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ASSET PURCHASE AND SALE AGREEMENT
FOR
GENERATING PLANTS AND RELATED ASSETS
By and Between
POTOMAC ELECTRIC POWER COMPANY
and
SOUTHERN ENERGY, INC.
Dated as of June 7, 2000
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
Page
<S> <C>
ARTICLE I - Definitions 1
Section 1.1 Definitions 1
Section 1.2 Accounting Terms 1
ARTICLE II - Purchase and Sale; Assumption of Certain
Liabilities 1
Section 2.1 Purchase and Sale 1
Section 2.2 Auctioned Assets and Retained Assets 2
Section 2.3 Assumed Obligations and Retained
Liabilities 6
Section 2.4 Third Party Consents 11
ARTICLE III - Purchase Price 11
Section 3.1 Purchase Price 11
Section 3.2 Certain Post-Closing Adjustments 12
Section 3.3 Allocation of Purchase Price 13
Section 3.4 PPA-Related Purchase Price Adjustments 14
ARTICLE IV - The Closing 15
Section 4.1 Time and Place of Closing 15
Section 4.2 Payment of Estimated Purchase Price 16
ARTICLE V - Representations and Warranties of Seller 16
Section 5.1 Organization; Qualification 17
Section 5.2 Authority Relative to This Agreement 17
Section 5.3 Consents and Approvals; No Violation 17
Section 5.4 Personal Property 18
Section 5.5 Real Estate 18
Section 5.6 Leases 18
Section 5.7 Certain Contracts and Arrangements 18
Section 5.8 Legal Proceedings 18
Section 5.9 Permits; Compliance with Law 19
Section 5.10 Environmental Matters 19
Section 5.11 Labor Matters 20
Section 5.12 ERISA; Benefit Plans 20
Section 5.13 Taxes 21
Section 5.14 Undisclosed Liabilities 21
Section 5.15 Brokers 22
Section 5.16 Insurance 22
Section 5.17 Disclaimers 22
ARTICLE VI - Representations and Warranties of Buyer 23
Section 6.1 Organization 23
Section 6.2 Authority Relative to This Agreement 23
Section 6.3 Consents and Approvals; No Violation 23
Section 6.4 Availability of Funds 24
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
Section 6.5 Brokers 24
Section 6.6 No Knowledge of Seller's Breach 24
Section 6.7 Qualified Buyer 25
Section 6.8 WARN Act 25
Section 6.9 Financial Representations 25
Section 6.10 Legal Proceedings 25
ARTICLE VII - Covenants of the Parties 25
Section 7.1 Conduct of Business Relating to
the Auctioned Assets 25
Section 7.2 Access to Information 28
Section 7.3 Consents and Approvals; Transferable
Permits 29
Section 7.4 Further Assurances 30
Section 7.5 Public Statements 31
Section 7.6 Tax Matters 31
Section 7.7 Bulk Sales or Transfer Laws 31
Section 7.8 Witness Services 31
Section 7.9 Control of Litigation 32
Section 7.10 Confidentiality 32
Section 7.11 Risk of Loss 32
Section 7.12 Tax Exempt Financing 33
Section 7.13 Compliance with Governmental Agreements 36
Section 7.14 PJM; MAAC 36
Section 7.15 Trade Names 36
Section 7.16 Enforcement of Retained Rights 37
Section 7.17 Conduct of Business Relating to PPAs 37
ARTICLE VIII - Conditions 37
Section 8.1 Conditions Precedent to Each Party's
Obligation To Effect the Purchase
and Sale 37
Section 8.2 Conditions Precedent to Obligation
of Buyer To Effect the Purchase and Sale 38
Section 8.3 Conditions Precedent to Obligation
of Seller To Effect the Purchase and Sale 39
ARTICLE IX - Employee Matters 41
Section 9.1 Employee Matters 41
Section 9.2 Pension Plans 43
Section 9.3 Buyer's Savings Plan 43
Section 9.4 Severance Liabilities 45
Section 9.5 COBRA 45
Section 9.6 WARN Act 45
ARTICLE X - Indemnification and Dispute Resolution 46
Section 10.1 Indemnification 46
Section 10.2 Third Party Claims Procedures 48
ARTICLE XI - Termination 50
Section 11.1 Termination 50
ARTICLE XII - Miscellaneous Provisions 50
Section 12.1 Expenses 50
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
Section 12.2 Amendment and Modification; Extension;
Waiver 51
Section 12.3 No Survival of Representations or
Warranties 51
Section 12.4 Notices 51
Section 12.5 Assignment; No Third Party Beneficiaries 52
Section 12.6 Governing Law 53
Section 12.7 Counterparts 53
Section 12.8 Interpretation 53
Section 12.9 Jurisdiction and Enforcement 54
Section 12.10 Entire Agreement 55
Section 12.11 Severability 55
Section 12.12 Conflicts 55
</TABLE>
<PAGE> 5
SCHEDULES AND EXHIBITS
<TABLE>
<CAPTION>
Schedules Title
========= ======
<S> <C>
Schedule 1.1(a) Definitions
Schedule 1.1(c) Seller's Severance Plans
Schedule 2.2(a)(ii) Spare Parts
Schedule 2.2(a)(iii) Personal Property
Schedule 2.2(a)(iv) Assigned Contracts
Schedule 2.2(a)(v) Transferable Permits
Schedule 2.2(a)(vi) Transferred SO2 Allowances
Schedule 2.2(a)(vii) Transferred NOx Allowances
Schedule 2.2(b)(i) Retained Transmission and
Distribution Facilities
Schedule 2.2(b)(ii)(B) Communications Equipment/Related
Support Equipment
Schedule 2.3(a)(iv) Assumed Consent Order Obligations
Schedule 2.4 Retained Rights/Unassigned PPAs
Schedule 5.3(a) Contracts Approvals; No Violation
Schedule 5.3(b) Seller Required Regulatory Approvals
Schedule 5.5(a) Real Estate Legal Description
Schedule 5.5(b) Title Surveys
Schedule 5.7 Material Contract Defaults
Schedule 5.8 Legal Proceedings
Schedule 5.9 Permits
Schedule 5.10(a) Environmental Matters
Schedule 5.10(b) Environmental Notification
Schedule 5.10(c) Environmental Reports
Schedule 5.12 Benefit Plans
Schedule 6.3(b) Buyer Required Regulatory Approvals
Schedule 7.1(b)(viii) Capital Expenditures
Schedule 7.12 Exempt Facilities/Revenue Bonds
</TABLE>
<TABLE>
<CAPTION>
Exhibits Title
======== =====
<S> <C>
Exhibit A Assignment and Assumption Agreement
Exhibit B Bill of Sale
Exhibit C-1, C-2, C-3 and C-4 Easements Agreements
Exhibit D Guarantee Agreement
Exhibit E-1, E-2, E-3 and E-4 Interconnection Agreements
Exhibit F Local Area Support Agreement
Exhibit G Operating Agreement
Exhibit H Potomac River Lease
Exhibit I-1 and I-2 Transition Power Agreements
Exhibit J Deeds of Conveyance
Exhibit K Opinion of Seller's Counsel
Exhibit L Opinion of Buyer's Counsel
Exhibit M Opinion of Guarantor's Counsel
</TABLE>
<PAGE> 6
ASSET PURCHASE AND SALE AGREEMENT (including the Schedules hereto, this
"Agreement"), dated as of June 7, 2000, by and between POTOMAC ELECTRIC POWER
COMPANY, a District of Columbia and Virginia corporation ("Seller"), and
SOUTHERN ENERGY, INC., a Delaware corporation ("Buyer," collectively with
Seller, the "Parties").
WHEREAS, Seller owns certain power generating facilities (described
herein as the "Generating Facilities") and other assets associated therewith;
and
WHEREAS, Buyer desires to purchase and assume, and Seller desires to
sell and assign, the Auctioned Assets (as defined in Section 2.2 below) and
certain associated liabilities, upon the terms and conditions hereinafter set
forth.
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements hereinafter set forth, and intending
to be legally bound hereby, the Parties agree as follows:
ARTICLE I
Definitions
SECTION 1.1 Definitions. Any capitalized terms which are used but
not defined in this Agreement shall have the meaning given to such terms in the
attached Schedule 1.1.
SECTION 1.2 Accounting Terms. Any accounting terms used in this
Agreement or the Ancillary Agreements shall, unless otherwise specifically
provided, have the meanings customarily given them in accordance with United
States generally accepted accounting principles ("GAAP") and all financial
computations hereunder or thereunder shall, unless otherwise specifically
provided, be computed in accordance with GAAP consistently applied.
ARTICLE II
Purchase and Sale; Assumption of Certain Liabilities
SECTION 2.1 Purchase and Sale. Upon the terms and subject to the
satisfaction of the conditions contained in this Agreement, at the Closing,
Seller agrees to sell, assign, convey, transfer and deliver to Buyer (or Buyer's
permitted assignees pursuant to Section 12.5(a)), and Buyer agrees to purchase
and acquire from Seller (or shall cause Buyer's permitted assignees pursuant to
Section 12.5(a) to purchase and acquire from Seller) all of the Auctioned
Assets. In the case of any Auctioned Assets
<PAGE> 7
not located at the Generating Facilities (including supplies, materials and
spare parts inventory), Buyer agrees that from and after the Closing, Buyer will
bear all risk of casualty or loss with regard to such Auctioned Assets
(regardless of whether they remain on Seller's Real Estate or otherwise in
Seller's possession).
SECTION 2.2 Auctioned Assets and Retained Assets.
