, maintenance or operation of the Purchased Assets on or
after the Closing Date (but excluding all fines and penalties that arise in
connection with the ownership, lease, maintenance or operation of the
Purchased Assets prior to the Closing Date), and the costs associated with
correcting any such violations; (ii) loss of life, injury to persons or
property or damage to natural resources (whether or not such loss, injury
or damage arose or was made manifest before the Closing Date or arises or
becomes manifest on or after the Closing Date) caused (or allegedly caused)
by any Environmental Condition or the presence or Release of Hazardous
Substances at, on, in, under, or migrating from the Purchased Assets prior
to, on or after the Closing Date, including any Environmental Condition or
Hazardous Substances contained in building materials at or migrating from
the Purchased Assets or in the soil, surface water, sediments, groundwater,
landfill cells, or in other environmental media at or near the Purchased
Assets; (iii) any Remediation (whether or not such Remediation commenced
before the Closing Date or commences on or after the Closing Date) of any
Environmental Condition or Hazardous Substances that are present or have
been Released prior to, on or after the Closing Date at, on, in, under, or
migrating from, the Purchased Assets or in the soil, surface water,
sediments, groundwater, landfill cells or in other environmental media at
or migrating from the Purchased Assets; (iv) any bodily injury, loss of
life, property damage, or natural resource damage arising from the storage,
transportation, treatment, disposal, discharge, recycling or Release, at
any Off-Site Location, or arising from the arrangement for such activities,
on or after the Closing Date, of Hazardous Substances generated in
connection with the ownership, lease, maintenance or operation of the
Purchased Assets; and (v) any Remediation of any Environmental Condition or
Release of Hazardous Substances arising from the storage, transportation,
treatment, disposal, discharge, recycling or Release, at any Off-Site
Location, or arising from the arrangement for such activities, on or after
the Closing Date, of Hazardous Substances generated in connection with the
ownership, lease, maintenance or operation of the Purchased Assets;
provided that nothing set forth in this Section 2.3(d) shall require Buyer
to assume any Liabilities that are Excluded Liabilities pursuant to
Sections 2.4(e), 2.4(g), 2.4(h), 2.4(i), 2.4(j) or 2.4(n);
19
(e) With respect to the Purchased Assets, any Tax that may
be imposed by any federal, state or local government on the ownership,
lease, maintenance, use or sale of the Purchased Assets on or after the
Closing Date, except for any Income Taxes attributable to income received
by Seller; and
(f) For purposes of clarification, Buyer acknowledges that
it shall assume and be fully responsible for holding in its accounts
sufficient SO2 Allowances and NOx Allowances to cover emissions of SO2 and
NOx from all of the Sites for all of the calendar year in which the Closing
occurs, including the period of such year prior to the Closing Date.
2.4 Excluded Liabilities. Notwithstanding Section 2.3, Buyer shall
not assume or be obligated to pay, perform or otherwise discharge the
following Liabilities of Seller (the "Excluded Liabilities"):
(a) Any Liabilities of Seller in respect of any Excluded
Assets or other assets of Seller which are not Purchased Assets, except to
the extent caused by the acts or omissions of Buyer or its Representatives
or Buyer's ownership, lease, maintenance or operation of the Purchased
Assets;
(b) Any Liabilities of Seller in respect of Taxes
attributable to the Purchased Assets for taxable periods ending before the
Closing Date, except for Taxes for which Buyer is liable pursuant to
Section 3.5 or 6.6;
(c) Any Liabilities of Seller arising from the breach prior
to the Closing Date by Seller of any of the Seller's Agreements;
(d) Any and all Liabilities to third parties for personal
injury or tort, or similar causes of action to the extent arising out of
the ownership, lease, maintenance or operation of the Purchased Assets
prior to the Closing Date, other than the Liabilities assumed by Buyer
under Section 2.3(d);
(e) Any fines or penalties imposed by any Governmental
Authority resulting from any violation of law by Seller that occurred prior
to the Closing Date;
(f) Any payment obligations of Seller or its Affiliates for
goods delivered or services rendered prior to the Closing Date, other than
the Liabilities assumed by Buyer under Section 2.3(d);
(g) Liability for Remediation of Environmental Conditions
at, on, under or migrating from the Purchased Assets, but only to the
extent that (i) such Liability arises out of or derives from the same facts
which form the basis of a conviction, guilty plea or plea of nolo
contendere by Seller for a violation of Environmental Laws by Seller; (ii)
Seller's conviction, guilty plea or plea of nolo contendere was based on
Seller's intentional and willful wrongful
20
actions; and (iii) Seller's conviction, guilty plea or plea of nolo contendere
arises from a matter as to which Seller has received written notice from a
Governmental Authority on or before the sixth anniversary of the Closing Date.
(h) Any Liability under or related to Environmental Laws or
the common law arising as a result of or in connection with loss of life,
injury to persons or property or damage to natural resources (whether or
not such loss, injury or damage arose or was made manifest before the
Closing Date or arises or becomes manifest on or after the Closing Date)
caused (or allegedly caused) by the disposal, storage, transportation,
discharge, migration of, Release or recycling of Hazardous Substances at an
Off-Site Location, or the arrangement for such activities, prior to the
Closing Date, in connection with the ownership, lease, maintenance or
operation of the Purchased Assets, provided that, for purposes of this
Section, "Off-Site Location" does not include any location to which
Hazardous Substances disposed of or Released at the Purchased Assets have
migrated;
(i) Any Liability under or related to Environmental Laws or
the common law arising as a result of or in connection with the Remediation
(whether or not such Remediation commenced before the Closing Date or
commences on or after the Closing Date) of Hazardous Substances that are
disposed, stored, transported, discharged, migrating from, Released,
recycled, or the arrangement of such activities, in connection with the
ownership, lease, maintenance or operation of the Purchased Assets, at any
Off-Site Location, prior to the Closing Date; provided that, for purposes
of this Section, "Off-Site Location" does not include any location to which
Hazardous Substances disposed of or Released at the Purchased Assets have
migrated;
(j) Any Liability under or related to Environmental Laws or
the common law arising as a result of or in connection with the ownership,
lease, maintenance or operation by Seller or its Affiliates of the
Transmission Assets prior to, on or after the Closing Date, except to the
extent caused by the acts or omissions of Buyer or Buyer's ownership,
lease, maintenance or operation of the Purchased Assets;
(k) Any Liabilities relating to any Benefit Plan maintained
by Seller or any trade or business (whether or not incorporated) which is
or ever has been under common control, or which is or ever has been treated
as a single employer, with Seller under Section 414(b), (c), (m) or (o) of
the Code ("ERISA Affiliate") or to which Seller and any ERISA Affiliate
contributed thereunder (the "ERISA Affiliate Plans"), maintained by,
contributed to, or obligated to contribute to, by Seller or any ERISA
Affiliate, including any Liability (i) to the Pension Benefit Guaranty
Corporation under Title IV of ERISA; or (ii) with respect to any
noncompliance by Seller with ERISA or any other applicable Laws, but not
including any Liabilities assumed by Buyer pursuant to Section 6.8;
(l) Any Liabilities relating to the employment or
termination of employment, including discrimination, wrongful discharge,
unfair labor practices, or constructive termination
21
by Seller of any individual, attributable to any action or inaction by Seller
prior to the Closing Date other than such actions or inactions taken at the
direction of Buyer;
(m) Any obligation to provide continuation coverage under
COBRA (and notice of the right to elect such coverage) to Transferred
Employees, employees associated with the Purchased Assets who do not become
Transferred Employees (and their dependents or former dependents), and
former dependents of Transferred Employees who became eligible for
continuation coverage under COBRA on account of a "qualifying event" (as
defined under COBRA) occurring before the Closing Date (but not including
any Liabilities assumed by Buyer pursuant to Section 6.8);
(n) Liability for Remediation of the Environmental Condition
described in Schedule 2.4(n); and
(o) Subject to Section 6.10, any Liabilities under the bonds
listed on Schedule 6.10.
2.5 Control of Litigation. The Parties agree and acknowledge that
Seller shall be entitled exclusively to control, defend and settle any
suit, action or proceeding, and any investigation arising out of or
relating to any Excluded Assets or Excluded Liabilities, and Buyer agrees
to cooperate in connection therewith to the extent Seller reasonably
requests; provided, however, that Buyer shall not be required to incur any
out-of-pocket costs and Seller shall reimburse Buyer for the costs incurred
by Buyer in making its employees available for such purpose, including the
allocable amount of salaries and wages of such employees.
2.6 Inventories. Schedule 2.6 lists the quantities of Inventories
relating to the Wholly Owned Stations that will be transferred at the
Closing to Buyer, to the extent located at or in transit to any Wholly
Owned Station on the Closing Date, together with the Net Book Value of
Inventories, in each case, as of August 31, 1999.
ARTICLE III
THE CLOSING
3.1 Closing. The sale, assignment, conveyance, transfer and
delivery of the Purchased Assets by Seller to Buyer, and the purchase,
assumption and acquisition by Buyer of the Purchased Assets and the Assumed
Liabilities, and the consummation of the other transactions contemplated
hereby, shall take place at a closing (the "Closing") to be held at the
offices of Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP, One ▇▇▇▇▇▇ Square,
Wilmington, Delaware, at 10:00 a.m. local time, on the first Business Day
after August 31, 2000 that is ten (10) Business Days after the date on
which the last of the conditions precedent to the Closing set forth in
Sections 7.1(a) and (c), and Sections 7.2(a) and (c) of this Agreement,
shall have been satisfied
22
or, to the extent permitted by applicable Law, waived by the Party for whose
benefit such conditions precedent exist, or at such other date, time and
location thereafter as may be agreed upon in writing between Buyer and Seller.
The date on which the Closing actually occurs is hereinafter called the "Closing
Date." The Closing shall be effective for all purposes as of 12:01 a.m., New
York City time, on the Closing Date.
3.2 Payment of Purchase Price.
(a) Upon the terms and subject to the conditions set forth
in this Agreement, in consideration of the aforesaid sale, assignment,
conveyance, transfer and delivery of the Purchased Assets, Buyer shall, at
the Closing, (i) pay to Seller cash in the aggregate amount of $508,463,000
plus the amount, if any, by which the Closing Adjustment Amount exceeds the
Target Adjustment Amount, or minus the amount, if any, by which the Target
Adjustment Amount exceeds the Closing Adjustment Amount (the "Purchase
Price"), and (ii) assume and agree to pay, perform and otherwise discharge
the Assumed Liabilities.
(b) At least five (5) Business Days prior to the Closing
Date, Seller shall provide to Buyer its good faith estimate of the Closing
Adjustment Amount, which estimate shall be certified in writing by an
appropriate officer of each Seller (the "Estimated Adjustment Amount").
(c) At the Closing, in furtherance but not in duplication of
Section 3.2(a) and without limiting the generality of Section 3.7, Buyer
shall pay to Seller cash in an aggregate amount equal to $508,463,000 plus
the amount, if any, by which the Estimated Adjustment Amount exceeds the
Target Adjustment Amount, or minus the amount, if any, by which the Target
Adjustment Amount exceeds the Estimated Adjustment Amount (the "Closing
Payment"). The Closing Payment shall be paid to Seller by Buyer at the
Closing by wire transfer of immediately available funds to the account of
Seller designated by Seller at least two (2) Business Days prior to the
Closing Date.
3.3 Adjustment to Purchase Price.
(a) Within sixty (60) days after the Closing Date, Seller
shall deliver to Buyer, at Seller's sole cost and expense, a statement
setting forth the Closing Adjustment Amount (the "Closing Statement").
Contemporaneously, Seller shall deliver to Buyer a schedule setting forth a
calculation of the Purchase Price and the amount of any payment to be made,
and by whom, pursuant to Section 3.3(c).
(b) In the event that Buyer is in disagreement with the
Closing Statement, and in the event that the aggregate amount of such
disagreements exceeds $100,000, Buyer shall, within ten (10) Business Days
after receipt of the Closing Statement, notify Seller of such disagreements
setting forth with specificity the nature and amounts thereof. In the event
that Buyer is in disagreement with only a portion of the Closing Statement,
Buyer or Seller, as the
23
case may be, shall pay all undisputed amounts in the manner set forth in Section
3.3(c); and all other amounts shall be paid at such time as all disagreements
are resolved in accordance with this Section 3.3(b). If (i) the aggregate amount
of the disagreements referred to in this Section 3.3(b) does not exceed $100,000
or (ii) Buyer fails to notify Seller of all disagreements within the ten (10)
Business Day period provided for herein, then the Closing Statement, as
delivered by Seller pursuant to Section 3.3(a), shall be final, binding and
conclusive on the Parties hereto. If Buyer is in disagreement with the Closing
Statement and notifies Seller within such ten (10) Business Day period, then the
Parties shall promptly attempt to resolve such disagreements by negotiation. If
the Parties are unable to resolve such disagreements within thirty (30) days
following such notice of disagreement by Buyer, the Parties shall appoint an
Independent Accounting Firm within forty-five (45) days following such notice,
which shall review the Closing Statement and determine the Closing Adjustment
Amount. Resolution of any disagreements shall be made by the Independent
Accounting Firm in a writing addressed to all Parties within thirty (30) days
following referral to it by the Parties of such disagreements in accordance with
this Agreement. The findings of such Independent Accounting Firm shall be final,
binding and conclusive on the Parties. All costs and fees of the Independent
Accounting Firm shall be borne equally by Buyer and Seller.
(c) No later than the fifth (5th) Business Day following the
determination of the Closing Adjustment Amount pursuant to Section 3.3(b),
either (i) Seller shall pay Buyer the amount, if any, by which the Closing
Payment exceeds the Purchase Price, or (ii) Buyer shall pay Seller the
amount, if any, by which the Purchase Price exceeds the Closing Payment, in
either case, together with simple interest accruing on such payment at the
Prime Rate from the Closing Date through and including the date of payment,
by wire transfer of immediately available funds to an account designated by
the receiving Party. As used herein, "Prime Rate" means, as of any date,
the prime rate as published in The Wall Street Journal on such date or, if
not published on such date, on the most recent date of publication.
3.4 Tax Reporting and Allocation of Purchase Price. Buyer and
Seller shall use their respective reasonable best efforts to agree in good
faith upon an allocation among the Purchased Assets of the sum of the
Purchase Price and the Assumed Liabilities consistent with Section 1060 of
the Code and the Treasury Regulations thereunder within sixty (60) days
after the Closing Date. In the event that the Parties cannot agree on a
mutually satisfactory allocation within such sixty-day period, the Parties
shall appoint an Independent Accounting Firm that shall, at Seller's and
Buyer's joint expense, determine the appropriate allocation. The finding of
such Independent Accounting Firm shall be final, binding and conclusive on
the Parties. After determination of the allocation by agreement of the
Parties or by binding determination of the Independent Accounting Firm,
Buyer and Seller shall file, for the tax year in which the Closing occurs,
Internal Revenue Service Form 8594, and all Tax Returns, in accordance with
such allocation. Buyer and Seller shall report the transactions
contemplated by this Agreement for United States federal Income Tax and all
other Tax purposes in a manner consistent with the allocation determined
pursuant to this Section 3.4. Buyer and Seller shall provide the other
promptly with any information required to complete Form 8594. Buyer and
Seller shall notify and provide the other
24
with reasonable assistance in the event of an examination, audit or other
proceeding regarding the agreed-upon allocation of the Purchase Price and the
Assumed Liabilities.
