EXHIBIT 10.1
ASSET PURCHASE AGREEMENT
By and Among
ILLINOIS ELECTRIC TRANSMISSION COMPANY, LLC,
TRANS-ELECT, INC.,
Solely For Purposes of Article 5, Section 8.2 and Article 11,
and
ILLINOIS POWER COMPANY
Dated as of October 7, 2002
TABLE OF CONTENTS
Page
ARTICLE 1 SALE AND TRANSFER OF BUSINESS, PROPERTIES, ASSETS AND RIGHTS
1.1 Sale and Transfer of Business, Properties, Assets and Rights ...................... 1
1.2 Purchase Price .................................................................... 1
1.3 Allocation of Purchase Price ...................................................... 2
1.4 Payment of Purchase Price ......................................................... 2
1.5 Identification of Transmission Assets Based on Functionalization Review ........... 2
1.6 Adjustments to the Purchase Price ................................................. 3
1.7 Potential Adjustment Based on Increased Financing Costs ........................... 5
1.8 Instruments of Conveyance, Transfer, Assumption, Etc .............................. 6
ARTICLE 2 CLOSING AND TERMINATION
2.1 Closing ........................................................................... 6
2.2 Termination ....................................................................... 7
2.3 Due Diligence Investigation ....................................................... 8
2.4 Effect of Termination ............................................................. 10
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER
3.1 Organization ...................................................................... 10
3.2 Corporate Authority ............................................................... 10
3.3 No Violation ...................................................................... 11
3.4 Litigation ........................................................................ 11
3.5 Personal Property. ................................................................ 11
3.6 Real Property ..................................................................... 12
3.7 Financial Information ............................................................. 13
3.8 Books and Records ................................................................. 14
3.9 Employee Matters. ................................................................. 14
3.10 Inventory ......................................................................... 15
3.11 No Material Change ................................................................ 15
3.12 Absence of Change or Event ........................................................ 15
3.13 Compliance With Law; Environmental Matters ....................................... 15
3.14 Contracts and Commitments; Licenses and Permits ................................... 16
3.15 Brokers and Finders ............................................................... 18
3.16 Assets Used in Performing the Business ............................................ 18
3.17 Jointly Used Assets; Dual Purpose Contracts ....................................... 18
3.18 Public Utility .................................................................... 19
3.19 Purchase and Sale Agreement for Ancillary Services-Related Resources .............. 19
3.20 Tax Matters ....................................................................... 19
3.21 Disclaimer of All Other Representations and Warranties ............................ 19
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER
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4.1 Organization ................................................... 19
4.2 Limited Liability Company Authority ............................ 19
4.3 No Violation ................................................... 20
4.4 Brokers and Finders ............................................ 20
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF PARENT
5.1 Organization ................................................... 20
5.2 Corporate Authority ............................................ 21
5.3 No Violation ................................................... 21
5.4 Brokers and Finders ............................................ 21
ARTICLE 6 CERTAIN COVENANTS AND AGREEMENTS
6.1 Conduct of Business Prior to the Closing Date .................. 22
6.2 Employee Matters ............................................... 23
6.3 Sales, Use and Transfer Taxes .................................. 24
6.4 Access to Information .......................................... 24
6.5 Confidentiality ................................................ 24
6.6 No Solicitation ................................................ 24
6.7 Publicity ...................................................... 24
6.8 Financing Commitments .......................................... 25
6.9 Change in Credit Status ........................................ 25
6.10 Bulk Sales Requirements ........................................ 25
6.11 Ancillary Agreements ........................................... 26
6.12 Membership in PJM .............................................. 26
6.13 Additional Information ......................................... 26
6.14 Books and Records .............................................. 26
6.15 Section 205 Filing ............................................. 27
6.16 Section 205 and Section 206 Rights ............................. 27
6.17 Real Property .................................................. 28
6.18 Claims ......................................................... 28
6.19 Transitional Funding Obligations ............................... 28
6.20 Efforts to Extend Financing Commitments ........................ 29
6.21 Tariff Funds ................................................... 29
ARTICLE 7 CONDITIONS PRECEDENT OF BUYER
7.1 Representations, Warranties and Covenants ...................... 29
7.2 No Actions ..................................................... 30
7.3 Consents and Approvals ......................................... 30
7.4 Transaction Documents .......................................... 30
7.5 Release of Liens ............................................... 30
7.6 Non-Foreign Person Certificate ................................. 31
7.7 Real Property .................................................. 31
7.8 Regulatory Termination ......................................... 31
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7.9 Miscellaneous Closing Deliveries ............................ 31
7.10 Consent and Agreement ....................................... 31
7.11 Section 10 and Right-of-Way Crossing Permits ................ 31
7.12 Municipal Easements ......................................... 32
7.13 Opinion ..................................................... 33
7.14 Set Aside ................................................... 33
ARTICLE 8 CONDITIONS PRECEDENT OF SELLER
8.1 Representations, Warranties and Covenants ................... 33
8.2 Representations, Warranties and Covenants ................... 34
8.3 No Actions .................................................. 34
8.4 Consents and Approvals ...................................... 34
8.5 Transaction Documents ....................................... 34
8.6 Miscellaneous Closing Deliveries ............................ 34
8.7 Opinion ..................................................... 34
ARTICLE 9 INDEMNIFICATION
9.1 Indemnification by Seller ................................... 35
9.2 Indemnification by Buyer .................................... 36
9.3 Third Party Claim Procedures ................................ 37
9.4 Certain Limitations ......................................... 38
9.5 Remedies .................................................... 38
9.6 No Contact .................................................. 39
9.7 Reimbursement ............................................... 39
ARTICLE 10 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS
10.1 Representations, Warranties and Covenants ................... 39
ARTICLE 11 MISCELLANEOUS
11.1 Waiver ...................................................... 39
11.2 Notices ..................................................... 40
11.3 Governing Law and Judicial Proceedings ...................... 42
11.4 Guarantee of Parent ......................................... 42
11.5 Counterparts ................................................ 42
11.6 Headings .................................................... 42
11.7 Entire Agreement ............................................ 42
11.8 Amendment and Modification .................................. 42
11.9 Binding Effect; Benefits .................................... 42
11.10 Assignability ............................................... 43
11.11 Expenses .................................................... 43
11.12 Good Faith Efforts; Further Assurances ...................... 43
11.13 Severability; Enforcement ................................... 44
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11.14 Specific Performance .......................................... 44
11.15 Time .......................................................... 44
11.16 Construction .................................................. 44
ARTICLE 12 DEFINITIONS
12.1 Definitions .................................................... 45
List of Exhibits
Exhibit A ▇▇▇▇ of Sale and Assignment and Assumption of Contract Rights
Exhibit B ▇▇▇▇ of Sale and Partial Assignment and Assumption of Contract Rights
Exhibit C Summary of Seller's Transmission Related Revenue
Exhibit D Limited Warranty Deed
Exhibit E Network Integration Transmission Service Agreement
Exhibit F Services Agreement
Exhibit G Purchase and Sale Agreement for Ancillary Services-Related Resources
Exhibit H Distribution-Transmission Interconnection Agreement
Exhibit I Common-Use Right-of-Way and Pole Attachment Agreement
Exhibit J Easement Agreement
Exhibit K Non-Competition Agreement
Exhibit L Consent and Agreement
Exhibit M Opinion of Counsel
List of Schedules
Schedule 1.1 Sale and Transfer of Business, Properties, Assets and Rights
Schedule 1.1(A) Guidelines for Partial Assignments
Schedule 1.6 Adjustments to the Purchase Price
Schedule 1.7 Potential Adjustment Based on Increased Financing Costs
Schedule 3.3 No Violation
Schedule 3.4 Litigation
Schedule 3.5 Personal Property
Schedule 3.6 Real Property
Schedule 3.6(e) Real Property
Schedule 3.6(f) Real Property
Schedule 3.6(g) Real Property
Schedule 3.6(h) Real Property
Schedule 3.9 Employee Matters
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Schedule 3.10 Inventory
Schedule 3.11 No Material Change
Schedule 3.12 Absence of Change or Event
Schedule 3.13(a) Compliance With Law; Environmental Matters
Schedule 3.13(b) Compliance With Law; Environmental Matters
Schedule 3.13(c) Compliance With Law; Environmental Matters
Schedule 3.13(d) Compliance With Law; Environmental Matters
Schedule 3.13(e) Compliance With Law; Environmental Matters
Schedule 3.13(f) Compliance With Law; Environmental Matters
Schedule 3.14 Contracts and Commitments; Licenses and Permits
Schedule 3.14(d) Contracts and Commitments; Licenses and Permits
Schedule 3.16 Assets Used in Performing the Business
Schedule 4.3 No Violation
Schedule 5.3 No Violation
Schedule 6.1 Conduct of Business Prior to the Closing Date
Schedule 6.18 Claims
Schedule 7.12 Easements
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement is entered into as of October 7, 2002
(herein, together with the Schedules and Exhibits attached hereto, referred to
as this "Agreement") by and among Illinois Electric Transmission Company, LLC, a
Delaware limited liability company ("Buyer"), Trans-Elect, Inc., a Michigan
corporation ("Parent"), solely for purposes of Article 5, Section 8.2 and
Article 11, and Illinois Power Company, an Illinois corporation ("Seller").
Capitalized terms used herein shall have the meanings ascribed to them
in either the Sections cross-referenced in Article 12 or in Article 12.
RECITALS
WHEREAS, Seller, upon the terms and conditions hereinafter set forth,
desires to sell and transfer to Buyer, and Buyer desires to purchase from
Seller, the Purchased Assets.
NOW, THEREFORE, subject to the terms and conditions of this Agreement
and in reliance upon the representations and warranties made herein and in
consideration of the mutual covenants and agreements herein contained, and
intending to be legally bound, the Parties agree as follows:
ARTICLE 1
SALE AND TRANSFER OF BUSINESS, PROPERTIES, ASSETS AND RIGHTS
1.1 Sale and Transfer of Business, Properties, Assets and Rights. Seller
hereby agrees to sell, transfer, convey, assign and deliver to Buyer at the
Closing provided for in Section 2.1 hereof all of Seller's right, title and
interest in all of Seller's assets listed or described on and located at the
locations specified on Schedule 1.1 (the "Purchased Assets"). Certain of the
Purchased Assets identified on Schedule 1.1 will be partially sold, transferred,
conveyed or assigned by Seller to Buyer ("Partial Assignments"). Seller and
Buyer have jointly developed and agreed to guidelines, attached hereto as
Schedule 1.1(A), to serve as the guiding principles for the preparation by
Seller and Buyer of detailed descriptions of the Partial Assignments (the
"Guidelines for Partial Assignments") prior to the Closing.
1.2 Purchase Price. In consideration of such sale, transfer, conveyance,
assignment and delivery, Buyer agrees (a) to pay to Seller the amount of
$239,000,000 (the "Closing Date Payment"), as may be adjusted pursuant to
Section 1.6 and Section 1.7 (as finally adjusted, the "Purchase Price") and (b)
to undertake, assume and agree to perform and otherwise pay, satisfy and
discharge in accordance with their respective terms, and to indemnify and hold
Seller harmless with respect to, and, except as expressly otherwise provided in
this Agreement, only with respect to, the debts, liabilities and obligations of
Seller specified in the Full ▇▇▇▇ and Assignment and the Partial ▇▇▇▇ and
Assignment on the terms set forth therein.
1.3 Allocation of Purchase Price. Seller and Buyer shall use their Best
Efforts to agree, on or prior to the Closing Date, to an allocation of the
Purchase Price (together with liabilities assumed hereunder and other relevant
items) among the Purchased Assets, which shall be subject to adjustment
consistent with any adjustment to the Purchase Price pursuant to Section 1.6 or
Section 1.7. Such allocation, as so adjusted, will comply with the requirements
of Section 1060 of the Internal Revenue Code of 1986, as amended (the "Code").
Unless otherwise required by a final determination within the meaning of Section
1313 of the Code (or a counterpart provision of foreign, state or local law),
Seller and Buyer agree to report the transactions hereunder in accordance with
such allocation, as so adjusted, for all Tax purposes and to execute and file a
Form or Forms 8594 reflecting such allocation, as so adjusted. Seller and Buyer
represent, warrant and agree that such allocation will be determined through
arm's length negotiations. Each of Seller and Buyer agrees that, to the extent
permitted by applicable law, it will adopt and utilize the amounts allocated to
each asset or class of assets for purposes of all Tax returns or reports of any
nature filed by it and that it will not voluntarily take any position
inconsistent therewith upon examination of any such Tax returns or reports, in
any claim for Tax refund, in any litigation or otherwise with respect to such
Tax returns or reports. Notwithstanding any other provisions of this Agreement,
the foregoing agreement shall survive the Closing Date without limitation.
1.4 Payment of Purchase Price. The Purchase Price shall be paid by Buyer as
follows: at the Closing, Buyer shall deliver to Seller the Closing Date Payment,
as adjusted, in immediately available funds by wire transfer (Fedwire) to an
account designated in writing by Seller at least two (2) business days prior to
the Closing Date. Any additional adjustments resulting from the determination of
the Purchase Price after the Closing Date shall be paid in accordance with
Section 1.6(e).
1.5 Identification of Transmission Assets Based on Functionalization
Review.
(a) Transmission Assets. Between the date of this Agreement and
December 31, 2002, the Parties shall cooperate and use Best Efforts to (i)
identify facilities and assets owned by Seller as either "transmission" or
"distribution" in accordance with the same methodology and underlying principles
of the "seven factor test" set forth in FERC Order No. 888 unless modification
to such "seven factor test" is agreed upon by the Parties, consistent with the
regulations and orders of the FERC, and (ii) prepare a statement setting forth
its estimate of the aggregate Net Plant in Service of all of Seller's facilities
and assets owned and identified by the Parties as "transmission" (the
"Transmission Assets Valuation").
(b) Disputes. Disputes between Buyer and Seller relating to the
identification of "transmission assets" or the Transmission Assets Valuation
that cannot be resolved by them within five (5) business days may be referred no
later than ten (10) business days after such disagreement for decision at the
insistence of either Party to ▇▇▇▇ ▇▇▇▇▇ or such other qualified Person as to
whom the Parties may mutually agree (the "Arbitrator"). Prior to referring the
matter to the Arbitrator, the Parties shall agree on the procedures to be
followed by the Arbitrator (including procedures with regard to presentation of
evidence). Such procedures shall not alter the accounting practices, principles
and policies to be applied to the Transmission Assets Valuation, which shall be
those required by this Agreement. If the Parties are unable to agree upon
procedures before the end of five (5) business days after referral of the
dispute to the
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Arbitrator, the Arbitrator shall establish such procedures giving due regard to
the intention of the Parties to resolve disputes as quickly, efficiently and
inexpensively as possible, which procedures may be, but need not be, those
proposed by either Party. The Parties shall then submit evidence in accordance
with the procedures established, and the Arbitrator shall decide the dispute in
accordance therewith within ten (10) business days of the referral to the
Arbitrator. The Arbitrator's decision on any matter referred to it shall be
final and binding on Seller and Buyer. The fee of the Arbitrator shall be borne
by Seller and Buyer in equal portions, unless the Arbitrator decides, based on
its determination with respect to the reasonableness of the respective positions
of the Parties, that the fee shall be borne in unequal proportions.
(c) Resolution. The Transmission Assets Valuation shall become final
and binding upon the Parties upon the earlier of (i) the agreement between Buyer
and Seller with respect thereto or (ii) the decision by the Arbitrator with
respect to any disputes under Section 1.5(b). The Transmission Assets Valuation
shall be subject to adjustment by the FERC and the ICC before becoming final and
binding upon the Parties.
1.6 Adjustments to the Purchase Price.
(a) Preparation of Preliminary Closing Statement. At least three (3)
business days prior to the Closing Date, Seller shall prepare in good faith and
deliver to Buyer an estimated statement of Net Plant in Service, Inventory, CWIP
and Accounts Payable to be assigned to and assumed by Buyer as of the Closing
Date (the "Preliminary Closing Statement"). The Preliminary Closing Statement
shall, except as set forth on Schedule 1.6, be prepared in accordance with
United States generally accepted accounting principles ("GAAP") consistently
applied in accordance with past practices.
(b) Closing Date Adjustment to the Closing Date Payment. On the
Closing Date, the Closing Date Payment shall be adjusted as follows:
(i) the amount, if any, that the Net Plant in Service as
reflected in the Preliminary Closing Statement is greater or less than
$146,178,000 shall result in an immediate upward or downward adjustment, as the
case may be, of the Closing Date Payment in the amount of $1,630 for each $1,000
of such difference;
(ii) the amount, if any, that the Inventory as reflected in the
Preliminary Closing Statement is greater or less than $3,113,000 shall result in
an immediate upward or downward adjustment, as the case may be, of the Closing
Date Payment by such amount of difference;
(iii) the amount, if any, that the CWIP as reflected in the
Preliminary Closing Statement is greater or less than $1,226,000 shall result in
an immediate upward or downward adjustment, as the case may be, of the Closing
Date Payment by such amount of difference;
(iv) the amount, if any, of the Accounts Payable as reflected in
the Preliminary Closing Statement shall result in an immediate downward
adjustment of the Closing Date Payment by such amount;
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(v) the amount, if any, of credits owed as of the Closing Date to
third parties pursuant to interconnection agreements or other contracts assigned
to Buyer to the extent that the same would reduce revenues which would otherwise
be received by Buyer under such agreements or contracts after the Closing Date
(the "Owed Credits") shall result in an immediate downward adjustment of the
Closing Date Payment by such amount; provided, however, that, in lieu of any
such adjustment to the Closing Date Payment, Seller may elect to indemnify Buyer
with respect to reduction in revenues to Buyer resulting from any such Owed
Credits to the extent that Seller reasonably believes that it is likely that
such reduction will never occur (including the amount, if any, of interest
determined to be accrued and payable to a third party in respect of such Owed
Credits until such Owed Credits are used); provided, further, that such
indemnification shall be in accordance with the procedures set forth in Article
9, but not subject to the limitations set forth in Section 9.4; and
(vi) the amount, if any, reasonably agreed in good faith by
Seller and Buyer to equitably reflect the final determination of the Partial
Assignments in accordance with the Guidelines for Partial Assignments.
(c) Review of Adjusted Closing Statement. Within thirty (30) days of
the Closing Date, Seller shall revise the Preliminary Closing Statement to
reflect any required modifications thereto (the "Adjusted Closing Statement").
The Adjusted Closing Statement shall be binding and conclusive upon, and deemed
accepted by, Buyer unless Buyer notifies Seller in writing of any objections
thereto consistent with the provisions of this Section 1.6 within thirty (30)
days after receipt of the Adjusted Closing Statement. The written notice under
this Section 1.6 shall specify in reasonable detail each item on the Adjusted
Closing Statement that Buyer disputes and a summary of Buyer's reasons for such
dispute.