(a) Auctioned Assets. The term "Auctioned Assets" means all of the
assets, real and personal property, goodwill and rights of Seller of whatever
kind and nature, whether tangible or intangible, in each case, primarily
relating to the power generation operations of the Generating Facilities and the
Support Operations, other than the Retained Assets, including the following:
(i) except with respect to the Potomac River Real
Property, all real property and leaseholds and other interests in real property
of Seller, together with all buildings, improvements, structures and fixtures
thereon, including the Chalk Point/Morgantown Fuel Pipeline, the Ryceville
Pumping Station, the Production Service Center, and the Ash Storage Sites,
subject to any Permitted Exceptions (the "Buyer Real Estate");
(ii) all inventories of fuels, supplies, materials and
spare parts, together with and subject to (A) all Permitted Exceptions, and (B)
all warranties against manufacturers and vendors relating thereto, including the
spare parts listed on Schedule 2.2(a)(ii), in each case, other than assets that
become obsolete or that are used, consumed, replaced or disposed of in the
ordinary course of business consistent with past practice or as permitted by
this Agreement;
(iii) the machinery, equipment (including any Revenue
Meters), facilities, furniture and other tangible personal property on the Buyer
Real Estate or the Potomac River Station Site, including any items of personal
property located on the Buyer Real Estate, the Potomac River Station Site or
temporarily removed from the Buyer Real Estate or the Potomac River Station Site
for repairs, servicing or maintenance and listed on Schedule 2.2(a)(iii),
together with and subject to (A) any Permitted Exceptions, and (B) all
warranties against manufacturers or vendors relating thereto, in each case,
<PAGE> 8
other than assets that become obsolete or that are used, consumed, replaced or
disposed of in the ordinary course of business consistent with past practice or
as permitted by this Agreement;
(iv) subject to Sections 2.2(b)(xi) and 2.4, all right,
title and interest of Seller in, to and under all contracts, agreements,
personal property leases (whether Seller is lessor or lessee thereunder),
commitments and all other legally binding arrangements (including any rights of
Seller under any PPA to sell energy to any third party power supplier) whether
oral or written, which are (A) set forth on Schedule 2.2(a)(iv), (B) not
material to the ownership and operation of the Generating Facilities, or (C)
otherwise entered into by Seller in accordance with Section 7.1 (collectively,
the "Contracts"), in each case, to the extent in full force and effect on the
Closing Date;
(v) the Permits and Environmental Permits that are
transferred or transferable by Seller to Buyer (collectively, the "Transferable
Permits"), including the Transferable Permits set forth on Schedule 2.2(a)(v),
in each case, to the extent in full force and effect on the Closing Date;
(vi) the amount of SO2 Allowances listed on Schedule
2.2(a)(vi) attached hereto ("Transferred SO2 Allowances");
(vii) the amount of NOx Allowances listed on Schedule
2.2(a)(vii) attached hereto ("Transferred NOx Allowances");
(viii) (A) all data, information, books, operating records,
operating, safety and maintenance manuals, engineering design plans, blueprints
and as-built plans, specifications, procedures, facility compliance plans,
environmental procedures and similar records, to the extent in Seller's
possession or readily available (collectively, the "Operating Records"), and (B)
to the extent permitted by law, all personnel files relating to the Transferred
Employees, to the extent in Seller's possession and readily available and to the
extent such files pertain to (1) skill and development training and resumes, (2)
seniority histories, (3) salary and benefit information, (4) Occupational Safety
and Health Act medical reports, (5) active medical restriction forms and (6) any
other matters, disclosure
<PAGE> 9
of which by Seller to Buyer is permitted under applicable law without the
consent of the Transferred Employee, but not including any performance
evaluations or disciplinary records (collectively, the "Transferred Employee
Records"); provided, however, that Seller shall be permitted to retain copies,
or originals to the extent it provides Buyer with copies of same, of all
Operating Records and Transferred Employee Records;
(ix) (A) except as provided in Section 2.2(b)(iv), the
software (provided, however, that Buyer acknowledges that it will require
licenses from third parties in order to be legally entitled to use such
software), and (B) a non-exclusive, royalty-free license to use solely in
connection with the Auctioned Assets the software or other copyrighted material
owned by Seller located at Buyer Real Estate; and
(x) all claims, causes of action, choses in action,
rights of recovery and rights of set-off of any kind in favor of the Seller
arising prior to the Closing Date relating to the Auctioned Assets other than
those pertaining to the Retained Assets.
(b) Retained Assets. The term "Retained Assets" means:
(i) the electric transmission and distribution facilities
owned, controlled or operated by Seller for purposes of providing point-to-point
transmission service, network integration service and distribution service and
other related purposes, used in controlling continuity between the Generating
Facilities and the transmission and distribution facilities and for other
purposes (including the Seller's undivided ownership interest in the Conemaugh
Switchyard and the Conemaugh Transmission Line), including those described on
Schedule 2.2(b)(i) attached hereto (the "Transmission System");
(ii) (A) except as set forth in Section 2.2(a)(iii), all
Interconnection Facilities and other transmission, distribution and substation
machinery, equipment and facilities and related support equipment located on
Buyer Real Estate or Seller Real Estate or temporarily removed from Buyer Real
Estate
<PAGE> 10
or Seller Real Estate for repairs, servicing or maintenance; (B) Communications
Equipment and related support equipment (1) located on Buyer Real Estate or
temporarily removed from Buyer Real Estate for repairs, servicing or maintenance
and listed on Schedule 2.2(b)(ii)(B) or acquired by Seller after the date of
this Agreement and designated by Seller as a Retained Asset or (2) located on
Seller Real Estate or temporarily removed from Seller Real Estate for repairs,
servicing or maintenance; and (C) all Protective Relaying Systems not located on
Buyer Real Estate;
(iii) all cash, cash equivalents, bank deposits and
accounts receivable;
(iv) (A) all mainframe computer systems of Seller and (B)
all software, copyrights, know-how or other proprietary information not
primarily relating to the power generation operations of the Generating
Facilities, including software, copyrights, know-how or other proprietary
information licensed to Buyer pursuant to Section 2.2(a)(ix)(B);
(v) the names "Pepco," "Potomac Electric Power Company,"
and any related or similar trade names, trademarks, service marks or logos (and
any rights to and in the same, including any right to use the same);
(vi) any refunds or credits related to Taxes attributable
to taxable periods (or portions thereof) prior to the Closing Date, and any
other rents, charges, liabilities or obligations paid prior to the Closing Date
in respect of the Auctioned Assets;
(vii) personnel records (other than Transferred Employee
Records) and all other records (other than Operating Records);
(viii) (A) all Emission Reduction Credits or Greenhouse Gas
Emission Reduction Credits that are attributable to any emission reduction
activities of the Seller which occur following the Closing Date at any
locations, (B) any SO2 Allowances that are not Transferred SO2 Allowances, and
<PAGE> 11
(C) any NOx Allowances that are not Transferred NOx Allowances;
(ix) the Seller Real Estate (including a fee interest in
the Potomac River Real Property);
(x) all master station voltage control equipment within
and including the master station voltage control cabinets located at the
Generating Facilities;
(xi) the Retained Rights;
(xii) the Conemaugh Interest;
(xiii) all claims, causes of action, choses in action,
rights of recovery and rights of set-off of any kind in favor of the Seller
arising prior to the Closing Date other than those pertaining to the Assumed
Obligations; and
(xiv) any other asset that is not described with
particularity in this Agreement as an Auctioned Asset.
SECTION 2.3 Assumed Obligations and Retained Liabilities.
(a) Assumed Obligations. At the Closing, Buyer shall assume, and
from and after the Closing, shall discharge, all of the liabilities and
obligations, direct or indirect, known or unknown, absolute or contingent, which
relate to the Auctioned Assets, the Potomac River Station Site or are otherwise
specified below, other than the Retained Liabilities (collectively, the "Assumed
Obligations"), including the following:
(i) except as set forth in Section 2.3(b)(ii), any
liabilities and obligations under the Contracts (including any obligations of
Seller under any PPA to sell energy to any third party power supplier);
(ii) any liabilities and obligations for goods delivered or services
rendered on or after the Closing Date relating to the Auctioned Assets;
<PAGE> 12
(iii) except as set forth in Section 2.3(b)(iii), (iv) or
(v), any Environmental Liability including any Environmental Liability (A)
arising out of or in connection with any violation or alleged violation of, or
noncompliance or alleged noncompliance with, any Environmental Laws, prior to,
on or after the Closing Date, relating to or arising in connection with the
Auctioned Assets and the Potomac River Station Site, (B) arising out of or in
connection with the condition of any Auctioned Assets and the Potomac River
Station Site prior to, on or after the Closing Date, including any actual or
alleged presence, Release or threatened Release of any Hazardous Substances at,
on, in, under or migrating onto or from, the Auctioned Assets and the Potomac
River Station Site, prior to, on or after the Closing Date, (C) arising out of
or in connection with any Release or threatened Release of any Hazardous
Substance prior to, on or after the Closing Date relating to any equipment,
Hazardous Substance, product or recyclable or recycled material (collectively,
the "Disposed Items") which remains on or has been removed from the Auctioned
Assets and the Potomac River Station Site, (D) in respect of any personal injury
or property damage relating to or arising from the presence, exposure to, or
proximity to any Hazardous Substance, prior to, on or after the Closing Date,
and (E) of any sort whatsoever arising or occurring on or after the Closing
Date;
(iv) any liabilities and obligations under all consent
orders including those listed on Schedule 2.3(a)(iv) (the "Assumed Consent Order
Obligations");
(v) except as set forth in Section 2.3(b)(iv), any
liabilities and obligations with respect to the Permits to the extent arising or
accruing on or after the Closing Date;
(vi) (A) all wages, overtime, employment taxes, workers
compensation benefits, occupational safety and health liabilities or other
similar liabilities and obligations in respect of Transferred Employees arising
or accruing on or after the Closing Date, and (B) all other liabilities and
obligations with respect to the Transferred Employees for which Buyer is
responsible pursuant to Article IX;
(vii) (A) any liabilities and obligations in respect of any
personal injury or property (real or personal) damage claim (including any claim
based on wrongful death) relating to, resulting from, or arising out of the
Auctioned Assets and the Potomac River Station Site, arising or occurring on or
after the Closing Date, or (B) any liabilities and obligations in respect of any
discrimination, wrongful discharge or unfair labor practice claim by any
Transferred Employee arising out of or relating to acts or omissions occurring
on or after the Closing Date;
(viii) any liabilities and obligations, with respect to the
periods that include the Closing Date, with respect to real or personal property
rent, Taxes based on the ownership or use of property, utilities charges and
similar charges that primarily relate to the Generating Facilities
(collectively, the "Prorated Items"), including (A) personal property taxes,
real estate and occupancy taxes, assessments and other charges, (B) rent and all
other items payable by Seller under any Contract, (C) any fees with respect to
any Transferable Permit and (D) sewer rents and charges for water, telephone,
electricity and other utilities, in each case calculated by multiplying the
amount of any such Prorated Item by a fraction the numerator of which is the
number of days in such period beginning on and after the Closing Date and the
denominator of which is the number of days in such period;
(ix) any liabilities and obligations in respect of Taxes
(other than as provided for by Section 2.3 (a)(viii)) attributable to the
Auctioned Assets arising or accruing during taxable periods (or portions
thereof) beginning on or after the Closing Date;
(x) any severance costs payable under Seller's Severance
Plans with respect to those Non-Union Employees who do not receive a Qualified
Offer by the Buyer pursuant to Section 9.1 (such liabilities are the "Closing
Severance Expenses");
(xi) any liabilities and obligations of the Buyer relating
to the Potomac River Station Site as contemplated by the Potomac River Lease;
<PAGE> 13
(xii) all liabilities and obligations of Seller under the
loan agreements set forth on Schedule 7.12 attached hereto (the "Loan
Agreements") with respect to the Revenue Bonds; and
(xiii) any liabilities and obligations under the Ancillary
Agreements in respect of the Auctioned Assets arising on or after the Closing
Date.
(b) Retained Liabilities. Buyer shall not assume or be obligated
to pay, perform or otherwise discharge the following liabilities or obligations
(the "Retained Liabilities"):
(i) any liabilities and obligations of Seller exclusively
relating to any Retained Assets (other than as set forth in Section 2.3(a)(xi));
(ii) any liabilities and obligations under the Contracts
which relate to (A) goods delivered or services rendered prior to the Closing
Date, and (B) breaches by the Seller of its obligations thereunder occurring
prior to the Closing Date;
(iii) (A) any Environmental Liability of Seller arising out
of or in connection with the disposal by, or on behalf of, Seller and Release or
threatened Release, prior to the Closing Date of Hazardous Substances at any
Off-Site location, (B) any Environmental Liability of Seller arising out of or
in connection with any Release or threatened Release of any Hazardous Substance
on or after the Closing Date from the Seller Facilities or otherwise originating
from, or relating to, any equipment owned or used by Seller that is located on
Buyer Real Estate, and (C) any liability in respect of any personal injury
claims relating to the exposure of a third party to asbestos at the Auctioned
Assets or the Potomac River Station Site which have been filed with any state or
federal court having jurisdiction prior to the Closing Date;
(iv) notwithstanding the Assumed Obligations set forth in
Section 2.3(a)(iii)(A), any monetary fines or penalties (including fines or
penalties from violations of any Environmental Law) imposed by a Governmental
Authority to the extent arising out of or relating to acts or omissions of
Seller
<PAGE> 14
in respect of the Auctioned Assets prior to the Closing Date;
(v) any Environmental Liability whatsoever arising out
of, related to, or otherwise associated with the Release of fuel oil from the
Ryceville-Piney Point Pipeline described in Schedule 5.10(a);
(vi) (A) all wages, overtime, employment taxes, workers
compensation benefits, occupational safety and health liabilities or other
similar liabilities and obligations in respect of Transferred Employees to the
extent arising or accruing prior to the Closing Date and (B) all other
liabilities and obligations with respect to the Transferred Employees for which
Seller is responsible pursuant to Article IX;
(vii) any liabilities and obligations (A) in respect of any
personal injury or property damage claim (other than any Environmental
Liabilities which are Assumed Obligations pursuant to Section 2.2(a)(iii) above)
relating to the Auctioned Assets arising or occurring prior to the Closing Date,
or (B) in respect of any discrimination, wrongful discharge or unfair labor
practice claim by any Transferred Employee arising out of or relating to acts or
omissions of Seller prior to the Closing Date;
(viii) any liabilities and obligations, with respect to
periods prior to the Closing Date, for the Prorated Items, calculated as set
forth in Section 2.3(a)(viii);
(ix) any liabilities and obligations in respect of Taxes
(other than as provided for by Section 2.3(b)(viii)) attributable to the
Auctioned Assets or trades or businesses associated with the Auctioned Assets
arising or accruing during taxable periods (or portions thereof) ending before
the Closing Date; and
(x) any liabilities and obligations of Seller under the
Ancillary Agreements in respect of the Retained Assets.