3.5 Prorations.
(a) Buyer and Seller agree that, except as otherwise
provided in this Agreement, all of the items customarily prorated relating
to the ownership, lease, maintenance or operation of the Purchased Assets,
including those listed below (but not including Income Taxes), shall be
prorated as of the Closing Date, with Seller liable to the extent such
items relate to any period prior to the Closing Date, and Buyer liable to
the extent such items relate to any period on or after the Closing Date
(measured in the same units used to compute the item in question, otherwise
measured by calendar days):
(i) Personal property, real estate and occupancy
Taxes, assessments and other charges, if any, on or with respect to the
ownership, lease, maintenance or operation of the Purchased Assets;
(ii) Rent, Taxes and all other items (including
prepaid services and goods not included in Inventory), in each case,
payable by or to Seller under any of the Seller's Agreements;
(iii) Any permit, license, registration, compliance
assurance fees or other fees with respect to any Transferable Permit;
(iv) Sewer rents and charges for water, telephone,
electricity and other utilities;
(v) Insurance premiums paid on or with respect to the
ownership, lease, maintenance or operation of the Purchased Assets to the
extent payable under any policy or other arrangement included among the
Seller's Agreements; and
(vi) Prepaid operating and maintenance expenses.
(b) Seller or Buyer, as the case may be, shall promptly
reimburse the other Party that portion of any amount paid by such other
Party to the extent relating to the period for which Seller or Buyer, as
the case may be, is liable under Section 3.5(a), in each case, upon
presentation of a statement setting forth in reasonable detail the nature
and amount of any such payment. In connection with the prorations set forth
in Section 3.5(a), if actual figures are not available on the Closing Date,
the proration shall be calculated based upon the respective amounts accrued
through the Closing Date or paid for the most recent year or other
appropriate period for which such amounts paid are available. All prorated
amounts shall be recalculated and paid to the appropriate Party within
sixty (60) days after the date that the previously unavailable actual
figures become available. Seller and Buyer shall furnish each other with
such documents
25
and other records as may be reasonably requested in order to confirm all
proration calculations made pursuant to this Section 3.5. Notwithstanding
anything to the contrary herein, no proration shall be made under this Section
3.5 with respect to (i) real property Tax refunds that are Excluded Assets under
Section 2.2(h) or (ii) Taxes payable by Buyer pursuant to Section 6.6(a).
3.6 Deliveries by Seller. At the Closing, Seller shall deliver, or
cause to be delivered, the following to Buyer:
(a) One or more Limited Warranty Deeds, duly executed by
Seller and in recordable form;
(b) The Bills of Sale, duly executed by Seller;
(c) The Assignment and Assumption Agreements, duly executed
by Seller;
(d) The Interconnection Agreement, duly executed by Seller;
(e) The Power Purchase Agreement, duly executed by Seller;
(f) The Transition Services Agreement, duly executed by
Seller;
(g) The Access Agreement, duly executed by Seller and in
recordable form;
(h) Evidence, in form and substance reasonably satisfactory
to Buyer, demonstrating that Seller has obtained the Seller's Required
Regulatory Approvals set forth on Schedule 7.2(c);
(i) A FIRPTA Affidavit, duly executed by Seller;
(j) Copies, certified by the Secretary or Assistant
Secretary of Seller, of resolutions authorizing the execution and delivery
of this Agreement, each Additional Agreement to which Seller is a party and
all of the other agreements and instruments, in each case, to be executed
and delivered by Seller in connection herewith;
(k) A certificate of the Secretary or Assistant Secretary of
Seller identifying the name and title and bearing the signatures of the
officers of Seller authorized to execute and deliver this Agreement, each
Additional Agreement to which Seller is a party and the other agreements
and instruments contemplated hereby;
(l) All such other agreements, documents, instruments and
writings as shall, in the reasonable opinion of Buyer and its counsel, be
necessary to sell, assign, convey, transfer and deliver to Buyer the
Purchased Assets, in accordance with this Agreement and, where
26
necessary or desirable, in recordable form, provided that Seller shall not be
required to prepare or obtain any survey, abstract, title opinion or title
insurance policy with respect to the Real Property; and
(m) Such other agreements, documents, instruments and
writings as are required to be delivered by Seller at or prior to the
Closing Date pursuant to this Agreement or otherwise reasonably required in
connection herewith.
3.7 Deliveries by Buyer. At the Closing, Buyer shall deliver, or
cause to be delivered, the following to Seller:
(a) The Closing Payment, by wire transfer of immediately
available funds in accordance with Seller's instructions to the account of
Seller designated by Seller at least two (2) Business Days prior to the
Closing Date;
(b) The Assignment and Assumption Agreements, including an
Assignment and Assumption Agreement with respect to all applicable
obligations under the IBEW Collective Bargaining Agreements as they relate
to Transferred Union Employees, duly executed by Buyer;
(c) The Interconnection Agreement, duly executed by Buyer;
(d) The Power Purchase Agreement, duly executed by Buyer;
(e) The Transition Services Agreement, duly executed by
Buyer;
(f) The Access Agreement, duly executed by Buyer;
(g) Evidence, in form and substance reasonably satisfactory
to Seller, demonstrating that Buyer has obtained the Buyer's Required
Regulatory Approvals set forth on Schedule 7.1(c);
(h) A copy, certified by the Secretary or Assistant
Secretary of Buyer, of resolutions authorizing the execution and delivery
of this Agreement, each Additional Agreement and all of the agreements and
instruments, in each case, to be executed and delivered by Buyer in
connection herewith;
(i) A certificate of the Secretary or Assistant Secretary of
Buyer identifying the name and title and bearing the signatures of the
officers of Buyer authorized to execute and deliver this Agreement, each
Additional Agreement to which Buyer is a party and the other agreements
contemplated hereby;
(j) All such other permits, agreements, documents,
instruments and writings as shall, in the reasonable opinion of Seller and
its counsel, be necessary for Buyer to purchase
27
and acquire the Purchased Assets, and to assume the Assumed Liabilities, in each
case, in accordance with this Agreement and, where necessary or desirable, in
recordable form; and
(k) Such other permits, agreements, documents, instruments
and writings as are required to be delivered by Buyer at or prior to the
Closing Date pursuant to this Agreement or otherwise reasonably required in
connection herewith.
3.8 Post-Closing Excluded Asset Deliveries. In the event that
Seller or Buyer, or any of their respective Representatives, shall
determine after the Closing that any Excluded Asset is in the possession of
Buyer or any of its Representatives, Buyer shall, or shall cause any such
Representative to, promptly, but in no event later than five (5) Business
Days following such determination, pay or deliver, or cause to be paid or
delivered, to Seller such Excluded Asset, at Buyer's sole cost and expense.
3.9 Relationship of this Agreement and Related Purchase Agreements.
The transactions contemplated by this Agreement, together with the
transactions contemplated by the Related Purchase Agreements, are intended
by the Parties to be consummated substantially simultaneously; and if any
of the transactions contemplated hereby or by any of the Related Purchase
Agreements are not consummated simultaneously on the Closing Date in
accordance with the terms and subject to the conditions set forth herein
and therein, as applicable, then each Party shall take, or cause to be
taken, all actions, and do, or cause to be done, all things, in each case,
that are necessary to dissolve and invalidate all transactions contemplated
hereby; provided, however, that if the failure to consummate the
transactions contemplated hereby or by the Related Purchase Agreements
results from a default or breach of a party under this Agreement or any of
the Related Purchase Agreements, then nothing in the foregoing shall
preclude or limit the rights or remedies of any Party in connection with
such default or breach. Notwithstanding any provision contained herein to
the contrary, if all conditions to the obligations of all parties to the
ACE Related Purchase Agreements to consummate the transactions contemplated
thereby have been satisfied or, to the extent permitted by applicable Law,
waived, but, for any reason, the transactions contemplated by this
Agreement and the DP&L Related Purchase Agreement cannot be consummated
simultaneously therewith, then the Parties shall, at Buyer's option and in
its sole discretion, consummate the transactions contemplated by the ACE
Related Purchase Agreements; provided, however, that nothing contained in
this Section 3.9 shall be construed as relieving Buyer of any of its
obligations under this Agreement or the DP&L Related Purchase Agreement, as
set forth therein.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer as follows (all such
representations and warranties, except those set forth in Sections 4.1 and
4.2, being made to the Knowledge of Seller):
4.1 Organization; Qualification. Seller is a corporation duly
incorporated, validly existing and in good standing under the laws of the
State of Delaware and the Commonwealth of Virginia and has all requisite
corporate power and authority to own, lease and operate its properties and
to carry on its business as it is now being conducted. Seller is duly
qualified to do business as a foreign corporation and is in good standing
under the laws of each jurisdiction in which its business as now being
conducted requires it to be so qualified, except to the extent that the
failure to be so qualified would not, individually or in the aggregate,
have a Material Adverse Effect.
4.2 Authority. Seller has full corporate power and authority to
execute and deliver this Agreement and each Additional Agreement to which
it is a party and to consummate the transactions contemplated hereby and
thereby. The execution and delivery by Seller of this Agreement and each
Additional Agreement to which it is a party and the consummation by Seller
of the transactions contemplated hereby and thereby have been duly and
validly authorized by all necessary corporate action required on the part
of Seller. This Agreement has been duly and validly executed and delivered
by Seller and, subject to the receipt of Seller's Required Regulatory
Approvals, this Agreement constitutes, and upon the execution and delivery
by Seller of each Additional Agreement to which it is a party, each such
Additional Agreement will constitute, the legal, valid and binding
obligation of Seller, enforceable against Seller in accordance with its
terms, except that such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium
or other similar Laws affecting or relating to enforcement of creditors'
rights generally and general principles of equity (regardless of whether
enforcement is considered in a proceeding at law or in equity).
4.3 Consents and Approvals; No Violation.
(a) Except as set forth on Schedule 4.3(a), subject to
obtaining or making all Seller's Required Regulatory Approvals, neither the
execution and delivery by Seller of this Agreement and the Additional
Agreements to which it is a party nor the consummation by Seller of the
transactions contemplated hereby or thereby will (i) conflict with or
result in any breach of any provision of the certificate or articles of
incorporation or bylaws of Seller; (ii) result in a default (or give rise
to any right of termination, cancellation or acceleration) under any of the
terms, conditions or provisions of any note, bond, mortgage, indenture,
material agreement or other instrument or obligation to which Seller is a
party or by which it, or any of the Purchased Assets, may be bound, except
for such defaults (or rights of termination, cancellation or acceleration)
as to which requisite consents, approvals or waivers have been, or will be
prior to the Closing obtained, or which would not, individually or in the
aggregate, have a Material Adverse Effect; or (iii) constitute violations
of any Law, order, judgment or decree applicable to Seller, which
violations, individually or in the aggregate, would have a Material Adverse
Effect.
29
(b) Except for consents, approvals, filings and notices (i)
required under the HSR Act or (ii) set forth on Schedule 4.3(b) (the
consents, approvals, filings and notices referred to in clause (ii) of this
sentence are collectively referred to herein as the "Seller's Required
Regulatory Approvals"), no consent or approval of, filing with, or notice
to, any Governmental Authority is necessary for the execution and delivery
by Seller of this Agreement and the Additional Agreements to which it is a
party or the consummation by Seller of the transactions contemplated hereby
or thereby, other than (i) such consents, approvals, filings and notices
which, if not obtained or made, would not materially impair Seller's
ability to perform its material obligations under this Agreement or such
Additional Agreements; (ii) such consents, approvals, filings and notices
which become applicable to Seller or the Purchased Assets as a result of
the status of Buyer (or any of its Affiliates) or as a result of any other
facts that specifically relate to the business or activities in which Buyer
(or any of its Affiliates) is or proposes to be engaged; and (iii) such
consents, approvals, filings and notices, the failure of which to obtain or
make would not, individually or in the aggregate, have a Material Adverse
Effect.
4.4 Insurance. Except as set forth on Schedule 4.4, all material
policies of fire, liability, workers' compensation and other forms of
insurance owned or held by, or on behalf of, Seller and insuring any
Purchased Assets are in full force and effect, all premiums with respect
thereto covering all periods up to and including the date hereof have been
paid (other than retroactive premiums which may be payable with respect to
comprehensive general liability and workers' compensation insurance
policies), and no written notice of cancellation or termination has been
received by Seller with respect to any such policy which was not replaced
on substantially similar terms prior to the date of such cancellation or
termination. Except as set forth on Schedule 4.4, as of the date of this
Agreement, Seller has not been refused any such insurance with respect to
any Purchased Assets.
4.5 Title and Related Matters. Except for Permitted Encumbrances,
Seller has good, valid and marketable title to the Real Property included
in the Purchased Assets and has good and valid title to all other Purchased
Assets, free and clear of all Encumbrances.
4.6 Environmental Matters. Except as set forth on Schedule 4.6:
(a) Seller holds, and is in compliance with, all
Environmental Permits that Seller requires in order to own, lease and
operate the Purchased Assets, and Seller is otherwise in compliance with
applicable Environmental Laws with respect to the ownership, lease,
maintenance or operation of the Purchased Assets, except for such failures
to hold or comply with required Environmental Permits, and such failures to
be in compliance with applicable Environmental Laws, as would not,
individually or in the aggregate, materially impair the ability of Buyer to
operate the Purchased Assets after the Closing in the manner operated by
Seller on the date hereof;
30
(b) Seller has not received any written request for
information, or been notified in writing that it is a potentially
responsible party under CERCLA or any similar state law, with respect to
any of the Sites, or any written notice relating to any Governmental
Authority's allegation or investigation of any criminal violations by
Seller of any Environmental Laws, except for requests or notices with
respect to Liabilities as would not, individually or in the aggregate,
materially impair the ability of Buyer to operate the Purchased Assets
after the Closing in the manner operated by Seller on the date hereof; and
(c) Seller has not entered into or agreed to any consent
decree or order under any Environmental Law relating to the Purchased
Assets, and Seller is not subject to any outstanding judgment, decree or
order relating to compliance with any Environmental Law or to the
investigation or cleanup of Hazardous Substances under any Environmental
Law relating to the Purchased Assets, except for such decrees, orders and
judgments as would not, individually or in the aggregate, materially impair
the ability of Buyer to operate the Purchased Assets after the Closing in
the manner operated by Seller on the date hereof.
4.7 Labor Matters. Seller has previously delivered to Buyer true
and correct copies of all collective bargaining agreements to which Seller
is a party or is subject and which relate to its Employees. With respect to
the Employees, except as set forth on Schedule 4.7 and except for such
matters as would not, individually or in the aggregate, have a Material
Adverse Effect, (a) Seller is in compliance with all applicable Laws
respecting employment and employment practices, terms and conditions of
employment and wages and hours; (b) Seller has not received written notice
of any unfair labor practice complaint against it pending before the
National Labor Relations Board; and (c) no material arbitration proceeding
arising out of or under any collective bargaining agreement is pending
against Seller.
4.8 Benefit Plans; ERISA.
(a) Schedule 4.8(a) lists, as of the date of this Agreement,
all material deferred compensation, profit-sharing, retirement and pension
plans, and all material bonus, fringe benefit and other employee benefit
plans, maintained or with respect to which contributions are made by Seller
for the benefit of any Employee ("Benefit Plans"). True and complete copies
of all such Benefit Plans have been made available to Buyer.