(d) Disputes. Disputes between Buyer and Seller relating to the
Adjusted Closing Statement that cannot be resolved by them within five (5)
business days after receipt by Seller of the notice referred to in Section
1.6(c) may be referred no later than ten (10) business days after such receipt
for decision at the insistence of either Party to KPMG LLP. If KPMG LLP is
unavailable, then Buyer and Seller shall select an independent nationally
recognized accounting firm to decide the matter (KPMG LLP or such other firm
being referred to herein as the "Auditor"). Prior to referring the matter to the
Auditor, the Parties shall agree on the procedures to be followed by the Auditor
(including procedures with regard to presentation of evidence). Such procedures
shall not alter the accounting practices, principles and policies to be applied
to the Adjusted Closing Statement, which shall be those required by this
Agreement. If the Parties are unable to agree upon procedures before the end of
five (5) business days after referral of the dispute to the Auditor, the Auditor
shall establish such procedures giving due regard to the intention of the
Parties to resolve disputes as quickly, efficiently and inexpensively as
possible, which procedures may be, but need not be, those proposed by either
Party. The Parties shall then submit evidence in accordance with the procedures
established, and the Auditor shall decide the dispute in accordance therewith
within ten (10) business days of the referral to the Auditor. The Auditor's
decision on any matter referred to it shall be final and binding on Seller and
Buyer. The fee of the Auditor shall be borne by Seller and Buyer in equal
portions, unless the Auditor decides, based on its determination with respect to
the reasonableness of the respective positions of the Parties, that the fee
shall be borne in unequal proportions.
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(e) Final Closing Statement. The Adjusted Closing Statement shall
become final and binding upon the Parties upon the earlier of (i) the failure by
Buyer to object thereto within the period permitted under Section 1.6(c), (ii)
the agreement between Buyer and Seller with respect thereto or (iii) the
decision by the Auditor with respect to any disputes under Section 1.6(c). The
Adjusted Closing Statement, as adjusted pursuant to the agreement of the Parties
or decision of the Auditor, when final and binding is referred to herein as the
"Final Closing Statement". If any payment is required to be made by Seller or
Buyer, as the case may be, due to adjustments resulting from differences between
the Preliminary Closing Statement and the Final Closing Statement, such payment
must be made in immediately available funds within ten (10) business days of the
rendering of the Final Closing Statement.
1.7 Potential Adjustment Based on Increased Financing Costs. Buyer and
Illinois Transco Holdings, Limited Partnership, which is Buyer's single member
owner ("ITH"), have obtained a debt financing commitment (the "Debt Financing
Commitment") and an equity financing commitment (the "Equity Financing
Commitment") for the funding required to consummate the transactions
contemplated hereby as described in Section 6.8 (collectively, the "Financing
Commitments"). Buyer anticipates that, if the Closing were to occur on the date
hereof, the Applicable Margins (as defined in the Exhibits to the Debt Financing
Commitment) would not be higher than the Assumed Credit Spreads (as defined in
Schedule 1.7 attached hereto) (the "Assumed Credit Spreads"). Pursuant to the
terms of the Debt Financing Commitment, the credit spreads payable by Buyer and
ITH may increase above the Assumed Credit Spreads in order to permit a full
syndication of the loans issued pursuant to the Debt Financing Commitment. If
Buyer is advised in writing by the issuers of the Debt Financing Commitment or
by its financial advisor that there will be such an increase in the credit
spreads resulting from an adverse change subsequent to the date hereof in the
perceived credit quality of Seller (a "Credit Spread Increase"), then Buyer may
as soon as practicable, but in any event prior to ten (10) business days prior
to the scheduled Closing Date, propose that the Purchase Price be decreased in
accordance with the terms set forth on such Schedule 1.7 by providing notice to
Seller of its election to do so (a "Credit Spread Notice"), which notice shall
set forth the amount of the Credit Spread Increase, the calculation of the
resulting decrease in the Purchase Price and all information provided by the
issuers of the Debt Financing Commitment or Buyer's financial advisor providing
evidence of the Credit Spread Increase. In the event that Buyer provides a
Credit Spread Notice to Seller, Seller shall promptly provide written notice to
Buyer of its election to (i) accept the decrease in the Purchase Price as
specified in the Credit Spread Notice and proceed to the Closing or (ii) extend
the Closing for so long as Buyer's Financing Commitments remain in effect, after
giving effect to any extensions thereof (the first date upon which either the
Debt Financing Commitment or the Equity Financing Commitment finally expires
being referred to herein as the "Extended Closing Date"). Notwithstanding the
preceding sentence, it is provided that, unless the Parties agree, the Extended
Closing Date shall not be later than April 7, 2004 or six (6) months after the
issuance of all of the FERC Approvals, the ICC Approvals, the Antitrust Approval
and the SEC Approvals. If Buyer has delivered a Credit Spread Notice and Seller
has elected to extend the Closing Date in accordance with the immediately
preceding sentence, Buyer shall keep Seller advised on a weekly basis as to any
changes in the Credit Spread Increase. Upon any material change (either an
increase or a reduction) in the Credit Spread Increase, Buyer shall deliver to
Seller an updated Credit Spread Notice indicating the new Credit Spread
Increase, and Seller shall make an updated election under the second preceding
sentence. If at any time prior to the Extended Closing Date the credit
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spreads have declined, such that a Credit Spread Increase no longer exists (or
if Buyer in its sole discretion elects to waive any Purchase Price reduction
arising from a Credit Spread Increase) and if the conditions precedent to the
obligations of the Parties as set forth in Article 7 and Article 8 shall have at
such time been satisfied or waived, then the Closing shall occur with no
reduction in the Purchase Price pursuant to the provisions of this Section 1.7.
If at any time on or prior to the Extended Closing Date a Credit Spread Increase
remains in effect, then Seller may elect in writing at any time prior to such
Extended Closing Date by giving ten (10) business days prior written notice to
Buyer of its election to do so, to proceed to the Closing upon the satisfaction
or waiver of the conditions precedent to the obligations of the Parties as set
forth in Article 7 and Article 8, with the Purchase Price to be reduced in
accordance with the provisions of Schedule 1.7. If the Extended Closing Date
occurs prior to Seller electing to close in accordance with this Section 1.7 and
prior to the Credit Spread Increase being reduced to zero (or Buyer electing in
its sole discretion to waive a reduction in the Purchase Price resulting from a
Credit Spread Increase), this Agreement shall terminate. Buyer agrees that its
actions taken and determinations made in respect of the issues arising with
respect to the Debt Financing Commitment will be taken or made in the same
manner as the same would be taken or made if Buyer did not have the right to
reduce the Purchase Price as a result of a Credit Spread Increase.
Notwithstanding the foregoing and notwithstanding provisions in the Debt
Financing Commitment that would permit the lenders to implement changes in the
terms of the financing in order to permit a full syndication, as between Buyer
and Seller, Buyer shall not be required to accept any materially adverse changes
in the terms set forth on Exhibit A and Exhibit B to the Debt Financing
Commitment. Buyer agrees to exercise its rights in respect of the Debt Financing
Commitment so as to permit Seller to observe and provide input regarding the
syndications of the loans contemplated by the Financing Commitments.
1.8 Instruments of Conveyance, Transfer, Assumption, Etc.
(a) Seller shall properly execute and deliver to Buyer at the Closing:
(i) the Full ▇▇▇▇ and Assignment and the Partial ▇▇▇▇ and Assignment; (ii) all
appropriate limited warranty deeds, easement or lease assignments and other
instruments of transfer with respect to any real property interest comprising
part of the Purchased Assets ("Real Property Conveyances"); and (iii)
assignments with respect to each of the contracts and other agreements and
rights to be assigned to Buyer hereunder, which assignments shall, where
required for such assignments, include the consent or waiver of any third party,
in each case in form reasonably satisfactory to Buyer.
(b) Simultaneously with the Closing, Seller shall take all steps
required to put Buyer in actual possession and operating control of the
Purchased Assets.
ARTICLE 2
CLOSING AND TERMINATION
2.1 Closing. Upon the terms and subject to the conditions set forth in this
Agreement, the closing of the transactions provided for herein (the "Closing")
will take place at the offices of Pillsbury Winthrop LLP, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ at 10:00 A.M. on the first business day of the month
following the month that ends not earlier than twenty (20) days
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after the conditions precedent specified in Article 7 and Article 8 have each
been satisfied or waived, or at such other place, time and date as may be agreed
upon by Buyer and Seller (the "Closing Date"). Notwithstanding the foregoing,
the Closing Date shall not occur prior to January 1, 2003. For the purpose of
any calculation or determination required to be made by any of the Parties
following the Closing, the Closing shall be deemed to have been effective as of
12:01 A.M., Decatur, Illinois time, on the Closing Date, except that, with
respect to any transactions that are scheduled or settled with reference to
uniform prevailing time applicable in a territory of a controlling RTO, such
prevailing time shall apply.
2.2 Termination. Anything contained in this Agreement other than in this
Section 2.2 to the contrary notwithstanding, this Agreement may be terminated in
writing at any time prior to Closing:
(a) without liability on the part of any Party by mutual consent of
Buyer and Seller;
(b) without liability on the part of any Party by either Buyer or
Seller, if the Closing shall not have occurred on or before July 7, 2003 or, if
applicable in accordance with Section 1.7, the Extended Closing Date (or such
later date as may be agreed upon in writing by the Parties) (the "Final
Termination Date"), unless the failure of the Closing to occur is the result of
a material breach of this Agreement by the Party seeking to terminate this
Agreement;
(c) by Buyer in accordance with Section 7.8 or if any event occurs
that would render impossible the satisfaction of one or more conditions set
forth in Article 7 to the obligations of Buyer to consummate the transactions
contemplated by this Agreement;
(d) by Seller if any event occurs that would render impossible the
satisfaction of one or more conditions set forth in Article 8 to the obligations
of Seller to consummate the transactions contemplated by this Agreement;
(e) by Buyer in accordance with Section 6.9, in which case Seller
shall reimburse Buyer for its actual and reasonable out-of-pocket costs, fees
and expenses incurred in connection with the negotiation of the Transaction
Documents and its efforts to consummate the transactions contemplated thereby;
(f) by Buyer pursuant to Section 2.3(b) or, at Buyer's election, if
the amount of Buyer Losses to which Buyer is exposed relating to Asserted
Breach(es) exceeds $10,000,000 (as agreed or determined under such Section
2.3(b)), in which case Seller shall reimburse Buyer for its actual and
reasonable out-of-pocket costs, fees and expenses incurred in connection with
the negotiation of the Transaction Documents and its efforts to consummate the
transactions contemplated thereby;
(g) by Buyer in accordance with Section 7.1 or if Seller fails to
satisfy Section 7.1, in which case Seller shall reimburse Buyer for its actual
and reasonable out-of-pocket costs, fees and expenses incurred in connection
with the negotiation of the Transaction Documents and its efforts to consummate
the transactions contemplated thereby;
7
(h) by Seller if Buyer fails to satisfy Section 8.1, in which case
Buyer shall reimburse Seller for its actual and reasonable out-of-pocket costs,
fees and expenses incurred in connection with the negotiation of the Transaction
Documents and its efforts to consummate the transactions contemplated thereby;
(i) by Buyer if Seller breaches Section 6.1(b);
(j) by Seller if the FERC issues an order in response to the Section
205 Application that meets the requirements of the FERC Approvals but which is
conditioned upon Buyer joining an RTO other than PJM pursuant to Section 6.12
and Buyer elects to comply with such condition, in which case Seller shall
reimburse Buyer for its actual and reasonable out-of-pocket costs, fees and
expenses incurred in connection with the negotiation of the Transaction
Documents and its efforts to consummate the transactions contemplated thereby;
(k) by Buyer if the FERC issues an order in response to the Section
205 Application that meets the requirements of the FERC Approvals but which is
conditioned upon Buyer joining an RTO other than PJM pursuant to Section 6.12
and Buyer elects not to comply with such condition, in which case Buyer shall
reimburse Seller for its actual and reasonable out-of-pocket costs, fees and
expenses incurred in connection with the negotiation of the Transaction
Documents and its efforts to consummate the transactions contemplated thereby;
(l) by Buyer if it is unable to complete the financing of the
transactions contemplated hereby in whole or in part due to adverse credit
events from and after the date hereof (including the Bankruptcy of Seller)
affecting Seller's ability to perform its obligations hereunder; or
(m) by Seller pursuant to Section 1.7.
2.3 Due Diligence Investigation.
(a) Any breach of any of Seller's representations, warranties or
covenants in this Agreement Known to Buyer during Buyer's due diligence review
prior to the date hereof, unless such breach(es) were Known to Seller, shall be
deemed to have been waived for all purposes, and neither Article 9 nor Section
7.1 shall be applicable thereto, subject to Buyer's right to terminate the
transactions contemplated hereby under the terms of Section 7.1 as a result of a
material breach of any of Seller's representations, warranties or covenants in
this Agreement Known to Seller prior to the date hereof.
(b) If it becomes Known to Buyer or Known to Seller that there is any
breach of Seller's representations, warranties or covenants in this Agreement
after the date hereof, Buyer or Seller, as the case may be, shall provide a
written notice to the other Parties as promptly as possible after the discovery
thereof, including a reasonably detailed description of any and all such
breaches which would be covered by the indemnification set forth in Article 9
("Asserted Breaches"), together with a statement that such Asserted Breach(es)
were not Known to Buyer (unless Buyer asserts such breach was previously Known
to Seller) prior to the date hereof. Buyer may also give written notice to
Seller of, and the provisions of this Section 2.3(b) shall also apply to,
Asserted Breaches Known to Buyer prior to the date hereof which were also Known
to Seller prior to the date hereof and shall for the purposes of this Section
2.3(b) be
8
deemed to be Known to Buyer subsequent to the date hereof. Upon the giving of
such notice, Seller may, in its sole discretion, elect to (i) cure any or all
such Asserted Breaches or (ii) agree to a full indemnification of Buyer with
respect to any and all such Asserted Breaches (in the manner set forth in
Article 9); provided, however, that if Seller elects to provide indemnification
pursuant to clause (ii) of this Section 2.3(b), the Credit Support shall be
increased (to the extent that Seller is obligated to provide Credit Support
under Section 6.9) in an amount equal to the aggregate Buyer Losses to which
Buyer is exposed and for which Buyer would otherwise be entitled to
indemnification under Article 9 to the extent that such exposure would exceed
the Minimum and the Materiality Limit (the "Loss Exposure"). Alternatively,
Buyer and Seller may agree to cause the Purchase Price to be adjusted due to any
or all such Asserted Breaches, based on the diminution in value of the Purchased
Assets and/or the Business in an amount to be agreed upon by the Parties. If
Seller and Buyer do not agree to cause the Purchase Price to be adjusted and
Seller does not make an election with respect to any Asserted Breach identified
by Buyer pursuant to this Section 2.3(b) pursuant to clause (i) or (ii) of this
Section 2.3(b), Buyer may terminate this Agreement on the earlier of (x) the
forty-fifth (45th) day after the date of Buyer's or Seller's notice pursuant to
this Section 2.3(b) and (y) the Final Termination Date. If Seller shall elect to
cure any such Asserted Breach pursuant to clause (i) of this Section 2.3(b), it
shall cure such Asserted Breach prior to the Final Termination Date. Any breach
that becomes Known to Buyer subsequent to the date hereof otherwise than by
receipt of a notice from Seller which is (A) not described in a written notice
to Seller pursuant to this Section 2.3(b), unless such breach(es) were Known to
Seller and not disclosed by Seller pursuant to this Section 2.3(b) or Section
7.1 or (B) resolved pursuant to the provisions of clause (i) or (ii) of this
Section 2.3(b) or by an agreed Purchase Price adjustment pursuant to this
Section 2.3(b) shall be deemed to have been waived for all purposes of Section
7.1. For purposes of this Section 2.3, the representations and warranties of
Seller shall be read without giving effect to any "materiality" or "Material
Adverse Effect" qualification. Any indemnification given by Seller under this
Section 2.3(b) shall be governed by the provisions of Article 9, including
specifically, but without limitation, Section 9.4. If the Parties agree on an
adjustment to the Purchase Price with respect to an Asserted Breach, neither the
provisions of Section 7.1 or Article 9 shall be applicable to such Asserted
Breach.
(c) If the Parties cannot reasonably agree upon a Loss Exposure with
respect to any or all Asserted Breaches within ten (10) business days after
Seller has made the election pursuant to clause (ii) of Section 2.3(b), then
either Party may refer the Loss Exposure arising from such Asserted Breaches for
determination in the manner hereinafter provided to the Chicago office of KPMG
LLP or such other firm as mutually agreed by the parties (the "Loss Arbitrator")
by giving notice to the other Party and to such Loss Arbitrator of its election
to do so. Within five (5) business days after the referral of such matter to the
Loss Arbitrator, each Party will deliver to the other Party and the Loss
Arbitrator a notice (the "Loss Notice") setting forth its proposal for the
determination of the Loss Exposure, its reasons for such valuation, in adequate
detail its view of the Loss Exposure arising from such Asserted Breaches and any
additional support for its asserted Loss Exposure it wishes to provide to the
Loss Arbitrator. Within five (5) business days after the giving of the two Loss
Notices, the Parties shall attend a meeting (the "Loss Meeting") with the Loss
Arbitrator in Chicago, Illinois, or at such other place as may be mutually
agreed, at a mutually acceptable time to discuss fully the content of the Loss
Notices and based thereon determine whether either or both Parties wish to
modify their Loss Notices in any way. Any such modifications shall be discussed
so that, when each Party
9
finalizes its Loss Notice, it shall do so with full knowledge of the content of
the other Party's final Loss Notice. The finalization of such Loss Notices and
the delivery of the same by each Party to the other shall occur at the Loss
Meeting. The Loss Arbitrator shall be required to adopt the Loss Exposure set
forth in either final Loss Notice and shall have no power whatsoever to reach
any other result. The Loss Arbitrator shall adopt the Loss Exposure proposed by
a Party that in his or her judgment is the more fair and equitable and in
conformity with this Agreement based upon the nature of the applicable Asserted
Breaches, such other reasonable standards customary in the industry as are
applicable to this situation, and, in the case of matters relating to the
condition of the applicable Purchased Assets, the applicable cost which would be
incurred in repairing, replacing or otherwise remedying each of such Asserted
Breaches in accordance with Good Utility Practice. The decision made in writing
and signed by the Loss Arbitrator shall definitively determine the Loss
Exposure, and, accordingly, with respect to matters under clause (ii) of Section
2.3(b), the Credit Support (or such credit support to be otherwise provided as
set forth in such clause (ii)) in an amount equal to the Loss Exposure so
determined. Such written decision shall be made, signed and delivered to the
Parties within five (5) business days of the Loss Meeting unless otherwise
agreed by the Parties. The determination of Loss Exposure which may be agreed to
or made pursuant to this Section 2.3(c) in respect of the amount of Credit
Support shall not affect the actual liability of Seller with respect to the
Asserted Breaches or be admissible in any forum as evidence of the amount of an
actual Buyer Loss, it being agreed that such matters shall be governed by
Article 9. The expenses of the Loss Arbitrator shall be borne one-half by Seller
and one-half by Buyer, except that each Party shall bear the compensation and
expense of its counsel and employees.
2.4 Effect of Termination. Except as provided in this Section 2.4 and
Section 2.2(e), Section 2.2(f), Section 2.2(g), Section 2.2(h), Section 2.2(j),
Section 2.2(k) and Section 6.9, in the event this Agreement is terminated
pursuant to Section 2.2, all further obligations of the Parties under this
Agreement shall terminate without further liability of any Party to another
(except to the extent as provided in such Sections). A termination under Section
2.2(c), Section 2.2(d) or Section 2.2(i) shall not relieve any Party of any
liability for a breach of, or for any material misrepresentation under, this
Agreement, or be deemed to constitute a waiver of any available remedy
(including without limitation specific performance if available) for any such
breach or misrepresentation.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as of the date hereof and as
of the Closing Date that:
3.1 Organization. Seller is a corporation validly existing and in good
standing under the laws of the State of Illinois.