<PAGE> 15
SECTION 2.4 Third Party Consents.
(a) Notwithstanding Section 2.2(a)(ii), (iii) or (iv), to the
extent that Seller's rights under any Contract or warranty may not be assigned
without the consent of another person which consent has not been obtained, this
Agreement shall not constitute an agreement to assign the same if an attempted
assignment would constitute a breach thereof or be unlawful, and Seller, at its
expense, shall use its reasonable best efforts to obtain prior to the Closing
any such required consents with respect to any Material Contracts or material
warranties.
(b) Seller and Buyer agree that if any consent to an assignment of
any such Material Contract or material warranty shall not be obtained or if any
attempted assignment would in Seller's reasonable opinion be ineffective or
would impair any material rights and obligations of Buyer under such Material
Contract or material warranty, as applicable, so that Buyer would not in effect
acquire the benefit of all such rights and obligations, Seller, to the maximum
extent permitted by law and such Material Contract or material warranty, as
applicable, shall after the Closing appoint Buyer to be Seller's representative
and agent with respect to such Material Contract or material warranty, as
applicable, and Seller shall, to the maximum extent permitted by law and such
Material Contract or material warranty, as applicable, enter into such
reasonable arrangements with Buyer as are necessary to provide Buyer with the
benefits and obligations of such Material Contract or material warranty, as
applicable. Notwithstanding any of the foregoing, in the event that Seller is
unable to obtain a consent from a Power Seller to an assignment of a PPA, such
PPA shall be governed by Section II of Schedule 2.4 attached hereto. Seller and
Buyer shall cooperate and shall each use their reasonable best efforts after the
Closing to obtain an assignment of each such Material Contract or material
warranty, as applicable, to Buyer.
ARTICLE III
Purchase Price
SECTION 3.1 Purchase Price. Subject to adjustment pursuant to
Sections 3.2 and 3.4, the amount payable by Buyer to Seller for the Auctioned
Assets shall be the sum of (a) Two Billion Six Hundred Fifty Million Dollars
($2,650,000,000.00) (the "Purchase Price"), (b) an amount equal to the Final
Fuel Related Adjustment Amount, (c) an amount equal to the Final Non-Fuel
Related Adjustment Amount, and (d) an amount expended by Seller between the date
hereof and the Closing Date for Permitted Capital Expenditures pursuant to
Section 7.1(b)(viii).
<PAGE> 16
SECTION 3.2 Certain Post-Closing Adjustments.
(a) Within 60 Business Days after the last day of the month in
which Closing occurs, Seller shall prepare and deliver to Buyer a statement (an
"Adjustment Statement") which reflects (i) the book cost, as reflected on the
books of Seller as of the Closing Date, of all inventories, materials, spare
parts and supplies (excluding any fuel supplies) included in the Auctioned
Assets (the "Final Non-Fuel Related Adjustment Amount") and (ii) the book value,
as determined using Seller's historical weighted average method, of all fuel
supplies included in the Auctioned Assets (the "Final Fuel Related Adjustment
Amount"). The Final Fuel Related Adjustment Amount will be based on the actual
fuel inventory on the Closing Date, and the Final Non-Fuel Related Adjustment
Amount will be based on an inventory survey conducted within 30 Business Days
prior to the Closing Date, in each case, consistent with the inventory
procedures of Seller in effect as of the date of this Agreement (the "Inventory
Survey"). Seller will permit an employee, or representative, of Buyer to observe
the Inventory Survey. The Adjustment Statement shall be prepared using (i) GAAP
and (ii) with respect to the Final Non-Fuel Related Adjustment Amount the same
system average price that Seller has historically used to calculate the book
cost of its supplies, materials and spare parts inventory. Buyer agrees to
cooperate with Seller in connection with the preparation of the Adjustment
Statement and related information, and shall provide to Seller such access,
books, records and information as may be reasonably requested from time to time.
(b) Buyer may dispute the quantity delivered or quality of any
inventory item shown on the Adjustment Statement, or the mathematical
calculations reflected therein, by notifying Seller in writing of the disputed
amount, and the basis of such dispute, within 20 Business Days of Buyer's
receipt of the Adjustment Statement; provided, however, that in respect of the
quality of any inventory item, Buyer may not dispute Seller's normal and
customary methods for accounting for excess inventory. Buyer shall have no right
to dispute any other matter in respect of the Adjustment Statement, including
historical system average price used to calculate the book cost of the inventory
and the Final Non-Fuel Related Adjustment Amount or the appropriateness, under
GAAP or otherwise, of using such historical system average price to determine
the book cost of any particular item of inventory. In the event of a dispute
with respect to the quantity or quality of any inventory item shown on the
Adjustment Statement, or the mathematical calculations reflected therein, Buyer
and Seller shall attempt to reconcile their differences and any resolution by
them as to any disputed amounts shall be final, binding and conclusive on the
Parties. If Buyer and Seller are unable to reach a resolution of such
differences within 20 Business Days of receipt of Buyer's written notice of
dispute to Seller, Buyer and Seller shall submit the amounts remaining in
dispute for determination and resolution to KPMG Peat Marwick or any other
accounting firm of recognized national standing
<PAGE> 17
reasonably acceptable to Seller and Buyer (the "Accountants"), which shall be
instructed to determine and report to the Parties, within 20 Business Days after
such submission, upon such remaining disputed amounts, and such report shall be
final, binding and conclusive on the Parties with respect to the amounts
disputed. Buyer and Seller shall each pay an amount, if any, equal to that
percentage of the fees and disbursements of the Accountants incurred in
connection with the resolution of such disputed amounts that corresponds to the
percentage of disputed amounts awarded to the other Party by the Accountants
hereunder.
(c) For purposes of this Agreement, the "Closing Adjustment
Amount" shall be the sum of (A) the amount of the Final Non-Fuel Related
Adjustment Amount, and (B) the amount of the Final Fuel Related Adjustment
Amount minus (ii) the amount of the Estimated Non-Fuel Related Adjustment
Amount. If the Closing Adjustment Amount is a positive number, then on the
Adjustment Date (as defined below), Buyer shall pay to Seller the amount of such
positive number. If the Closing Adjustment Amount is a negative number, then on
the Adjustment Date, Seller shall pay to Buyer the amount of such negative
number. For purposes of this Agreement, the "Adjustment Date" means (1) if Buyer
does not disagree in any respect with the Adjustment Statement, the 23rd
Business Day following Buyer's receipt of the Adjustment Statement or (2) if
Buyer shall disagree in any respect with the Adjustment Statement, the third
Business Day following either the resolution of such disagreement by the Parties
or a final determination by the Accountants in accordance with Section 3.2(b).
Any amount paid under this Section 3.2(c) shall be paid with interest for the
period commencing on the Closing Date up to but not including the date of
payment, calculated at the prime rate of The Chase Manhattan Bank in effect on
the Closing Date, and in cash by wire transfer of immediately available funds.
SECTION 3.3 Allocation of Purchase Price. Buyer shall deliver to
Seller at Closing a preliminary allocation among the Auctioned Assets of the
amount payable by Buyer to Seller pursuant to Section 3.1 hereof, and, as soon
as practicable following the Closing (but in any event within 30 days following
the final determination of the Closing Adjustment Amount), Buyer shall prepare
and deliver to Seller a final allocation of the amount payable by Buyer to
Seller pursuant to Section 3.1 hereof, and the post-closing adjustment pursuant
to Section 3.2, among the Auctioned Assets (the "Allocation"). The Allocation
shall be consistent with Section 1060 of the Code and the Treasury Regulations
thereunder. Seller hereby agrees to accept Buyer's Allocation unless Seller
determines that such Allocation was not prepared in accordance with Section 1060
of the Code and the regulations thereunder ("Applicable Law"). If Seller so
determines, Seller shall within 20 Business Days thereafter propose any changes
necessary to cause the Allocation to be prepared in accordance with Applicable
Law. Within 10
<PAGE> 18
Business Days following delivery of such proposed changes, Buyer shall provide
Seller with a statement of any objections to such proposed changes, together
with a reasonably detailed explanation of the reasons therefor. If Buyer and
Seller are unable to resolve any disputed objections within 10 Business Days
thereafter, such objections shall be referred to the Accountants, whose review
will be limited to whether Buyer's Allocation of such disputed items regarding
the Allocation was prepared in accordance with Applicable Law. The Accountants
shall be instructed to deliver to Seller and Buyer a written determination of
the proper allocation of such disputed items within 20 Business Days. Such
determination shall be conclusive and binding upon the parties hereto for all
purposes, and the Allocation shall be so adjusted (the Allocation, including the
adjustment, if any, to be referred to as the "Final Allocation"). Fees and
disbursements of the Accountants attributable to the Allocation shall be shared
by Buyer and Seller on the basis of their respective percentages of the disputed
items which were allocated by the Accountants to the other Party hereunder. Each
of Buyer and Seller agrees to timely file Internal Revenue Service Form 8594,
and all Federal, state, local and foreign Tax Returns, in accordance with such
Final Allocation and to report the transactions contemplated by this Agreement
for Federal Income Tax and all other tax purposes in a manner consistent with
the Final Allocation. Each of Buyer and Seller agrees to promptly provide the
other party with any additional information and reasonable assistance required
to complete Form 8594, or compute Taxes arising in connection with (or otherwise
affected by) the transactions contemplated hereunder. Each of Buyer and Seller
shall timely notify the other Party and each shall timely provide the other
Party with reasonable assistance in the event of an examination, audit or other
proceeding regarding the Final Allocation.
SECTION 3.4 PPA-Related Purchase Price Adjustments.