(b) Except as set forth on Schedule 4.8(b) and except for
such matters as would not, individually or in the aggregate, have a
Material Adverse Effect: with respect to Employees, Seller has fulfilled
its obligations under the minimum funding requirements of Section 302 of
ERISA, and Section 412 of the Code, with respect to each of its "employee
pension benefit plans" (as defined in Section 3(2) of ERISA), and each such
plan is in compliance with the presently applicable provisions of ERISA and
the Code; Seller has not incurred any liability under Section 4062(b) of
ERISA to the Pension Benefit Guaranty Corporation in connection with any
employee pension benefit plan relating to its Employees which is subject to
Title IV of ERISA; Seller shall as soon as practicable after the date of
this Agreement apply for a
31
letter from the Internal Revenue Service for each employee pension benefit plan
determining that such plan is exempt from United States federal income Tax under
Sections 401(a) and 501(a) of the Code; and no withdrawal liability has been
incurred by or asserted against Seller with respect to any employee pension
benefit plan which is a "multiemployer plan" (as defined in Section 3(37) of
ERISA).
4.9 Real Property. Schedule 4.9 sets forth a description of the
Real Property. True and correct copies of all current surveys, abstracts,
title opinions and policies of title insurance currently in force, in each
case, in Seller's possession and relating to the Real Property, have been
previously made available to Buyer.
4.10 Condemnation. As of the date hereof, Seller has not received
any written notice of any pending or threatened proceedings or actions by
any Governmental Authority to condemn or take by power of eminent domain
all or any material part of the Purchased Assets.
4.11 Contracts and Leases.
(a) Schedule 4.11(a) sets forth a list of all written
Seller's Agreements, other than such contracts, licenses, agreements,
arrangements and personal property leases as (i) are set forth in any other
Schedule, (ii) constitute Excluded Assets or Excluded Liabilities, (iii)
may be terminated after the Closing by Buyer upon notice of no more than
ninety (90) days, (iv) involve future annual expenditures by Buyer after
the Closing of $1,000,000 or less, (v) are expected to expire or terminate
prior to the Closing or (vi) are entered into by Seller after the date
hereof consistent with the terms of Section 6.1(iii).
(b) Except as set forth on Schedule 4.11(a), each Seller's
Agreement set forth on Schedule 4.11(a): (i) constitutes the valid and
binding obligation of Seller that is a party thereto and the other parties
thereto and (ii) will continue in full force and effect after the Closing
in accordance with its terms.
(c) Except as set forth on Schedule 4.11(a), there is not
under any Seller's Agreement set forth on Schedule 4.11(a) any default or
event which, with notice or lapse of time or both, would constitute a
default, on the part of Seller or any other party thereto, except such
defaults as would not, individually or in the aggregate, have a Material
Adverse Effect.
4.12 Legal Proceedings. Except as set forth on Schedule 4.12, there
are no suits, actions or proceedings pending or, to the Knowledge of
Seller, threatened against Seller by or before any Governmental Authority,
which would, individually or in the aggregate, have a Material Adverse
Effect or would materially impair Seller's ability to consummate the
transactions contemplated hereby or by any Additional Agreement to which it
is a party. Except as set forth on Schedule 4.12, Seller is not subject to
any judgment, order or decree of any Governmental Authority which would,
individually or in the aggregate, have a Material Adverse Effect or
32
would materially impair Seller's ability to consummate the transactions
contemplated hereby or by any Additional Agreement to which it is a party.
4.13 Permits. Seller holds, and is in compliance with, all permits,
certificates, licenses and other authorizations of all Governmental
Authorities (collectively, "Seller's Permits") that Seller requires in
order to own the Purchased Assets, except for (a) Environmental Permits
(which are governed by Section 4.6) and (b) such failures to hold, or
comply with, Seller's Permits as would not, individually or in the
aggregate, have a Material Adverse Effect.
4.14 Year 2000. Seller, with respect to all Computer Systems
included in the Purchased Assets, has plans to achieve Year 2000 Compliance
with respect to such Computer Systems and are using Commercially Reasonable
Effects to execute and carry out such plans. "Computer Systems" means data
processing hardware, software and firmware products (including embedded
microcontrollers in non-computer equipment). "Year 2000 Compliance"
means that the Computer Systems will correctly differentiate between years
in different centuries that end in the same two digits, and will accurately
process date/time data (including calculating, comparing and sequencing)
from, into and between the twentieth and twenty-first centuries.
4.15 Assets Used in Operation of the Wholly Owned Stations. Other
than Emission Allowances and the Excluded Assets, the Purchased Assets
include all material assets and properties that are used by Seller in the
operation of the Wholly Owned Stations as electrical generation stations as
of the date hereof.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as follows (all such
representations and warranties, except those set forth in Sections 5.1 and
5.2, being made to the Knowledge of Buyer):
5.1 Organization; Qualification. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware and has all requisite corporate power and authority to
own, lease and operate its properties and to carry on its business as it is
now being conducted. Buyer is, or by the Closing will be, qualified to do
business in the State of New Jersey. Buyer has heretofore delivered to
Seller true and correct copies of its certificate or articles of
incorporation and bylaws (or other similar governing documents) as
currently in effect.
5.2 Authority. Buyer has full corporate power and authority to
execute and deliver this Agreement and each Additional Agreement to which
it is a party and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement and each such
Additional Agreement by Buyer and the consummation by Buyer of the
transactions
33
contemplated hereby or thereby have been duly and validly authorized by all
necessary corporate action required on the part of Buyer. This Agreement has
been duly and validly executed and delivered by Buyer and, subject to the
receipt of Buyer's Required Regulatory Approvals, this Agreement constitutes,
and upon the execution and delivery by Buyer of each Additional Agreement to
which it is a party, each such Additional Agreement will constitute, the legal,
valid and binding obligation of Buyer, enforceable against Buyer in accordance
with its terms, except that such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or
other similar Laws affecting or relating to enforcement of creditors' rights
generally and general principles of equity (regardless of whether enforcement is
considered in a proceeding at law or in equity).
5.3 Consents and Approvals; No Violation.
(a) Except as set forth on Schedule 5.3(a), and subject to
obtaining or making all Buyer's Required Regulatory Approvals, neither the
execution and delivery by Buyer of this Agreement or the Additional
Agreements to which it is a party nor the consummation by Buyer of the
transactions contemplated hereby or thereby will (i) conflict with or
result in any breach of any provision of the certificate or articles of
incorporation or bylaws (or other similar governing documents) of Buyer or
any of its Subsidiaries; (ii) result in a default (or give rise to any
right of termination, cancellation or acceleration) under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, material
agreement or other instrument or obligation to which Buyer or any of its
Subsidiaries is a party or by which Buyer, any such Subsidiary or any of
their respective properties and assets may be bound, except for such
defaults (or rights of termination, cancellation or acceleration) as to
which requisite consents, approvals or waivers have been or will be prior
to the Closing obtained, or which would not, individually or in the
aggregate, materially impair Buyer's ability to consummate the transactions
contemplated hereby or by any Additional Agreement, or to perform its
material obligations hereunder or thereunder (a "Buyer Material Adverse
Effect"); or (iii) constitute violations of any Law, order, judgment or
decree applicable to Buyer or any of its Subsidiaries, which violations,
individually or in the aggregate, would have a Buyer Material Adverse
Effect.
(b) Except for consents, approvals, filings and notices (i)
required under the HSR Act or (ii) set forth on Schedule 5.3(b) (the
consents, approvals, filings and notices referred to in clause (ii) of this
sentence are collectively referred to herein as the "Buyer's Required
Regulatory Approvals"), no consent or approval of, filing with, or notice
to, any Governmental Authority is necessary for the execution and delivery
by Buyer of this Agreement and the Additional Agreements to which it is a
party or the consummation by Buyer of the transactions contemplated hereby
or thereby, other than such consents, approvals, filings or notices, which,
if not obtained or made, would not have a Buyer Material Adverse Effect.
5.4 Buyer's Permits. Buyer holds, and is in compliance with, or on
or prior to the Closing Date will hold, and from and after the Closing Date
will comply with, all permits, certificates, licenses and other
authorizations of all Governmental Authorities that Buyer requires
34
in order to own, lease, maintain and operate the Wholly Owned Stations,
including the Purchased Assets (collectively, "Buyer's Permits").
5.5 Availability of Funds. Buyer has sufficient funds and lines of
credit available to it, or has received binding written commitments from
creditworthy financial institutions, true and correct copies of which have
been provided to Seller, to permit Buyer on the Closing Date to pay the
Purchase Price, all other amounts payable by Buyer hereunder or under any
Additional Agreement, and all fees and expenses incurred by Buyer in
connection with the transactions contemplated hereby and by the Additional
Agreements, and to permit Buyer to timely pay or perform all of its other
obligations (including its obligations pursuant to Article VIII) under this
Agreement and the Additional Agreements.
5.6 Financial Statements. Buyer has provided Seller with true and
correct copies of its balance sheet, income statement and statement of
changes in cash flows of Buyer for each of its last three completed fiscal
years, together with the related reports of its independent accountants,
PricewaterhouseCoopers LLP, and for its most recently completed fiscal
quarter ("Buyer's Financial Statements"). Buyer's Financial Statements have
been prepared in accordance with United States generally accepted
accounting principles consistently applied and fairly reflect, in all
material respects, the financial position, results of operations and cash
flow of Buyer at and for the periods therein.
5.7 Legal Proceedings. There are no suits, actions or proceedings
pending or threatened against Buyer by or before any Governmental
Authority, which would, individually or in the aggregate, have a Buyer
Material Adverse Effect or would materially impair such Buyer's ability to
consummate the transactions contemplated hereby or by any Additional
Agreement to which it is a party. Buyer is not subject to any judgments,
orders or decrees of any Governmental Authority which would, individually
or in the aggregate, have a Buyer Material Adverse Effect or would
materially impair such Buyer's ability to consummate the transactions
contemplated hereby or by any Additional Agreement to which it is a party.
5.8 Qualified Buyer. Buyer is qualified to obtain and, after the
Closing, retain all Buyer Permits, including Environmental Permits,
necessary for Buyer to own, lease, maintain and operate the Wholly Owned
Stations, including, from and after the Closing Date, the Purchased Assets.
5.9 Inspections. Buyer has, prior to the execution and delivery of
this Agreement, reviewed the environmental site assessments prepared for
Seller and set forth on Schedule 5.10.
5.10 WARN Act. Buyer does not intend to engage within sixty (60)
days of the Closing Date in a "plant closing" or "mass layoff" as such
terms are defined in the WARN Act.
5.11 Regulation as a Utility. Buyer is not subject to regulation as
a public utility or public service company (or similar designation) by any
Governmental Authority.
35
ARTICLE VI
COVENANTS OF THE PARTIES
6.1 Conduct of Business Relating to the Purchased Assets. Except as
set forth on Schedule 6.1, as contemplated by this Agreement or any
Additional Agreement or to the extent Buyer otherwise consents in writing,
during the period from the date of this Agreement to the Closing Date,
Seller shall operate the Purchased Assets in the ordinary course of
business consistent with the past practices of Seller and in accordance
with Good Utility Practices, and shall use all Commercially Reasonable
Efforts to preserve intact the Purchased Assets, and endeavor to preserve
the goodwill and relationships with customers, vendors, suppliers,
employees and others having business dealings with it. Without limiting the
generality of the foregoing, and, except as contemplated in this Agreement
or as set forth on Schedule 6.1 or as required under applicable Law or by
any Governmental Authority, between the date hereof and the Closing Date,
without the prior written consent of Buyer, Seller shall not, with respect
to the Purchased Assets:
(i) Sell, lease (as lessor), encumber, pledge,
transfer or otherwise dispose of, any Purchased Assets (except for
Purchased Assets used, consumed or replaced in the ordinary course of
business consistent with past practices of Seller or its Affiliates or with
Good Utility Practices) other than (a) to any Affiliate of Seller, in which
event, Seller shall cause such Affiliate to convey such Purchased Assets to
Buyer at the Closing, or (b) to the extent that any such action results in
a Permitted Encumbrance of the type described in clauses (c), (d) or (f) of
Section 1.1(96);
(ii) Modify, amend or voluntarily terminate prior to
the expiration date any of the material Seller's Agreements, other than (a)
in the ordinary course of business, to the extent consistent with the past
practices of Seller or its Affiliates or with Good Utility Practices or (b)
as may be required in connection with transferring Seller's rights or
obligations thereunder to Buyer pursuant to this Agreement;
(iii) Enter into any contract, agreement, commitment
or arrangement relating to the Purchased Assets (other than Capital
Expenditures) that provides for future payments in any twelve-month period
that individually exceed $1,000,000 or in the aggregate exceed $5,000,000,
unless it is terminable by Seller without penalty or premium upon no more
than ninety (90) days' notice;
(iv) Except as otherwise required by the terms of the
IBEW Collective Bargaining Agreements, Benefit Plans or applicable Law, (a)
materially increase the salaries or wages of Employees prior to the
Closing, (b) take any action prior to the Closing to effect a
36
material change in the IBEW Collective Bargaining Agreements or Benefit Plans or
(c) take any action prior to the Closing to materially increase the aggregate
benefits payable to Employees; or
(v) Except as otherwise provided herein, enter into
any written or oral contract, agreement, commitment or arrangement with
respect to any of the prohibited transactions set forth in the foregoing
paragraphs (i) through (iv).
6.2 Access to Information.
(a) Between the date of this Agreement and the Closing Date,
Seller shall: (i) give Buyer and its Representatives, during ordinary
business hours and upon reasonable notice, reasonable access to all books,
records, plans, offices and other facilities and properties in the
possession of Seller included in the Purchased Assets; (ii) furnish Buyer
with such financial and operating data and other information in the
possession of Seller with respect to the Purchased Assets as Buyer may from
time to time reasonably request; and (iii) furnish Buyer with all such
other information in the possession of Seller as shall be reasonably
necessary to enable Buyer to verify the accuracy of the representations and
warranties of Seller contained in this Agreement; provided, however, that
(A) any such inspections and investigations shall be conducted in such
manner as not to interfere unreasonably with the operation of the Purchased
Assets, (B) Seller shall not be required to take any action which would
constitute a waiver of the attorney-client or other privilege, and (C)
Seller need not supply Buyer with any information which Seller is under a
legal or contractual obligation not to supply. Notwithstanding anything
herein to the contrary, prior to the Closing Date, Buyer shall not have the
right to perform or conduct, or cause to be performed or conducted, any
environmental sampling or testing at, in, on or underneath any Wholly Owned
Station, and Seller shall only furnish or provide such access to Employee
personnel records and files to the extent permitted by applicable Law and
to the extent that such records and files pertain to the following: (i)
skill and development training; (ii) seniority histories; (iii) salary and
benefit information; (iv) Occupational, Safety and Health Administration
reports; and (v) active medical restriction forms.
(b) All information furnished to or obtained by Buyer and
Buyer's Representatives pursuant to this Section 6.2 shall be Proprietary
Information and shall be kept confidential in accordance with the terms of
the Confidentiality Agreement. Nothing in this Section 6.2 is intended to
or shall be deemed to amend, supplement or otherwise modify the obligations
of Buyer, its Representatives or its Affiliates under the Confidentiality
Agreement, all of which remain in effect until termination of such
agreement in accordance with its terms.
(c) For a period of seven (7) years from and after the
Closing Date, each Party and its Representatives shall have reasonable
access to all of the books and records of the Purchased Assets, including
all Transferred Employee Records, in the possession of the other Party to
the extent that such access may reasonably be required by such Party in
connection with the Assumed Liabilities or the Excluded Liabilities, or
other matters relating to or affected by the operation of the Purchased
Assets or the Excluded Assets. Such access shall be afforded by the
37
Party in possession of any such books and records upon receipt of reasonable
advance notice and during normal business hours. The Party exercising this right
of access shall be solely responsible for any costs or expenses incurred by it
or the other Party with respect to such access pursuant to this Section 6.2(c).