3.2 Corporate Authority. Seller has full corporate power and authority to
enter into each of the Transaction Documents to which it is or will be a party
at Closing and to consummate the transactions contemplated thereby. The
execution, delivery and performance by Seller of each of the Transaction
Documents to which it is party or will be a party at Closing
10
have been duly authorized by all requisite corporate action. Each of the
Transaction Documents to which it is or will be a party as of the Closing Date
has been duly executed and delivered by Seller, and (assuming due execution and
delivery by Buyer) constitutes a valid and binding obligation of Seller,
enforceable in accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally and except that the availability of
equitable remedies, including without limitation specific performance, is
subject to the discretion of the court before which any proceeding therefor may
be brought.
3.3 No Violation. Assuming the Approvals are obtained and except as
disclosed in Schedule 3.3, Seller is not subject to or bound by any provision of
(a) any law, statute, rule, regulation or judicial or
administrative decision,
(b) any articles or certificate of incorporation or
bylaws or similar organizational documents,
(c) any contract, commitment, mortgage, deed of trust, lease,
note, partnership agreement, member agreement, shareholders' agreement, bond,
indenture, other instrument or agreement, license, permit, trust, custodianship
or other restriction or
(d) any permit, judgment, order, writ, rule, regulation,
injunction or decree of any court, governmental body, administrative agency or
arbitrator or any private or governmental suit, action, claim or proceeding
pending or, to the Knowledge of Seller, threatened against Seller that would
prevent the execution and delivery by Seller of the Transaction Documents or
the consummation of the transactions contemplated by the Transaction Documents
at the Closing.
3.4 Litigation. Except as disclosed in Schedule 3.4, there is (a) no
outstanding consent, order, judgment, stipulation, injunction, award or decree
of any court, government or regulatory body or arbitration tribunal against or
involving Seller relating to any of the Purchased Assets which could reasonably
be expected to have a Material Adverse Effect, (b) no action, claim, suit,
dispute or governmental, administrative, arbitration or regulatory proceeding,
labor dispute or investigation pending or, to Seller's Knowledge, threatened
against Seller at law, in equity or otherwise, relating to any of the Purchased
Assets which could reasonably be expected to have a Material Adverse Effect and
(c) no inquiry or investigation pending or, to Seller's Knowledge, threatened
against Seller at law, in equity or otherwise, relating to any of the Purchased
Assets which could reasonably be expected to have a Material Adverse Effect.
3.5 Personal Property.
(a) Except as disclosed in Schedule 3.5, Seller is the owner
or lessee of the Purchased Assets that do not constitute Real Property, free and
clear of all Encumbrances (arising by, through or under Seller, other than
arising in connection with a transaction between Seller and any Affiliate of
Seller) other than Permitted Encumbrances as of the Closing Date. Other than
Buyer, no Person has any right derived by, through or under Seller to acquire
any of the Purchased Assets that do not constitute Real Property.
11
(b) To Seller's Knowledge, the Purchased Assets (other than
Real Property) are in good operating condition and repair, normal wear and tear
excepted.
(c) To Seller's Knowledge, during the past three (3) years
there has been neither a significant interruption of the operation of Seller's
transmission business due to inadequate maintenance of the Purchased Assets
(other than Real Property) nor has any maintenance of the Purchased Assets
(other than Real Property) been deferred, except in accordance with Good Utility
Practice.
(d) Seller has provided to Buyer access to and directed Buyer
to the location of copies of all of its maintenance and outage records
maintained in the Ordinary Course of Business with respect to the Purchased
Assets for the three (3) year period ending on March 31, 2002.
3.6 Real Property.
(a) Schedule 3.6 sets forth a description of each parcel of
real property or interest in real estate owned (or a plat depicting the location
of easement interests), held under lease (or sublease) or otherwise used by
Seller (including pursuant to an easement or license) and included in the
Purchased Assets (the "Real Property").
(b) Except as disclosed in Schedule 3.6, Seller:
(i) owns and has good and defensible title in fee simple
to the Real Property designated as "owned property" in Schedule 3.6 free and
clear of all Encumbrances, limited in each case to matters arising by, through
or under Seller (other than arising in connection with a transaction between
Seller and any Affiliate of Seller) other than Permitted Encumbrances;
(ii) with respect to the Real Property that is
designated as "leased property" or "non-owned property" in Schedule 3.6,
is the holder of the real estate right and interests reflected in such leases,
easements and licenses, free and clear of all Encumbrances other than Permitted
Encumbrances; and
(iii) has reasonable rights of ingress and egress to and
from all the Real Property from and to the public street systems for all
customary street, road and utility purposes.
(c) Seller has not received any notice of any appropriation,
condemnation or like proceeding relating to or affecting the Real Property or
any part thereof, and, to Seller's Knowledge, no such proceeding has been
threatened or commenced. No condemnation judgment or deed granted thereunder
prohibits transfer to Buyer where called for by this Agreement of the interest
in real estate acquired thereunder by Seller (or its predecessor).
(d) There are no outstanding rights of first refusal or
options to purchase all or any part of the Real Property or any other right of
participation in any of the Real Property designated as "owned property" in
Schedule 3.6 arising by, through or under Seller, and, to Seller's Knowledge,
there are no outstanding rights of first refusal or options to purchase all or
12
any part of the Real Property or any right of participation in any of the Real
Property designated as "leased property" or "non-owned property" in Schedule 3.6
arising by, through or under Seller.
(e) Each agreement granting Seller an interest in the
"non-owned property" in Schedule 3.6 is valid and binding in all material
respects and is in full force and effect. Except as set forth in Schedule 3.6(e)
(or as set forth in the applicable lease), there are no rents, licenses, fees or
other sums and charges payable by Seller under any of the agreements relating to
"non-owned property" or "leased property". Except as set forth in Schedule
3.6(e), there are no uncured defaults by Seller under any of the agreements
relating to "non-owned property" and, to Seller's Knowledge, no event has
occurred and no condition exists which, with the giving of notice or the lapse
of time or both, would constitute such a default or termination event or
condition.
(f) All transmission lines included in the Purchased Assets
were constructed, and have been operated and maintained, in accordance with Good
Utility Practice. Seller has provided to Buyer a copy of each Certificate of
Public Convenience and Necessity issued by the ICC and Known to Seller with
regard to such transmission lines, and such certificates remain in force and
effect or have been superseded by a blanket Certificate of Public Convenience
and Necessity which remains in full force and effect. All Purchased Assets with
such certificates were constructed and have been operated and maintained in
accordance with the applicable Certificate of Public Convenience and Necessity.
As of the date of this Agreement, the ICC has not directed (whether by
Certificate, order under Section 8-503 of the Illinois Public Utilities Act, or
otherwise) the construction or operation by Seller of any additional or modified
facilities (other than radial distribution facilities) any portion of which
would operate at a nominal voltage of 100,000 volts or above. Except as set
forth on Schedule 3.6(f), Seller has not agreed to construct or operate any
additional or modified facilities (other than radial distribution facilities)
any portion of which would operate at a nominal voltage of 100,000 volts or
above.
(g) Schedule 3.6(g) lists the only municipalities in which
Seller's transmission assets are located in the municipal public rights of way.
(h) Except as set forth on Schedule 3.6(h), the transmission
lines pursuant to which Seller is transmitting electricity are located on, above
or below the Real Property described in Schedule 3.6.
3.7 Financial Information.
(a) Seller has heretofore furnished Buyer with a preliminary
transmission assets valuation, together with any and all additions and
reductions as of the month ended May 31, 2002 with respect to transmission plant
and March 31, 2001 with respect to general intangibles. Such information
reflects Seller's good faith determination as to all facilities and assets owned
and identified as "transmission", and such information was derived from the
financial data of Seller customarily utilized in the preparation of its audited,
or to be audited, financial statements or its FERC filings.
(b) Seller has heretofore furnished Buyer with true, correct
and complete copies of (i) an accurate summary of the Transmission Capital
Expenditures incurred with
13
respect to the Purchased Assets for each of the 1999, 2000 and 2001 calendar
years and for the first six (6) months of 2002 and (ii) its most recent planning
budget prepared in the Ordinary Course of Business dated November 16, 2001, of
its budgeted Transmission Capital Expenditures with respect to the Purchased
Assets for the 2002 calendar year. The Transmission Capital Expenditures summary
was derived from the financial data of Seller customarily utilized in the
preparation of its audited, or to be audited, financial statements or its FERC
filings. Buyer acknowledges that (x) the Transmission Capital Expenditures
summary has not been audited or reviewed by the independent accountants of
Seller and (y) Seller prepared the Transmission Capital Expenditures summary at
the request of Buyer and not in the Ordinary Course of Business.
(c) Seller has furnished Buyer with copies of its unaudited,
pro-forma statement of income and expense and statement of cash flows relating
to the Business for the twelve (12) month period ended December 31, 2001 and the
six (6) month period ended June 30, 2002 (the "Pro-Forma Operating Statements").
The Pro-Forma Operating Statements were derived from the financial data of
Seller customarily utilized in the preparation of its audited, or to be audited,
financial statements. Buyer acknowledges that (i) the Pro-Forma Operating
Statements have not been audited or reviewed by the independent accountants of
Seller and (ii) Seller prepared the Pro-Forma Operating Statements at the
request of Buyer and not in the Ordinary Course of Business.
(d) Attached hereto as Exhibit C is a true and correct summary
of Seller's transmission related revenue and each of its components for each of
the 1999, 2000 and 2001 calendar years and for the first six (6) months of 2002.
Buyer acknowledges that (i) the summary of Seller's transmission related revenue
has not been reviewed by the independent accountants of Seller and (ii) Seller
prepared such summary at the request of Buyer and not in the Ordinary Course of
Business.
3.8 Books and Records. Seller has made or shall make available for
inspection by Buyer all the books of account and other business records relating
to the Purchased Assets and the Business in its possession or under its control.
Such books of account and other business records have been sufficient to allow
Seller to conduct the Business in a commercially prudent manner.
3.9 Employee Matters.
(a) Seller has heretofore furnished Buyer with a list of
Seller's employees to whom Buyer will offer employment, effective as of the
Closing Date (the "Potential Transferred Employees"); provided, that Seller may
update its list of Potential Transferred Employees for any and all changes
between the date hereof and the Closing Date with Buyer's consent. Seller has
provided to Buyer access to and directed Buyer to the location of true, correct
and complete copies of each current Benefit Plan, and information concerning
title, current base salary rate, accrued bonus, accrued sick leave, accrued
severance pay and accrued vacation benefits of each Potential Transferred
Employee.
(b) Except as set forth on Schedule 3.9, Seller (i) is not a
party to any collective bargaining, employment or consulting agreement covering
any Potential Transferred
14
Employee and (ii) has not announced or otherwise made a commitment to create any
bonus, option, deferred compensation, pension, profit-sharing or retirement plan
or arrangement, severance arrangement or other fringe benefit plan covering any
Potential Transferred Employee for which Buyer could be liable.
(c) Neither Seller nor any other member of the same controlled
group of organizations, within the meaning of Section 414(b), Section 414(c),
Section 414(m) or Section 414(o) of the Code, of which Seller is a member has
taken any action or failed to take any action, nor has any event occurred, which
could result in Buyer becoming subject to liability under Title IV of ERISA or
under Section 412 of the Code or Part 3 of Title I of ERISA.
3.10 Inventory. The inventory items included in the Purchased
Assets are useable in the Ordinary Course of Business. The inventory items
contained in the list of inventory supplied to Buyer and set forth in Schedule
3.10 were derived from the financial data of Seller customarily utilized in the
preparation of its audited, or to be audited, financial statements.
3.11 No Material Change. Except as set forth on Schedule 3.11, to
Seller's Knowledge, there has not been any Material Adverse Change, individually
or in the aggregate, since June 30, 2002.
3.12 Absence of Change or Event. Except as disclosed in Schedule
3.12, since June 30, 2002 to and including the date hereof, Seller has operated
the Business only in the Ordinary Course of Business in all material respects in
the same manner as previously conducted.
3.13 Compliance With Law; Environmental Matters.
(a) Except as disclosed in Schedule 3.13(a), to Seller's
Knowledge, Seller's operations and activities with respect to the Purchased
Assets and the Business are in compliance in all material respects with all
applicable federal, state and local laws, including without limitation (i) all
laws, ordinances and regulations of any governmental entity applicable to the
Purchased Assets or the Business and all Environmental Laws now in effect,
including without limitation all restrictions, conditions, standards,
limitations, prohibitions, requirements, obligations, schedules and timetables
contained in the Environmental Laws or contained in any regulation, code, plan,
order, decree, judgment, injunction, notice or demand letter issued, entered,
promulgated or approved thereunder, and (ii) the National Electrical Safety Code
as adopted in the State of Illinois in 83 Illinois Administrative Code Part 305.
During the three (3) year period ending on the date hereof, to Seller's
Knowledge, Seller has not received with respect to the Purchased Assets, and to
Seller's Knowledge there is not otherwise pending, any notice or written
communication from any entity (governmental or private) of any violations of any
Environmental Law or any obligation of Seller to undertake any remedial or other
action which is required pursuant to any Environmental Law.
(b) Except as disclosed in Schedule 3.13(b), to Seller's
Knowledge, the Real Property does not contain any underground storage tanks,
asbestos or equipment using polychlorinated biphenyls.
(c) Except as disclosed in Schedule 3.13(c), to Seller's
Knowledge: (i) Seller has obtained all Licenses, Permits and Franchises that are
required under all applicable federal,
15
state and local laws, including the Environmental Laws, for the ownership, use
and operation of the Purchased Assets or the Business; (ii) all such required
Licenses, Permits and Franchises are in full force and effect in all respects
and non-appealable, and no appeal or any other action is pending to revoke any
thereof; and (iii) Seller is in full compliance in all material respects with
all terms and conditions of all such required Licenses, Permits and Franchises
and is not in violation of or default of any thereof or any judgment, order,
writ, injunction or decree of any court or administrative agency issued against
it and relating to the operation of the Purchased Assets or the Business or any
statute, law, ordinance, rule or regulation applicable to the operation of the
Purchased Assets or the Business, which are in effect as of the date hereof or
on the Closing Date and which would reasonably be expected to have a Material
Adverse Effect with respect to Buyer's ownership and use of the Purchased
Assets.
(d) Except as disclosed in Schedule 3.13(d), there is no
civil, criminal or administrative action, suit, demand, claim, hearing, notice
of violation, investigation, proceeding, notice or demand letter pending or, to
Seller's Knowledge, threatened relating to Seller with respect to the Purchased
Assets which would reasonably be expected to have a Material Adverse Effect and
which arises under or relates in any way to the Environmental Laws or any
regulation, code, plan, order, decree, judgment or injunction entered,
promulgated or approved thereunder.
(e) Except as disclosed in Schedule 3.13(e), to Seller's
Knowledge, neither Seller nor any other Person has Released, spilled, disposed
of, placed, discharged, stored, buried or dumped any Hazardous Substances, Oils,
Pollutants or Contaminants or any other wastes produced by, or resulting from,
any business, commercial or industrial activities, operations or processes on,
beneath or adjacent to the Purchased Assets, except for temporary storage of
inventories of such substances to be used and wastes generated therefrom in the
Ordinary Course of Business of Seller and which, with respect to such wastes,
were subsequently stored or disposed of at locations other than the Purchased
Assets.
(f) Except as disclosed in Schedule 3.13(f), to Seller's
Knowledge, no Release or Cleanup occurred with respect to any Purchased Asset
which could reasonably be expected to result in the assertion or creation of an
Encumbrance (other than a Permitted Encumbrance) or that would have a Material
Adverse Effect on the Purchased Assets.
3.14 Contracts and Commitments; Licenses and Permits.
(a) Schedule 3.14 sets forth each material contract or
agreement to which Seller is a party relating to the Purchased Assets and the
Business (other than any contract or agreement required to be disclosed on any
other Schedule), including without limitation any contract or agreement which:
(i) involves future payment or receipt after the
Closing of in excess of $100,000 or future performance or receipt of services or
delivery or receipt of goods and materials, in each case with an aggregate value
in excess of $100,000, including without limitation sale and purchase
agreements, distributorship and sales representative agreements and loan
agreements, notes and other financing documents or commitments to enter into any
of the foregoing agreements;
16
(ii) is a mortgage, security agreement or other
arrangement intended to secure indebtedness of any Person (including Seller or
any affiliate of Seller) and creating an Encumbrance (other than a Permitted
Encumbrance) on any Purchased Asset;
(iii) imposes a right of first refusal, option or other
restriction with respect to any Purchased Asset by which Buyer will be bound or
to which the Purchased Assets will be subject after the Closing;
(iv) is an agreement, contract or commitment limiting the
freedom of Seller with respect to the Purchased Assets to engage in any line of
business or to compete with any Person by which Buyer will be bound or to which
the Purchased Assets will be subject after the Closing; or
(v) is an agreement or contract pursuant to which any
Person has the right to attach any fixture or other item to any of the Purchased
Assets.
(b) Except as disclosed on Schedule 3.14 (as the same may be
amended prior to the Closing):
(i) each of the agreements set forth in Schedule 3.14
and the agreements or contracts of Seller with respect to the Purchased Assets
disclosed in any other Schedule (the "Contracts") is in full force and effect
and enforceable against Seller (except to the extent that such enforceability
may be limited by applicable bankruptcy, insolvency, moratorium or other similar
laws affecting or relating to enforcement of creditors' rights generally or
general principles of equity) and, to Seller's Knowledge, the other party or
parties thereto. Seller has heretofore provided to Buyer access to and directed
Buyer to the location of complete and correct copies of the Contracts. There is
not under any Contract (A) any existing default by Seller or, to Seller's
Knowledge, by any other party thereto or (B) any event which, after notice or
lapse of time or both, would constitute a default by Seller or, to Seller's
Knowledge, by any other party thereto, or result in a right to accelerate or
terminate or result in a loss of rights of Seller;
(ii) neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated hereby will result in
the acceleration of, or the creation in any party of any right to accelerate,
terminate, modify or cancel, any Contract;
(iii) no consent, approval or authorization of or
declaration or filing with any individual, corporation, partnership, limited
liability company, trust or unincorporated organization or any government or any
agency or political subdivision thereof (a "Person") is required for the valid
execution, delivery and performance by Seller of the Transaction Documents to
which it is or will be a party and the consummation of the transactions
contemplated thereby;
(iv) since June 30, 2002 to and including the date
hereof, Seller has not with respect to the Purchased Assets amended or
terminated in any material respect or waived any material right under any of the
Contracts;
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(v) Seller is not party to or bound by any contract and
the Purchased Assets are not subject to any contract that commits the Purchased
Assets to be included within any independent transmission company other than
Buyer; and
(vi) no Person is renegotiating or, to Seller's
Knowledge, has asserted the right to renegotiate or has the right to renegotiate
any amount paid or payable to or by Seller under any Contract or any other term
or provision of any Contract.