(a) In the event Closing occurs hereunder with respect to the
Auctioned Assets other than the Panda PPA as contemplated by Section 4.1,
(i) at the Closing, Buyer shall deposit Two Hundred
Fifty-Nine Million Eight Hundred Twenty-Seven Thousand Dollars ($259,827,000.00)
in immediately available funds in an interest-bearing escrow account pursuant to
an escrow agreement mutually satisfactory to the Parties, providing for the
release to Seller of the remaining balance of such escrow account after the
release, if any, to Buyer pursuant to Section 3.4(a)(ii) (together with all
earnings on such remaining balance) upon the earlier to occur of completion of
the post-Closing consummation of this Agreement with respect to the Panda PPA
(the "Panda Release") or the twelve (12) month period following the Closing
<PAGE> 19
(after which the Panda PPA shall no longer be an "Assigned Contract" under
Schedule 2.2(a)(iv)) ; and
(ii) at the time of the Panda Release, subject to Section
3.4(b), the escrow agent shall release to Buyer the funds deposited in the
escrow account described in Section 3.4(a)(i) (together with all earnings on the
principal released).
(b) In the event the Closing or the Panda Release occurs after
October 31, 2000, Buyer shall pay Seller at Closing or at the time of the Panda
Release, as applicable, by wire transfer of immediately available funds (or in
the case of the Panda Release, the escrow agent shall reduce the amount released
to Buyer pursuant to Section 3.4(a)(ii) above by) an amount in United States
Dollars equal to One Million Two Hundred Thousand Dollars ($1,200,000.00) per
month with respect to the Panda PPA, and Two Million Seven Hundred Thousand
Dollars ($2,700,000.00) per month with respect to the OE PPA, as applicable,
(the "Adjustment Amounts") for each calendar month (prorated for any portion of
a calendar month) occurring between October 31, 2000 and the Closing Date or the
time of the Panda Release, as applicable. In the event that the Panda Release
does not occur within the twelve (12) month period described in Section
3.4(a)(i), the escrow agent shall release to Seller the entire amount in such
escrow account (together with all earnings thereon). The foregoing amounts shall
be adjustments to the Purchase Price.
ARTICLE IV
The Closing
SECTION 4.1 Time and Place of Closing.
(a) Upon the terms and subject to the satisfaction of the
conditions contained in Article VIII, the closing of the sale of the Auctioned
Assets contemplated by this Agreement (the "Closing") will take place on such
date as the Parties may agree, which date shall be as soon as practicable, but
no later than ten Business Days, following the date on which all of the
conditions set forth in Article VIII have been satisfied or waived, at the
Washington, D.C. offices of Dickstein Shapiro Morin & Oshinsky LLP, or at such
other place or time as the Parties may agree. Notwithstanding the foregoing, in
the event all conditions set forth in Article VIII are satisfied other than the
condition set forth in Section 8.3(h), Closing will take place with respect to
all of the Auctioned Assets as set forth above, provided, however, the Panda
Release shall occur only upon satisfaction or waiver of the condition set forth
in Section 8.3(h)(which condition may only be waived by Seller if the MDPSC has
either issued an order determining that the Panda
<PAGE> 20
Release does not violate the Panda PPA or dismissed the proceeding listed at
Item 1 of Schedule 5.8). The date and time at which the Closing actually occurs
is hereinafter referred to as the "Closing Date".
(b) The Parties agree that in the event there is a post-Closing
Panda Release, the effect hereunder shall be limited to (i) the Purchase Price
adjustments and other payments contemplated by Section 3.4; (ii) delivery by the
Parties at the time of the Panda Release of a Novation or other instruments of
assignment and assumption in respect of the Panda PPA, or an acknowledgement of
the applicability as of the time of the Panda Release of the provisions of
Section II of Schedule 2.4 hereto to the Panda PPA; (iii) exclusion of the Panda
PPA from the scope of all representations, warranties and opinions delivered at
Closing (which representations, warranties and opinions as to the Panda PPA will
be required to be delivered at the time of the Panda Release); and (iv)
references in this Agreement and the Ancillary Agreements to the Closing Date
relating to the Panda PPA shall be deemed references to the date of the Panda
Release.
SECTION 4.2 Payment of Estimated Purchase Price. (a) At the
Closing, Buyer will pay or cause to be paid to Seller by wire transfer of
immediately available funds to an account previously designated in writing by
Seller an amount in United States dollars equal to the sum of (a) Two Billion
Six Hundred Fifty Million Dollars ($2,650,000,000.00), (b) an amount equal to
the Estimated Non-Fuel Related Adjustment Amount, (c) an amount expended by
Seller between the date hereof and the Closing Date for Permitted Capital
Expenditures pursuant to Section 7.1(b)(viii) (the "Estimated Purchase Price").
In addition, at the Closing, Buyer will promptly pay Seller an amount equal to
the Closing Severance Expenses, as contemplated by Section 2.3(a)(x) hereof.
(b) At least 5 Business Days prior to the Closing Date, Seller
shall provide to Buyer its good faith estimate of the Final Non-Fuel Related
Adjustment Amount as of the last day of the month preceding the Closing Date,
which estimate shall be certified in writing by an appropriate officer of Seller
(the "Estimated Non-Fuel Related Adjustment Amount"). On or before the Closing
Date, Seller shall provide to Buyer a report which details the amounts expended
by Seller between the date hereof and the Closing Date for Permitted Capital
Expenditures pursuant to Section 7.1(b)(viii) (the "Permitted Capital
Expenditure Report").
ARTICLE V
Representations and Warranties of Seller
Seller represents and warrants to Buyer as follows:
<PAGE> 21
SECTION 5.1 Organization; Qualification. Seller is a corporation
duly incorporated, validly existing and in good standing under the laws of the
Commonwealth of Virginia and the District of Columbia and has all requisite
corporate power and authority to own, lease and operate the Auctioned Assets and
to carry on the business of the Auctioned Assets as currently conducted.
SECTION 5.2 Authority Relative to This Agreement. Seller has all
necessary corporate power and authority to execute and deliver this Agreement
and the Ancillary Agreements and to consummate the transactions contemplated
hereby and thereby. The execution and delivery by Seller of this Agreement and
the Ancillary Agreements and the consummation by Seller of the transactions
contemplated hereby and thereby have been duly and validly authorized by the
Board of Directors of Seller or by a committee thereof to whom such authority
has been delegated and no other corporate proceedings on the part of Seller are
necessary to authorize this Agreement or the Ancillary Agreements or the
consummation of the transactions contemplated hereby or thereby. This Agreement
and the Ancillary Agreements have been duly and validly executed and delivered
by Seller and, assuming that this Agreement and the Ancillary Agreements
constitute valid and binding agreements of Buyer and each other party thereto,
subject to the receipt of the Seller Required Regulatory Approvals and the Buyer
Required Regulatory Approvals, constitute valid and binding agreements of
Seller, enforceable against Seller in accordance with their respective terms.
SECTION 5.3 Consents and Approvals; No Violation.
(a) Subject to obtaining the Seller Required Regulatory Approvals
and the Buyer Required Regulatory Approvals, neither the execution and delivery
of this Agreement or the Ancillary Agreements by Seller nor the consummation of
the transactions contemplated hereby or thereby or the sale by Seller of the
Auctioned Assets pursuant to this Agreement will (i) conflict with or result in
any breach of any provision of the Certificate of Incorporation or By-laws of
Seller, (ii) except as set forth on Schedule 5.3(a), result in a default (or
give rise to any right of termination, cancellation or acceleration) under any
of the terms, conditions or provisions of any note, bond, mortgage, indenture,
license, agreement, lease or other instrument or obligation to which Seller is a
party or by which Seller, or any of the Auctioned Assets, may be bound, except
for such defaults (or rights of termination, cancellation or acceleration) as to
which requisite waivers or consents have been obtained or which would not,
individually or in the aggregate, create a Material Adverse Effect, or (iii)
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to Seller, or the Auctioned Assets, except for such violations which
would not, individually or in the aggregate, create a Material Adverse Effect.
<PAGE> 22
(b) Except for (i) the filings by Seller and Buyer required by the
HSR Act and the expiration or earlier termination of all waiting periods under
the HSR Act, and (ii) the Required Regulatory Approvals set forth on Schedule
5.3(b) attached hereto (collectively, the "Seller Required Regulatory
Approvals"), no declaration, filing or registration with, or notice to, or
authorization, consent or approval of any Governmental Authority is necessary
for the consummation by Seller of the transactions contemplated hereby or by the
Ancillary Agreements, other than such declarations, filings, registrations,
notices, authorizations, consents or approvals (A) which, if not obtained or
made, would not individually or in the aggregate, create a Material Adverse
Effect or (B) which relate to the Transferable Permits.
SECTION 5.4 Personal Property. Except for Permitted Exceptions,
Seller has good and marketable title, free and clear of all Encumbrances, to all
personal property included in the Auctioned Assets.
SECTION 5.5 Real Estate. Except for Permitted Exceptions, Seller
has good and marketable title, free and clear of all Encumbrances, to all Buyer
Real Estate. Schedule 5.5(a) contains legal descriptions of the Buyer Real
Estate. The most recent real property surveys in the possession of Seller with
respect to the Buyer Real Estate or any portion thereof are listed on Schedule
5.5(b).
SECTION 5.6 Leases. As of the date of this Agreement, Seller is
not a tenant under any real property leases which are material to the Auctioned
Assets.
SECTION 5.7 Certain Contracts and Arrangements. (a) Except for
(i) any contract or agreement listed on Schedule 2.2(a)(iv) (the "Material
Contracts") and (ii) Contracts which will expire prior to the Closing Date or
that are permitted to be entered into under this Agreement, Seller is not a
party to any contract which is material to the business or operations of the
Auctioned Assets.
(b) Each Contract (i) constitutes a valid and binding obligation
of Seller, and, to the Knowledge of Seller, of the other parties thereto, and
(ii) to the Knowledge of Seller, is in full force and effect.
(c) Except as set forth on Schedule 5.7 attached hereto, to the
Knowledge of the Seller, there is not, under any of the Contracts, any default
or event which, with notice or lapse of time or both, would constitute a
material default by Seller, except for such events of default and other events
as to which requisite waivers or consents have been obtained or which would not,
individually or in the aggregate, create a Material Adverse Effect.
SECTION 5.8 Legal Proceedings. Except as set forth on Schedule
5.8 or in the Filed Seller SEC Documents, as of the date of this Agreement,
there are no claims, actions, proceedings or investigations pending or, to the
<PAGE> 23
Knowledge of Seller, threatened against or relating to Seller with respect to
the business or operations of the Auctioned Assets, before any Governmental
Authority which would, individually or in the aggregate, be reasonably expected
to create a Material Adverse Effect. With respect to the business or operations
of the Auctioned Assets, Seller is not, as of the date of this Agreement,
subject to any outstanding judgment, rule, order, writ, injunction or decree of
any Governmental Authority which could create a Material Adverse Effect. The
representations and warranties of Seller set forth in this Section 5.8 shall not
apply to, and do not cover, any environmental matters which, with respect to any
representations and warranties of Seller, are exclusively governed by Section
5.10.
SECTION 5.9 Permits; Compliance with Law. Except as set forth on
Schedule 5.9 or in the Filed Seller SEC Documents, Seller is in current
compliance with all Permits necessary to conduct the business and operations of
the Auctioned Assets as currently conducted, and, to the Knowledge of Seller,
Seller is otherwise in current compliance with all laws, statutes, orders,
rules, regulations, ordinances or judgments of any Governmental Authority
applicable to the business and operations of the Auctioned Assets, except for
such failures to comply with such Permits, or such failures to be in compliance
with such laws, statutes, orders, rules, regulations, ordinances or judgments,
which would not, individually or in the aggregate, create a Material Adverse
Effect. The representations and warranties of Seller set forth in this Section
5.9 shall not apply to, and do not cover, any environmental matters which, with
respect to any representations and warranties of Seller, are exclusively
governed by Section 5.10.
SECTION 5.10 Environmental Matters.