If the Party in possession of such books and records shall desire to dispose of
any books and records upon or prior to the expiration of such seven-year period,
such Party shall, prior to such disposition, give the other Party a reasonable
opportunity, at such other Party's cost and expense, to segregate and remove
such books and records as such other Party may select.
(d) Buyer shall not, prior to the Closing Date, contact any
customer, vendor, supplier or employee of, or any other Person having
business dealings with, Seller or its Affiliates with respect to any aspect
of the Purchased Assets or the transactions contemplated hereby or by any
Additional Agreement, without the prior written consent of Seller, which
consent shall not be unreasonably withheld or delayed.
6.3 Public Statements. Except as required by applicable Law or by
applicable rules of any national securities exchange, in which event the
Parties shall consult with each other in advance, prior to the Closing
Date, no press release or other public announcement, statement or comment
in response to any inquiry relating to the transactions contemplated by
this Agreement shall be issued, made or permitted to be issued or made by
any Party or its Representatives without the prior written consent of the
other Party.
6.4 Further Assurances.
(a) Subject to the terms and conditions of this Agreement,
each of the Parties hereto shall use its reasonable best efforts to take,
or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper or advisable under applicable Laws to consummate
and make effective the purchase and sale of the Purchased Assets pursuant
to this Agreement and the assumption of the Assumed Liabilities, including
using its reasonable best efforts to ensure satisfaction of the conditions
precedent to each Party's obligations hereunder, including obtaining all
necessary consents, approvals and authorizations of, and making all
required notices or filings with, third parties required to be obtained or
made in order to consummate the transactions hereunder, including the
transfer of the Transferable Permits to Buyer. Seller shall cooperate with
Buyer in its efforts to obtain all other Permits and Environmental Permits
necessary for Buyer to operate the Purchased Assets. Buyer shall perform
all conditions required of Buyer in connection with obtaining the Seller's
Required Regulatory Approvals. No Party shall, without prior written
consent of the other Party, take or fail to take any action which might
reasonably be expected to prevent or materially impede, interfere with or
delay the transactions contemplated by this Agreement.
(b) Without limiting the generality of Section 6.4(a):
38
(i) In the event that any Purchased Asset shall not
have been conveyed to Buyer at the Closing, Seller shall, subject to
Section 6.4(b)(ii), use Commercially Reasonable Efforts after the Closing
to convey such asset to Buyer as promptly as practicable.
(ii) To the extent that Seller's rights under any
material Seller's Agreement may not be assigned without the consent,
approval or authorization of any third party which consent, approval or
authorization has not been obtained by the Closing Date, this Agreement
shall not constitute an agreement to assign such right if an attempted
assignment would constitute a breach of such Seller's Agreement or violate
any applicable Law. If any consent, approval or authorization to the
assignment of any material Seller's Agreement shall not be obtained, or if
any attempted assignment would be ineffective or would impair Buyer's
rights and obligations under such Seller's Agreement, such that Buyer would
not acquire and assume the benefit and detriment of all such rights and
obligations, Seller, at its option and to the fullest extent permitted by
applicable Law and such Seller's Agreement, shall, after the Closing Date,
appoint Buyer to be Seller's agent with respect to such Seller's Agreement,
or, to the fullest extent permitted by applicable Law and such Seller's
Agreement, enter into such reasonable arrangements with Buyer or take such
other actions as are necessary to provide Buyer with the same or
substantially similar rights and obligations under such Seller's Agreement.
6.5 Consents and Approvals. Without limiting the generality of
Section 6.4(a):
(a) As promptly as practicable after the date of this
Agreement, Seller and Buyer shall each file or cause to be filed with the
Federal Trade Commission and the United States Department of Justice all
notifications required to be filed under the HSR Act and the rules and
regulations promulgated thereunder, as amended from time to time, with
respect to the transactions contemplated hereby and by the Additional
Agreements. The Parties shall use their respective Commercially Reasonable
Efforts to respond promptly to any requests for additional information made
by such agencies, and to cause the applicable waiting period under the HSR
Act to terminate or expire at the earliest possible date after the date of
filing. Buyer shall pay all filing fees payable under the HSR Act but each
Party shall bear its own costs and expenses of the preparation of any
filing.
(b) As promptly as practicable after the date of this
Agreement, Seller and Buyer shall take, or cause to be taken, all actions,
and do, or cause to be done, all things necessary, proper or advisable
under applicable Laws to obtain all required consents and approvals of the
DPSC, the MPSC, the SEC and all other Governmental Authorities, and make
all other filings and give all other notices required to be made prior to
the Closing with respect to the transactions contemplated hereby and by the
Additional Agreements. In furtherance of the foregoing, the Parties shall,
prior to January 31, 2000, agree upon a form of Power Purchase Agreement,
substantially to the effect of the term sheet set forth in Exhibit G
hereto. The Parties shall respond promptly to any requests for additional
information made by such Persons, and use their respective Commercially
Reasonable Efforts to cause all such consents and approvals to be obtained
or waived at the earliest possible date after the date of filing. Each
Party will bear its
39
own costs of the preparation of any such filing or notice; provided, however,
that Buyer shall bear all costs associated with experts and consultants
reasonably necessary for the preparation of any such filing or notice or
reasonably necessary to obtain such consents and approvals as promptly as
practicable.
(c) Seller and Buyer shall cooperate with each other and
promptly prepare and file notifications with, and request Tax clearances
from, state and local taxing authorities in jurisdictions in which a
portion of the Purchase Price may be required to be withheld or in which
Buyer would otherwise be liable for any Tax Liabilities of Seller pursuant
to state or local Tax Law.
(d) Without limiting the generality of Section 6.5(b), as
promptly as practicable after the date hereof, Buyer shall make all filings
required by the Federal Power Act. Prior to filing any application with the
FERC, Buyer shall submit such application to Seller for review and comment
and shall incorporate into such application all revisions reasonably
requested. Buyer shall be solely responsible for the cost of preparing and
filing such application, as well as all petition(s) for rehearing and all
reapplications. If any filing is rejected by the FERC, Buyer shall petition
the FERC for rehearing or permission to re-submit an application with the
FERC, provided that, in either case, such action has been approved by
Seller.
6.6 Certain Tax Matters.
(a) All transfer, sales and similar Taxes ("Transfer Taxes")
incurred in connection with this Agreement and the Additional Agreements,
and the transactions contemplated hereby and thereby (including (i) sales
Tax on the sale or purchase of the Purchased Assets imposed by Delaware and
Maryland and (ii) transfer Tax on conveyances of interests in real property
imposed by Delaware and Maryland) shall be borne by Buyer (and, to the
extent paid by Seller, Buyer shall reimburse Seller upon request);
provided, however, that if, pursuant to Section 6.6(e), the transactions
contemplated by this Agreement are effectuated as a Like-Kind Exchange,
then Seller shall bear such Transfer Taxes to the extent that they exceed
the amount of Transfer Taxes that would have otherwise been incurred had
the transactions not been effectuated as a Like-Kind Exchange (and all such
amounts shall be computed on an after-Tax basis). Buyer, at its expense,
shall prepare and file, to the extent required by, or permissible under,
applicable Law, all necessary Tax Returns and other documentation with
respect to all such Transfer Taxes, and, if required by applicable Law,
Seller shall join in the execution of all such Tax Returns and other
documentation; provided, however, that prior to the Closing Date, to the
extent applicable, Buyer shall provide to Seller appropriate certificates
of Tax exemption from each applicable Governmental Authority.
(b) With respect to Taxes to be prorated in accordance with
Section 3.5, Buyer shall prepare and timely file all Tax Returns required
to be filed after the Closing Date with respect to the Purchased Assets, if
any, and shall duly and timely pay all such Taxes shown to be due on such
Tax Returns. Buyer's preparation of such Tax Returns shall be subject to
Seller's
40
approval, which approval shall not be unreasonably withheld or delayed. Buyer
shall make each such Tax Return available for Seller's review and approval
(which approval shall not be unreasonably withheld or delayed) no later than
fifteen (15) Business Days prior to the due date for filing such Tax Return, it
being understood that Seller's failure to approve any such Tax Return shall not
limit Buyer's obligation to timely file such Tax Return and duly and timely pay
all Taxes shown to be due thereon.
(c) Buyer and Seller shall provide the other with such
assistance as may reasonably be requested by the other Party in connection
with the preparation of any Tax Return, audit or other examination, or any
proceeding, by or before any Governmental Authority relating to Liability
for Taxes, and each Party shall retain and provide the requesting Party
with all books and records or other information which may be relevant to
such Tax Return, audit, examination or proceeding. All books, records and
information obtained pursuant to this Section 6.6(c) or pursuant to any
other Section that provides for the sharing of books, records and
information or review of any Tax Return or other instrument relating to
Taxes shall be kept confidential by the parties hereto in accordance with
the terms and conditions set forth in the Confidentiality Agreement.
(d) In the event that a dispute arises between Seller and
Buyer regarding Taxes or any amount due under this Section 6.6, the
affected Parties shall attempt in good faith to resolve such dispute and
any agreed-upon amount shall be promptly paid to the appropriate Party. If
any such dispute is not resolved within thirty (30) days after notice
thereof is given to any Party, the affected Parties shall submit the
dispute to an Independent Accounting Firm for resolution, which resolution
shall be final, binding and conclusive on such Parties. Notwithstanding
anything in this Agreement to the contrary, the fees and expenses of the
Independent Accounting Firm in resolving the dispute shall be borne equally
by Seller and Buyer. Any payment required to be made as a result of the
resolution by the Independent Accounting Firm of any such dispute shall be
made within five (5) Business Days after such resolution, together with any
interest determined by the Independent Accounting Firm to be appropriate.
(e) As reasonably requested by Seller, Buyer shall cooperate
with Seller in effectuating the transactions contemplated by this Agreement
in such a manner as to qualify for deferred like-kind exchange treatment
under Section 1031 of the Code ("Like-Kind Exchange") (including the
transfer of cash and other property and the assignment of this Agreement to
one or more qualified intermediaries and the execution of appropriate
documentation). In such event, Seller shall be responsible, and shall
indemnify Buyer for, any Transfer Taxes incurred by Buyer as a result of
effectuating such Like-Kind Exchange to the extent that the amount of such
Transfer Taxes exceeds the amount of Transfer Taxes that the Buyer would
have otherwise incurred had the transactions not been effectuated as a
Like-Kind Exchange (and all such amounts shall be computed on an after-Tax
basis). At Buyer's request, Seller shall promptly provide Buyer copies of
all documents prepared by Seller, including proposed agreements, relating
to the Like-Kind Exchange and shall give Buyer a reasonable opportunity to
promptly comment on such documents and agreements.
41
(f) To the extent that any Party receives a Tax refund or
credit with respect to a Tax that was paid or incurred by the other Party,
such receiving Party shall promptly pay the amount of such Tax refund or
credit to the other Party.
6.7 Advice of Changes. Prior to the Closing, each Party shall
advise the other in writing with respect to any matter arising after the
date of this Agreement of which that Party obtains Knowledge and which, if
existing or occurring on or prior to the date of this Agreement, would have
been required to be set forth in this Agreement, including any of the
Schedules hereto. Seller shall, from time to time prior to the Closing,
promptly supplement or amend the Schedules to this Agreement with respect
to (a) any matter that existed as of the date of this Agreement and should
have been set forth or described in any of the Schedules hereto and (b) any
matter hereafter arising which, if existing as of the date of this
Agreement, would have been required to be set forth or described in any of
the Schedules hereto in order to make any representation or warranty set
forth in this Agreement true and correct as of such date; provided,
however, that, with respect to clause (a) above, any such supplemental or
amended disclosure shall not be deemed to have been disclosed as of the
date of this Agreement unless expressly consented to in writing by Buyer;
and provided further, that, with respect to clause (b) above, any such
supplemental or amended disclosure shall, for purposes of this Agreement,
including for purposes of determining whether the conditions to Closing set
forth in Article VII are satisfied, be deemed to have been disclosed as of
the date of this Agreement.
6.8 Employees.
(a) Buyer shall offer employment, effective as of the
Closing Date, to all employees of Seller employed at the Wholly Owned
Stations as of the Closing Date who are covered by any IBEW Collective
Bargaining Agreement, including those employees absent from active service
due to illness or leave of absence (the "Union Employees"), pursuant to and
in accordance with the applicable IBEW Collective Bargaining Agreement and
applicable Law. Each Union Employee who becomes employed by Buyer pursuant
to this Section 6.8(a) is referred to herein as a "Transferred Union
Employee". Each Transferred Union Employee shall receive on or before the
date that is thirty (30) days after the Closing Date a $4,500 lump sum
signing bonus from Seller, less applicable withholdings.
(b) Any Union Employee who refuses an offer of employment
from Buyer shall be treated by Seller as a terminated employee under the
terms of the IBEW Collective Bargaining Agreements.
(c) Schedule 6.8(c) sets forth the collective bargaining
agreements and amendments and supplements thereto to which Seller is a
party with the IBEW in connection with the Wholly Owned Stations (as so
amended and supplemented, "IBEW Collective Bargaining Agreements").
Transferred Union Employees shall retain their seniority and receive full
credit for service with Seller and its Affiliates in connection with
entitlement to vacation and all
42
other benefits and rights under the IBEW Collective Bargaining Agreements to
which seniority or years of service are applicable. On the Closing Date, Buyer
shall assume the IBEW Collective Bargaining Agreements for the duration of their
respective terms as they relate to Transferred Union Employees and other
employees to be employed by Buyer or its Affiliates at the Wholly Owned Stations
in positions covered by the IBEW Collective Bargaining Agreements, and Buyer
shall comply with all applicable obligations under the IBEW Collective
Bargaining Agreements. Buyer shall establish a pension plan and benefit programs
for the duration of the remaining term of the IBEW Collective Bargaining
Agreements which are substantially equivalent to Seller's plans and programs and
shall provide, with respect to each benefit and coverage thereunder, at least
the same level of benefits and coverage as Seller's plans and programs as of the
Closing Date, all in accordance with the IBEW Collective Bargaining Agreements.
Buyer shall recognize the IBEW as the collective bargaining agent for the
Transferred Employees in positions covered by the IBEW Collective Bargaining
Agreements.
(d) Buyer shall comply with the provisions of ss. 1016(b) of
the Delaware Electric Utility Restructuring Act of 1999, and similar Laws
in other jurisdictions, with respect to all Union Employees covered by the
IBEW Collective Bargaining Agreements.
(e) Buyer may, but, except as set forth below, shall not be
required to, offer employment, effective as of the Closing Date, to certain
employees of Seller, to be agreed to by Buyer and Seller, who are (i)
employed at the Wholly Owned Stations (other than Union Employees) or (ii)
corporate support personnel identified by Seller within thirty (30) days
after the date hereof (collectively, the "Non-Union Employees" and,
together with Union Employees, "Employees"), provided that, Buyer shall
hire its initial complement of management personnel from among the
Non-Union Employees. Within ninety (90) days after the date hereof, Buyer
shall notify Seller as to the identity of those Non-Union Employees to whom
it intends to offer employment, provided that, during such period, Seller
shall, upon reasonable notice and to the extent not disruptive to the
operation of the Purchased Assets, provide Buyer with reasonable access to
Non-Union Employees and, to the extent permitted by applicable Law, their
personnel records. Each Non-Union Employee who becomes employed by Buyer
pursuant to this Section 6.8(e) shall be referred to herein as a
"Transferred Non-Union Employee" and, together with Transferred Union
Employees, the "Transferred Employees." Each Transferred Non-Union Employee
shall receive on or before the date that is thirty (30) days after the
Closing Date a lump sum signing bonus from Seller equal to 10% of such
Transferred Non-Union Employee's base salary in the most recent calendar
year ending prior to the Closing, less applicable withholdings. Any offer
of employment to a Non-Union Employee that satisfies all of the following
requirements is referred to herein as a "Qualified Offer":
(i) Buyer shall offer such Non-Union Employee
full-time employment with Buyer; provided, however, that nothing herein
shall prevent Buyer from terminating any Transferred Non-Union Employee
following the Closing Date for cause within twelve (12) months after the
Closing and for any reason thereafter.