(c) Seller has provided to Buyer access to and directed Buyer
to the location of true, correct and complete schedules and summaries setting
forth the following with respect to any independent power project that is
interconnected to the Purchased Assets or proposes to become interconnected to
the Purchased Assets: (i) a reference to the applicable interconnection
agreement, if any, (ii) a reference to the interconnection study request or
transmission study request, if any, and any deposits posted in connection with
any such study, (iii) a description of the status of any ongoing interconnection
study or transmission study, (iv) the amount of any transmission service deposit
with respect to any such independent power project, (v) a listing of any other
contracts with respect to the foregoing and (vi) any and all relevant
correspondence relating to the foregoing.
(d) Schedule 3.14(d) sets forth (except to the extent set
forth on other Schedules) all Licenses, Permits and Franchises of Seller with
respect to the Purchased Assets. Seller has directed Buyer to the location where
Seller maintains copies of all such Licenses, Permits and Franchises and has
provided Buyer with access to that location.
3.15 Brokers and Finders. Neither Seller nor any of its
Affiliates, officers, directors or employees has employed any broker, investment
banker, finder, financial advisor or other Person or incurred any liability for
any brokerage fees, commissions, financial advisor's or finders fees in
connection with the transactions contemplated by any of the Transaction
Documents based on arrangements made by or on behalf of Seller, and Buyer shall
not have any liability for any such fees or commissions.
3.16 Assets Used in Performing the Business. Except as set forth
on Schedule 3.16, the Purchased Assets as to which title is effectively conveyed
at the Closing constitute all of the tangible and intangible assets used by
Seller in the Business and all assets necessary to conduct the Business in
accordance with Good Utility Practice and, as such services are currently being
conducted, are sufficient to operate the Business in the manner in which it is
currently being conducted and in the manner in which it was conducted during the
period covered by the Pro-Forma Operating Statements.
3.17 Jointly Used Assets; Dual Purpose Contracts. The Jointly Used
Assets and other assets of Seller to be employed pursuant to the Operational
Documents are used in performing the Business and in other businesses conducted
by Seller. The Operational Documents also set forth the allocation agreed to by
the Parties for such assets to be employed by the Parties in connection with the
ownership and operation of their respective businesses from and after the
Closing. Seller and Buyer have agreed in the Operational Documents on the manner
in which those Jointly Used Assets shall be utilized in the Business from and
after the Closing. In addition, certain assets of Seller are subject to joint
use agreements with third parties. Such agreements, to the extent
18
assumed by Buyer under the Transaction Documents, shall not impair the ability
of Buyer to operate the Purchased Assets substantially in the same manner as
previously operated by Seller.
3.18 Public Utility. Seller is a public utility company as defined
in Section 2(a)(5) of the PUHCA and is exempt from registration under the PUHCA
and all regulations thereunder (other than pursuant to Section 9(a)(2) thereof)
pursuant to Section 3(a)(1) thereof and Rule 2 thereunder. Seller is a
"subsidiary company", as defined in Section 2(a)(8) of the PUHCA, of a "holding
company", as defined in Section 2(a)(7) of the PUHCA, which holding company is
exempt from registration under the PUHCA pursuant to Section 3(a)(1) thereof and
Rule 2 thereunder.
3.19 Purchase and Sale Agreement for Ancillary Services-Related
Resources. Seller has provided to Buyer access to and directed Buyer to the
location of documents relating to any proposed modifications or alterations to
Ancillary Services (as defined in the Purchase and Sale Agreement for Ancillary
Services-Related Resources attached as Exhibit G) which the Transmission
Provider (as defined in the Purchase and Sale Agreement for Ancillary
Services-Related Resources attached as Exhibit G) offers.
3.20 Tax Matters. No Tax liens or other encumbrances have attached
or shall attach to any of the Purchased Assets or the Business because of a
deficiency or delinquency in payment of Taxes by Seller or because of a failure
to qualify in any jurisdiction other than liens for Taxes not yet due and
payable or Taxes that are being contested in good faith through appropriate
proceedings, for which adequate provision has been made in accordance with GAAP.
3.21 Disclaimer of All Other Representations and Warranties. Except
as expressly set forth in this Article 3, Seller makes no representation or
warranty, express or implied, at law or in equity, in respect of the Purchased
Assets, the Business or any matter contemplated by the Transaction Documents,
including with respect to merchantability or fitness for any particular purpose,
and all other representations or warranties are hereby expressly disclaimed.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as of the date hereof and as
of the Closing Date that:
4.1 Organization. Buyer is a limited liability company validly
existing and in good standing under the laws of the State of Delaware.
4.2 Limited Liability Company Authority. Buyer has full limited
liability company power and authority to enter into the Transaction Documents to
which it is a party and to consummate the transactions contemplated thereby. The
execution, delivery and performance by Buyer of each of the Transaction
Documents to which it is a party have been duly authorized by all requisite
limited liability company action. Each of the Transaction Documents to which it
is a party will be, as of the Closing Date, duly executed and delivered by
Buyer, and (assuming due execution and delivery by Seller) constitutes a valid
and binding obligation of Buyer, enforceable
19
in accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally or by general equitable principles and except that the
availability of equitable remedies, including without limitation specific
performance, is subject to the discretion of the court before which any
proceeding therefor may be brought.
4.3 No Violation. Assuming the Approvals are obtained and except as
disclosed in Schedule 4.3, Buyer is not subject to or bound by any provision of
(a) any law, statute, rule, regulation or judicial or
administrative decision,
(b) any articles or certificate of incorporation or bylaws or
similar organizational documents,
(c) any contract, commitment, mortgage, deed of trust, lease,
note, partnership agreement, member agreement, shareholders' agreement, bond,
indenture, other instrument or agreement, license, permit, trust, custodianship
or other restriction or
(d) any permit, judgment, order, writ, rule, regulation,
injunction or decree of any court, governmental body, administrative agency or
arbitrator or any private or governmental suit, action, claim or proceeding
pending or, to the Knowledge of Buyer, threatened against Buyer
that would prevent the execution and delivery by Buyer of the Transaction
Documents or the consummation of the transactions contemplated by the
Transaction Documents at the Closing. Except as disclosed in Schedule 4.3, no
consent, approval or authorization of or declaration or filing with any Person
is required for the valid execution, delivery and performance by Buyer of the
Transaction Documents to which it is or will be a party and the consummation of
the transactions contemplated thereby.
4.4 Brokers and Finders. Neither Buyer nor any of its officers,
directors, employees or members has employed any broker, investment banker,
finder, financial advisor or other Person or incurred any liability for any
brokerage fees, commissions, financial advisors or finders fees in connection
with the transactions contemplated by the Transaction Documents based on
arrangements made by or on behalf of Buyer, and Seller shall not have any
liability for any such fees or commissions.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to Seller as of the date hereof and as
of the Closing Date that:
5.1 Organization. Parent is a corporation validly existing and in
good standing under the laws of the State of Michigan.
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5.2 Corporate Authority. Parent has full corporate power and
authority to enter into this Agreement to which it is a party solely for
purposes of this Article 5, Section 8.2 and Article 11 and to consummate the
transactions contemplated thereby. The execution, delivery and performance by
Parent of this Agreement to which it is a party solely for purposes of this
Article 5, Section 8.2 and Article 11 have been duly authorized by all requisite
corporate action. This Agreement to which Parent is a party solely for purposes
of this Article 5, Section 8.2 and Article 11 will be, as of the Closing Date,
duly executed and delivered by Parent, and (assuming due execution and delivery
by Seller and Buyer) constitutes a valid and binding obligation of Parent solely
for purposes of this Article 5, Section 8.2 and Article 11 enforceable in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally or by general equitable principles and except that the
availability of equitable remedies, including without limitation specific
performance, is subject to the discretion of the court before which any
proceeding therefor may be brought.
5.3 No Violation. Assuming the Approvals are obtained and except as
disclosed in Schedule 5.3, Parent is not subject to or bound by any provision of
(a) any law, statute, rule, regulation or judicial or
administrative decision,
(b) any articles or certificate of incorporation or bylaws or
similar organizational documents,
(c) any contract, commitment, mortgage, deed of trust, lease,
note, partnership agreement, member agreement, shareholders' agreement, bond,
indenture, other instrument or agreement, license, permit, trust, custodianship
or other restriction or
(d) any permit, judgment, order, writ, rule, regulation,
injunction or decree of any court, governmental body, administrative agency or
arbitrator or any private or governmental suit, action, claim or proceeding
pending or, to the knowledge of Parent, threatened against Parent
that would prevent the execution and delivery by Parent of the Transaction
Documents or the consummation of the transactions contemplated by the
Transaction Documents at the Closing. Except as disclosed in Schedule 5.3, no
consent, approval or authorization of or declaration or filing with any Person
is required for the valid execution, delivery and performance by Parent of the
Transaction Documents to which it is or will be a party and the consummation of
the transactions contemplated thereby.
5.4 Brokers and Finders. Neither Parent nor any of its officers,
directors or employees has employed any broker, investment banker, finder,
financial advisor or other Person or incurred any liability for any brokerage
fees, commissions, financial advisors or finders fees in connection with the
transactions contemplated by the Transaction Documents based on arrangements
made by or on behalf of Parent, and Seller shall not have any liability for any
such fees or commissions.
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ARTICLE 6
CERTAIN COVENANTS AND AGREEMENTS
6.1 Conduct of Business Prior to the Closing Date. Except as set
forth on Schedule 6.1, Seller agrees that, between the date hereof and the
Closing Date:
(a) Except as contemplated by this Agreement or permitted by
prior written consent of Buyer, Seller shall operate the Business only in the
Ordinary Course of Business consistent with Good Utility Practice and not fail
to make any Transmission Capital Expenditures required in accordance with Good
Utility Practice in the Ordinary Course of Business.
(b) Seller shall not become a party to any contract or
otherwise permit the Purchased Assets to become subject to any commitment to be
included within any independent transmission company other than Buyer.
(c) Seller shall discuss with Buyer any material filing (or
amendment thereto) to be made by Seller with any federal or state regulatory
agency relating to the Purchased Assets or the Business.
(d) Seller shall not, without the consent of Buyer unless
required by the ICC, the FERC, or other regulatory body or any regional
transmission organization or independent system operator (in the latter case
subject to Section 3.11):
(i) place any Encumbrance (other than a Permitted
Encumbrance) on any of the Purchased Assets;
(ii) sell, transfer, license, lease to others or
otherwise dispose of any of the Purchased Assets (except for inventory sales or
returns to vendors in the Ordinary Course of Business and items which are
replaced by items of substantially similar usefulness) or cancel, waive, release
or otherwise compromise any material claim or any material right of value
relating to the Purchased Assets;
(iii) institute any litigation, action or proceeding
before any court, governmental body or arbitration tribunal for which Buyer
could be liable or which could otherwise materially and adversely affect the
Business;
(iv) amend or terminate in any material respect or waive
any material right under any of the Contracts;
(v) acquire or agree to acquire any assets that are
material, individually or in the aggregate, to be included in the Purchased
Assets, except purchases of equipment or spare parts in the Ordinary Course of
Business;
(vi) settle any contingent liabilities with respect to
the Purchased Assets for which Buyer could be liable; or
22
(vii) enter into any contract, agreement or understanding with
PJM or any other RTO, without Buyer's consent, which shall not be unreasonably
withheld.
6.2 Employee Matters.
(a) Buyer will offer employment to the Potential Transferred
Employees, commencing as of the Closing Date on terms and conditions (including
compensation and benefits) comparable to those Buyer would offer other similarly
situated prospective employees. All such individuals who accept offers of
employment with Buyer as of the Closing shall be referred to herein as
"Transferred Employees". Transferred Employees shall receive a base salary not
less than what they received immediately prior to the Closing Date, and shall be
credited for their years of service with Seller for purposes of qualifying for
benefits under Buyer's benefit plans. Seller shall assist Buyer in effecting
such Transferred Employees' change of employment as of the Closing Date. From
the date hereof through the Closing Date, Seller shall revise or update any and
all information previously provided to Buyer with respect to the Potential
Transferred Employees pursuant to Section 3.9. Buyer shall have no obligation or
liability, for severance benefits or otherwise, with respect to Potential
Transferred Employees to whom Buyer does not extend an offer of employment or
who reject Buyer's offer of employment, and Seller shall be solely responsible
for all obligations and liabilities with respect to such Potential Transferred
Employees. Buyer shall be responsible for any and all severance liabilities with
respect to any Transferred Employee whose employment with Buyer and its
affiliates is terminated after the Closing Date. If a Potential Transferred
Employee declines Buyer's offer of employment commencing as of the Closing Date,
Buyer agrees that either (i) it shall not hire such individual at any time
during the first six (6) months after the Closing Date or (ii) if Buyer does
hire such individual during the first six (6) months after the Closing Date,
Buyer shall reimburse Seller, or shall cause such individual to reimburse
Seller, for any and all cash severance pay received by such individual from
Seller. Nothing in this Section 6.2 shall affect the nature of the employment
relationship between Buyer and the Transferred Employees as the same shall exist
under applicable law or affect the ability of Buyer under applicable law to
change any salary, compensation or benefit of any Transferred Employee after the
Closing.
(b) Notwithstanding the foregoing, at least ten (10) business
days prior to the Closing Date, Seller shall be permitted to identify to Buyer
in writing no more than two (2) Potential Transferred Employees who provide
transmission billing services whose employment will continue with Seller for no
more than six (6) months after the Closing Date, and to whom Buyer shall offer
employment upon their termination of employment with Seller. Any such individual
hired by Buyer shall be considered a "Transferred Employee" for purposes of this
Section 6.2 commencing upon his or her date of hire by Buyer.
(c) Buyer shall not assume any assets or liabilities or any
other obligation with respect to any Benefit Plan, vacation, bonus or other
arrangement with respect to any current, former or retired employee of Seller,
including any Transferred Employee, and Seller retains all liabilities with
respect to all such benefits. Buyer shall be responsible for any and all
liabilities that Buyer or Seller incur under the Worker Adjustment & Retraining
Notification Act of 1988 (the "WARN Act") with respect to the Transferred
Employees and which are related to actions taken by Buyer following the Closing
Date. Seller shall be responsible for any and all liabilities that Buyer or
Seller incur under the WARN Act with respect to Transferred Employees
23
(and any other current employees of Seller) and which are related to actions
taken on or prior to the Closing Date (or after the Closing Date, with respect
to Potential Transferred Employees described in Section 6.2(b)).
6.3 Sales, Use and Transfer Taxes. Buyer and Seller shall cooperate in
preparing and filing all sales, use or other transfer tax returns, including any
exemption certificates relating to the transactions contemplated by the
Transaction Documents, and shall use their Best Efforts to minimize any such
sales, use or other transfer taxes. Any such sales, use or other transfer taxes
and any other transfer or documentary taxes or any filing or recording fees
applicable to the transactions contemplated by the Transaction Documents shall
be borne and paid by the Buyer.
6.4 Access to Information. Seller agrees that Buyer and its lenders may
conduct such reasonable investigation with respect to the business, business
prospects, assets, liabilities (contingent or otherwise), results of operations,
employees and financial condition of the Purchased Assets or the Business or the
transactions contemplated by the Transaction Documents as shall permit Buyer and
its lenders to evaluate its interest in the transactions contemplated by the
Transaction Documents. Seller shall authorize and permit Buyer, its lenders and
their respective representatives, including Buyer's independent accountants and
counsel and Buyer's lenders and their counsel and advisors, from the date hereof
to the Closing Date (or the Final Termination Date, if earlier), to have
reasonable access during normal business hours, upon reasonable notice and in
such manner as shall not unreasonably interfere with the conduct of the
Business, to all of Seller's properties, books, records, operating instructions
and procedures, Tax returns relating to the Purchased Assets and all other
information with respect to the Business as Buyer or its lenders may from time
to time reasonably request, and to make copies of such books, records and other
documents and to discuss the Business with such third persons, including without
limitation Seller's directors, officers, employees, accountants, suppliers,
customers and creditors, as Buyer or its lenders considers reasonably necessary
or appropriate for the purposes of familiarizing itself with the Purchased
Assets, obtaining any necessary approvals of or permits for the transactions
contemplated by this Agreement and conducting an evaluation of the Purchased
Assets or the Business. All investigations, inspections and other rights of
access exercised pursuant to this Section 6.4 shall be at Buyer's sole cost and
expense.
6.5 Confidentiality. Buyer and Seller acknowledge and agree that the terms
and conditions of that certain Confidentiality Agreement dated as of July 17,
2001 by and between Seller and Parent shall apply to each of the Transaction
Documents and to the transactions contemplated thereby.
6.6 No Solicitation. Seller shall not, and shall direct each of its
Affiliates, officers, employees, representatives or agents not to, directly or
indirectly, encourage, solicit, initiate or engage in discussions or
negotiations with, or provide any non-public information to, any Person or
concerning any sales of substantial assets or similar transactions involving the
Purchased Assets or enter into any agreement with respect thereto.
6.7 Publicity. Any public announcements regarding this Agreement, the other
Transaction Documents or the transactions contemplated hereby and thereby shall
be made only with the mutual consent of Seller and Buyer, which will not be
unreasonably withheld or delayed, except as may be required by applicable law or
stock exchange regulations, in which case the
24
Party required to issue the public announcement shall allow the other Party
reasonable time to comment on such release or statement in advance of its
issuance.
6.8 Financing Commitments. Buyer has provided to Seller written
confirmation of the Financing Commitments sufficient to fund the Purchase Price.
Seller hereby agrees that the terms and conditions of such Financing Commitments
are acceptable to Seller.
6.9 Change in Credit Status. If, at any time after the date of this
Agreement, (i) Seller's credit rating is below "BB+" by S&P and "Ba1" by ▇▇▇▇▇'▇
or (ii) Seller's gross tangible assets fall below $200,000,000, then, at Buyer's
request, Seller shall provide a letter of credit in the amount of $10,000,000
from an Acceptable Bank that supports the performance of any and all of Seller's
obligations under this Agreement in form and substance reasonably satisfactory
to Buyer or another form of credit support reasonably acceptable to Buyer (the
"Credit Support"). If such request is made prior to the Closing Date and Seller
fails to confirm that it will provide such Credit Support on or prior to the
Closing Date, or if Seller in fact fails to provide the Credit Support on or
prior to the date at which the Closing Date would otherwise occur, Buyer may
terminate this Agreement. Seller's obligation to provide the Credit Support
shall terminate on the earlier of (A) three (3) years from the Closing Date or
(B) at such time that Seller's credit rating is "BB+" or higher by S&P and "Ba1"
or higher by ▇▇▇▇▇'▇ (provided Seller's gross tangible assets are $200,000,000
or greater), but, notwithstanding any such termination, the Credit Support
related to pending indemnification claims ("Pending Indemnification Claims")
shall remain in force and effect in an amount necessary to secure such claims
and, in the case of a termination under clause (ii), such termination shall
apply only as to the Credit Support previously provided by Seller, Seller
remaining obligated to provide Credit Support if the events described in clause
(i) or (ii) in the first sentence of this Section 6.9 reoccur within three (3)
years from the Closing Date. Such amount shall be the aggregate Buyer Losses to
which Buyer is exposed as a result of such Pending Indemnification Claims. If
Seller and Buyer are unable to agree on the amount of such Buyer Losses, either
Party may refer the matter to an arbitrator in accordance with the procedures
set forth in Section 2.3(c). Seller acknowledges that if such Credit Support (x)
expires prior to the third anniversary of the Closing Date, then Buyer may draw
on such Credit Support in full, or (y) expires after the third anniversary of
the Closing Date while Buyer has Pending Indemnification Claims, then Buyer may
draw on such Credit Support in an amount equal to the estimated Buyer Losses
relating to the Pending Indemnification Claims, in the case of either clause (x)
or (y) if Seller has failed to extend such Credit Support before the fifth
business day prior to the expiration thereof. Any funds so received as a result
of such draw shall be promptly placed in escrow as security for potential Buyer
Losses, and shall be released from escrow upon (a) the third anniversary of the
Closing Date, except to the extent of the amount necessary to secure Pending
Indemnification Claims, and, from time to time after the third anniversary of
the Closing Date, to the extent the Pending Indemnification Claims are resolved
or (b) the posting of Credit Support in the amount then remaining in escrow. It
is provided, however, that if for any reason the Closing contemplated hereby
shall not occur, any letter of credit (or other Credit Support) may be
terminated as of the termination of this Agreement and any funds held as cash
collateral shall be returned to Seller.