(a) Except as set forth in Schedule 5.10(a) or disclosed in the
Filed Seller SEC Documents, Seller holds, and is in compliance with all
Environmental Permits required for Seller to conduct the business and operations
of the Auctioned Assets as currently conducted under applicable Environmental
Laws, and, to the Knowledge of Seller, Seller is otherwise in current compliance
with all applicable Environmental Laws on the date hereof with respect to the
business and operations of the Auctioned Assets, except for such failures to
hold or comply with such Environmental Permits, or such failures to be in
compliance with such applicable Environmental Laws on the date hereof, which
would not, individually or in the aggregate, create a Material Adverse Effect.
(b) Except as set forth in Schedule 5.10(b) or disclosed in the
Filed Seller SEC Documents, Seller has not received any written notice of a
violation of any Environmental Law, or been notified that it is a potentially
responsible party under the Federal Comprehensive Environmental Response,
Compensation, and Liability Act or any similar state law with respect to any
real property included in the
<PAGE> 24
Buyer Real Estate or any Off-Site location, except for such matters under such
Environmental Laws as would not, individually or in the aggregate, create a
Material Adverse Effect.
(c) To the Knowledge of Seller, no Release of Hazardous Substances
has occurred at, from, in, on, or under the real property included in the Buyer
Real Estate that has given, or could give rise to Environmental Liabilities
under Environmental Laws, except for such Environmental Liabilities which (i)
are disclosed in the environmental reports set forth on Schedule 5.10(c)
attached hereto, or (ii) would not, individually or in the aggregate, have a
Material Adverse Effect.
For purposes of the representations and warranties made in this Article V, the
Seller specifically disclaims any representations and warranties with respect to
standards of performance for new stationary sources promulgated under Section
111 of the Federal Clean Air Act, 42 U.S.C. Section 7411. The representations
and warranties made in this Section 5.10 are the exclusive representations and
warranties of the Seller relating to environmental matters as of the date
hereof.
SECTION 5.11 Labor Matters. Seller has previously made available
to Buyer copies of all collective bargaining agreements to which Seller is a
party or is subject and which relate to the business or operations of the
Auctioned Assets. With respect to the business and operations of the Auctioned
Assets, as of the date of this Agreement, (a) Seller is in compliance with all
applicable laws regarding employment and employment practices, terms and
conditions of employment and wages and hours, (b) Seller has not received
written notice of any unfair labor practice complaint against Seller pending
before the National Labor Relations Board, (c) there is no labor strike,
slowdown or stoppage actually pending or, to the Knowledge of Seller, threatened
against or affecting Seller, (d) Seller has not received notice that any
representation petition respecting the employees of Seller has been filed with
the National Labor Relations Board, (e) no arbitration proceeding arising out of
or under collective bargaining agreements is pending against Seller and (f)
Seller has not experienced any primary work stoppage since December 31, 1998,
except, in the case of each of the foregoing clauses, for such matters as would
not, individually or in the aggregate, create a Material Adverse Effect.
SECTION 5.12 ERISA; Benefit Plans. Schedule 5.12 sets forth a list of
all material deferred compensation, profit-sharing, retirement and pension plans
and all material bonus and other material employee benefit or fringe benefit
plans maintained, or with respect to which contributions have been made, by
Seller with respect to current or former employees employed in connection with
the power generation operations of the Generating Facilities (collectively,
"Benefit Plans").
<PAGE> 25
Seller and each trade or business (whether or not incorporated) which are or
have ever been under common control, or which are or have ever been treated as a
single employer, with Seller under Section 414(b), (c), (m) or (o) of the Code
(an "ERISA Affiliate") have fulfilled their respective obligations under the
minimum funding requirements of Section 302 of ERISA, and Section 412 of the
Code, with respect to each Benefit Plan which is an "employee pension benefit
plan" as defined in Section 3(2) of ERISA and each such plan is in compliance in
all respects with the presently applicable provisions of ERISA and the Code,
except for such failures to fulfill such obligations or comply with such
provisions which would not, individually or in the aggregate, create a Material
Adverse Effect. Neither Seller nor any ERISA Affiliate has incurred any
liability under Section 4062(b) of ERISA, or any withdrawal liability under
Section 4201 of ERISA, to the Pension Benefit Guaranty Corporation in connection
with any Benefit Plan which is subject to Title IV of ERISA which liability
remains outstanding, and there has not been any reportable event (as defined in
Section 4043 of ERISA) with respect to any such Benefit Plan (other than a
reportable event with respect to which the 30-day notice requirement has been
waived by the PBGC). Neither Seller nor any ERISA Affiliate or parent
corporation, within the meaning of Section 4069(b) or Section 4212(c) of ERISA,
has engaged in any transaction, within the meaning of Section 4069(b) or Section
4212(c) of ERISA. No Benefit Plan and no "employee pension benefit plan" (as
defined in Section 3(2) of ERISA) maintained by Seller or any ERISA Affiliate or
to which Seller or any ERISA Affiliate has contributed is a multiemployer plan.
SECTION 5.13 Taxes. With respect to the Auctioned Assets and trades
or businesses associated with the Auctioned Assets, (a) all Tax Returns required
to be filed have been filed and (b) all Taxes shown to be due on such Tax
Returns, and all Taxes otherwise owed, have been paid in full, except to the
extent that any failure to file or any failure to pay any Taxes would not,
individually or in the aggregate, create a Material Adverse Effect. No written
notice of deficiency or assessment has been received from any taxing authority
with respect to liabilities for Taxes of Seller in respect of the Auctioned
Assets which has not been fully paid or finally settled or which is not being
contested in good faith through appropriate proceedings, except for any such
notices regarding Taxes which would not, individually or in the aggregate,
create a Material Adverse Effect. There are no outstanding agreements or waivers
extending the applicable statutory periods of limitation for Taxes associated
with the Auctioned Assets for any period, except for any such agreements or
waivers which would not, individually or in the aggregate, create a Material
Adverse Effect.
SECTION 5.14 Undisclosed Liabilities. With respect to the Auctioned
Assets, there are no liabilities or obligations of any nature or kind (absolute,
accrued, contingent or otherwise) that would have been required to be set forth
on a balance sheet in respect of the Auctioned Assets or in the notes thereto
prepared in
<PAGE> 26
accordance with GAAP, as applied by Seller in connection with its December 31,
1999 balance sheet, except for any such liabilities or obligations which (a) are
disclosed in or contemplated or permitted by this Agreement or the Ancillary
Agreements (including the Assumed Obligations), (b) are disclosed in the
Information Memorandum, (c) are disclosed in the Filed Seller SEC Documents, (d)
have been incurred in the ordinary course of business, or (e) which would not,
individually or in the aggregate, create a Material Adverse Effect.
SECTION 5.15 Brokers. No broker, finder or other person is entitled
to any brokerage fees, commissions or finder's fees in connection with the
transaction contemplated hereby by reason of any action taken by Seller, except
Navigant Consulting, Inc. and Merrill Lynch & Co., which are acting for and at
the expense of Seller.
SECTION 5.16 Insurance. Seller carries policies of insurance covering
fire, workers' compensation, property all-risk, comprehensive bodily injury,
property damage liability, automobile liability, product liability, completed
operations, explosion, collapse, contractual liability, personal injury
liability and other forms of insurance relating to the Auctioned Assets, or
otherwise self-insures in accordance with all statutory and regulatory criteria
against any such liabilities, which insurance is in such amounts, has such
deductibles and retentions and is underwritten by such companies as would be
obtained by a reasonably prudent electric power business.
SECTION 5.17 Disclaimers. EXCEPT FOR THE REPRESENTATIONS AND
WARRANTIES EXPRESSLY SET FORTH IN THIS ARTICLE V, THE AUCTIONED ASSETS ARE BEING
SOLD AND TRANSFERRED "AS IS, WHERE IS", AND SELLER IS NOT MAKING ANY OTHER
REPRESENTATIONS OR WARRANTIES WRITTEN OR ORAL, STATUTORY, EXPRESS OR IMPLIED,
CONCERNING SUCH AUCTIONED ASSETS (INCLUDING ANY RELATING TO LIABILITIES,
OPERATIONS OF THE GENERATING FACILITIES, CONDITION, VALUE OR QUALITY OF THE
AUCTIONED ASSETS OR THE PROSPECTS (FINANCIAL OR OTHERWISE), RISKS OR OTHER
INCIDENTS OF THE AUCTIONED ASSETS) OR WITH RESPECT TO THIS AGREEMENT OR THE
ANCILLARY AGREEMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. SELLER
SPECIFICALLY DISCLAIMS ANY REPRESENTATION OR WARRANTY OF MERCHANTABILITY, USAGE,
SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE, WITH RESPECT TO THE AUCTIONED
ASSETS, OR ANY PART THEREOF, OR AS TO THE WORKMANSHIP THEREOF, OR THE ABSENCE OF
ANY DEFECTS THEREIN, WHETHER LATENT OR PATENT, OR COMPLIANCE WITH ENVIRONMENTAL
REQUIREMENTS, OR THE APPLICABILITY OF ANY GOVERNMENTAL REQUIREMENTS, INCLUDING
BUT NOT LIMITED
<PAGE> 27
TO ANY ENVIRONMENTAL LAWS, OR WHETHER SELLER POSSESSES SUFFICIENT REAL PROPERTY
OR PERSONAL PROPERTY TO OPERATE THE AUCTIONED ASSETS. EXCEPT AS OTHERWISE
EXPRESSLY PROVIDED IN SECTION 5.10 HEREOF, SELLER FURTHER SPECIFICALLY DISCLAIMS
ANY REPRESENTATION OR WARRANTY REGARDING THE ABSENCE OF HAZARDOUS SUBSTANCES OR
LIABILITY OR POTENTIAL LIABILITY ARISING UNDER ENVIRONMENTAL LAWS WITH RESPECT
TO THE AUCTIONED ASSETS, ALL OF WHICH ARE HEREBY EXPRESSLY WAIVED BY BUYER.
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, SELLER MAKES NO REPRESENTATION
OR WARRANTY WITH RESPECT TO THE INFORMATION SET FORTH IN, OR CONTEMPLATED BY,
THE INFORMATION MEMORANDUM.
ARTICLE VI
Representations and Warranties of Buyer
Buyer represents and warrants to Seller as follows:
SECTION 6.1 Organization. Buyer is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Delaware
and has all requisite corporate power and authority to own, lease and operate
its properties and to carry on its business as is now being conducted.
SECTION 6.2 Authority Relative to This Agreement. Buyer has all
necessary corporate power and authority to execute and deliver this Agreement
and the Ancillary Agreements to which it is party and to consummate the
transactions contemplated hereby and thereby. The execution and delivery by
Buyer of this Agreement and such Ancillary Agreements and the consummation by
Buyer of the transactions contemplated hereby and thereby have been duly and
validly authorized by the Board of Directors of Buyer and no other corporate
proceedings on the part of Buyer are necessary to authorize this Agreement or
such Ancillary Agreements or the consummation of the transactions contemplated
hereby or thereby. This Agreement and such Ancillary Agreements have been duly
and validly executed and delivered by Buyer and, assuming that this Agreement
and the Ancillary Agreements constitute valid and binding agreements of Seller
and each other party thereto, subject to the receipt of the Buyer Required
Regulatory Approvals and the Seller Required Regulatory Approvals, this
Agreement and the Ancillary Agreements constitute valid and binding agreements
of Buyer, enforceable against Buyer in accordance with their respective terms.
SECTION 6.3 Consents and Approvals; No Violation.