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(ii) Buyer shall pay and provide such Transferred
Non-Union Employee annual compensation, bonus and other incentive
opportunities (the "Total Cash Compensation") at a rate equal to at least
85% of such Transferred Non-Union Employee's Total Cash Compensation in the
most recent calendar year ending prior to the Closing.
(iii) The location of such Transferred Non-Union
Employee's workplace must be no more than 50 miles from the location of
such Transferred Non-Union Employee's workplace as of immediately prior to
the Closing Date.
(iv) Such Transferred Non-Union Employee shall be
eligible to participate in such employee benefit plans, programs and
arrangements of Affiliates of Buyer as are offered to similarly situated
non-union employees of Buyer's operating Affiliates ("Buyer's Benefit
Plans") and shall receive full credit for service with Seller and their
Affiliates for eligibility, vesting and benefits entitlement purposes;
provided, however, that such service shall not be required to be recognized
to the extent that such recognition would result in a duplication of
benefits. Buyer shall cause the Buyer's Benefit Plans to (x) waive all
limitations as to pre-existing condition exclusions and waiting periods
with respect to such Transferred Non-Union Employee under the employee
welfare benefit plans (as such term is defined in Section 3(1) of ERISA) of
Buyer or its Affiliates ("Buyer's Welfare Plans") to the extent such
limitations or waiting periods that were in effect with respect to such
Transferred Non-Union Employees under Seller's employee welfare plans have
been satisfied as of the Closing Date, and (y) provide such Transferred
Non-Union Employee with credit for any co-payments and deductibles paid
prior to the Closing Date in satisfying any deductible or out-of-pocket
requirements under the Buyer Welfare Plans (on a pro rata basis in the
event of a difference in plan years).
(f) With respect to each Transferred Employee's accrued
benefit (based on service and compensation as of the Closing Date) (the
"Closing Date Benefits"), Seller shall, effective as of the Closing Date,
amend the Conectiv Retirement Plan ("Seller's Pension Plan") to (i)
recognize service with Buyer for purposes of vesting the Closing Date
Benefits in Seller's Pension Plan; (ii) recognize service with Buyer toward
eligibility for receipt of subsidized early retirement and optional benefit
forms with respect to the Closing Date Benefits under Seller's Pension
Plan; (iii) provide that retirement from Buyer's service shall be deemed
retirement from active employment with Seller for purposes of eligibility
for receipt of subsidized early retirement and optional benefit forms with
respect to the Closing Date Benefits under Seller's Pension Plan; and (iv)
provide that Closing Date Benefits cannot commence until the earlier of
such Transferred Employee's actual retirement from Buyer's employment or
attainment of age 65. The pension plan of Buyer ("Buyer's Pension Plan")
shall recognize all prior service with Seller for purposes of vesting and
benefit accrual for Transferred Union Employees (and, at Buyer's election,
Transferred Non-Union Employees), and may offset the Closing Date Benefits
from benefit accruals thereunder. Buyer and Seller shall provide each other
with such records and information as may be necessary or appropriate to
carry out their respective obligations under this Section 6.8(f) for the
purposes of administration of Buyer's Pension Plan and Seller's Pension
Plan.
44
(g) As soon as practicable, and in any event within ninety
(90) days after the Closing Date, Buyer shall establish or make available
to Transferred Union Employees a defined contribution pension plan (or
plans) and trust (or trusts) intended to qualify under Sections 401(a) and
501(a) of the Code (such plan or plans referred to as "Buyer's Savings
Plan") in which all Transferred Union Employees shall be eligible to
participate as of the later of the Closing Date or the Buyer's Savings
Plan's Effective Date. Buyer's Savings Plan shall provide for deferral
options and employer matching contributions with respect to the Transferred
Union Employees who are participants in the Conectiv Savings & Investment
Plan and the Atlantic City Electric Co. Savings Plan B (collectively,
"Seller's Savings Plans") as of the Closing Date (such employees, the
"Transferred Savings Employees") that are no less favorable than those
provided as of immediately prior to the Closing Date to the Transferred
Savings Employees under the Seller's Savings Plans (including an
opportunity to make up for any lost deferrals and/or employer matching
contributions that were unavailable because of a delay between the Closing
Date and the effective date of Buyer's Savings Plan). Contributions to the
Seller's Savings Plans with respect to the Transferred Savings Employees
shall cease effective as of the Closing Date. Each Transferred Savings
Employee shall be afforded the option of transferring his or her account
balance into the Buyer's Savings Plan; provided, however, that if Seller is
able to obtain a favorable ruling from the Internal Revenue Service to the
effect that the consummation of the transactions contemplated hereby shall
constitute a sale of substantially all of the assets used in a trade or
business within the meaning of Section 401(k)(10) of the Code, each
Transferred Savings Employee shall be afforded the option of rolling over
his or her account balance into the Buyer's Savings Plan. Such transfers or
rollovers shall satisfy the requirements of Section 414(l) of the Code and
Section 208 of ERISA and shall be in the form of cash or other property, as
Seller and Buyer shall mutually agree prior to such transfer or rollover.
Prior to such transfer or rollover, Buyer will provide Seller with such
documents and other information as Seller shall reasonably request to
assure itself that Buyer's Savings Plan and the trust or trusts established
pursuant thereto (i) provide for voluntary participant after-tax
contributions and (ii) contain participant loan provisions and procedures
necessary to effect the orderly transfer of participant loan balances
associated with the transfer or rollover. In the event that a Transferred
Savings Employee shall elect to leave his or her loan balance in one of
Seller's Savings Plans, Buyer shall cooperate with Seller in providing that
such outstanding loan balance shall be repaid through payroll deductions
from Buyer's payroll. Upon such transfer, Buyer's Savings Plan shall assume
all Liabilities whatsoever with respect to all amounts transferred from
Seller's Savings Plan to Buyer's Savings Plan in respect of the Transferred
Savings Employees and Seller, its Affiliates and Seller's Savings Plan
shall be relieved of all such Liabilities. Notwithstanding anything in this
Section 6.8(g) to the contrary, no such transfer or rollover shall take
place unless and until Seller have received written evidence of the
adoption of Buyer's Savings Plan and the trust (or trusts) thereunder by
Buyer and either (A) a copy of a favorable determination letter issued by
the Internal Revenue Service and satisfactory to Seller's counsel with
respect to Buyer's Savings Plan or (B) an opinion, satisfactory to Seller's
counsel, of Buyer's counsel to the effect that the terms of Buyer's Savings
Plan and its related trust or trusts qualify under Sections 401(a) and
501(a) of the Code. Buyer and Seller shall provide each other with such
records and information
45
as may be necessary or appropriate to carry out their obligations under this
Section 6.8(g) for the purposes of administration of Buyer's Savings Plan, and
they shall cooperate in the filing of documents required by the transactions
described herein.
(h) Buyer shall provide severance benefits as set forth on
Schedule 6.8(h) to any Transferred Non-Union Employee (i) who, within the
12-month period immediately following the Closing Date, is terminated by
Buyer or any of its Affiliates other than for cause (as defined on Schedule
6.8(h)) or (ii) with respect to such Persons who have received and accepted
Qualifying Offers, whose terms and conditions of employment with Buyer or
any of its Affiliates are changed during the 12-month period immediately
following the Closing Date, such that such terms and conditions fail to
satisfy all of the requirements set forth in clauses (i) through (iv) of
Section 6.8(e).
(i) Buyer shall provide notice of and the opportunity to
purchase continuation coverage as required by COBRA to any dependent or
former dependent of a Transferred Union Employee or Transferred Non-Union
Employee who incurs a "qualifying event" (as such term is defined in COBRA)
on or after the Closing Date, or who incurs a "qualifying event" prior to
the Closing Date (other than a termination of employment or death of the
employee) as to which notice is not provided to Seller or Buyer until the
Closing Date or thereafter.
(j) Seller shall be responsible, with respect to the
Purchased Assets, for performing and discharging all requirements under the
WARN Act and under applicable state and local Laws for the notification of
Union Employees and Non-Union Employees of any "employment loss" (within
the meaning of the WARN Act) which occurs prior to the Closing Date.
(k) Notwithstanding any contrary provision of this Section
6.8, Buyer may, in its sole discretion and at its expense, choose to offer
a voluntary early retirement or employment termination benefit program to
any group of Union Employees or Non-Union Employees, and such program may
be offered either before or after the Closing. Seller shall (i) cooperate
with Buyer in the design, implementation and administration of such
program; and (ii) provide Buyer with such financial and demographic
information as may be reasonably necessary for such design, implementation
or administration. Buyer acknowledges and agrees that (x) any such program
will require participating Employees to sign a release or waiver as a
condition of receipt of benefits thereunder; (y) such release or waiver
shall be designed and implemented in compliance with the requirements for
valid waivers contained in the Age Discrimination in Employment Act, as
amended, whether or not a participating Employee is protected by such Act;
and (z) such release or waiver shall release Seller, its directors,
officers and subsidiaries, to the same extent that Buyer is released
thereby. Buyer shall reimburse Seller for all reasonable out-of-pocket
costs, fees and expenses incurred at the direction of Buyer in the design,
implementation or administration of such program.
6.9 Risk of Loss.
46
(a) From the date hereof through the Closing Date, all risk
of loss or damage to the Tangible Personal Property included in the
Purchased Assets shall be borne by Seller, other than loss or damage caused
by the negligent acts or omissions of Buyer or any Buyer Representative,
which loss or damage shall be the responsibility of Buyer.
(b) Notwithstanding any provision hereof to the contrary,
subject to Section 9.1(g), if, before the Closing Date, all or any portion
of the Purchased Assets is (i) condemned or taken by eminent domain or is
the subject of a pending or threatened condemnation or taking which has not
been consummated, or (ii) materially damaged or destroyed by fire or other
casualty, Seller shall notify Buyer promptly in writing of such fact, and
(x) in the case of a condemnation or taking, Seller shall assign or pay, as
the case may be, any net proceeds thereof to Buyer at the Closing and (y)
in the case of a fire or other casualty, Seller shall either restore such
damage or assign the insurance proceeds therefor to Buyer at the Closing.
Notwithstanding the foregoing, if such condemnation, taking, damage or
destruction results in a Material Adverse Effect, Buyer and Seller shall
negotiate to resolve the loss resulting from such condemnation, taking,
damage or destruction (and such negotiation shall include the negotiation
of a fair and equitable adjustment to the Purchase Price). If no such
resolution can be agreed upon within ninety (90) days after Seller has
notified Buyer of such loss, then Buyer, on the one hand, or Seller, on the
other hand, may terminate this Agreement pursuant to Section 9.1(g).
6.10 Certain Tax-Exempt Bonds. Buyer acknowledges that Seller
financed the Purchased Assets set forth on Schedule 6.10 with the proceeds
of tax-exempt bonds and that the continuing tax-exempt status of such bonds
depends on the continuing qualifying use of such assets as property used to
▇▇▇▇▇ or control water or atmospheric pollution or contamination by
removing, altering, disposing or storing pollutants, contaminants, water or
heat within the meaning of Section 103(b)(4)(F) of the Code ("Qualifying
Use"). In the event that the use of such assets is changed to a
non-Qualifying Use on or before the maturity date of such bonds, as set
forth on Schedule 6.10, Seller will be required to take certain action to
comply with their obligations to maintain the tax-exempt status of those
bonds. Accordingly, Buyer shall give Seller written notice of any change in
the use of such assets from their current Qualifying Use that occurs before
the maturity date of such bonds, as set forth on Schedule 6.10. Such notice
shall be given at least ten (10) Business Days prior to such change in use.
Notwithstanding the foregoing, Buyer shall not be deemed to have breached
this Section 6.10 if Buyer shall abandon the use of such assets. In the
event that Buyer sells or otherwise transfers such assets on or before the
maturity date of such bonds, as set forth on Schedule 6.10, Buyer shall
give written notice to Sellers at least ten (10) Business Days prior
thereto and Buyer shall require the subsequent owner of such assets to
covenant and agree to comply with the provisions of this Section 6.10. This
covenant shall be included in any recorded deed of transfer of such assets
and, to the extent applicable, will be considered a covenant that runs with
the land.
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6.11 PJM; MAAC. From and after the Closing Date, Buyer shall
maintain membership in good standing in PJM and MAAC, and shall submit to
the governance of the independent system operator established and
administered under the PJM Agreement.
6.12 Emission Allowances.
(a) Buyer and Seller shall take all necessary actions,
including executing any required forms or providing appropriate notices to
Governmental Authorities, in a timely fashion, to ensure that (i) Buyer
will obtain all, or the rights to all, (A) Emission Allowances that are to
be transferred to it pursuant to Section 2.1(f) and as set forth on
Schedule 2.1(f), including the right to receive such Emission Allowances
that are to be allocated or issued by a Governmental Authority in the
future, and (B) Excess Emission Allowances that are to be transferred to it
pursuant to Section 2.1(g) and as set forth on Schedule 2.1(g) and (ii)
Seller will retain or obtain all, or the rights to all, Emission Allowances
that are defined as Excluded Assets pursuant to Section 2.2(p), including
the right to receive such Emission Allowances that are to be allocated or
issued by a Governmental Authority in the future. Buyer and Seller further
acknowledge and agree that such actions may be required before, on or after
the Closing Date.
(b) Notwithstanding anything in this Agreement to the
contrary, Seller shall provide additional Emissions Allowances to Buyer in
connection with Seller's operation of the Purchased Assets during the year
of the Closing, or Buyer shall transfer Emissions Allowances to Seller, as
follows:
(i) SO2 Allowances.
(A) Seller shall provide SO2 Allowances to
Buyer based on the following formula: (1) Seller's emissions of SO2 (in
tons) from the units subject to Title IV of the Clean Air Act, 42 ▇.▇.▇.▇▇.
7401, et seq., for the period of the year from and including January 1 of
the year the transaction closes up to, but not including, the Closing Date;
minus (2) Seller's Prorated SO2 Allowances. Seller's Prorated SO2
Allowances shall be determined by adding all of the SO2 Allowances set
forth on Schedule 6.12(b)(i) from and including January 1 of the year in
which the transaction closes up to, but not including, the Closing Date. If
the result of this calculation is less than zero, then Buyer shall transfer
to Seller SO2 Allowances equal to the absolute value of the result of the
calculation set forth in this subsection.
(B) If Schedule 6.12(b)(i) is not finalized as
of the date of the execution of this Agreement, Seller hereby covenants to
act in good faith to promptly prepare such schedule. Schedule 6.12(b)(i)
shall be prepared as follows. First, Seller shall develop a projection of
its SO2 emissions for each of the Purchased Assets for each calendar day
for the year 2000. Second, Seller shall take the SO2 Allowances set forth
on Schedule 2.1(f) for each Purchased Asset for the year 2000 and allocate
the SO2 Allowances to each calendar day for the year 2000 so that for each
calendar day, the ratio of said SO2 Allowances to the total number of SO2
Allowances for the Purchased Asset set forth on Schedule 2.1(f) for the
year 2000 shall
48
equal the ratio of the projected SO2 emissions for each calendar day to the
total number of projected SO2 emissions for the Purchased Asset for the year
2000. When completed, Schedule 6.12(b)(i) shall be a day-by-day schedule of SO2
Allowances for each of the Purchased Assets. The final form and substance of
Schedule 6.12(b)(i) shall be subject to the agreement of Seller and Buyer,
acting in good faith, consistent with the terms of this subsection.