6.10 Bulk Sales Requirements. The Parties acknowledge that neither Seller
nor Buyer shall comply with any bulk sales laws or notice requirements, and
Seller shall indemnify and
25
hold Buyer harmless from any and all losses, liabilities, claims and expenses
which shall arise against or be incurred by Buyer for the failure to comply with
such requirements.
6.11 Ancillary Agreements. Each of the Parties shall, on or before the
Closing Date, execute and deliver each Transaction Document to which it is a
party.
6.12 Membership in PJM. Buyer shall (i) not take any action, or omit to
take any action, that frustrates, impedes or otherwise interferes with Seller's
(A) negotiations with PJM or (B) efforts to obtain any approvals, consents,
licenses, permits or other authorizations of any Person relating to PJM or any
contract, agreement or understanding relating thereto, (ii) assume any and all
contracts, agreements or understandings of Seller with PJM on the Closing Date
and comply in all material respects with the terms and conditions thereof and
(iii) remain a member of PJM until at least December 31, 2004; provided,
however, that if the FERC orders Buyer into another RTO or conditions one or
more of the FERC Approvals upon Buyer transferring into another RTO, Buyer shall
not be deemed in breach of this Agreement under this Section 6.12. If the FERC
issues an order in response to the Section 205 Application that meets the
requirements of the FERC Approvals set forth in Section 7.8 but which is
conditioned upon Buyer joining an RTO other than PJM, Buyer may comply with such
condition without being in violation of this Section 6.12. In such event, Buyer
shall provide written notice to Seller that it intends to comply with such
condition, and Seller shall then have the right to terminate this Agreement at
any time within five (5) business days of its receipt of such notice.
6.13 Additional Information. In addition to the access contemplated by
Section 6.4, during the period from the date hereof through (and including) the
Closing Date, the Parties agree as follows:
(a) Seller shall furnish promptly to Buyer (i) a copy of each report,
schedule and other document filed by it with respect to the Purchased Assets or
the Business during such period with any governmental entity relating to the
Purchased Assets or the Business, (ii) a copy of any and all material
correspondence to or from any governmental entity relating to the Purchased
Assets or the Business, (iii) monthly operating and revenue reports relating to
the Purchased Assets prepared by Seller in the Ordinary Course of Business and
(iv) all other information concerning the Purchased Assets or the Business as
Buyer may reasonably request; and
(b) Buyer shall furnish promptly to Seller (i) a copy of each report,
schedule and other document filed by it with respect to the Purchased Assets or
the Business during such period with any governmental entity relating to the
Purchased Assets or the Business and (ii) a copy of any and all material
correspondence to or from any governmental entity relating to the Purchased
Assets or the Business.
6.14 Books and Records. For a period of three (3) years after the Closing
Date, each of Seller and Buyer shall retain all books, records and other
documents pertaining to the Business in existence on the Closing Date and shall
make the same available after the Closing Date for inspection and copying by the
other Party for any reason pertaining to the period prior to the Closing and
Seller's ownership of the Purchased Assets at such other Party's expense during
normal business hours, upon reasonable request and upon reasonable notice.
During such three
26
(3) year period, no such books, records or documents shall be destroyed by
Seller or Buyer without first advising the other Party in writing and giving the
other Party a reasonable opportunity to obtain possession thereof. Without
limiting the generality of the foregoing, Buyer shall make available to Seller,
the Affiliates of Seller and their respective representatives all information
deemed necessary or desirable by Seller in preparing its financial statements
and conducting any audits in connection therewith.
6.15 Section 205 Filing. Seller agrees not to protest or otherwise object
to or file any motion relating to rates, terms, or conditions filed by Buyer or
any of its Affiliates on behalf of Buyer in the Section 205 Application to
effectuate this Agreement and the transactions contemplated hereby.
6.16 Section 205 and Section 206 Rights.
(a) Seller agrees to waive its rights to protest and/or file a
complaint under Section 205 and Section 206 of the Federal Power Act with regard
to any transmission service (including ancillary service) rates, charges or Rate
Treatments proposed by Buyer under Section 205 of the Federal Power Act in
connection with the Purchased Assets and filed concurrently with the filing of
this Agreement under Section 203 of the Federal Power Act. Seller agrees to
waive its rights to protest and/or file a complaint under Section 205 or Section
206 of the Federal Power Act with regard to the rates, charges or Rate
Treatments applicable to any transmission service rates proposed by Buyer, or
placed into effect by the FERC, under Section 205 or Section 206 of the Federal
Power Act to become effective in connection with the Purchased Assets prior to
January 1, 2007; provided, that the Rate Treatments proposed by Buyer, or placed
into effect by the FERC, do not differ from the Rate Treatments proposed by
Buyer in connection with the Purchased Assets and filed concurrently with the
filing of this Agreement. These rate treatments are implementation of a
Levelized Rate for transmission service based on gross plant and a formula rate
that includes a rate of return on equity of not less than thirteen percent (13%)
and a capital structure with an equity component of not less than fifty percent
(50%) for rate making purposes ("Rate Treatments"). Seller reserves the right to
protest and/or file a complaint under Section 205 and Section 206 of the Federal
Power Act as to any Excepted Rate Matters. Seller agrees and acknowledges that
any review conducted or to be conducted of Buyer's Rate Treatments, rates,
charges, terms and conditions for electric transmission service, to become
effective in connection with the Purchased Assets prior to January 1, 2007,
shall only be reviewable by the FERC under the "public interest" standard of
review set forth in United Gas Pipe Line Co. v. Mobile Gas Service Corp., ▇▇▇
▇.▇. ▇▇▇ (1956) and Federal Power Commission v. Sierra Pacific Power Co., 350
U.S. 348 (1956) (the "Mobile-Sierra" doctrine); provided, that such standard
shall not apply to Excepted Rate Matters; provided, further, that this
limitation shall not affect the rights of any state regulatory commission under
the Federal Power Act. Seller reserves all of its rights under Section 205 and
Section 206 of the Federal Power Act to make filings with the FERC with regard
to Buyer's transmission service (including ancillary services) Rate Treatments,
rates, charges, terms and conditions either proposed to become effective, or in
effect, on or after January 1, 2007.
(b) "Excepted Rate Matters" means: (i) any changes in the rate design
or rate formula; (ii) any change in the Rate Treatments proposed by Buyer, or
placed into effect by the FERC; (iii) any misapplication of the formula rate
that is the subject of the FERC Approvals; (iv)
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any increase in transmission gross plant associated with projects undertaken as
a result of satisfying RTO investment requirements that exceeds 115% of the
RTO-estimated costs for the project; (v) any cost components (including, without
limitation, Administrative and General Expenses and Operations and Maintenance
Expenses (each as defined by the FERC Uniform System of Accounts), but excluding
capital expenditures) that exceed by 15% the prior year's costs; and (vi) any
new rates, charges or surcharges and any terms and conditions of service. Any
increase in charges assessed by Seller to Buyer under the Services Agreement
attached as Exhibit F will not be used in calculating the percentage change in
clause (v), except that, if Buyer incurs any such costs that are not prudent,
then Seller shall have the right to object to such costs.
(c) For purposes of this Section 6.16, any rates, rate treatments or
charges proposed by an RTO on Buyer's behalf, or any other entity on Buyer's
behalf, and premised upon Buyer's Rate Treatments and the formula rate, shall be
deemed to have been proposed by Buyer, provided that any changes in the terms
and conditions of the RTO Open Access Transmission Tariff, surcharges or other
transmission rate adders shall be deemed to have been proposed by the RTO.
6.17 Real Property. Seller shall provide to Buyer access to and direct
Buyer to the location of complete and correct copies of each and every of the
following, if any, in the possession of Seller: (i) data affording information
or opinions with respect to, certifying to, or evidencing the extent of, current
title, title history, title marketability, use, possession, restriction or
regulation, if any (governmental or otherwise), and compliance with applicable
laws, of the Real Property; (ii) deed or title-holding or trust agreements, if
any, under which any of the Real Property may have been conveyed to Seller or
under which the same may be held for the benefit of Seller; and (iii) leases,
subleases, easements, licenses or other agreements included as Purchased Assets
and all documents relating thereto under which Seller uses or occupies or has
the right to use or occupy, now or in the future, any Real Property, including
any amendments thereto and any assignment thereof. Seller has provided access to
Buyer and directed Buyer to the location of a true and complete schedule of the
"owned property" and will provide access to Buyer and direct Buyer to the
location of a true and complete schedule of all of the documents described in
this Section 6.17 at least ten (10) business days prior to the Closing Date.
6.18 Claims. Schedule 6.18 sets forth, to Seller's Knowledge, all claims
individually in excess of $5,000 asserted during the past two (2) years against
Seller with respect to the Purchased Assets or the Business in respect of
personal injury, wrongful death or property damage, except data and other
information subject to an attorney-client privilege.
6.19 Transitional Funding Obligations. As long as any Transitional Funding
Instruments are outstanding, Seller shall not (a) cause or allow any
transmission revenues due to Buyer to be reduced or impaired by or on account of
any credit or claim under the TFO Documents, (b) on account of any credit or
claim under the TFO Documents, reduce or offset any amount due from Seller to
Buyer for transmission services performed by Buyer, or (c) seek to impose on
Buyer any obligations as successor, or as a successor servicer, under the TFO
Documents.
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6.20 Efforts to Extend Financing Commitments. In the event that the Closing
Date is delayed due to the occurrence and continuance of a Credit Spread
Increase pursuant to Section 1.7, and it appears likely that such Credit Spread
Increase may not be resolved prior to the then-expiration of the Financing
Commitment Letters, Buyer will use Best Efforts to extend the then-expiration
dates of the Financing Commitment Letters for so long as such Credit Spread
Increase continues in effect; provided, that Buyer shall not be required to
extend the Financing Commitment Letters for more than ninety (90) days after the
original expiration date of the Financing Commitments unless requested by
Seller, in which case Seller shall pay the fees and expenses for any and all
such extensions after the initial ninety (90) day extension period.
6.21 Tariff Funds. At Buyer's request made no later than thirty (30) days
after the date of this Agreement, Seller shall use Best Efforts to seek a final
and non-appealable order of the ICC confirming that Buyer's receipt of revenues
under its tariffs for transmission services provided using Purchased Assets are
not subject to claim by holders of Transitional Funding Instruments.
ARTICLE 7
CONDITIONS PRECEDENT OF BUYER
Buyer need not consummate the transactions contemplated by this Agreement
unless the following conditions shall be fulfilled:
7.1 Representations, Warranties and Covenants. Except as otherwise
contemplated or permitted by this Agreement, (a) all representations and
warranties of Seller contained in Article 3 (as may be amended) qualified as to
materiality or by reference to "Material Adverse Effect" shall be true in all
respects, and those not so qualified shall be true and correct in all material
respects, in each case as of the date hereof and as of the Closing Date as
though made as of the Closing Date and (b) Seller shall have performed and
complied with all agreements and conditions required by this Agreement to be
performed or complied with by Seller prior to or on the Closing Date in all
material respects. Buyer shall have been furnished with a certificate of an
appropriate officer of Seller, dated the Closing Date, certifying to the effect
of clauses (a) and (b) of this Section 7.1. Notwithstanding the breach of a
representation or warranty, the conditions set forth in this Section 7.1 shall
be deemed satisfied if the failure of any representation or warranty is Fully
Covered by Seller's indemnity as provided in Article 9 or, to the extent not
Fully Covered, such failure would not reasonably be expected to result in a
Material Adverse Effect, provided such failure was not Known to Seller prior to
the date of this Agreement. With respect to any failure of Seller's
representations and warranties contained in Article 3 qualified as to
materiality or by reference to "Material Adverse Effect" to have been true in
all respects, and those not so qualified to have been true in all material
respects, in each case as of the date hereof, where such breaches were Known to
Seller as of the date hereof, Seller shall promptly upon discovery of such
failure notify Buyer and amend, modify or otherwise revise any disclosure
schedule contemplated by this Agreement to correct such breach (but in no event
later than seven (7) days prior to the Closing Date); provided, however, upon
receipt of such notice and amended, modified and otherwise revised disclosure
schedule from Seller, that unless (i) Seller shall elect to cure the matter
which is the subject of such breach, such that the applicable representation and
warranty as made on the date hereof would be true at Closing or (ii) such
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breach was also Known to Buyer as of the date hereof, Buyer may, within five (5)
days of receipt thereof, elect to terminate this Agreement pursuant to Section
2.2.
7.2 No Actions. No action, suit or proceeding before any court or
governmental or regulatory authority shall be pending, no investigation by any
governmental or regulatory authority shall have been commenced, and no action,
suit or proceeding by any governmental or regulatory authority shall have been
threatened, against Buyer, Seller or any of the principals, officers, directors
or managers of any of them, seeking to restrain, prevent or change the
transactions contemplated by the Transaction Documents or questioning the
legality or validity of any such transactions or seeking damages in connection
with any such transactions.
7.3 Consents and Approvals. The following consents, approvals and
authorizations shall have been obtained (the "Approvals"):
(i) the FERC Approvals;
(ii) the ICC Approvals;
(iii) the Antitrust Approval;
(iv) the SEC Approvals;
(v) Transfers of Licenses, Permits and Franchises (subject to the
Guidelines for Partial Assignments); provided, that the condition set forth in
this Section 7.3(v) shall be deemed satisfied if the failure of such condition
is Fully Covered by Seller's indemnity as provided in Article 9 or, to the
extent not covered, does not result in a material diminution in the value of the
Purchased Assets to Buyer or impair the ability of Buyer to operate the
Purchased Assets in substantially the same manner as previously operated by
Seller; provided, further, that, to the extent the condition set forth in this
Section 7.3(v) is subject to Section 7.12 and meets the qualifications of
subsections (a) through (c) of Section 7.12, it shall be deemed to be Fully
Covered; and
(vi) the transfer or assignment to Buyer of all third-party leases,
Contracts, and warranties relating to the continued operation and maintenance of
the Purchased Assets that Buyer is assuming pursuant to the Full ▇▇▇▇ and
Assignment and Partial ▇▇▇▇ and Assignment, in each case without any conditions,
restrictions, or alterations which are materially adverse to Buyer; provided,
that the condition set forth in this Section 7.3(vi) shall be deemed satisfied
if the failure of such condition is Fully Covered by Seller's indemnity as
provided in Article 9 or, to the extent not covered, does not result in a
material diminution in the value of the Purchased Assets or impair the ability
of Buyer to operate the Purchased Assets in substantially the same manner as
previously operated by Seller.
7.4 Transaction Documents. Seller shall have executed and delivered each of
the Transaction Documents to which it is a party.
7.5 Release of Liens. Seller shall have received the release(s) of (i) the
First Mortgage Lien and shall have provided Buyer with written evidence of the
recordation and/or filing, as appropriate, of the release(s) of the First
Mortgage Lien and (ii) any and all liens and
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Encumbrances (other than Permitted Encumbrances) recorded against or in any way
affecting the Purchased Assets (including without limitation mortgages, deeds of
trust, leasehold deeds of trust, financing statements, assignments and
subordination agreements) granted by Seller or any of its Affiliates to any
Person, and Buyer shall have received satisfactory written evidence of the
recordation and/or filing, as appropriate, of the releases of liens, termination
statements and satisfactions with respect to such liens and Encumbrances (other
than Permitted Encumbrances); provided, that the conditions set forth in this
Section 7.5 shall be deemed satisfied if the failure of any such condition is
Fully Covered by Seller's indemnity as provided in Article 9 or, to the extent
not covered, would not reasonably be expected to result in a Material Adverse
Effect.
7.6 Non-Foreign Person Certificate. Seller shall have executed and
delivered an affidavit of Seller, in form and substance reasonably acceptable to
Buyer, setting forth Seller's name, address and federal tax identification
number and stating that Seller is not a "foreign person" within the meaning of
Section 1445 of the Code.
7.7 Real Property. There shall be no material restrictions of any nature on
Seller's ability to assign its interest in the agreements relating to Real
Property at the time of the Closing, either by the terms of such agreements or
by operation of law; provided, that the condition set forth in this Section 7.7
shall be deemed satisfied if the failure of such condition is Fully Covered by
Seller's indemnity as provided in Article 9 or, to the extent not covered, would
not reasonably be expected to result in a Material Adverse Effect. Any fees or
expenses incurred to any third party to effectuate the Real Property Conveyances
shall be borne and paid by Seller.
7.8 Regulatory Termination. As promptly as reasonably possible after the
execution of this Agreement, Buyer shall file with the FERC an application under
Section 205 of the Federal Power Act with Seller's prior approval, such approval
not to be unreasonably withheld (the "Section 205 Application"). If the FERC
issues an order dispositive of such application (a "Non-Complying Order") that
does not approve, in a manner reasonably satisfactory to Buyer, the rates and
rate treatments requested in the Section 205 Application as set forth in the
definition of "FERC Approvals" in Section 12.1(a), then Buyer may, within five
(5) business days after the entry of such Non-Complying Order, terminate this
Agreement by giving Seller notice of its election to do so prior to the
expiration of such five (5) business day period.
7.9 Miscellaneous Closing Deliveries. Buyer shall have received from Seller
such evidence, including appropriate certificates of Seller's authorized
officers, as Buyer may reasonably request in order to establish (i) the
corporate power and authority of Seller to consummate the transactions
contemplated by this Agreement and (ii) compliance with the conditions of
Closing set forth herein.
7.10 Consent and Agreement. Seller shall have executed and delivered to
Buyer a Consent and Agreement substantially in the form of Exhibit L attached
hereto for each of this Agreement and the Operational Documents.
7.11 Section 10 and Right-of-Way Crossing Permits. Buyer shall have
received copies of all required permits pursuant to Section 10 of the Rivers and
Harbors Act of 1899, 33 USC 403, and either (a) all such required permits shall
have been transferred to Buyer or (b) new permits shall have been issued to
Buyer, at Seller's expense, effective on the Closing Date.