<PAGE> 28
(a) Subject to obtaining the Buyer Required Regulatory Approvals
and the Seller Required Regulatory Approvals, neither the execution and delivery
of this Agreement or the Ancillary Agreements to which it is party by Buyer nor
the consummation of the transactions contemplated hereby or thereby or the
purchase by Buyer of the Auctioned Assets pursuant to this Agreement will (i)
conflict with or result in any breach of any provision of the [Organizational
Documents] of Buyer, (ii) result in a default (or give rise to any right of
termination, cancellation or acceleration) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, agreement, lease or
other instrument or obligation to which Buyer or any of its subsidiaries is a
party or by which any of their respective assets may be bound or (iii) violate
any order, writ, injunction, decree, statute, rule or regulation applicable to
Buyer, or any of its assets, except, in the case of clause (ii) and (iii), for
such failures to obtain a necessary consent, defaults and violations which would
not, individually or in the aggregate, have a Buyer Material Adverse Effect.
(b) Except for (i) the filings by Buyer and Seller required by the
HSR Act and the expiration or earlier termination of all waiting periods under
the HSR Act, and (ii) the Required Regulatory Approvals set forth on Schedule
6.3(b) attached hereto (collectively, the "Buyer Required Regulatory
Approvals"), no declaration, filing or registration with, or notice to, or
authorization, consent or approval of any Governmental Authority is necessary
for the consummation by Buyer of the transactions contemplated hereby or by the
Ancillary Agreements, other than such declarations, filings, registrations,
notices, authorizations, consents or approvals which relate to the Transferable
Permits.
SECTION 6.4 Availability of Funds. Buyer has sufficient funds
available to it or has received binding written commitments (copies of which
have heretofore been delivered to Seller) from one or more nationally recognized
financial institutions to provide sufficient funds on the Closing Date to pay
the Estimated Purchase Price.
SECTION 6.5 Brokers. No broker, finder or other person is entitled
to any brokerage fees, commissions or finder's fees in connection with the
transaction contemplated hereby by reason of any action taken by Buyer, except
Credit Suisse First Boston Corporation, which is acting for and at the expense
of Buyer.
SECTION 6.6 No Knowledge of Seller's Breach. Buyer has no Knowledge
of any breach by Seller of any representation or warranty of Seller, or of any
other condition or circumstance that would excuse Buyer from its timely
performance of its obligations hereunder. Buyer shall notify promptly Seller,
with respect to Seller's representations and warranties or such other conditions
or
<PAGE> 29
circumstances, if any such information comes to Buyer's attention prior to the
Closing.
SECTION 6.7 Qualified Buyer. Buyer is qualified to obtain any
Permits and Environmental Permits necessary for Buyer to own and operate the
Auctioned Assets as of the Closing Date. Without limiting the foregoing, Buyer
is not aware of any reason or circumstance that would prevent Buyer from
procuring the Buyer Required Regulatory Approvals.
SECTION 6.8 WARN Act. Buyer does not intend to engage in a "Plant
Closing" or "Mass Lay-off" as such terms are defined in the WARN Act within
sixty days of the Closing Date.
SECTION 6.9 Financial Representations. Buyer has provided Seller
with the most recent balance sheet, income statement and statement of changes in
cash flows and independent auditors reports for each of the preceding three
fiscal years and most recent interim period. Such financial statements have been
prepared in accordance with GAAP and fairly reflect the financial position and
results of operations of Buyer as at and for the periods therein.
SECTION 6.10 Legal Proceedings. There are no claims, actions,
proceedings or investigations pending or, to the Knowledge of Buyer threatened
against or relating to Buyer before any Governmental Authority which would,
individually or in the aggregate, be reasonably expected to create a Buyer
Material Adverse Effect. Buyer is not subject to any outstanding judgment, rule,
order, writ, injunction or decree of any Governmental Authority which could
create a Buyer Material Adverse Effect.
ARTICLE VII
Covenants of the Parties
SECTION 7.1 Conduct of Business Relating to the Auctioned Assets.
(a) Except with the prior written consent of Buyer (such consent
not to be unreasonably withheld) or as required to effect the purchase and sale
of the Auctioned Assets and related transactions contemplated by this Agreement,
during the period from the date of this Agreement to the Closing Date, Seller
will operate the Auctioned Assets in the usual, regular and ordinary course and
in accordance with Good Utility Practices, and continue to pay accounts payable
which relate to the Auctioned Assets in a timely manner, consistent with past
practice.
<PAGE> 30
(b) Notwithstanding the foregoing, except as contemplated in this
Agreement or the Ancillary Agreements, prior to the Closing Date, without the
prior written consent of Buyer (such consent not to be unreasonably withheld),
Seller will not:
(i) except for Permitted Exceptions, grant any
Encumbrance on the Auctioned Assets securing any indebtedness for borrowed money
or guarantee or other liability for the obligations of any Person;
(ii) make any material change in the levels of fuel
inventory and supplies, materials and spare parts inventory customarily
maintained by Seller with respect to the Auctioned Assets, other than consistent
with past practice;
(iii) sell, lease (as lessor), transfer or otherwise
dispose of, any of the Auctioned Assets, other than assets that become obsolete
or assets used, consumed or replaced in the ordinary course of business
consistent with past practice;
(iv) except as contemplated by Sections 7.9 and 7.17 with
respect to the Unassigned PPAs, terminate, materially extend or otherwise
materially amend any of the Material Contracts (other than in accordance with
their respective terms) or waive any default by, or release, settle or
compromise any material claim against, any other party thereto;
(v) amend any of the Transferable Permits, other than (A)
Transferable Permits not material to the operations of the Auctioned Assets as
currently conducted, (B) as reasonably necessary to complete the transfer of
Transferable Permits as contemplated hereby, and (C) routine renewals or
non-material modifications or amendments;
(vi) enter into any Contract for the purchase, sale or
storage of fuel (other than in the ordinary course of business) with respect to
the Auctioned Assets (whether commodity or transportation) with a term in excess
of 12 months and not terminable on or before the Closing Date either (A)
automatically, or (B) by option of Seller (or, after the
<PAGE> 31
Closing, by Buyer) in its sole discretion, if the aggregate payments under such
commitment for fuel and all other outstanding commitments for fuel (not
previously approved by Buyer) would exceed $5,000,000;
(vii) except in the case of capital expenditures covered by
clause (viii) below, enter into any Contract with respect to the Auctioned
Assets for goods or services not addressed in clauses (i) through (vi) with a
term in excess of 12 months, if the aggregate future liability or receivable
outstanding on the date for measurement for the purpose of this covenant for all
such Contracts would be in excess of $1,000,000, not including any such Contract
terminable by notice of not more than 30 days without penalty or cost (other
than de minimis administrative costs); provided, however, that notwithstanding
any other provision of this Agreement to the contrary, Seller may enter into any
Contract reasonably necessary to effect the physical, legal or operational
separation of the sites on which the Auctioned Assets are located or to
otherwise implement the change of ownership contemplated hereby, or subdivision,
of such sites or implement the provisions of the Ancillary Agreements;
(viii) make, or commit to make, any capital expenditures
except (A) those capital expenditures described on Schedule 7.1(b)(viii), (B)
those capital expenditures which do not exceed in the aggregate $2,000,000 (in
addition to those other capital expenditures permitted under this subsection
(viii)), (C) those capital expenditures which are approved by Buyer, or (D)
those capital expenditures which are mandated by a law or regulation of a
Governmental Authority; provided, however, that, in the case of clause (D),
Seller will not make any such mandated capital expenditures (unless the failure
by Seller to make such capital expenditures would have an adverse impact upon
the Auctioned Assets) if (y) such mandated capital expenditures are not required
to be made by Seller prior to the Closing Date, and (z) the Buyer assumes
responsibility, at its sole cost, to make such mandated capital expenditures
after the Closing (any capital expenditures described above are the "Permitted
Capital Expenditures");
<PAGE> 32
(ix) enter into any Contract with Affiliates of Seller the
term of which are not indicative of arms-length negotiations;
(x) (A) amend any Benefit Plans, or (B) grant any
Employee an increase in compensation, except in the ordinary course of business
consistent with past practice;
(xi) make any tax election with respect to the Auctioned
Assets; or
(xii) enter into any Contract with respect to the Auctioned
Assets relating to any of the transactions set forth in the foregoing clauses
(i) through (xi).
(c) Without limiting the generality of Sections 7.1(a) and (b), to
the extent Section 7.1(a) or (b) prohibits Seller from entering into any
Contract for goods and services in connection with maintenance or capital
expenditures, Buyer agrees that Seller may request Buyer's consent to enter into
such Contract, such consent not to be unreasonably withheld, and to the extent
Buyer so consents, all liabilities and obligations under such Contract shall
constitute Assumed Obligations and Buyer shall otherwise reimburse Seller for
all its expenditures thereunder.
(d) Notwithstanding anything in this Section 7.1 to the contrary,
Seller may take any action, incur any expense or enter into any obligation with
respect to the Auctioned Assets to the extent that (i) all obligations and
liabilities arising with respect thereto do not constitute Assumed Obligations,
(ii) such actions are at Seller's expense and are deemed by Seller to be
necessary, or (iii) Seller otherwise provides that such obligations and
liabilities shall not be assumed or retained by Buyer.
SECTION 7.2 Access to Information.
(a) Between the date of this Agreement and the Closing Date,
Seller will, subject to the Confidentiality Agreement, during ordinary business
hours and upon reasonable notice (i) give Buyer and its representatives
reasonable access to all books, records, personnel, plants, offices and other
facilities and properties constituting the Auctioned Assets, including for the
purpose of observing the operation by Seller of the Auctioned Assets, (ii)
permit Buyer to make such reasonable inspections thereof as Buyer may reasonably
request, (iii) furnish Buyer with such financial and operating data and other
information with respect to the Auctioned Assets as Buyer may from time to time
reasonably request, (iv) furnish
<PAGE> 33
Buyer upon request a copy of each material report, schedule or other document
with respect to the Auctioned Assets filed by Seller with, or received by Seller
from, any PSC or FERC; provided, however, that (A) any such activities shall be
conducted in such a manner as not to interfere unreasonably with the operation
of the Auctioned Assets, (B) Seller shall not be required to take any action
which would constitute a waiver of the attorney-client privilege and (C) Seller
need not supply Buyer with (1) any information or access which Seller is under a
legal obligation not to supply or (2) any information which Seller has
previously supplied to Buyer. Notwithstanding anything in this Section 7.2 to
the contrary, (i) Seller will not be required to provide such information or
access to any employee records other than Transferred Employee Records, (ii)
Buyer shall not have the right to perform or conduct any environmental sampling
or testing at, in, on, around or underneath the Auctioned Assets and (iii)
Seller shall not be required to provide such access or information with respect
to any Retained Asset or Retained Liabilities.
(b) From and after the Closing Date, for a period of no
less than 7 years, Buyer shall retain all Operating Records (whether in
electronic form or otherwise) relating to the Auctioned Assets on or prior to
the Closing Date. Buyer also agrees that, from and after the Closing Date,
Seller shall have the right, upon reasonable request to Buyer, to have access
to, or receive from Buyer copies of, any Operating Records or other information
in Buyer's possession relating to the Auctioned Assets on or prior to the
Closing Date and required by Seller in order to comply with applicable law.
Seller shall reimburse Buyer for its reasonable costs and expenses incurred in
connection with the foregoing sentence. If the Buyer shall desire to dispose of
any Operating Records or other information contemplated above, Buyer shall,
prior to such disposition, give Seller a reasonable opportunity to segregate and
remove such records and information as it may select.