(ii) NOx Emission Allowances.
(A) Seller shall provide NOx Emission
Allowances to Buyer based on the following formula: (1) Seller's emissions
of NOx (in tons) from the units subject to the NOx Budget Program of New
Jersey for the period of the year from and including May 1 of the year in
which the transaction closes up to, but not including, the Closing Date or
September 30 of said year, whichever comes first; minus (2) Seller's
Prorated NOx Emission Allowances. Seller's Prorated NOx Emission Allowances
shall be determined by adding all of the NOx Emission Allowances set forth
on Schedule 6.12(b)(ii) from and including May 1 of the year the
transaction closes up to, but not including, the Closing Date or September
30 of the year the transaction closes, whichever comes first. If the result
of this calculation is less than zero, than Buyer shall transfer to Seller
an amount of NOx Emission Allowances equal to the absolute value of the
result of the calculation set forth in this subsection.
(B) If Schedule 6.12(b)(ii) is not finalized
as of the date of the execution of this Agreement, Seller hereby covenants
to act in good faith to promptly prepare such schedule after the relevant
Governmental Authority finalizes the allocation of NOx Emission Allowances
for the year 2000. Schedule 6.12(b)(ii) shall be prepared as follows.
First, Seller shall develop a projection of its NOx emissions for each of
the Purchased Assets for each calendar day from May 1, 2000 to and
including September 30, 2000. Second, Seller shall take the NOx Emission
Allowances set forth on Schedule 2.1(f) for each Purchased Asset for the
year 2000 and allocate the NOx Emission Allowances to each calendar day for
the period May 1, 2000 to and including September 30, 2000, so that for
each such calendar day, the ratio of said NOx Emission Allowances to the
total number of NOx Emission Allowances for the Purchased Asset set forth
on Schedule 2.1(f) for the year 2000 shall equal the ratio of the projected
NOx emissions for each such calendar day to the total number of projected
NOx emissions for the Purchased Asset for the period May 1, 2000 to and
including September 30, 2000. When completed, Schedule 6.12(b)(ii) shall be
a day-by-day schedule of NOx Emission Allowances for each of the Purchased
Assets. The final form and substance of Schedule 6.12(b)(ii) shall be
subject to the agreement of Seller and Buyer, acting in good faith,
consistent with the terms of this subsection.
(iii) If it appears that the Closing of the
transactions contemplated by this Agreement will not occur until after
December 31, 2000, Seller shall prepare schedules that will accomplish the
same purpose as Schedules 6.12(b)(i) and 6.12(b)(ii) for calendar year
2001. Such schedules shall be prepared consistent with the terms of Section
6.12(b).
49
(c) Buyer shall deliver to Seller, within thirty (30) days
after Closing, a statement indicating the amount of SO2 Allowances and NOx
Emission Allowances it is owed, or that it owes Seller, in accordance with
the formulas set forth in subsection (b) (the "Statement"). The Statement
shall be based on verified CEMs data for SO2 and NOx and shall include
sufficient information to be evaluated by Seller. In the event that Seller
is in disagreement with the Statement, Seller shall, within ten (10)
calendar days after receipt of the Statement, notify Buyer of such
disagreement setting forth with specificity the nature of such
disagreement. If Seller fails to notify Buyer of all disagreements within
the ten (10) calendar days provided for herein, then the Statement, as
delivered by Buyer pursuant to Section 6.12(c), shall be final, binding and
conclusive on the Parties hereto and the Party owing SO2 Allowances and/or
NOx Emission Allowances to the other Party shall transfer such SO2
Allowances and/or NOx Emission Allowances (or make a payment in lieu of
transferring such Emissions Allowances in accordance with Section 6.12(d)).
If Seller is in disagreement with the Statement and notifies Buyer within
such ten (10) calendar day period, then the Parties shall promptly attempt
to resolve such disagreement by negotiation. If the Parties are unable to
resolve such disagreements within fifteen (15) calendar days following such
notice of disagreement, the Parties shall appoint an Independent Accounting
Firm within thirty (30) calendar days following such notice, which shall
review the Statement and any additional information related to the
Statement submitted by either of the Parties and shall determine the amount
of SO2 Allowances and/or NOx Emission Allowances owed by either of the
Parties. Resolution of any such disagreements shall be made by the
Independent Accounting Firm in a writing addressed to all Parties within
thirty (30) calendar days following referral to it by the Parties of such
disagreements in accordance with this Agreement. The findings of such
Independent Accounting Firm shall be final, binding and conclusive on the
Parties. All costs and fees of the Independent Accounting Firm shall be
borne by Buyer and Seller equally.
(d) The Party or Parties owing SO2 Allowances and/or NOx
Emission Allowances calculated pursuant to this Section shall transfer the
number of SO2 Allowances and/or NOx Emission Allowances owed to the other
Party by no later than thirty (30) days prior to the dates by which Buyer
must have sufficient SO2 Allowances and/or NOx Emission Allowances in its
compliance accounts in order to comply with Title IV of the federal Clean
Air Act or the NOx Budget Programs of Delaware and Maryland. The NOx
Emission Allowances and SO2 Allowances transferred hereunder shall have a
vintage year that is the same as the year the transaction closes or, solely
in the case of SO2 Allowances, a prior vintage year, unless the Party that
is owed such Emission Allowances waives such requirement in writing. If the
Party owing SO2 Allowances and/or NOx Emission Allowances does not or
cannot meet this provision, the other Party shall be entitled to (i)
acquire SO2 Allowances and/or NOx Emission Allowances equal to the number
of additional SO2 Allowances and/or NOx Emission Allowances calculated
pursuant to this Section and (ii) seek compensation from the owing Party
for the cost of acquiring such additional SO2 Allowances and/or NOx
Emission Allowances, respectively ("Allowance Cost"), which shall be
calculated based on the market price for such allowances as of the date
such allowances are purchased; provided, that a Party that is owed SO2
Allowances and/or NOx Emission Allowances and has the right to purchase
such Emission Allowances pursuant to this Section must purchase such
Emission Allowances no later than 180 days after the date(s) by which the
owing Party was to provide such Emission Allowances
50
to the owed Party, as set forth in the first sentence of this subsection, in
order to be entitled to receive compensation under this subsection. The Party
that has the right to purchase SO2 Allowances and/or NOx Emission Allowances
pursuant to this Section shall also be entitled to receive simple interest at
the Prime Rate on the Allowance Cost, which shall accrue from the date(s)
payment is due as provided in the following sentence through and including the
date of payment by the owing Party. Payment shall be made no later than thirty
(30) days after the owing Party receives an invoice from the owed Party for
compensation, which invoice shall specify the market price of the Emissions
Allowances acquired by the owed Party; provided, that the owing Party shall not
be obligated to make such payment if it disputes the amount of compensation
claimed by the owed Party within fifteen (15) days after receipt of the invoice
from the owed Party. Any disputes concerning the compensation owed to Buyer
under Section 6.12(d) shall be resolved through good faith negotiations between
the Parties. Buyer and Seller shall be obligated to act reasonably to mitigate
the Allowance Cost as set forth herein. Furthermore, notwithstanding anything to
the contrary herein, Seller shall have no obligation to indemnify Buyer for any
penalties or fines or other costs or expenses related to Buyer's failure to
comply with the legal requirements of Title IV of the Clean Air Act or the NOx
Budget Program of New Jersey.
6.13 Insurance Claims. Seller shall use its Commercially Reasonable
Efforts to assist Buyer in making any claims relating to pre-Closing
periods against any insurance policies of Seller that may provide coverage
related to the Assumed Liabilities.
6.14 Reimbursement of Certain Metering Expenses. From and after the
Closing, Buyer shall (i) reimburse Seller for reasonable amounts expended
by Seller prior to the later to occur of December 31, 2000 and the date
that is ninety (90) days after the Closing Date in connection with the
installation, renovation or improvement of revenue quality meters and
related equipment up to an aggregate amount of $1,500,000; and (ii)
cooperate with Seller as fully as reasonably possible in order to
facilitate Seller's installation, renovation or improvement of revenue
quality meters and related equipment to the extent that such installation,
renovation or improvement requires that Seller gain access to the Real
Property after the Closing Date.
ARTICLE VII
CONDITIONS
7.1 Conditions to Obligation of Buyer. The obligation of Buyer to
effect the transactions contemplated by this Agreement shall be subject to
the satisfaction (or the waiver, to the extent permitted by applicable Law,
by Buyer) at or prior to the Closing of the following conditions:
51
(a) The waiting period under the HSR Act applicable to the
consummation of the transactions contemplated hereby shall have expired or
been terminated;
(b) No preliminary or permanent injunction, order or decree
by any Governmental Authority which prevents the consummation of the
transactions contemplated hereby or by the Additional Agreements shall have
been issued and remain in effect (Buyer agreeing to use its reasonable best
efforts to have any such injunction, order or decree lifted), and no
applicable Law shall be in effect which prohibits the consummation of the
transactions contemplated hereby or thereby;
(c) Buyer shall have obtained the Buyer's Required
Regulatory Approvals set forth on Schedule 7.1(c), in form and substance
reasonably satisfactory to Buyer (including any adverse conditions
therein); and such Buyer's Required Regulatory Approvals shall be final and
nonappealable;
(d) Seller shall have in all material respects performed and
complied with the covenants and agreements contained in this Agreement
which are required to be performed and complied with by Seller on or prior
to the Closing Date;
(e) (i) The representations and warranties of Seller set
forth in this Agreement that are qualified by reference to Material Adverse
Effect shall be true and correct in all respects and (ii) the
representations and warranties of Seller set forth in this Agreement that
are not so qualified shall be true and correct in substantially all
respects, in each case, as of the Closing Date as though made at and as of
the Closing Date (other than representations and warranties that are made
as of a specific date which shall have been true and correct as of such
date);
(f) Buyer shall have received a certificate from an
authorized officer of Seller, dated the Closing Date, to the effect that,
to such officer's Knowledge, the conditions set forth in Sections 7.1(d)
and (e) have been satisfied by Seller;
(g) Buyer shall have received an opinion from Seller's
counsel, which counsel shall be reasonably acceptable to Buyer, dated the
Closing Date, substantially in the form of Exhibit I hereto;
(h) There shall not have occurred any Material Adverse
Effect during the period commencing on the date hereof and ending at the
Closing;
(i) Buyer shall be able to obtain at Closing an owner's
policy or policies of title insurance issued on the form customarily used
in Delaware and Maryland as applicable, insuring title to the Real Property
in an amount equal to the Purchase Price relating to such Real Property, or
such lesser amount as Buyer elects, with exceptions only for Permitted
Encumbrances, but without the so-called "standard" exceptions for (x) the
rights of parties in possession, (y) unfiled mechanics' and materialmens'
liens and (z) matters arising after the dates of the
52
Title Commitments and with the creditors' rights exclusion to coverage deleted,
without Buyer being obligated to pay more than $50,000 in aggregate additional
premium in order for the issuer to delete or insure over title exceptions which
are not Permitted Encumbrances. For purposes hereof "additional premium" means
premium in excess of the amount that the title insurer has otherwise agreed to
accept for issuing the policies of title insurance to Buyer in the requested
amount;
(j) Buyer shall have obtained an easement or comparable
access rights allowing Buyer reasonable access to the rail line serving the
Vienna Station;
(k) Seller shall have (i) completed in all material respects
the overhaul of the high pressure section of the steam turbine of ▇▇▇▇ ▇ ▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇ (▇▇) inspected and, to the extent consistent with
Seller's past practice, completed in all material respects the overhaul of
the low pressure section of the steam turbine of Unit 8 at the Vienna
Station, in each case, in a manner consistent with Seller's past practice;
provided, however, that, if prior to November 30, 2000 all conditions to
the obligations of all Parties to this Agreement to consummate the
transactions contemplated hereby have been satisfied or, to the extent
permitted by applicable Law, waived, other than the condition set forth in
this Section 7.1(k), then the condition set forth in this Section 7.1(k)
shall be deemed satisfied if such overhaul can reasonably be completed
after the Closing by Buyer, at Seller's expense, on or before November 30,
2000; it being understood that after the Closing Buyer shall complete such
overhaul in a manner consistent with Seller's past practice;
(l) Seller shall have completed in all material respects the
testing, start-up and commissioning of the ▇▇▇▇ ▇ ▇▇▇ ▇▇▇▇ ▇ ▇▇▇▇ ▇▇ the
Indian River Station;
(m) Seller shall have completed in all material respects the
repair of the generator, transformer and related equipment forming a part
of Unit 3 at the Indian River Station such that: (i) such repair complies
in all material respects with Good Utility Practices; and (ii) upon
completion of such repair, Unit 3 at the Indian River Station shall be
capable of meeting its net capacity of 165 MW as demonstrated for PJM's
summer and winter capacity tests prior to the effective date of the Power
Purchase Agreement;
(n) Seller shall have obtained an operating permit from
DNREC for Units 1 and 2 at the Indian River Station authorizing the use of
low NOx burner technology and over fire air; and
(o) Subject to the last sentence of Section 3.9, the Related
Purchase Agreements shall be in full force and effect and the valid and
binding obligation of each party thereto (other than Buyer); and all
conditions to the obligations of all parties to the Related Purchase
Agreements to consummate the transactions contemplated thereby shall have
been satisfied or, to the extent permitted by applicable Law, waived.
53
7.2 Conditions to Obligation of Seller. The obligation of Seller to
effect the transactions contemplated by this Agreement shall be subject to
the satisfaction (or the waiver, to the extent permitted by applicable Law,
by Seller) at or prior to the Closing of the following conditions:
(a) The waiting period under the HSR Act applicable to the
consummation of the transactions contemplated hereby shall have expired or
been terminated;
(b) No preliminary or permanent injunction or other order or
decree by any Governmental Authority which prevents the consummation of the
transactions contemplated hereby or by the Additional Agreements shall have
been issued and remain in effect (Seller agreeing to use its reasonable
best efforts to have any such injunction, order or decree lifted), and no
applicable Law shall be in effect which prohibits the consummation of the
transactions contemplated hereby or thereby;
(c) Seller shall have obtained the Seller's Required
Regulatory Approvals set forth on Schedule 7.2(c), in form and substance
reasonably satisfactory to Seller (including any adverse conditions
therein) and all conditions to effectiveness prescribed therein or
otherwise by Law shall have been satisfied in all material respects; and
such Seller's Required Regulatory Approvals shall be final and
nonappealable;
(d) Buyer shall have in all material respects performed and
complied with the covenants and agreements contained in this Agreement
which are required to be performed and complied with by Buyer on or prior
to the Closing Date;
(e) (i) The representations and warranties of Buyer set
forth in this Agreement that are qualified by reference to Buyer Material
Adverse Effect shall be true and correct in all respects and (ii) the
representations and warranties of Buyer that are not so qualified shall be
true and correct in substantially all respects, in each case, as of the
Closing Date as though made at and as of the Closing Date (other than
representations and warranties that are made as of a specific date which
shall have been true and correct as of such date);
(f) Seller shall have received a certificate from an
authorized officer of each Buyer, dated the Closing Date, to the effect
that, to such officer's Knowledge, the conditions set forth in Sections
7.2(d) and (e) have been satisfied by Buyer;
(g) Seller shall have received an opinion from Buyer's
counsel, which counsel shall be reasonably acceptable to Seller, dated the
Closing Date, substantially in the form of Exhibit J hereto; and
(h) Subject to the last sentence of Section 3.9, the Related
Purchase Agreements shall be in full force and effect and the valid and
binding obligation of each party thereto (other than Seller); and all
conditions to the obligations of all parties to the Related Purchase
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Agreements to consummate the transactions contemplated thereby shall have
been satisfied or, to the extent permitted by applicable Law, waived.