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Further, Buyer shall have received copies, at Seller's expense, of all required
permits to cross waterways, roads or other public rights-of-way owned, operated
or maintained by the federal government, the State of Illinois or any
instrumentality thereof, or any unit of local government, and such permits shall
be transferred to Buyer or new permits shall have been issued to Buyer. Further,
Buyer shall have received copies of all required permits to cross a railroad,
pipeline or other public utility right-of-way, and such permits shall be
transferred to Buyer or new permits shall have been issued to Buyer, at Seller's
expense. To the extent Seller fails to satisfy the foregoing condition as of the
Closing Date, then Seller shall:
(a) indemnify Buyer in accordance with the procedures set forth in
Article 9, but not subject to the limitations set forth in Section 9.4 or
Section 10, and, in addition to all other indemnity obligations created herein,
from and against any and all Buyer Losses (including reasonable out-of-pocket
litigation costs, consultants' fees and attorneys' fees) Buyer incurs, by reason
of such failure, or by reason of any failure alleged by a third party
(unaffiliated with Buyer) to secure, or any insufficiency alleged by a third
party (unaffiliated with Buyer) in, any of such permits; provided, that in no
event shall Seller indemnify Buyer for any Buyer Losses to the extent resulting
from any breach by Buyer of the Transaction Documents or from the negligence or
willful misconduct of Buyer or its Affiliates and their respective agents,
directors, employees, officers and contractors; and
(b) agree that Buyer is allowed to use its own efforts to secure or
seek to secure such licenses and permits, with such assistance from Seller as
Buyer may reasonably request, after the Closing, with all reasonable
out-of-pocket costs (including consultants' fees and attorneys' fees) incurred
by Buyer in seeking to obtain or obtaining such licenses and permits, or in
coming into compliance with such licenses or permits, being indemnified by
Seller in accordance with the procedures set forth in Article 9, but not subject
to the limitations set forth in Section 9.4.
In such circumstances this condition will be deemed satisfied.
7.12 Municipal Easements. Each municipality set forth on Schedule 7.12
shall have granted Buyer a franchise or permit(s) permitting occupation of the
municipal rights-of-way by Buyer's transmission system in a form reasonably
satisfactory to Buyer. Where Buyer is granted rights under or by assignment (in
whole or in part) of Seller's pre-existing franchise rights, Seller shall
exercise Best Efforts, in accordance with the Guidelines for Partial
Assignments, to secure the consent of such municipality to such assignment. To
the extent Seller fails to satisfy the foregoing condition as of the Closing
Date or such consent cannot be secured by the Closing, then Seller shall:
(a) In the case of a consent not being obtained, use its Best Efforts
to provide to Buyer an opinion of experienced Illinois regulatory counsel in
form and substance reasonably satisfactory to Buyer that the form of Partial
Assignment: (i) would transfer to Buyer Seller's rights relating to
authorization for the continued location, operation and maintenance of the
Purchased Assets in the subject municipality; (ii) do not impose upon Buyer any
obligation, or confer upon Buyer any right, to engage in distribution of
electricity, provide or offer bundled electric utility service or sell or offer
to sell electric energy at retail within the municipality; or (iii) do not
result in Buyer being an electric utility, as that term is used in Article XVI
of the
32
Illinois Public Utilities Act, or a market participant, as that term is used in
regulations and orders of the FERC;
(b) indemnify Buyer in accordance with the procedures set forth in
Article 9, but not subject to the limitations set forth in Section 9.4 or
Section 10, and, in addition to all other indemnity obligations created herein,
from and against any and all Buyer Losses (including reasonable litigation
costs, consultants' fees and attorneys' fees) it incurs by reason of such
failure, or by reason of any failure alleged by a third party (unaffiliated with
Buyer) to secure, or any insufficiency alleged by a third party (unaffiliated
with Buyer) in, the municipal rights granted by a franchise or Partial
Assignment; provided, that (i) in no event shall Seller indemnify Buyer for any
Buyer Losses to the extent resulting from any breach by Buyer of the Transaction
Documents or from the negligence or willful misconduct of Buyer or its
Affiliates and their respective agents, directors, employees, officers and
contractors and (ii) such indemnification shall not extend to Buyer Losses
related to periods beyond those for which Seller's rights would have subsisted,
in the case of Partial Assignments of existing Seller permit(s) or franchises;
and
(c) agree that Buyer is allowed to use its own efforts to secure or
seek to secure, with such assistance from Seller as Buyer may reasonably
request, after the Closing: (i) a consent to the Partial Assignment; or (ii)
separate permit(s) or a franchise authorizing its occupation of the municipal
rights-of-way, in each case with the costs of such efforts being borne by the
Parties in accordance with the Guidelines for Partial Assignments.
In such circumstances this condition will be deemed satisfied.
7.13 Opinion. Buyer shall have received an opinion of counsel to Seller
substantially in the form attached hereto as Exhibit M.
7.14 Set Aside. Seller shall have set aside and allocated for the benefit
of the Grantee and the Note Issuer, and made payment to the Indenture Trustee
of, the Allocable IFC Revenue Amounts (as such terms are defined in the
indenture dated as of December 1, 1998 made by Illinois Power Special Purpose
Trust and with the Allocable IFC Revenue Amount calculated in accordance with
the Intangible Transition Property Servicing Agreement dated as of December 1,
1998 between the Grantee and Seller).
ARTICLE 8
CONDITIONS PRECEDENT OF SELLER
Seller need not consummate the transactions contemplated hereby unless the
following conditions shall be fulfilled:
8.1 Representations, Warranties and Covenants. Except as otherwise
contemplated or permitted by this Agreement, (a) all representations and
warranties of Buyer contained in Article 4 (as may be amended) shall be true and
correct in all material respects, in each case as of the date hereof and as of
the Closing Date as though made as of the Closing Date and (b) Buyer shall have
performed and complied with all agreements and conditions required by this
Agreement to be performed or complied with by it prior to or on the Closing Date
in all material respects.
33
Seller shall have been furnished a certificate of an appropriate officer of
Buyer, dated the Closing Date, certifying to the effect of clauses (a) and (b)
of this Section 8.1.
8.2 Representations, Warranties and Covenants. Except as otherwise
contemplated or permitted by this Agreement, (a) all representations and
warranties of Parent contained in Article 5 (as may be amended) shall be true
and correct in all material respects, in each case as of the date hereof and as
of the Closing Date as though made as of the Closing Date and (b) Parent shall
have performed and complied with all agreements and conditions required by
Article 5 and Article 11 of this Agreement to be performed or complied with by
it prior to or on the Closing Date in all material respects. Seller shall have
been furnished a certificate of an appropriate officer of Parent, dated the
Closing Date, certifying to the effect of clauses (a) and (b) of this Section
8.2.
8.3 No Actions. No action, suit or proceeding before any court or
governmental or regulatory authority shall be pending, no investigation by any
governmental or regulatory authority shall have been commenced, and no action,
suit or proceeding by any governmental or regulatory authority shall have been
threatened, against Buyer, Seller or any of the principals, officers, directors
or managers of any of them seeking to restrain, prevent or change the
transactions contemplated by the Transaction Documents or questioning the
legality or validity of any such transactions or seeking damages in connection
with any such transactions.
8.4 Consents and Approvals. The Approvals shall have been obtained.
8.5 Transaction Documents. Buyer shall have executed and delivered each of
the Transaction Documents to which it is a Party.
8.6 Miscellaneous Closing Deliveries. Seller shall have received each of
the following from Buyer:
(a) the Closing Date Payment, as may be adjusted pursuant to Section
1.6 and Section 1.7; and
(b) such evidences, including appropriate certificates of Buyer's
authorized officers, as Seller may reasonably request in order to establish (i)
the limited liability company power and authority of Buyer to consummate the
transactions contemplated by this Agreement and (ii) compliance with the
conditions of Closing set forth herein.
8.7 Opinion. Seller shall have received an opinion of counsel to Buyer
substantially in the form attached hereto as Exhibit M.
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ARTICLE 9
INDEMNIFICATION
9.1 Indemnification by Seller. Subject to the limitations set forth in
Section 9.4 and Section 10.1, Seller hereby agrees to defend, indemnify and hold
harmless Buyer and its managers, members, officers, shareholders, successors,
assigns and Affiliates from and against any and all losses, deficiencies, Taxes,
liabilities, damages, assessments, judgments, costs and expenses, including
attorneys' fees (both those incurred in connection with the defense or
prosecution of the indemnifiable claim and those incurred in connection with the
enforcement of this provision) and Environmental Liabilities and Costs
(collectively, "Buyer Losses"), caused by, based upon, resulting from or arising
out of:
(a) (i) breaches of representations or warranties under this Agreement
on the part of Seller or (ii) failures by Seller to perform or otherwise fulfill
any covenant, provision, undertaking or other agreement or obligation to the
extent to be performed on or after the Closing Date under this Agreement;
(b) (i) claims arising in connection with breach of contract, death,
personal injury, other injury to Persons, property damage, losses or deprivation
of rights (whether based on statute, negligence, breach of warranty, strict
liability or any other theory), or the imposition of any monetary penalty or
other sanction due to a violation of law, to the extent that any of the same was
caused by or resulted from, directly or indirectly, acts or omissions by Seller
on or before the Closing Date, (ii) any other claims asserted against Buyer
arising from any action or inaction of Seller to the extent relating to the
Purchased Assets or the Business on or before the Closing Date, including
without limitation the actions set forth in Schedule 3.4, except with respect to
the FERC RTO litigation referred to in Schedule 3.4, (iii) any legal obligation
or requirement that Buyer implements which is necessary as a result of any of
the Purchased Assets or the Business not being in compliance with the
requirements of applicable law as of the Closing Date, (iv) the loss of life,
injury to persons or property or damage to natural resources ("Damage") which
results from actions of Seller in the Release, storage, transportation,
treatment or generation of Hazardous Substances, Oils, Pollutants or
Contaminants generated, stored, used, disposed of, treated or handled on the
Purchased Assets to the extent that such Release, storage, transportation,
treatment, generation, use, handling or disposal occurred prior to the Closing
Date (limited, however, to the extent that such Damage (A) is the result of the
Release, storage, transportation, treatment or generation of Hazardous
Substances, Oils, Pollutants or Contaminants generated, stored, used, disposed
of, treated or handled on the Purchased Assets on or before the Closing Date and
(B) would have resulted or arisen regardless of any Release, storage,
transportation, treatment, generation, use, handling or disposal by Buyer or any
other Person after the Closing Date) and (v) any and all claims, demands,
judgments, damages, actions, causes of actions, losses, liabilities, penalties,
costs and expenses of any kind whatsoever for Cleanup of Hazardous Substances,
Oils, Pollutants or Contaminants Released, disposed of or discharged on, beneath
or adjacent to the Purchased Assets prior to the Closing Date; provided, that,
with respect to matters which arise after the Closing Date, nothing in this
Agreement is intended to limit in any manner Seller's liability to Buyer or
obligation to indemnify Buyer under any of the Operational Documents; provided,
further, that (x) Seller shall not be liable for Buyer Losses that arise by
reason of any change in Environmental Law after the Closing Date and (y)
35
the cost of remediation of any condition at the Closing Date which is subject to
Seller's indemnification pursuant to this Section 9.1(b) and to which Buyer
contributes after the Closing Date will be equitably pro rated to reflect the
relative contribution of each Party;
(c) (i) each and every item set forth in Schedule 3.13(a), Schedule
3.13(c), Schedule 3.13(d) and Schedule 3.13(f); provided, that, with respect to
matters which arise after the Closing Date, nothing in this Agreement is
intended to limit in any manner Seller's liability to Buyer or obligation to
indemnify Buyer under any of the Operational Documents;
(d) any other liability of Seller with respect to acts or omissions
prior to the Closing not specifically assumed by Buyer pursuant to the Full ▇▇▇▇
and Assignment and Partial ▇▇▇▇ and Assignment;
(e) any and all actions, suits, proceedings, claims and demands
incident to any of the foregoing or such indemnification;
(f) any and all liability resulting from defects in title (arising by,
through or under Seller, other than arising in connection with a transaction
between Seller and any Affiliate of Seller) relating to the Purchased Assets
(including the Real Property);
(g) any and all Taxes of Seller or any of its Affiliates or any Tax
required to be collected (other than with respect to the transactions
contemplated by this Agreement) by Seller, including without limitation Taxes
relating to the Purchased Assets, the Business and, except as provided in
Section 6.3, the transactions contemplated by this Agreement, for all periods
ending on or prior to the Closing Date; provided, however, that, for this
purpose, Taxes relating to a Tax period that begins on or prior to, and ends
after, the Closing Date shall be apportioned between Seller and Buyer (i) in the
case of real and personal property taxes and any other Taxes not measured or
measurable, in whole or in part, by net or gross income or receipts, on a per
diem basis and (ii) in the case of other Taxes, as determined from the books and
records of Seller consistent with past practices of Seller;
(h) (x) any claim by any person or entity under the TFO Documents for
or with respect to any breach of such TFO Documents, (y) any transmission
revenues which are not paid to Buyer due to claims under or requirements of the
TFO Documents or (z) any claim that Buyer has obligations under the TFO
Documents, including any claim that Buyer is a successor to Seller, or is a
successor servicer to Seller, under the TFO Documents; or
(i) the amount, if any, of interest determined to be accrued and
payable to a third party in respect of Owed Credits for periods up to and
including the Closing Date.
9.2 Indemnification by Buyer. Buyer hereby agrees to defend, indemnify and
hold harmless Seller and its directors, officers, shareholders, successors,
assigns and Affiliates from and against any and all losses, deficiencies, Taxes,
liabilities, damages, assessments, judgments, costs and expenses, including
attorneys' fees (both those incurred in connection with the defense or
prosecution of the indemnifiable claim and those incurred in connection with the
enforcement of this provision), resulting from or arising out of:
36
(a) (i) breaches of representations and warranties under this
Agreement on the part of Buyer or (ii) failures by Buyer to perform or otherwise
fulfill any undertaking or agreement or obligation under this Agreement;
(b) (i) Damage which results from actions of Buyer in the Release,
storage, transportation, treatment or generation of Hazardous Substances, Oils,
Pollutants or Contaminants generated, stored, used, disposed of, treated or
handled on the Purchased Assets to the extent that such Release, storage,
transportation, treatment, generation, use, handling or disposal occurred after
the Closing Date or (ii) any and all claims, demands, judgments, damages,
actions, causes of actions, losses, liabilities, penalties, costs and expenses
of any kind whatsoever for Cleanup of Hazardous Substances, Oils, Pollutants or
Contaminants Released, disposed of or discharged on, beneath or adjacent to the
Purchased Assets after the Closing Date; provided, that the indemnity granted in
clauses (i) and (ii) shall not include any Damage to the extent that the same
(A) is the result of or was caused by Seller or any other Person generating,
storing, using, treating or handling such Hazardous Substances, Oils, Pollutants
or Contaminants on or before the Closing Date and (B) would have resulted or
arisen as a result of such acts or omissions of Seller or any other Person on or
before the Closing Date without regard to any Release, storage, transportation,
treatment, generation, use, handling or disposal by Buyer or any other Person
after the Closing Date; provided, further, that, with respect to matters which
arise after the Closing Date, nothing in this Agreement is intended to limit in
any manner Buyer's liability to Seller or obligation to indemnify Seller under
any of the Operational Documents;
(c) any other liability of Seller specifically assumed by Buyer
pursuant to the Full ▇▇▇▇ and Assignment and Partial ▇▇▇▇ and Assignment;
(d) any and all actions, suits, proceedings, claims and demands
incident to any of the foregoing or such indemnification;
(e) any and all Taxes of Buyer or any of its Affiliates, including
without limitation Taxes relating to the Purchased Assets or the Business, for
all periods beginning after the Closing Date; provided, however, that, for this
purpose, Taxes relating to a Tax period that begins on or prior to, and ends
after, the Closing Date shall be apportioned between Seller and Buyer (i) in the
case of real and personal property taxes and any other Taxes not measured or
measurable, in whole or in part, by net or gross income or receipts, on a per
diem basis and (ii) in the case of other Taxes, as determined from the books and
records of Seller consistent with past practices of Seller; or
(f) the amount, if any, of interest determined to be accrued and
payable in respect of Owed Credits for periods after the Closing Date.
9.3 Third Party Claim Procedures.
(a) If any third party claim, demand or action (collectively, an
"Action") is commenced in which any indemnified party is a party that may give
rise to a claim for indemnification against any indemnitor then such indemnified
party will promptly give notice to the indemnitor. Failure to notify the
indemnitor shall not relieve the indemnitor of any liability
37
that it may have to the indemnified party, except to the extent the defense of
such Action is materially and irrevocably prejudiced by such indemnified party's
failure to give such notice.
(b) The indemnitor shall have the right to defend against an
indemnification claim with counsel of its choice reasonably satisfactory to the
indemnified party.
9.4 Certain Limitations. For purposes of this Article 9, the
representations and warranties of Seller and Buyer, as the case may be, shall be
read without giving effect to any "materiality" or "Material Adverse Effect"
qualification. Seller's obligation to indemnify for Buyer Losses under Section
9.1 (other than any Buyer Losses with respect to breaches of (i) the
representations and warranties contained in Section 3.1 (Organization), Section
3.2 (Corporate Authority), Section 3.3 (No Violation) and Section 3.15 (Brokers
and Finders), (ii) the covenants and agreements under this Agreement to the
extent they survive the Closing and (iii) Section 9.1(g)) shall accrue only if
the aggregate of all such Buyer Losses exceeds $1,000,000 (the "Minimum").
Seller's liability for all Buyer Losses shall be limited to (x) $35,000,000 for
any Buyer Losses with respect to (a) breaches of the representations and
warranties contained in Section 3.16 (Assets Used in Performing the Business),
(b) any and all existing claims in connection with breach of contract, death,
personal injury, other injury to Persons, property damage, losses or
depreciation of rights (whether based on statute, negligence, breach of
warranty, strict liability or any other theory) caused by or resulting from,
directly or indirectly, acts or omissions by Seller on or before the Closing
Date, (c) breaches of the representations and warranties contained in Section
3.13 (Compliance with Law; Environmental Matters) and (d) Section 9.1(c) and (y)
five percent (5%) of the Purchase Price for all other Buyer Losses; provided,
however, that in no event shall Seller's liability with respect to clauses (x)
and (y) exceed $35,000,000. For purposes of computing the Minimum, there shall
be a materiality limit of $50,000 for each separate claim (or series of related
claims) for indemnification or, in respect of claims for indemnification under
Section 9.1(b)(v) which have a similar cause, for each separate site (the
"Materiality Limit"); provided, however, that if any claim (or series of related
claims) for indemnification, including claims for indemnification under Section
9.1(b)(v) which have a similar cause, exceeds the Materiality Limit, such
claim(s) shall be includable in computing the Minimum. If the Closing shall not
occur for failure of Seller or Buyer, as the case may be, to consummate the
transactions contemplated by this Agreement when its conditions precedent
contained in Article 7 or Article 8, as the case may be, have been fulfilled,
then Seller or Buyer, as the case may be, shall pay to the other Party as the
exclusive remedy for its failure to consummate the transactions contemplated by
this Agreement a termination fee (as liquidated damages) of $5,000,000 by wire
transfer of same day funds to an account previously designated in writing by
Seller or Buyer, as the case may be. The calculation of the Minimum and the
Materiality Limits for purposes of this Section 9.4 shall include Buyer Losses
pursuant to Section 2.3(b).