SECTION 7.3 Consents and Approvals; Transferable Permits.
(a) Seller and Buyer shall cooperate with each other and
(i) prepare and file (or otherwise effect) as soon as practicable all
applications, notices, petitions and filings with respect to and (ii) use their
reasonable best efforts to obtain (A) the Seller Required Regulatory Approvals
and the Buyer Required Regulatory Approvals and (B) any other consents,
approvals or authorizations of any other Governmental Authorities or third
parties that are necessary to consummate the transactions contemplated by this
Agreement or the Ancillary Agreements other than such consents, individually or
in the aggregate, create a Material Adverse Effect. Without limiting the
generality of the foregoing, (1) each Party agrees to, upon the other party's
request, support such other Party's applications for regulatory approvals of the
purchase and sale of the Auctioned Assets contemplated by this Agreement, and
(2) Buyer and Seller agree to defend any lawsuits or other legal proceedings,
<PAGE> 34
whether judicial or administrative, challenging this Agreement or the Ancillary
Agreements, or the consummation of the transactions contemplated hereby or
thereby, including seeking to have any stay or temporary restraining order
entered by any Governmental Authority vacated or reversed.
(b) Upon execution of this Agreement, Seller shall
commence the process of transferring to Buyer the Transferable Permits,
including completing and filing applications and related documents with the
appropriate Governmental Authorities. Seller hereby reserves the right to
modify, alter or amend any Transferable Permit or to refuse to correct
violations or deficiencies in respect of any Transferable Permit as long as such
modification, alteration, amendment or refusal would not, individually or in the
aggregate, create a Material Adverse Effect.
(c) Seller shall use its reasonable best efforts to
cooperate with Buyer in the transfer of Transferable Permits to Buyer by
Closing. If in the sole discretion of Seller, the transfer of any Transferable
Permit cannot be completed by Closing, Buyer is hereby authorized, but not
required, to act as Seller's representative and agent in respect of such
Transferable Permit and to do all things necessary for effecting transfer of
such Transferable Permit as soon after the Closing as is practicable, with
Seller remaining the Transferable Permit "holder of record" in such case until
such transfer is completed. In the case of each such Transferable Permit, Seller
shall, to the maximum extent permitted by law and such Transferable Permit,
enter into such reasonable arrangements with Buyer as are necessary to provide
Buyer with the benefits and obligations of such Transferable Permit. If in the
sole discretion of Seller, Buyer is able to complete the transfer of any
Transferable Permit after Closing without the occurrence of any event that, if
such event had occurred between the execution of this Agreement and the Closing,
would have created, individually or in the aggregate, a Material Adverse Effect,
Seller may substitute Buyer in its place and stead as the Party responsible for
completing the transfer of such Transferable Permit.
SECTION 7.4 Further Assurances. Subject to the terms and conditions
of this Agreement, each of the Parties will use its reasonable best efforts to
take, or cause to be taken, as soon as possible, all action, and to do, or cause
to be done, as soon as possible, all things necessary, proper or advisable under
applicable laws and regulations to consummate the sale of the Auctioned Assets
pursuant to this Agreement as soon as possible, including using its reasonable
best efforts to ensure satisfaction of the conditions precedent to each Party's
obligations hereunder. Prior to Buyer's submission of any application with a
Governmental Authority for a regulatory approval, Buyer shall submit such
application to Seller for review and comment and Buyer shall incorporate into
such application any revisions reasonably requested by Seller. Neither of the
Parties will, without prior written consent of the other Party, take or fail to
take, or permit their respective Affiliates to take or fail to
<PAGE> 35
take, any action, which would reasonably be expected to prevent or materially
impede, interfere with or delay the consummation, as soon as possible, of the
transactions contemplated by this Agreement or the Ancillary Agreements.
SECTION 7.5 Public Statements. The Parties shall consult with each
other prior to issuing any public announcement, statement or other disclosure
with respect to this Agreement, the Ancillary Agreements or the transactions
contemplated hereby or thereby, and shall not issue any such public
announcement, statement or other disclosure prior to such consultation, except
as may be required by law.
SECTION 7.6 Tax Matters.
(a) All transfer and sales taxes (including (i) sales tax
on the sale or purchase of the Auctioned Assets imposed by Governmental
Authorities, (ii) transfer tax on the conveyance of interest in real property
imposed by Governmental Authorities, and (iii) any petroleum business taxes and
similar excise taxes on sales of petroleum based products imposed by
Governmental Authorities) incurred in connection with this Agreement and the
transactions contemplated hereby shall be borne by Buyer. Buyer shall prepare
and file in a timely manner any and all Tax Returns or other documentation
relating to such taxes; provided, however, that, to the extent required by
applicable law, Seller will join in the execution of any such Tax Returns or
other documentation relating to any such taxes. Buyer shall provide to Seller
copies of each Tax Return described in the proviso in the preceding sentence at
least 30 days prior to the date such Tax Return is required to be filed.
(b) At Seller's election, but on no less than 10 Business
Days' notice to Buyer, the transfer of some or all of the Auctioned Assets and
the receipt of the amount payable by Buyer to Seller pursuant to Section 3.1
hereof shall be made through a qualified intermediary in a manner satisfying the
requirements of Treasury Regulation Section 1.1031(k)-1(g); provided, however,
that Seller shall pay and be responsible for any incremental costs associated
with such use of a qualified intermediary.
SECTION 7.7 Bulk Sales or Transfer Laws. Buyer acknowledges that
Seller will not comply with the provisions of any bulk sales or transfer laws of
any jurisdiction in connection with the transactions contemplated by this
Agreement. Buyer hereby waives compliance by Seller with the provisions of the
bulk sales or transfer laws of all applicable jurisdictions.
SECTION 7.8 Witness Services. At all times from and after the
Closing Date, each Party shall use reasonable best efforts to make available to
the other
<PAGE> 36
Party, upon reasonable written request, its and its subsidiaries' then current
or former officers, directors, employees (including former employees of Seller)
and agents as witnesses to the extent that (i) such persons may reasonably be
required by such requesting Party in connection with any claim, action,
proceeding or investigation in which such requesting Party may be involved and
(ii) there is no conflict between Buyer and Seller in such claim, action,
proceeding or investigation. Such other Party shall be entitled to receive from
such requesting Party, upon the presentation of invoices for such witness
services, payments for such amounts, relating to supplies, disbursements and
other out-of-pocket expenses and direct and indirect costs of employees who are
witnesses, as may be reasonably incurred in providing such witness services.
SECTION 7.9 Control of Litigation. The Buyer and Seller agree and
acknowledge that Seller shall be entitled exclusively to control, defend and
settle any litigation, administrative or regulatory proceeding, and any
investigation or remediation activity arising out of or related to any
Unassigned PPAs, Retained Assets or Retained Liabilities, and Buyer agrees to
cooperate fully in connection therewith. Without Buyer's prior written consent,
Seller shall not settle any litigation, administrative or regulatory proceeding
relating to an Unassigned PPA that would result in a material adverse effect on
the rights of Buyer hereunder. Buyer and Seller agree and acknowledge that Buyer
shall be entitled to participate at its expense and assume control of any
litigation, administrative or regulatory proceeding, exclusively arising out of
or related to any Assumed Obligations, and Seller agrees to cooperate fully in
connection therewith. Anything contained in this Agreement to the contrary
notwithstanding, no Party shall be entitled to assume the defense of any
litigation, administrative or regulatory proceeding or investigation if such
litigation, administrative or regulatory proceeding or investigation seeks an
order, injunction or other equitable relief for other than monetary damages
against the other Party which, if successful, would materially adversely affect
the business of such other Party.
SECTION 7.10 Confidentiality. Buyer hereby agrees to comply with its
obligations to keep confidential certain information in accordance with the
terms set forth in the Confidentiality Agreement.
SECTION 7.11 Risk of Loss.
(a) Except as otherwise provided for in this Section
7.11, from the date hereof through the Closing Date, all risk of loss or damage
to the assets and properties included in the Auctioned Assets shall be borne by
Seller (other than loss or damage caused by the acts or negligence of Buyer or
any of its employees, officers, agents or representatives, which loss or damage
shall be the responsibility of Buyer).
<PAGE> 37
(b) If, before the Closing Date, all or any portion of
the Auctioned Assets are (1) taken by eminent domain or are the subject of a
pending or (to the Knowledge of the Seller) contemplated taking which has not
been consummated, or (2) damaged or destroyed by fire or other casualty, Seller
shall notify Buyer promptly in writing of such fact. If the fair market value of
the Auctioned Assets that are the subject of, or are adversely affected by, such
taking or loss is one percent (1%) or less of the fair market value of the
Auctioned Assets (as estimated in good faith by Seller), Buyer and Seller agree
that such taking or loss shall not have any effect on (or otherwise impede in
any manner) the transactions contemplated hereby, and Buyer shall be entitled to
an assignment of all of Seller's right, title and interest in and to any related
award or insurance proceeds. If (1) the fair market value of the Auctioned
Assets that are the subject of, are adversely affected by such taking or loss is
in excess of one percent (1%) of the fair market value of the Auctioned Assets
(as estimated in good faith by Seller in accordance with the preceding sentence)
and (2) Seller has not notified Buyer of its intention to cure such taking or
loss within 30 days after its occurrence, Buyer and Seller shall negotiate in
good faith a fair and equitable adjustment to the Purchase Price and, upon such
settlement, consummate the transactions contemplated by this Agreement pursuant
to the terms of this Agreement. If no such settlement is reached within 60 days
after Seller has notified Buyer of such taking or casualty, Buyer or Seller may
terminate this Agreement pursuant to Section 11.1.
SECTION 7.12 Tax Exempt Financing.
(a) Buyer understands and agrees that:
(i) those certain facilities of the Seller
listed on Schedule 7.12 attached hereto (the "Exempt Facilities") have been
financed, and refinanced, in whole or in part, with the proceeds of the issuance
and sale by various Governmental Authorities of industrial development revenue
bonds or private activity bonds as set forth on Schedule 7.12 attached hereto
(collectively, the "Revenue Bonds") the interest on which, with certain
exceptions, is excluded from gross income for purposes of federal income
taxation; and Seller is the economic obligor in respect of such bonds;
(ii) The basis for such exclusion is the use of
the Exempt Facilities for the purpose of (A) the abatement or control of
atmospheric or water pollution or contamination and/or (B) the collection,
storage, treatment, utilization, processing or final disposal of solid waste
and/or (C) the collection, storage, treatment, utilization, processing or
<PAGE> 38
final disposal of sewage, such qualifying purposes being discussed in more
detail in (b) below;
(iii) The use of the Exempt Facilities for a
purpose other than a qualifying purpose indicated in subsection (ii) above could
impair (A) such exclusion from gross income of the interest on such bonds,
possibly with retroactive effect, unless appropriate remedial action were taken
(which could include prompt defeasance or redemption of such bonds) and/or (B)
the deductibility of payment by Seller of interest based on the restrictions in
Section 150 (b) of the Code; and
(iv) Any breach by Buyer of its obligations
under this Section 7.12 could result in the incurrence by Seller of additional
costs and expenses, including without limitation, increased interest costs, loss
of the interest deduction for tax purposes and transaction costs relating to any
refinancing, redemption and/or defeasance of all or part of the Revenue Bonds,
and Buyer will be liable to Seller for such additional costs and expenses.