ARTICLE VIII
INDEMNIFICATION AND ARBITRATION
8.1 Indemnification.
(a) From and after the Closing Date, Buyer shall indemnify,
defend and hold harmless Seller and its Representatives (each, a "Seller's
Indemnitee"), from and against any and all claims, demands, suits, losses,
liabilities, penalties, damages, obligations, payments, costs and expenses
(including reasonable attorneys' fees and expenses in connection therewith)
(each, an "Indemnifiable Loss"), asserted against or suffered by any
Seller's Indemnitee relating to, resulting from or arising out of (i) any
breach by Buyer of any covenant or agreement of Buyer contained in this
Agreement, (ii) the Assumed Liabilities, (iii) any Inspection, or (iv) any
Third-Party Claim against any Seller's Indemnitee in connection with
Buyer's ownership, lease, maintenance or operation of any of the Purchased
Assets on or after the Closing Date (other than to the extent such
Third-Party Claim constitutes an Excluded Liability); provided, however,
that Buyer shall be liable to Seller pursuant to clause (i) of Section
8.1(a) only for Indemnifiable Losses for which any Seller's Indemnitee
gives written notice to Buyer (setting forth with reasonable specificity
the nature and amount of the Indemnifiable Loss) during the period for
which such covenants or agreements survive the Closing in accordance with
Section 10.6.
(b) From and after the Closing, Seller shall indemnify,
defend and hold harmless Buyer and its Representatives (each, a "Buyer's
Indemnitee" and, together with Seller's Indemnitees, an "Indemnitee"), from
and against any and all Indemnifiable Losses asserted against or suffered
by any Buyer's Indemnitee relating to, resulting from or arising out of (i)
any breach by Seller of any covenant or agreement of Seller set forth in
this Agreement or (ii) the Excluded Liabilities; provided, however, that
Seller shall be liable pursuant to clause (i) of this Section 8.1(b) only
for Indemnifiable Losses for which any Buyer's Indemnitee gives written
notice to Seller (setting forth with reasonable specificity the nature and
amount of the Indemnifiable Loss) during the period for which such
covenants or agreements survive the Closing in accordance with Section
10.6.
(c) In furtherance, and not in limitation, of the provisions
set forth in Section 8.1(a), Buyer, for itself and on behalf of its
Representatives, hereby irrevocably releases, holds harmless and forever
discharges Seller from any and all Indemnifiable Losses of any kind or
character, whether known or unknown, contingent or accrued, arising under
or relating to Environmental Laws, or relating to any claim in respect of
any Environmental Condition or Hazardous Substance, whether based on common
law or Environmental Laws relating to the Purchased Assets, other than such
Liabilities which have been retained by Seller hereunder
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(collectively, "Environmental Claims"). In furtherance of the foregoing, Buyer,
for itself and on behalf of its Representatives, hereby irrevocably waives any
and all rights and benefits with respect to such Environmental Claims that it
now has, or in the future may have conferred upon it by virtue of any Law or
common law principle, which provides that a general release does not extend to
claims which a party does not know or suspect to exist in its favor at the time
of executing the release, if knowledge of such claims would have materially
affected such party's settlement with the obligor. In this connection, Buyer
hereby acknowledges that it is aware that factual matters now unknown to it may
have given, or hereafter may give, rise to Environmental Claims that are
presently unknown, unanticipated and unsuspected, and Buyer further agrees that
this release set forth in this Section 8.1(c) has been negotiated and agreed
upon in light of that awareness, and Buyer, for itself and on behalf of its
Representatives, nevertheless hereby intends irrevocably to release, hold
harmless and forever discharge Seller from all such Environmental Claims.
(d) The rights and remedies of Seller and Buyer set forth in
this Article VIII are exclusive and in lieu of any and all other rights and
remedies which Seller and Buyer may have under this Agreement, under
applicable Law, whether at common law or in equity, including for
declaratory, injunctive or monetary relief, in each case, with respect to
any Indemnifiable Loss.
(e) Notwithstanding anything to the contrary herein, no
Person (including an Indemnitee) shall be entitled to recover from any
other Person (including any Party hereto required to provide
indemnification under this Agreement (an "Indemnifying Party")) any amount
in excess of the actual compensatory damages, court costs and reasonable
attorneys' fees suffered by such Party. Buyer and Seller hereby irrevocably
waive any right to recover punitive, special, exemplary and consequential
damages arising in connection with or with respect to this Agreement (other
than with respect to indemnification for a Third-Party Claim).
(f) Any Indemnitee shall use Commercially Reasonable Efforts
to mitigate all losses, damages and the like relating to a claim under the
indemnification provisions in this Section 8.1, including availing itself
of any defenses, limitations, rights of contribution, claims against third
Persons and other rights at law or equity. For purposes of this Section
8.1(f), the Indemnitee's Commercially Reasonable Efforts shall include the
reasonable expenditure of money to mitigate or otherwise reduce or
eliminate any loss or expenses for which indemnification would otherwise be
due, and, in addition to its other obligations hereunder, the Indemnifying
Party shall reimburse the Indemnitee for the Indemnitee's reasonable
expenditures in undertaking the mitigation.
8.2 Defense of Claims.
(a) If any Indemnitee receives notice of the assertion of
any claim or of the commencement of any suit, action or proceeding made or
brought by any Person who is not an Indemnitee (a "Third-Party Claim") with
respect to which indemnification is to be sought from
56
an Indemnifying Party, the Indemnitee shall give such Indemnifying Party
reasonably prompt written notice thereof, but in no event later than ten (10)
Business Days after the Indemnitee's receipt of notice of such Third-Party
Claim. Such notice shall describe the nature of the Third-Party Claim in
reasonable detail and shall indicate the estimated amount, if practicable, of
the Indemnifiable Loss that has been or may be incurred by the Indemnitee. The
Indemnifying Party shall have the right to participate in or, by giving written
notice to the Indemnitee, to elect to assume the defense of any Third-Party
Claim at such Indemnifying Party's expense and by such Indemnifying Party's own
counsel. If an Indemnifying Party elects not to assume the defense of any Third-
Party Claim, the Indemnitee may defend, compromise or settle such Third-Party
Claim with counsel selected by it, provided that, without the prior written
consent of the Indemnifying Party, the Indemnitee shall not agree to the entry
of any judgment with respect to, or any compromise or settlement of, any Third-
Party Claim, which judgment, compromise or settlement does not include the
unconditional release of the Indemnifying Party.
(b) If, within twenty (20) Business Days after an Indemnitee
gives written notice to the Indemnifying Party of any Third-Party Claim,
such Indemnitee receives written notice from the Indemnifying Party that
such Indemnifying Party has elected to assume the defense of such
Third-Party Claim as provided in Section 8.2(a), then the Indemnifying
Party shall not be liable for any costs, fees or expenses subsequently
incurred by the Indemnitee in connection with the defense, compromise or
settlement thereof.
(c) Subject to Section 8.3, any claim by an Indemnitee on
account of an Indemnifiable Loss which does not constitute a Third-Party
Claim (a "Direct Claim") shall be asserted by giving the Indemnifying Party
reasonably prompt written notice thereof, in no event later than twenty
(20) Business Days after the Indemnitee becomes aware of such Direct Claim,
stating the nature of such claim in reasonable detail and indicating the
estimated amount, if practicable, of such Indemnifiable Loss and the
Indemnifying Party shall have a period of twenty (20) Business Days within
which to respond to such Direct Claim. If the Indemnifying Party fails to
respond during such twenty (20) Business Day period, the Indemnifying Party
shall be deemed to have accepted such claim and, subject to this Article
VIII, shall promptly reimburse the Indemnitee for the Indemnifiable Losses
set forth in the Indemnitee's notice.
(d) A failure to give timely notice as provided in this
Section 8.2 shall not affect the rights or obligations of any Party
hereunder except to the extent that, as a result of such failure, the Party
which was entitled to receive such notice was actually prejudiced as a
result of such failure.
8.3 Arbitration.
(a) Notwithstanding any provision hereof to the contrary, in
the event of any dispute between Seller and Buyer arising after the Closing
(whether relating to facts, events or circumstances occurring or existing
prior to, on or after the Closing Date) and relating to or arising out of
any provision of this Agreement (other than disputes arising under Section
2.3, 2.4,
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3.2, 3.3, 3.4, 6.6 or 8.1(a)(ii)), the Party asserting such dispute shall give
written notice to the other of the fact that a dispute has arisen pursuant
hereto. Such notice shall include (i) a statement setting forth in reasonable
detail the facts, events, circumstances, evidence and arguments underlying such
dispute and (ii) proposed arrangements for a meeting to attempt to resolve the
dispute to be held within sixty (60) days after such notice is given. Within
thirty (30) days after such notice is given, the other Party hereto shall submit
to the Party giving such notice a written summary responding to such statement
of facts, events, circumstances, evidence and arguments contained in the notice
and an acceptance of or proposed alternative to the meeting arrangements set
forth in the initial notice.
(b) The chief executive officers (or any other executive
officer or officers directly reporting to, and duly designated by, such
chief executive officers) of each of the Parties shall meet at a mutually
acceptable time and place to attempt to settle any dispute in good faith;
provided, however, that such meeting shall be held at the principal offices
of the Party receiving the notice of dispute unless otherwise agreed; and
provided further, that any such meeting shall be held no later than sixty
(60) days after the written notice of dispute is given pursuant to Section
8.3(a). Each Party shall bear its own costs and expenses with respect to
preparation for, attendance at and participation in such meeting.
(c) In the event that (i) a meeting has been held in
accordance with Section 8.3(b), (ii) any such dispute of the kind referred
to in Section 8.3(a) shall not have been resolved at such meeting and (iii)
the aggregate amount in dispute exceeds $100,000, then either Party may
submit such dispute to binding arbitration pursuant to the Commercial
Arbitration Rules of the American Arbitration Association (the "Commercial
Arbitration Rules"). In the event that such dispute is submitted to
arbitration pursuant to the Commercial Arbitration Rules, then the
arbitration tribunal shall be composed of three arbitrators (one arbitrator
selected by each Party within thirty (30) days after the meeting held in
accordance with Section 8.3(b) with the third selected by the other two
arbitrators or, in the absence of agreement between them, the American
Arbitration Association), the venue of the arbitration shall be Wilmington,
Delaware, the language of the arbitration shall be English and the
arbitration shall commence no later than sixty (60) days after the meeting
held in accordance with Section 8.3(b). The decision, judgment and order of
the arbitration tribunal shall be final, binding and conclusive as to the
Parties and their respective Representatives, and may be entered in court
of competent jurisdiction. Other than the fees and expenses of the
arbitrators, which shall be shared equally by the Parties, each Party shall
bear its own costs and expenses (including attorneys' fees and expenses)
relating to the arbitration.
8.4 Remediation of Matters Covered in Sections 2.4(g) and 2.4(n).
With respect to the Liabilities as to which Seller has retained
responsibility for Remediation pursuant to Section 2.4(g) or 2.4(n):
(a) Seller shall have the right, but not the obligation, to
control the management of any Remediation covered by this Section 8.4. With
respect to the Liabilities described in
58
Schedule 2.4(n), Seller shall notify Buyer at the Closing whether it intends to
control the management of the Remediation after the Closing. As for other
Liabilities that are potentially covered by this Section 8.4, Seller must notify
Buyer within thirty (30) days of receipt of notice of Buyer's claim for
indemnification for such matter that it intends to undertake responsibility for
said Remediation. Prior to a determination by Seller that it will undertake
Remediation pursuant to this Section 8.4, Buyer shall, at Seller's expense, take
only those actions necessary to comply with applicable Environmental Laws or as
required by Governmental Authorities or address conditions that pose an
immediate and acute environmental or health risk (unless additional actions are
approved by Seller, such approval not to be unreasonably withheld or delayed).
(b) Seller shall comply with all applicable Laws, including
all applicable Environmental Laws, with respect to its performance pursuant
to this Section 8.4. Seller shall promptly provide copies to Buyer of all
notices, correspondence, draft reports, submissions, work plans, and final
reports and shall give Buyer a reasonable opportunity (at Buyer's own
expense) to promptly comment on any submissions Seller intends to deliver
or submit to the appropriate regulatory body prior to said submission.
Buyer may, at its own expense, hire its own consultants, attorneys or other
professionals to monitor the investigation or remediation, including any
field work undertaken by Seller, and Seller shall provide Buyer with the
results of all such field work. Notwithstanding the foregoing, Buyer shall
not take any actions that shall unreasonably interfere with Seller's
performance of the Remediation. Seller shall undertake any such work
required herein in a manner designed to minimize any disruption, to the
greatest extent possible, with the conduct of operations at the property.
Buyer shall allow Seller reasonable access to conduct any of the work
contemplated herein and shall fully cooperate with Seller in the
performance of the Remediation, including providing Seller with reasonable
access to employees and documents as necessary.
(c) If Seller declines to undertake the performance of a
Remediation hereunder, Buyer shall be entitled to control the investigation
and remediation. Buyer shall promptly provide copies to Seller of all
notices, correspondence, draft reports, submissions, work plans, and final
reports and shall give Seller a reasonable opportunity (at Seller's own
expense) to promptly comment on any submissions Buyer intends to deliver or
submit to the appropriate regulatory body prior to said submission. Seller
may, at its own expense, hire its own consultants, attorneys or other
professionals to monitor the Remediation, including any field work
undertaken by Buyer, and Buyer shall provide Seller with the results of all
such field work. Notwithstanding the foregoing, Seller shall not take any
actions that shall unreasonably interfere with Buyer's performance of the
Remediation. Seller's decision to allow Buyer to undertake Remediation
hereunder shall not limit or affect Seller's obligation to indemnify Buyer
for said investigation and remediation as otherwise provided in this
Agreement.
(d) Without regard to whether Buyer or Seller is conducting
a Remediation pursuant to this Section 8.4, the Parties agree that such
Remediation will be conducted in a reasonable manner and consistent with
the use of the Site in question as an electric generating station. Without
limiting the foregoing, the Parties agree that they will conduct any such
59
Remediation so that the Remediation Standard that is applicable to the Site
is the least stringent Remediation Standard that would apply to the Site
based on the current use of the Site, and Buyer furthermore covenants that
it will accept a deed restriction or other reasonable institutional or
engineering controls, if such mechanisms will (A) allow the Remediation of
the Site to be completed in the least cost manner in compliance with
applicable Environmental Law and (B) not unreasonably interfere with
operations at the Site. Notwithstanding the foregoing, if Buyer determines
at or after the Closing that it desires a Remediation such that the Site is
remediated to a more stringent Remediation Standard, it may do so,
provided, that (x) if Seller is managing a Remediation pursuant to this
Section 8.4, it has the right, to the extent permitted by Law, to cease
conduct of the Remediation and request Buyer to assume the conduct of the
Remediation and (y) notwithstanding which of the Parties conducts the
Remediation, Buyer shall be liable for the costs and expenses associated
with the Remediation to the extent those costs and expenses exceed those
that would be associated with a Remediation Standard as determined by the
previous sentence.
ARTICLE IX
TERMINATION
9.1 Termination.
(a) This Agreement may be terminated at any time prior to
the Closing by mutual written consent of the Parties.