9.5 Remedies. Notwithstanding anything to the contrary in any of the
Transaction Documents but subject to Section 11.14, after the Closing, the sole
and exclusive remedy of all of the Parties under this Agreement shall be
restricted to the indemnification provisions set forth in this Article 9, except
in the case of fraud. The remedy provisions of any Transaction Document (other
than this Agreement) will not be limited by this Article 9 with respect to any
claims arising solely under such Transaction Document. The remedies contained in
Section 11.12 will not be limited by this Article 9.
38
9.6 No Contact. With respect to any matter for which Seller has indemnified
Buyer pursuant to any Transaction Document, Buyer agrees not to contact, notify
or otherwise inform, directly or indirectly, any third party with an interest,
directly or indirectly, in the subject matter of such indemnification unless
required by applicable law or to avoid a threat or imminent public harm;
provided, however, Buyer shall give Seller reasonable prior written notice of
such contact if practicable and, if not practicable, prompt written notice
following such contact.
9.7 Reimbursement. Each Party agrees to reimburse the other Party or any
other indemnified party, as the case may be, promptly upon demand for any
unreimbursed payment made or loss suffered by the other Party or any other
indemnified party, as the case may be, at any time after the Closing Date in
respect of any loss, liability, judgment, claim or demand to which the indemnity
provisions of this Article 9 relate subject to the limitations set forth in
Section 9.4.
ARTICLE 10
SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS
10.1 Representations, Warranties and Covenants. The representations,
warranties and covenants contained herein shall survive the Closing Date for the
longer of a period of twelve (12) months from the Closing Date or until April
30, 2004, except as follows: (i) any representation or warranty of Seller
contained in Section 3.1 (Organization), Section 3.2 (Corporate Authority),
Section 3.3 (No Violation), Section 3.15 (Brokers and Finders) and Section 3.20
(Tax Matters), which in each case shall not terminate; (ii) the representations
and warranties of Seller contained in Section 3.13 (Compliance with Law;
Environmental Matters), any representation or warranty of Seller the breach of
which was Known to Seller prior to the Closing and the covenants of each of
Seller and Buyer set forth under Sections 9.1(b) and 9.1(c) and Section 9.2(b),
respectively shall survive the Closing for a period of thirty-six (36) months
from the Closing Date; (iii) covenants that by their terms require compliance
through a specified date or are to be performed after the Closing will continue
through such date or time period in which the same are to be performed; and (iv)
the covenants of each of Seller and Buyer in Article 9 shall in no event
terminate until at least such time that any representations and warranties
referred to therein have terminated. The Parties agree that claims made on or
prior to the applicable expiration date shall survive such expiration date until
such claims are resolved pursuant to, and in accordance with, this Agreement.
Each of the provisions set forth in this Section 10.1 shall be subject to the
indemnification limitations set forth in Section 9.4 and Section 9.5.
ARTICLE 11
MISCELLANEOUS
11.1 Waiver. Except as otherwise provided herein, any failure of Seller to
comply with any of its obligations, covenants, conditions or agreements herein
contained may be waived only in writing by Buyer. Any failure of Buyer to comply
with any of its obligations, covenants, conditions or agreements herein
contained may be waived only in writing by Seller. Any failure
39
of Seller, on the one hand, or Buyer, on the other, to comply with any
obligation, covenant, agreement or condition herein may be expressly waived in
writing by the other Party, but such waiver or failure to insist upon strict
compliance with such obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure. No failure on the part of any Party to exercise or delay in exercising
any right hereunder shall be deemed a waiver thereof, nor shall any single or
partial exercise preclude any further or other exercise of such or any other
right.
11.2 Notices. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given upon receipt of: hand delivery (which shall not include delivery
by the United States Postal Service); certified or registered mail, return
receipt requested; telecopy transmission with confirmation of receipt or
delivery by a nationally recognized overnight delivery service (other than the
United States Postal Service):
(a) If to Seller, to:
Illinois Power Company
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
(with a copy to, which will not constitute notice):
Dynegy Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: General Counsel
(with a copy to, which will not constitute notice):
Akin Gump ▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
▇▇▇▇ ▇▇▇▇▇, Esq.
40
(b) If to Buyer, to:
Trans-Elect, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
(with a copy to, which will not constitute notice):
Pillsbury Winthrop LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
If to Parent solely for purposes of Article 5,
Section 8.2 and Article 11, to:
Trans-Elect, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
(with a copy to, which will not constitute notice):
Pillsbury Winthrop LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Such names and addresses may be changed by written notice to each Person listed
above.
41
11.3 Governing Law and Judicial Proceedings.
(a) This Agreement and the legal relations among the Parties
hereto shall be governed by and construed in accordance with the laws of the
State of Illinois without reference to choice of law principles, including all
matters of construction, validity and performance.
(b) Any judicial proceeding brought against any Party to this
Agreement or its Affiliates with respect to any claim related to this Agreement
may be brought in any court of competent jurisdiction in Chicago, Illinois, and,
by the execution and delivery of this Agreement, each Party to this Agreement
accepts, generally and unconditionally, the nonexclusive jurisdiction of such
courts and any related appellate court and irrevocably agrees to be bound by any
judgment rendered thereby in connection with any claim related to this Agreement
and irrevocably waives any objection it may now or hereafter have as to the
venue of any such proceeding brought in such a court or that such a court is an
inconvenient forum. Each Party to this Agreement hereby waives personal service
of process and consents that service of process upon it may be made by certified
or registered mail, return receipt requested, at its address specified or
determined in accordance with the notice provisions of this Agreement, and
service so made shall be deemed completed on the third business day after such
service is deposited in the mail, certified or registered, return receipt
requested. Nothing herein shall affect the right of any Party to this Agreement
to serve process in any other manner permitted by law. Any judicial proceeding
brought by any Party to this Agreement involving any claim related to this
Agreement shall be brought only in a court located in Chicago, Illinois.
11.4 Guarantee of Parent. Parent fully and unconditionally guarantees
each of the representations, warranties, covenants, obligations and undertakings
of Buyer hereunder; provided, however, that Parent's aggregate liability in all
circumstances under this Agreement shall not exceed $5,000,000.
11.5 Counterparts. This Agreement may be executed simultaneously in
two (2) or more counterparts, each of which shall be deemed an original but all
of which together shall constitute one and the same instrument.
11.6 Headings. The Section and Article headings contained in this
Agreement are for reference purposes only and shall not constitute a part hereof
or affect in any way the meaning or interpretation of this Agreement.
11.7 Entire Agreement. This Agreement, including the Exhibits and
Schedules hereto and the documents referred to herein, embodies the entire
agreement and understanding of the Parties hereto in respect of the subject
matter contained herein. This Agreement supersedes and cancels all prior
agreements, promises, negotiations, covenants, arrangements, communications,
representations, warranties and understandings, whether oral or written, between
the Parties with respect to such subject matter.
11.8 Amendment and Modification. Subject to applicable law, this
Agreement may be amended, modified and supplemented only by written agreement of
the Parties hereto.
11.9 Binding Effect; Benefits. This Agreement shall inure to the
benefit of and be binding upon the Parties hereto and their respective
successors and assigns. Except as set forth
42
in Section 11.4, nothing in this Agreement, express or implied, is intended or
shall be construed to confer on or give to any Person other than the Parties
hereto and their respective successors and assigns (and, to the extent provided
in Section 9.1 and Section 9.2, the other indemnitees) any rights, remedies,
interests, obligations or liabilities under or by reason of this Agreement.
11.10 Assignability. This Agreement shall not be assignable by any
Party hereto without the prior written consent of the other Parties; provided,
that Buyer and/or Parent may assign this Agreement and the Operational
Documents, the Full ▇▇▇▇ and Assignment and the Partial ▇▇▇▇ and Assignment as
security for money borrowed without the prior written consent of Seller to any
of Buyer's and/or Parent's sources of financing in connection with the
transactions contemplated by this Agreement; provided, further, that in the
event of such assignment Buyer and Parent shall remain obligated to fulfill
their respective obligations hereunder. Seller agrees to execute a Consent and
Agreement substantially in the form of Exhibit L in connection with any such
assignment by Buyer and/or Parent of this Agreement, the Operational Documents,
the Full ▇▇▇▇ and Assignment and the Partial ▇▇▇▇ and Assignment as security for
money borrowed prior to the Closing and within the five year period after the
Closing Date. In the event that Seller assigns its rights under this Agreement,
any of the Operational Documents, the Full ▇▇▇▇ and Assignment or the Partial
▇▇▇▇ and Assignment prior to the end of such five year period, Seller will bind
its assignee to deliver a Consent and Agreement in accordance with the preceding
sentence.
11.11 Expenses. Except as provided in Section 1.5(b), Section 1.6(d),
Section 2.2, Section 2.3, Section 3.15, Section 4.4, Section 5.4, Section 6.3,
Section 6.4, Section 6.20, Section 7.7, Section 7.11, Section 7.12 and Article
9, the Parties agree that all fees and expenses incurred by them in connection
with this Agreement and the transactions contemplated hereby shall be borne by
the Party incurring such fees and expenses, including without limitation all
fees of counsel, actuaries, accountants, surveyors and title searchers. Each
Party shall pay its own expenses incurred by it in the preparation, submission
and prosecution of the Antitrust Approval, including reasonable attorneys' fees
and the filing fee relating to such Party's filing.
11.12 Good Faith Efforts; Further Assurances. Each Party shall use
its Best Efforts to cause all conditions to its and the other Parties'
obligations hereunder to be timely satisfied and to perform and fulfill all
obligations on its part to be performed and fulfilled under each of the
Transaction Documents, to the end that the transactions contemplated by the
Transaction Documents shall be effected in accordance with their terms. The
Parties shall cooperate with each other in such actions and in securing the
requisite Approvals. At the Closing and from time to time after the Closing, at
the reasonable request of any Party and without further consideration, the other
Party or Parties shall promptly execute and deliver to the requesting Party such
certificates and other instruments of sale, transfer, conveyance and assignment,
and take such other action, as may reasonably be requested by such Party more
effectively to confirm any obligation assigned or assumed pursuant to the Full
▇▇▇▇ and Assignment and Partial ▇▇▇▇ and Assignment and to sell, transfer,
convey and assign to and vest in Buyer or to put Buyer in possession of the
Purchased Assets, and to secure any required regulatory or governmental approval
hereunder. Each Party shall execute and deliver both before and after the
Closing Date such further certificates, agreements and other documents and take
such other actions as the other Parties may request and without further
consideration to consummate or implement the transactions contemplated hereby or
to evidence such events or
43
matters. To the extent that any consents, waivers or Approvals required to be
obtained by Seller and necessary to convey an item of Purchased Assets to Buyer
are not obtained prior to the Closing, Seller shall use its Best Efforts to: (i)
provide to Buyer, at the request of Buyer, the benefits of any such Purchased
Asset, and hold the same in trust for Buyer; (ii) cooperate in any reasonable
and lawful arrangement, approved by Buyer, designed to provide such benefits to
Buyer; and (iii) enforce and perform, at the request of Buyer, for the account
of Buyer, any legal rights or legal obligations of Seller arising from any such
item against or in respect of any third person (including a government or
governmental unit), including the right to elect to terminate any contract,
arrangement or agreement in accordance with its terms. Buyer agrees to use its
Best Efforts to assist Seller in the collection of its accounts receivable after
the Closing and promptly deliver such amounts to Seller.
11.13 Severability; Enforcement. The invalidity of any portion hereof
shall not affect the validity, force or effect of the remaining portions hereof.
If it is ever held that any restriction hereunder is too broad to permit
enforcement of such restriction to its fullest extent, each Party agrees that a
court of competent jurisdiction may enforce such restriction to the maximum
extent permitted by law, and each Party hereby consents and agrees that such
scope may be judicially modified accordingly in any proceeding brought to
enforce such restriction in accordance with Section 11.3.
11.14 Specific Performance. Each Party acknowledges and agrees that
the other Party would be damaged irreparably if any provision of this Agreement
is not performed in accordance with its specific terms or is otherwise breached.
Accordingly, each Party agrees that the other Party shall be entitled to an
injunction or injunctions to prevent breaches of the provisions of this
Agreement and to enforce specifically this Agreement and its terms and
provisions in accordance with Section 11.3.
11.15 Time. Time is of the essence in the performance of this
Agreement.
11.16 Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. If an ambiguity or question of
intent or interpretation arises, this Agreement shall be construed as if drafted
jointly by the Parties and no presumption or burden of proof shall arise
favoring or disfavoring any Party because of the authorship of any provision of
this Agreement. Any reference to any federal, state, local, or foreign law shall
be deemed also to refer to law as amended and all rules and regulations
promulgated thereunder, unless the context requires otherwise. The words
"include", "includes" and "including" shall be deemed to be followed by "without
limitation". Pronouns in masculine, feminine and neuter genders shall be
construed to include any other gender, and words in the singular form shall be
construed to include the plural and vice versa, unless the context otherwise
requires. The words "this Agreement", "herein", "hereof", "hereby", "hereunder"
and words of similar import refer to this Agreement as a whole and not to any
particular subdivision unless expressly so limited.
44
ARTICLE 12
DEFINITIONS
12.1 Definitions.
(a) For purposes of this Agreement:
"Acceptable Bank" means a bank whose long-term unsecured and unguaranteed
debt is rated at least "A-" (or the equivalent) by S&P or at least "A3" (or the
equivalent) by Moody's.
"Accounts Payable" means those current trade accounts and notes payable (no
more than sixty (60) days old) arising under the Contracts that Buyer is
assuming pursuant to the Full ▇▇▇▇ and Assignment and Partial ▇▇▇▇ and
Assignment.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Exchange Act.
"Antitrust Approval" means the waiting period under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Act applicable to the consummation of the transactions contemplated by this
Agreement shall have expired or been terminated with no request for additional
information and no adverse action taken or threatened by any applicable
governmental entity.
"Bankruptcy" means, with respect to any entity, such entity (i) files a
petition or otherwise commences, authorizes or acquiesces in the commencement of
a proceeding or cause of action under any bankruptcy, insolvency, reorganization
or similar law, or has any such petition filed or commenced against it, (ii)
makes an assignment or any general arrangement for the benefit of creditors,
(iii) otherwise becomes bankrupt or insolvent (however evidenced), (iv) has a
liquidator, administrator, receiver, trustee, conservator or similar official
appointed with respect to it or any substantial portion of its property or
assets or (v) is generally unable to pay its debts as they fall due.
"Benefit Plan" means each employee benefit plan or compensation plan,
agreement or arrangement covering each Potential Transferred Employee (including
those within the meaning of Section 3(3) of ERISA), stock purchase plan, stock
option plan, fringe benefit plan, change in control plan, severance plan, bonus
plan and any other deferred compensation agreement or plan or funding
arrangement covering each Potential Transferred Employee.
"Best Efforts" means the use of commercially reasonable best efforts to
ensure a result is achieved.
"Business" means the operation by Seller of the Purchased Assets or the
provision of the Transmission Services as of the date hereof or the Closing
Date, as the context may require.
"Cleanup" means all actions required by appropriate federal, state and
local governments to: (A) cleanup, remove, treat or remediate Hazardous
Substances, Oils, Pollutants or Contaminants in the indoor or outdoor
environment; (B) prevent the Release of Hazardous Substances, Oils, Pollutants
or Contaminants so that they do not migrate, endanger or threaten to
45
endanger public health or welfare or the indoor or outdoor environment; (C)
perform pre-remedial studies and investigations and post-remedial monitoring and
care; or (D) respond to any government requests for information or documents in
any way relating to cleanup, removal, treatment or remediation or potential
cleanup, removal, treatment or remediation of Hazardous Substances, Oils,
Pollutants or Contaminants in the indoor or outdoor environment.
"CWIP" shall have the meaning in FERC chart of accounts, Account 107,
Construction work in progress--Electric.
"Encumbrance" means any pledges, liens, charges, encumbrances, easements,
physical encroachments in violation of the terms of the applicable easement,
security interests, mortgages, claims, options, restrictions or any other burden
which may reasonably be expected to result in a material diminution in value.
"Environmental Laws" means all federal, state and local laws, regulations,
statutes, codes, rules and ordinances relating to pollution or protection of the
environment that are applicable to the Purchased Assets and which are in effect
as of the date hereof or on the Closing Date, including laws relating to
Releases of Hazardous Substances, Oils, Pollutants or Contaminants into the
indoor or outdoor environment (including without limitation ambient air, surface
water, groundwater, land, surface and subsurface strata) or otherwise relating
to the manufacture, processing, distribution, use, treatment, storage, Release,
transport or handling of Hazardous Substances, Oils, Pollutants or Contaminants,
and all laws and regulations with regard to recordkeeping, notification,
training, disclosure and reporting requirements respecting Hazardous Substances,
Oils, Pollutants or Contaminants which are in effect as of the date hereof or on
the Closing Date.
"Environmental Liabilities and Costs" means all liabilities, obligations,
responsibilities, obligations to conduct Cleanup, losses, damages, deficiencies,
punitive damages, consequential damages, treble damages, costs and expenses
(including all reasonable fees, disbursements and expenses of counsel, expert
and consulting fees and costs of investigations and feasibility studies and
responding to government requests for information or documents), fines,
penalties, restitution and monetary sanctions, interest, direct or indirect,
known or unknown, absolute or contingent, past, present or future, resulting
from any claim or demand, by any Person (other than Buyer, Parent or an
Affiliate thereof), whether based in contract, tort, implied or express
warranty, strict liability, joint and several liability, criminal or civil
statute which is in effect as of the date hereof or on the Closing Date,
including any Environmental Law, or otherwise arising from environmental
conditions at the Purchased Assets, or the Release or threatened Release of
Hazardous Substances, Oils, Pollutants or Contaminants into the environment, as
a result of ownership, leasing or operation of the Purchased Assets by Seller,
including any of the foregoing incurred in connection with the conduct of any
Cleanup.
"ERISA" means the Employee Retirement Income Security Act of 1974.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"FERC" means the Federal Energy Regulatory Commission.
46
"FERC Approvals" means the Final approval by the FERC reasonably
satisfactory to Seller of the terms of each of the following as it relates to
filings made by Seller or jointly with Buyer and reasonably satisfactory to
Buyer of the terms of each of the following as it relates to filings made by
Buyer or jointly with Seller:
(a) the joint application under Section 203 of the Federal Power Act
to be filed by Buyer and Seller in connection with the transactions contemplated
by this Agreement;
(b) any application under Section 204 of the Federal Power Act which
may be filed by Buyer with respect to the financing of the transactions
contemplated by this Agreement;
(c) the Section 205 Application to be filed by Buyer in connection
with the transactions contemplated by this Agreement;
(d) the application to be filed by Seller pursuant to FERC Order
No. 888 approving the reclassification of certain transmission and distribution
assets of Seller under the "seven factor test" set forth in Order No. 888 in
connection with the transactions contemplated by this Agreement or giving
deference to an order of the ICC approving such reclassification; and
(e) any agreements to be executed by Seller and Buyer between the date
hereof and the Closing Date, where required, relating to the future relationship
between Seller and Buyer, such as interconnection agreement(s) and agreement(s)
for the provision of ancillary services and wholesale distribution service by
Seller.
The FERC Approval under Section 205 of the Federal Power Act shall not be
deemed reasonably satisfactory to Buyer unless such approval approves the
Section 205 Application, in a manner reasonably satisfactory to Buyer. The
Section 205 Application will include implementation of a Levelized Rate for
transmission service based on gross plant and a formula rate that includes a
rate of return on equity of not less than thirteen percent (13%) and a capital
structure with an equity component of not less than fifty percent (50%) for rate
making purposes.