(b) This Agreement may be terminated by Seller, on the one
hand, or Buyer, on the other hand, upon written notice to the other Party,
(i) at any time prior to the Closing if any court of competent jurisdiction
shall have issued an order, judgment or decree permanently restraining,
enjoining or otherwise prohibiting the Closing, and such order, judgment or
decree shall have become final and nonappealable; (ii) at any time prior to
the Closing if any Law shall have been enacted or issued by any
Governmental Authority which, directly or indirectly, prohibits the
consummation of the transactions contemplated by this Agreement or by any
Additional Agreement; or (iii) at any time after the first anniversary of
the date of this Agreement if the Closing shall not have occurred on or
before such date; provided, however, that the right to terminate this
Agreement under this Section 9.1(b) (iii) shall not be available to any
Party whose breach of this Agreement has caused, or resulted in, the
failure of the Closing to occur on or before such date; and provided,
further, that if on such date, the conditions to the Closing set forth in
Section 7.1(c) or 7.2(c) shall not have been satisfied but all other
conditions to the Closing shall be satisfied or shall be capable of being
satisfied, then no Party shall be entitled to terminate this Agreement
prior to the date which is 180 days after the first anniversary of the date
of this Agreement.
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(c) This Agreement may be terminated by Buyer, upon written
notice to Seller, if any of Buyer's Required Regulatory Approvals, the
receipt of which is a condition to the obligation of Buyer to consummate
the Closing as set forth in Section 7.1(c), shall have been denied (and a
petition for rehearing or refiling of an application initially denied
without prejudice shall also have been denied), and such denial was not
caused by or the result of a breach of this Agreement by Buyer.
(d) This Agreement may be terminated by Seller, upon written
notice to Buyer, if any of the Seller's Required Regulatory Approvals, the
receipt of which is a condition to the obligation of Seller to consummate
the Closing as set forth in Section 7.2(c), shall have been denied (and a
petition for rehearing or refiling of an application initially denied
without prejudice shall also have been denied), and such denial was not
caused by or the result of a breach of this Agreement by Seller.
(e) Except as otherwise provided in this Agreement, this
Agreement may be terminated by Buyer, upon written notice to Seller, if
there has been a breach by Seller of any covenant, agreement,
representation or warranty contained in this Agreement which has had a
Material Adverse Effect and such breach is not cured by the earlier of the
Closing Date or the date thirty (30) days after receipt by Seller of notice
specifying in reasonable detail the nature of such breach, unless Buyer
shall have previously waived such breach.
(f) Except as otherwise provided in this Agreement, this
Agreement may be terminated by Seller, upon written notice to Buyer, if
there has been a material breach by Buyer of any covenant, agreement,
representation or warranty contained in this Agreement which has had a
Material Adverse Effect and such breach is not cured by the earlier of the
Closing Date or the date thirty (30) days after receipt by Buyer of notice
specifying in reasonable detail the nature of such breach, unless Seller
shall have previously waived such breach.
(g) This Agreement may be terminated by Seller, on the one
hand, or Buyer, on the other hand, upon written notice to the other Party,
in accordance with the provisions of Section 6.9(b), provided that the
Party seeking to so terminate shall have complied with its obligations
under Section 6.9.
9.2 Effect of Termination. Upon termination of this Agreement prior
to the Closing pursuant to Section 9.1, this Agreement shall be null and
void and of no further force or effect (except that the provisions set
forth in Section 6.3, this Section 9.2 and Article X, and the
Confidentiality Agreement, shall remain in full force and effect in
accordance with their respective terms); and no Party shall have any
further Liability under this Agreement (other than for any wilful breach of
its obligations hereunder).
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ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 Amendment and Modification. Subject to applicable Law, this
Agreement may be amended, supplemented or otherwise modified only by
written agreement entered into by all Parties.
10.2 Expenses. Except to the extent provided herein, whether or not
the transactions contemplated hereby are consummated, all costs, fees and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be borne by the Party incurring such costs, fees
and expenses, including the fees and commissions referred to in Section
10.3. Notwithstanding the foregoing, Buyer shall be responsible for the
payment of, or reimbursement of Seller for, (a) all actual out-of-pocket
costs, fees and expenses charged by Lawyers Title Insurance Corporation in
connection with obtaining any title insurance policy and all endorsements
thereto, including policy premiums, (b) all survey costs, fees and
expenses, incurred by Buyer, (c) all survey costs, fees and expenses
incurred by Seller on or prior to the date hereof, but, together with all
such costs, fees and expenses incurred in connection with the Related
Purchase Agreements, not in excess of $600,000, (d) all filing fees under
the HSR Act and (e) all costs for experts and consultants in accordance
with Section 6.5(b).
10.3 Fees and Commissions. Seller, on the one hand, and Buyer, on
the other hand, represent and warrant to the other that, except for Credit
Suisse First Boston, Inc. and ▇▇▇▇/Navigant Consulting Group, which are
acting for and at the expense of Seller, and CIBC World Markets Corp.,
which is acting for and at the expense of Buyer, no broker, finder or other
Person is entitled to any brokerage fees, commissions or finder's fees in
connection with the transactions contemplated hereby by reason of any
action taken by such Party or its Representatives. Seller, on the one hand,
and Buyer, on the other hand, shall pay or otherwise discharge all such
brokerage fees, commissions and finder's fees so incurred by such Parties.
10.4 Bulk Sales Laws. Buyer hereby acknowledges that,
notwithstanding anything in this Agreement to the contrary, Seller will not
comply with the provisions of the bulk sales laws of any jurisdiction in
connection with the transactions contemplated by this Agreement; and Buyer
hereby irrevocably waives compliance by Seller with the provisions of the
bulk sales laws of all applicable jurisdictions.
10.5 Waiver of Compliance; Consents. To the extent permitted by
applicable Law, any failure of any of the Parties to comply with any
covenant, agreement or condition set forth herein may be waived by the
Party entitled to the benefit thereof only by a written instrument signed
by such Party, but any such waiver shall not operate as a waiver of, or
estoppel with respect to, any prior or subsequent failure to comply
therewith.
10.6 No Survival. No representation or warranty contained in this
Agreement shall survive the delivery of the Limited Warranty Deeds and the
Closing. The covenants and
62
agreements of the Parties contained in this Agreement shall survive the Closing
in accordance with their respective terms.
10.7 Disclaimers. EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES SET
FORTH IN ARTICLE IV, THE PURCHASED ASSETS ARE SOLD "AS IS, WHERE IS", AND
SELLER EXPRESSLY DISCLAIMS ALL OTHER REPRESENTATIONS AND WARRANTIES OF ANY
KIND OR NATURE, EXPRESS OR IMPLIED, AS TO SELLER AND THE PURCHASED ASSETS.
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, EXCEPT FOR THE
REPRESENTATIONS AND WARRANTIES SET FORTH IN ARTICLE IV: SELLER EXPRESSLY
DISCLAIMS ALL OTHER REPRESENTATIONS AND WARRANTIES REGARDING LIABILITIES,
OWNERSHIP, LEASE, MAINTENANCE OR OPERATION OF THE PURCHASED ASSETS, THE
TITLE, CONDITION, VALUE OR QUALITY OF THE PURCHASED ASSETS OR THE PROSPECTS
(FINANCIAL AND OTHERWISE), RISKS AND OTHER INCIDENTS OF THE PURCHASED
ASSETS; AND SELLER EXPRESSLY DISCLAIMS ALL REPRESENTATIONS AND WARRANTIES
OF MERCHANTABILITY, USAGE, SUITABILITY OR FITNESS FOR ANY PARTICULAR
PURPOSE WITH RESPECT TO THE PURCHASED ASSETS, OR ANY PART THEREOF, OR AS TO
THE WORKMANSHIP THEREOF, OR THE ABSENCE OF ANY DEFECTS THEREIN, WHETHER
LATENT OR PATENT, OR COMPLIANCE WITH ENVIRONMENTAL REQUIREMENTS, OR THE
APPLICABILITY OF ANY GOVERNMENTAL AUTHORITY, INCLUDING ANY ENVIRONMENTAL
LAWS, OR WHETHER SELLER POSSESSES SUFFICIENT REAL PROPERTY OR PERSONAL
PROPERTY TO OPERATE THE PURCHASED ASSETS. EXCEPT AS OTHERWISE EXPRESSLY
PROVIDED HEREIN, SELLER FURTHER EXPRESSLY DISCLAIMS ALL REPRESENTATIONS OR
WARRANTIES REGARDING THE ABSENCE OF HAZARDOUS SUBSTANCES OR LIABILITY OR
POTENTIAL LIABILITY ARISING UNDER ENVIRONMENTAL LAWS WITH RESPECT TO THE
PURCHASED ASSETS. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, EXCEPT
AS OTHERWISE EXPRESSLY PROVIDED HEREIN, SELLER EXPRESSLY DISCLAIMS ALL
REPRESENTATIONS AND WARRANTIES OF ANY KIND REGARDING THE CONDITION OF THE
PURCHASED ASSETS OR THE SUITABILITY OF THE PURCHASED ASSETS FOR OPERATION
AS A POWER PLANT OR AS A FUEL PROCESSING FACILITY, AS APPLICABLE, AND NO
SCHEDULE OR EXHIBIT TO THIS AGREEMENT, NOR ANY OTHER MATERIAL OR
INFORMATION PROVIDED, OR COMMUNICATIONS MADE, BY SELLER OR ITS
REPRESENTATIVES, INCLUDING ANY BROKER OR INVESTMENT BANKER, WILL CAUSE OR
CREATE ANY SUCH REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE
TITLE, CONDITION, VALUE OR QUALITY OF THE PURCHASED ASSETS.
SELLER EXPRESSLY DISCLAIMS ALL REPRESENTATIONS AND WARRANTIES WITH
RESPECT TO THE NAMES "INDIAN RIVER POWER PLANT" AND "VIENNA POWER PLANT,"
INCLUDING ALL REPRESENTATIONS AND WARRANTIES OF (1) TITLE; (2) LENGTH,
NATURE, EXCLUSIVITY AND CONTINUITY OF USE; (3) STRENGTH OR FAME; AND (4)
NONINFRINGEMENT AND NONDILUTION OF
63
TRADEMARK, SERVICE ▇▇▇▇, TRADE NAME OR OTHER PROPRIETARY RIGHTS OF ANY THIRD
PARTY. BUYER HEREBY ACKNOWLEDGES THAT THE NAMES "INDIAN RIVER POWER PLANT" AND
"VIENNA POWER PLANT" EACH HAVE A GEOGRAPHIC CONNOTATION ASSOCIATED WITH THE
LOCATION OF CERTAIN OF THE PURCHASED ASSETS.
10.8 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given on the day when delivered
personally or by facsimile transmission (with confirmation), on the next
Business Day when delivered to a nationally recognized overnight courier or
five (5) Business Days after deposited as registered or certified mail
(return receipt requested), in each case, postage prepaid, addressed to the
recipient Party at its address set forth below (or at such other address or
facsimile number for a Party as shall be specified by like notice;
provided, however, that any notice of a change of address or facsimile
number shall be effective only upon receipt thereof):
(a) If to Seller, to:
Conectiv
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chairman
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esquire
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to Buyer, to:
NRG Energy, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Vice President and General Counsel
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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with a copy to:
▇▇▇▇, Plant, ▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇, P.A.
3400 City Center
▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esquire
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
10.9 Assignment. This Agreement shall be binding upon and inure to
the benefit of the Parties and their respective successors and permitted
assigns, but neither this Agreement nor any of the rights, interests,
obligations or remedies hereunder shall be assigned by any Party hereto,
including by operation of law, without the prior written consent of the
other Parties, nor is this Agreement intended to confer upon any other
Person any rights, interests, obligations or remedies hereunder. Without
limiting the generality of the foregoing, no provision of this Agreement
shall create any third-party beneficiary rights in any Employee or former
employee of Seller (including any beneficiary or dependent thereof) in
respect of continued employment or resumed employment, and no provision of
this Agreement shall create any rights in any such Persons in respect of
any benefits that may be provided, directly or indirectly, under any
employee benefit plan or arrangement except as expressly provided for
thereunder. Notwithstanding the foregoing, (i) Seller may assign all or any
portion of its rights, interests, obligations and remedies hereunder to
Conectiv, a Delaware corporation, or any of Conectiv's wholly owned
subsidiaries; provided, however, that no such assignment shall (A)
materially impair or delay the consummation of the transactions
contemplated hereby or (B) relieve or discharge Seller from any of its
obligations hereunder; and (ii) Buyer may assign all or any portion of its
rights, interests, obligations and remedies hereunder to (A) any of its
wholly owned subsidiaries or (B) a trustee, lending institution or other
Person solely for purposes of financing the transactions contemplated
hereby; provided, however, that no such assignment shall (A) materially
impair or delay the consummation of the transactions contemplated hereby or
(B) relieve or discharge Buyer from any of its obligations hereunder.
10.10 Governing Law; Forum; Service of Process. This Agreement
shall be governed by and construed in accordance with the laws of the State
of Delaware (without giving effect to conflicts of law principles) as to
all matters, including validity, construction, effect, performance and
remedies. Venue in any and all suits, actions and proceedings related to
the subject matter of this Agreement shall be in the state and federal
courts located in and for the State of Delaware (the "Courts"), which shall
have exclusive jurisdiction for such purpose, and the Parties hereby
irrevocably submit to the exclusive jurisdiction of such courts and
irrevocably waive the defense of an inconvenient forum to the maintenance
of any such suit, action or proceeding. Service of process may be made in
any manner recognized by such Courts. Each of the Parties hereby
irrevocably waives its right to a jury trial arising out of any dispute in
connection with this Agreement or the transactions contemplated hereby.
10.11 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
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10.12 Interpretation. The article and section headings contained in
this Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
construction of this Agreement. Ambiguities and uncertainties in the
wording of this Agreement shall not be construed for or against any Party,
but shall be construed in the manner that most accurately reflects the
Parties' intent as of the date of this Agreement. Each Party acknowledges
that it has been represented by counsel in connection with the review and
execution of this Agreement, and, accordingly, there shall be no
presumption that this Agreement or any provision hereof be construed
against the Party that drafted this Agreement.
10.13 Schedules and Exhibits. Except as otherwise provided in this
Agreement, all Exhibits and Schedules referred to herein are intended to be
and hereby are made a part of this Agreement.
10.14 Entire Agreement. This Agreement (including the Schedules and
Exhibits), together with the Confidentiality Agreement, embodies the entire
agreement and understanding of the Parties hereto in respect of the
transactions contemplated by this Agreement and the Additional Agreements
and supersedes all prior agreements and understandings between or among the
Parties with respect to such transactions. There are no representations,
warranties, covenants or agreements between or among the Parties with
respect to the subject matter set forth in such agreements, other than
those expressly set forth or referred to herein or therein. Without
limiting the generality of the foregoing, Buyer hereby acknowledges and
agrees that there are no representations, warranties, covenants or
agreements between or among the Parties with respect to the subject matter
set forth in such agreements contained in any material made available to
Buyer pursuant to the terms of the Confidentiality Agreement (including the
Offering Memorandum dated June 18, 1999, previously provided to Buyer by or
on behalf of Seller, ▇▇▇▇/Navigant Consulting Group and Credit Suisse First
Boston, Inc.).
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, Seller and Buyer have caused this Purchase and
Sale Agreement to be duly executed and delivered by their respective duly
authorized officers as of the date first above written.
DELMARVA POWER & LIGHT COMPANY
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
---------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Executive Vice President
NRG ENERGY, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
Title: Senior Vice President
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