"Final" means action by the relevant regulatory authority which has not
been reversed, stayed, enjoined, set aside, annulled or suspended, (i) with
respect to which any waiting period prescribed by law before the transactions
contemplated hereby may be consummated has expired, and as to which all
conditions to the consummation of such transactions prescribed by law,
regulation or order have been satisfied, (ii) with respect to an order issued
pursuant to Section 205 of the Federal Power Act and any filings with respect
thereto, (A) there shall have been no petitions for rehearing or appeals that
have been filed that have not been resolved by a final order or judgment and (B)
the rehearing and appeal periods provided by FERC regulation and other federal
law shall have expired, provided that Buyer may waive the requirements of this
clause (ii), and (iii) with respect to an order issued pursuant to the Illinois
Public Utilities Act and any filings with respect thereto, (A) there shall have
been no petitions for rehearing or appeals that have been filed that have not
been resolved by a final order or judgment and (B) the rehearing and appeal
periods provided by Illinois law shall have expired, provided that Buyer may
waive the requirements of this clause (iii).
47
"Financing Commitment Letters" means the commitment letters delivered
pursuant to Section 6.8.
"First Mortgage Lien" means the lien under the General Mortgage Indenture
and Deed of Trust from Seller to BNY Midwest Trust Co. dated as of November 1,
1992, as amended, modified or supplemented from time to time.
"Full ▇▇▇▇ and Assignment" means a certain ▇▇▇▇ of Sale and Assignment and
Assumption of Contract Rights that is to be executed by Buyer and Seller and
delivered to each other at the Closing, attached hereto as Exhibit A.
"Fully Covered" means that the Buyer Loss to which Buyer is exposed,
together with all other Buyer Losses to which Buyer is exposed, subject to the
Minimum and the Materiality Limit set forth in Section 9.4, does not exceed
$10,000,000.
"Good Utility Practice" means any of the practices, methods and acts
engaged in or approved by a significant proportion of the electric utility
industry during the relevant time period, or any of the practices, methods and
acts which, in the exercise of reasonable judgment in light of the facts known
at the time the decision was made, could have been expected to accomplish the
desired result at a reasonable cost consistent with good business practices,
reliability, safety and expedition. Good Utility Practice is not intended to be
limited to the optimum practice, method or act to the exclusion of all others,
but rather to be acceptable practices, methods or acts generally accepted in the
region.
"Hazardous Substances, Oils, Pollutants or Contaminants" means any
pollutant or contaminant, hazardous waste, hazardous substance, hazardous
constituent or toxic substance, as defined in the Comprehensive Environmental
Response, Compensation, and Liability Act (CERCLA), 42 USC 9601 et seq.,
Resource Conservation and Recovery Act (RCRA), 42 USC 6901 et seq., Toxic
Substances Control Act (TSCA), 15 USC 2601 et seq., or any other similar
statutes now in effect, and specifically includes, anything in the above
referenced laws to the contrary notwithstanding, petroleum and petroleum
products and petroleum liquids of any type.
"ICC" means the Illinois Commerce Commission.
"ICC Approvals" means the final and non-appealable order(s) or action(s) of
the ICC: (a) approving the transfer of the Purchased Assets by Seller to Buyer
pursuant to this Agreement; (b) approving the issuance to Buyer of one or more
Certificates of Public Convenience and Necessity that collectively authorize the
construction, operation and maintenance of the Purchased Assets and additions or
extensions thereto, but not establishing any retail service territory; (c)
approving Buyer's status, upon purchase and operation of the Purchased Assets,
as a Public Utility, but not as an Electric Utility, within the meaning of the
Illinois Public Utilities Act, and finding that, as such, Buyer is not required
to file a state-jurisdictional distribution tariff; (d) approving, to the extent
required, the retention by Seller of the sole right and obligation to provide
retail electric distribution service to end users in Seller's retail service
territory, including in the Large Corridors; (e) approving, if necessary, any
agreements relating to the joint use, operation and maintenance of Illinois
jurisdictional utility facilities, whether between Buyer and Seller or Seller
and any other third party(ies) who are presently party to a joint use
48
agreement applicable to any Purchased Asset, which agreement will be assumed by
Buyer; (f) affirming that Buyer is not a "successor or assign" of Seller, or a
successor to Seller in its role as servicer, under or with respect to the
Transitional Funding Order entered by the ICC on September 10, 1998 or any
subsequent transitional funding order entered prior to Closing by the ICC with
respect to Transitional Funding Instruments; (g) approving the issuance by Buyer
of stock and/or debt required by Buyer to finance the acquisition of the
Purchased Assets; and (h) approving the Transmission Assets Valuation. Each such
approval shall be without any conditions or restrictions materially adverse to
either Seller or Buyer.
"Inventory" shall have the meaning in FERC chart of accounts, Account 154,
Plant materials and operating supplies.
"Jointly Used Assets" shall have the meaning set forth in the Operational
Documents.
"Knowledge of Buyer" or "Known to Buyer" means the actual knowledge of each
of ▇▇▇ Bambanek, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇ ▇.
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, and shall not
include constructive or imputed knowledge.
"Knowledge of Seller", "Known to Seller" or "Seller's Knowledge" means the
actual knowledge of each of the President, General Counsel, Vice
President-Energy Supply, Vice President and Senior Director-Utility Operations,
Vice President-Asset Management and Senior Director Utility Services, and their
direct reports, and shall not include constructive or imputed knowledge.
"Large Corridors" means portions of Seller's retail service territory in
which Seller is authorized or obligated to provide retail electric service by
reason of the proximity to a high-voltage facility or by reason of being
included in a corridor defined in an agreement between Seller and a municipality
or with another electric supplier under the Illinois Electric Supplier Act.
"Levelized Rate" means a rate that uses a sinking fund (or capital
recovery) depreciation which levelizes the rate using the utility's overall cost
of capital as the discount rate. The sinking fund depreciation formula is:
R/(((1+R)/\n)-1), where "R" is equal to the overall return and "n" is equal to
the average life of the facilities. The sinking fund depreciation formula
adjusts the return and depreciation components of the levelized rate to equal
the same as the return and depreciation components of a nonlevelized rate on a
present value basis (using the utility's overall cost of capital as the discount
rate).
"Licenses, Permits and Franchises" means all licenses, permits,
governmental authorizations, and franchises used by Seller in connection with
the use of the Purchased Assets in the Business, including without limitation
municipal franchises, zoning permits, road and rail crossing and occupancy
licenses and permits, and permits for the occupancy and use of
specially-regulated lands, but shall exclude those specific authorizations
defined as the ICC Approvals, FERC Approvals, Antitrust Approvals and SEC
Approvals.
"Material Adverse Change" or "Material Adverse Effect" means a material
adverse change or effect, individually or in the aggregate, to the Purchased
Assets or the Business.
49
"Moody's" means ▇▇▇▇▇'▇ Investors Service, Inc.
"Net Plant in Service" means the original cost of transmission plant put
into service as of the Closing Date depreciated in accordance with GAAP
consistently applied in accordance with past practices.
"Operational Documents" means the Network Integration Transmission Service
Agreement attached hereto as Exhibit E, the Services Agreement attached hereto
as Exhibit F, the Purchase and Sale Agreement for Ancillary Services-Related
Resources attached hereto as Exhibit G, the Distribution-Transmission
Interconnection Agreement attached hereto as Exhibit H, the Common-Use
Right-of-Way and Pole Attachment Agreement attached hereto as Exhibit I and the
Easement Agreement attached hereto as Exhibit J.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity,
quality and frequency) in the industry in which Seller does business.
"Partial ▇▇▇▇ and Assignment" means a certain ▇▇▇▇ of Sale and Partial
Assignment and Assumption of Contract Rights that is to be executed by Buyer and
Seller and delivered to each other at the Closing, attached hereto as Exhibit B.
"Parties" means Buyer, Seller, and Parent solely for purposes of Article 5,
Section 8.2 and Article 11.
"Permitted Encumbrances" means (a) any contracts, agreements, leases or
instruments or other matter referred to in Schedule 3.6, (b) liens for taxes or
assessments not yet delinquent or, if delinquent, that are being contested in
good faith, (c) materialman's, mechanic's, repairman's, employee's,
contractor's, operator's and other similar liens or charges arising in the
ordinary course of business that are inchoate and have not been perfected
pursuant to law or that are being contested in good faith, (d) to the extent
pertaining to owned property or leased property, easements, rights-of-way,
servitudes, permits, surface leases and other rights relating to surface
operations that do not have a Material Adverse Effect on the operation, value or
use of the property affected thereby, (e) rights reserved to or vested in any
governmental authority to control or regulate property in any manner, and
applicable laws, rules and orders of governmental authorities and (f) defects
and irregularities of title affecting the Purchased Assets that individually or
in the aggregate do not have a Material Adverse Effect on the operation or use
of the property affected thereby.
"PJM" means PJM Interconnection LLC.
"PUHCA" means the Public Utility Holding Company Act of 1935, as amended.
"Release" means, when used as a noun, any release, spill, emission,
discharge, leaking, pumping, injection, deposit, disposal, discharge, dispersal,
leaching or migration into the indoor or outdoor environment (including without
limitation ambient air, surface water, groundwater and surface or subsurface
strata) or into or out of any of the Purchased Assets, including the movement of
Hazardous Substances, Oils, Pollutants or Contaminants through or in the air,
soil, surface water, groundwater or property; and, when used as a verb, the
occurrence of any Release.
50
"RTO" means a FERC-approved Regional Transmission Organization.
"S&P" means Standard & Poor's, a Division of The ▇▇▇▇▇▇-▇▇▇▇ Companies,
Inc.
"SEC" means the Securities and Exchange Commission.
"SEC Approvals" means (i) the Final approval by the SEC under the PUHCA of
all transactions contemplated by this Agreement that are subject to SEC
jurisdiction under the PUHCA and (ii) the receipt from the Staff of a no-action
letter stating that the Staff would not recommend any enforcement action under
the PUHCA as a result of the equity investment by AIG Highstar Capital, L.P. in
Buyer and the exercise by AIG Highstar Capital, L.P. (or its affiliated
successor in interest) of any of its rights and powers under the limited
partnership agreement of Buyer's single member, provided that the underlying
request for no-action relief shall state that if AIG Highstar Capital, L.P. (or
its affiliated successor in interest) were to exercise its rights pursuant to GP
Events (as defined in the Equity Financing Commitment), it would take all
necessary steps to ensure its ongoing compliance with the PUHCA, including the
filing of an application for exemption under Section 3(a)(4) of the PUHCA or
take such other similar steps as may be appropriate to receive similar relief.
"Staff" means the staff of the SEC.
"Tax" or "Taxes" means any federal, state, local, foreign or other taxes
(including without limitation income (net or gross), gross receipts, profits,
alternative or add-on minimum, franchise, license, capital, capital stock,
intangible, services, premium, mining, transfer, sales, use, ad valorem,
payroll, wage, severance, employment, occupation, property (real or personal),
windfall profits, import, excise, custom, stamp or withholding taxes), duties,
assessments or other governmental charges of any kind whatsoever (including
interest, penalties, additions to tax or additional amounts with respect to such
items).
"TFO Documents" means each and all of (a) the Electric Utility Transitional
Funding Law, (b) (i) the Transitional Funding Order dated September 10, 1998,
(ii) Rider IFC and (iii) the Agreement Relating to Grant of Intangible
Transition Property dated December 1, 1998, the Intangible Transition Property
Servicing Agreement dated December 1, 1998, the Intangible Transition Property
Sale Agreement dated December 1, 1998 and the related Indenture with ▇▇▇▇▇▇
Trust and Savings Bank dated December 1, 1998, (c) any order entered by the ICC
after the date hereof and prior to Closing with respect to, and the agreements
effecting or implementing, Transitional Funding Instruments to be issued after
the date hereof, and (d) other agreements, instruments, notes and documents
effecting or implementing the transactions set forth in the items listed in the
foregoing clauses (a) through (d), in each case as any of the same may be
modified or amended from time to time.
"Transaction Documents" means this Agreement, together with each of the
following agreements attached to this Agreement as Exhibits A-L, respectively:
(i) Full ▇▇▇▇ and Assignment;
(ii) Partial ▇▇▇▇ and Assignment;
(iii) Summary of Seller's Transmission Related Revenue;
51
(iv) Limited Warranty Deed;
(v) Network Integration Transmission Service Agreement;
(vi) Services Agreement;
(vii) Purchase and Sale Agreement for Ancillary
Services-Related Resources;
(viii) Distribution-Transmission Interconnection
Agreement;
(ix) Common-Use Right-of-Way and Pole Attachment
Agreement;
(x) Easement Agreement;
(xi) Non-Competition Agreement; and
(xii) Consent and Agreement.
"Transfers of Licenses, Permits and Franchises" means having secured,
at no significant cost to Buyer: (a) the transfer to Buyer conditioned on
Closing or (b) the irrevocable commitment by the issuer of the License, Permit
or Franchise (or its successor) to transfer to Buyer, immediately upon Closing,
all Licenses, Permits and Franchises used by Seller in connection with the
Business, in each case without any conditions or restrictions materially adverse
to either Seller or Buyer. For purposes of this definition, an irrevocable and
unconditional agreement by the issuer of a License, Permit or Franchise (or its
successor) to issue to Buyer a replacement License, Permit or Franchise on
identical terms immediately upon Closing shall be deemed to be equivalent to an
irrevocable agreement to transfer such License, Permit or Franchise without any
conditions or restrictions materially adverse to either Seller or Buyer.
"Transitional Funding Instruments" means (i) those transitional funding
instruments issued in connection with the Transitional Funding Order issued by
the ICC on September 10, 1998 and that certain Indenture dated December 1, 1998
between Illinois Power Special Purpose Trust and ▇▇▇▇▇▇ Trust and Savings Bank,
in each case as the same may be amended or modified from time to time, and (ii)
any other transitional funding instruments (as defined in the Electric Utility
Transitional Funding Law, Section 220 ILCS 5/18-101 et seq.) issued by or on
behalf of Seller, or whose proceeds are received by or on behalf of Seller,
after the date hereof and prior to Closing.
"Transmission Capital Expenditures" means capital expenditures with
respect to the Purchased Assets.
"Transmission Services" means the services for the transmission of
electricity performed by Seller pursuant to its currently effective FERC Open
Access Transmission Tariff or any successor tariff thereto.
52
(b) The following terms have the meanings set forth in the Sections
set forth below:
Term Section
---- -------
Acceptable Bank 12.1(a)
Accounts Payable 12.1(a)
Action 9.3(a)
Adjusted Closing Statement 1.6(c)
Affiliate 12.1(a)
Agreement Preamble
Antitrust Approval 12.1(a)
Approvals 7.3
Arbitrator 1.5(b)
Asserted Breaches 2.3(b)
Assumed Credit Spreads 1.7
Auditor 1.6(d)
Bankruptcy 12.1(a)
Benefit Plan 12.1(a)
Best Efforts 12.1(a)
Business 12.1(a)
Buyer Preamble
Buyer Losses 9.1
Cleanup 12.1(a)
Closing 2.1
Closing Date 2.1
Closing Date Payment 1.2
Code 1.3
Contracts 3.14(b)(i)
Credit Spread Increase 1.7
Credit Spread Notice 1.7
Credit Support 6.9
CWIP 12.1(a)
Damage 9.1(b)
Debt Financing Commitment 1.7
Encumbrance 12.1(a)
Environmental Laws 12.1(a)
Environmental Liabilities and Costs 12.1(a)
Equity Financing Commitment 1.7
ERISA 12.1(a)
Excepted Rate Matters 6.16(b)
Exchange Act 12.1(a)
Extended Closing Date 1.7
FERC 12.1(a)
FERC Approvals 12.1(a)
Final 12.1(a)
Final Closing Statement 1.6(e)
53
Term Section
---- -------
Final Termination Date 2.2(b)
Financing Commitment Letters 12.1(a)
Financing Commitments 1.7
First Mortgage Lien 12.1(a)
Full ▇▇▇▇ and Assignment 12.1(a)
Fully Covered 12.1(a)
GAAP 1.6(a)
Good Utility Practice 12.1(a)
Guidelines for Partial Assignments 1.1
Hazardous Substances, Oils, Pollutants or Contaminants 12.1(a)
ICC 12.1(a)
ICC Approvals 12.1(a)
Inventory 12.1(a)
ITH 1.7
Jointly Used Assets 12.1(a)
Knowledge of Buyer or Known to Buyer 12.1(a)
Knowledge of Seller/Known to Seller/Seller's 12.1(a)
Knowledge
Large Corridors 12.1(a)
Levelized Rate 12.1(a)
Licenses, Permits and Franchises 12.1(a)
Loss Arbitrator 2.3(c)
Loss Exposure 2.3(b)
Loss Meeting 2.3(c)
Loss Notice 2.3(c)
Material Adverse Change or Material Adverse Effect 12.1(a)
Materiality Limit 9.4
Minimum 9.4
▇▇▇▇▇'▇ 12.1(a)
Net Plant in Service 12.1(a)
Non-Complying Order 7.8
Operational Documents 12.1(a)
Ordinary Course of Business 12.1(a)
Owed Credits 1.6(b)(v)
Parent Preamble
Partial ▇▇▇▇ and Assignment 12.1(a)
Partial Assignments 1.1
Parties 12.1(a)
Pending Indemnification Claims 6.9
Permitted Encumbrances 12.1(a)
Person 3.14(b)(iii)
PJM 12.1(a)
Potential Transferred Employees 3.9(a)
Preliminary Closing Statement 1.6(a)
54
Term Section
---- -------
Pro-Forma Operating Statements 3.7(c)
PUHCA 12.1(a)
Purchase Price 1.2
Purchased Assets 1.1
Rate Treatments 6.16(a)
Real Property 3.6(a)
Real Property Conveyances 1.8(a)
Release 12.1(a)
RTO 12.1(a)
S&P 12.1(a)
SEC 12.1(a)
SEC Approvals 12.1(a)
Section 205 Application 7.8
Seller Preamble
Staff 12.1(a)
Tax or Taxes 12.1(a)
TFO Documents 12.1(a)
Transaction Documents 12.1(a)
Transferred Employees 6.2(a)
Transfers of Licenses, Permits and Franchises 12.1(a)
Transitional Funding Instruments 12.1(a)
Transmission Assets Valuation 1.5(a)
Transmission Capital Expenditures 12.1(a)
Transmission Services 12.1(a)
WARN Act 6.2(c)
55
IN WITNESS WHEREOF, the Parties hereto have duly executed this Agreement as
of the date first above written.
ILLINOIS ELECTRIC TRANSMISSION
COMPANY, LLC
By: ILLINOIS TRANSCO HOLDINGS,
LIMITED PARTNERSHIP, its sole member
By: TRANS-ELECT ILLINOIS, LLC,
its General Partner
By: TRANS-ELECT, INC., its sole member
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: EVP Finance and Treasurer
Solely for purposes of Article 5, Section 8.2
and Article 11:
TRANS-ELECT, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: EVP Finance and Treasurer
ILLINOIS POWER COMPANY
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Senior Vice President, General
Counsel and Secretary