(b) i) Buyer agrees that it shall not use,
or permit the use of, the Exempt Facilities for any purpose other than the
continuing use of such Exempt Facilities for
(A) abating or controlling atmospheric
or water pollution or contamination by removing, altering, disposing of or
storing pollutants, contaminants, waste or heat, all as contemplated in U.S.
Treasury Regulations Section 1.103-8(g);
(B) the collection, storage, treatment,
utilization, processing or final disposal of solid waste, all as contemplated in
U.S. Treasury Regulations Section 1.103-8(f); or
(C) the collection, storage, treatment,
utilization, processing or final disposal of sewage, all as contemplated in U.S.
Treasury Regulations Section 1.103-8(f)
<PAGE> 39
unless Buyer has obtained at its own expense an opinion addressed to Seller of
nationally recognized bond counsel reasonably acceptable to Seller ("Bond
Counsel") that such use will not impair (x) the exclusion from gross income of
the interest on any issue of Revenue Bonds for Federal income tax purposes or
(y) the deductibility of Seller's payments of interest based on the restrictions
in Section 150(b) of the Code.
(ii) Buyer reasonably expects, as of the date of
this Agreement, that the Exempt Facilities will continue to be used for the
qualifying purposes set forth in subsection (i) above, and for no other purpose,
for the remainder of their useful lives.
(c) It is expressly understood and agreed that the
provisions of clause (b) above shall not prohibit Buyer from (i) suspending the
operation of the Exempt Facilities on a temporary basis, and/or (ii) selling
exclusively for cash Exempt Facilities consisting of personal property, in whole
or in part, including any sale for scrap, provided that the operation of the
Generating Plant served by such Exempt Facilities shall not theretofore have
been, and is not then being, terminated on a permanent basis, and provided
further that the proceeds of such sale of the Exempt Facilities shall within six
months from the date of sale be expended to acquire replacement property to be
used for the same qualifying purpose as the Exempt Facilities so sold, and/or
(iii) any other suspension or termination of operation or sale, exchange,
transfer or other disposition of Exempt Facilities, provided that Buyer has
obtained at its own expense an opinion addressed to Seller of Bond Counsel that
the failure to take this action will not impair (x) the exclusion from gross
income of the interest on any issue of Revenue Bonds for Federal income tax
purposes or (y) the deductibility of Seller's payments of interest based on the
restrictions in Section 150(b) of the Code.
(d) Buyer agrees that it shall not issue, or have issued
on its behalf, any tax-exempt bonds to finance or refinance its acquisition of
the Exempt Facilities; provided that it is expressly understood and agreed that
this clause (d) shall not prohibit the use of tax-exempt bonds to finance or
refinance any improvement to the Exempt Facilities made after the date of
acquisition or to any assets other than the Exempt Facilities.
(e) Buyer agrees that it shall give Seller at least 180
days' prior written notice of any suspension or termination of the operation of
the Exempt Facilities, or any part thereof, and of any sale, exchange, transfer
or other disposition of the Exempt Facilities, or any part thereof, including,
but not limited to, a sale for scrap, such written notice to be provided whether
or not an opinion of Bond Counsel is required to be obtained in accordance with
clause (c).
<PAGE> 40
(f) If Seller shall desire to refund any Revenue Bonds,
Buyer shall cooperate with Seller and with Bond Counsel with respect to such
refunding bonds and shall provide upon request any representations, agreements
or covenants that are reasonably requested concerning its compliance to such
date and/or in the future with the representations, agreements and covenants
made herein.
(g) If Buyer shall sell, exchange, transfer or otherwise
dispose of the Exempt Facilities to a third party, Buyer shall cause to be
included in the documentation relating to such transaction covenants and
agreements on the part of such third party for the benefit of the Seller, and as
requested by the Seller, the trustee for the holders of any Revenue Bonds
substantially identical to those on the part of Buyer contained in this Section
7.12.
(h) The covenants and agreements on the part of Buyer
contained in this Section 7.12 shall continue in effect so long as any of the
Revenue Bonds, including any refunding bonds issued hereafter to refund any
Revenue Bonds, shall remain outstanding. Seller shall notify Buyer promptly when
there shall be no Revenue Bonds outstanding and, at the request of the Seller,
the Buyer shall execute further documentation to provide that such covenants and
agreements are also for the benefit of the trustee for the holders of any
Revenue Bonds.
(i) Notwithstanding any provision in this Agreement to
the contrary, from and after the Closing Date, Seller agrees that it will remain
primarily liable for, and promptly pay when due, all obligations to pay
principal and interest under the Loan Agreements.
SECTION 7.13 Compliance with Governmental Agreements. From and after
the Closing Date, Buyer agrees that it will abide by, and comply with, all
existing permit conditions, provisions in the Certificates of Public Convenience
and Necessity issued to the Seller by any PSC, and any other agreements or
arrangements between the Seller and the District of Columbia or the State of
Maryland (or any political subdivision thereof), including provisions or
agreements relating to environmental compliance and mitigation.
SECTION 7.14 PJM; MAAC. From and after the Closing Date, Buyer shall
maintain membership in good standing in PJM and MAAC, and shall submit to the
governance of the independent system operator established and administered under
the PJM Agreement.
SECTION 7.15 Trade Names. Seller shall not object to the use by Buyer
of any trade names, trademarks, service marks or logos (and any rights to and in
the same, including any right to use the same) which are not Retained Assets in
<PAGE> 41
connection with its ownership and operation of the Generating Facilities. In
addition, Buyer hereby acknowledges the right of Seller to use such trade names,
trademarks, service marks or logos in connection with Seller's ownership and
operation of the Retained Assets.
SECTION 7.16 Enforcement of Retained Rights. Notwithstanding any
provision of the Agreement to the contrary, Seller shall be entitled to enforce
all rights and remedies in respect of the Retained Rights in accordance with the
terms and conditions of each PPA, including termination of interconnection and
related services to the applicable Power Seller.
SECTION 7.17 Conduct of Business Relating to PPAs. Prior to Closing,
except as expressly contemplated by this Agreement, required by the terms of any
PPA or consented to by Buyer (which shall not be unreasonably withheld), Seller
shall not amend, modify or extend any PPA, or waive performance of the
obligations of any party thereunder, which, would have a material adverse effect
on the rights of Buyer hereunder.
ARTICLE VIII
Conditions
SECTION 8.1 Conditions Precedent to Each Party's Obligation To
Effect the Purchase and Sale. The respective obligations of each Party to effect
the purchase and sale of the Auctioned Assets shall be subject to the
satisfaction or waiver by such Party on or prior to the Closing Date of the
following conditions:
(a) all Seller Required Regulatory Approvals and Buyer
Required Regulatory Approvals shall have been obtained by Seller and Buyer, as
the case may be, and all conditions to effectiveness prescribed therein or
otherwise by law, regulation or order shall have been satisfied by such Parties;
provided, that the Seller will not be required to close if any Seller Required
Regulatory Approval contains terms and conditions that create a Regulatory
Material Adverse Effect;
(b) no preliminary or permanent injunction or other order
or decree by any Federal or state court of competent jurisdiction and no statute
or regulation enacted by any Governmental Authority prohibiting the consummation
of the purchase and sale of the Auctioned Assets (collectively, "Restraints")
shall be in effect; and
(c) the execution and delivery of each Ancillary
Agreement, by each Party thereto.
<PAGE> 42
SECTION 8.2 Conditions Precedent to Obligation of Buyer To Effect
the Purchase and Sale. The obligation of Buyer to effect the purchase and sale
of the Auctioned Assets contemplated by this Agreement shall be subject to the
satisfaction or waiver by Buyer on or prior to the Closing Date of the following
additional conditions:
(a) Seller shall have performed its covenants and
agreements contained in this Agreement which are required to be performed on or
prior to the Closing Date, except where the failure to perform such covenants
and agreements would not, individually or in the aggregate, create a Material
Adverse Effect;
(b) the representations and warranties of Seller which
are set forth in this Agreement shall be true and correct as of the date of this
Agreement and as of the Closing Date, as if made at and as of such time (except
to the extent expressly made as of an earlier date, in which case as of such
date), except where the failure of such representations and warranties to be so
true and correct (without giving effect to any limitation as to "materiality" or
"Material Adverse Effect" set forth therein) would not, individually or in the
aggregate, create a Material Adverse Effect;
(c) Buyer shall have received a certificate from an
authorized officer of Seller, dated the Closing Date, to the effect that, to the
best of such officer's Knowledge, the conditions set forth in Section 8.2(a) and
(b) have been satisfied;
(d) all material Permits and Environmental Permits
required for Buyer to conduct the business and operations of the Auctioned
Assets as currently conducted shall have been transferred or will be
transferable to Buyer, or shall have been obtained or will be obtained by Buyer,
except where the failure to obtain such material Permits or Environmental
Permits will not have, individually or in the aggregate, a Material Adverse
Effect;
(e) Buyer shall have received (i) the deeds of conveyance
substantially in the form of Exhibit J, and (ii) an opinion from Dickstein
Shapiro Morin & Oshinsky LLP or other counsel reasonably acceptable to Buyer,
dated the Closing Date, and reasonably satisfactory in form and substance to
Buyer covering the matters set forth in Exhibit K;
(f) Buyer shall have received a Foreign Investment in
Real Property Tax Act Certification and Affidavit, executed by Seller; and
(g) Seller shall have delivered to Buyer all such other
instruments as shall, in the reasonable opinion of the Buyer and its counsel, be
(i) necessary to transfer to
<PAGE> 43
Buyer the Auctioned Assets in accordance with this Agreement or (ii) required to
consummate the transactions contemplated by this Agreement.
SECTION 8.3 Conditions Precedent to Obligation of Seller To Effect
the Purchase and Sale. The obligation of Seller to effect the purchase and the
sale of the Auctioned Assets contemplated by this Agreement shall be subject to
the satisfaction or waiver by Seller on or prior to the Closing Date of the
following additional conditions:
(a) Buyer shall have performed its covenants and
agreements contained in this Agreement which are required to be performed on or
prior to the Closing Date, except where the failure to perform such covenants
and agreements would not, individually or in the aggregate, create a Buyer
Material Adverse Effect;
(b) the representations and warranties of Buyer which are
set forth in this Agreement shall be true and correct as of the date of this
Agreement and as of the Closing Date, as if made at and as of such time (except
to the extent expressly made as of an earlier date, in which case as of such
date), except where the failure of such representations and warranties to be so
true and correct (without giving effect to any limitation as to "materiality" or
"Buyer Material Adverse Effect" set forth therein) would not, individually or in
the aggregate, create a Buyer Material Adverse Effect;
(c) Seller shall have received a certificate from an
authorized officer of Buyer, dated the Closing Date, to the effect that, to the
best of such officer's Knowledge, the conditions set forth in Section 8.3(a) and
(b) have been satisfied;
(d) Seller shall have received an opinion from Troutman
Sanders LLP or other counsel reasonably acceptable to Seller, dated the Closing
Date, and reasonably satisfactory in form and substance to Seller covering the
matters set forth in Exhibit L;
(e) Buyer shall have provided evidence in form and
substance reasonably satisfactory to Seller of compliance by Buyer with its
obligations under Article IX (including, without limitation, a certificate from
an authorized officer of Buyer, dated the Closing Date, which identifies the
Non-Union Employees who did not receive from the Buyer a Qualified Offer
pursuant to Section 9.1(d));
(f) If a Guarantee Agreement has been entered into:
(i) the Guarantee Agreement shall be in full
force and effect;
<PAGE> 44
(ii) the Guarantor shall have performed in all
material respects its covenants and agreements contained in the Guarantee
Agreement which are required to be performed on or prior to the Closing Date;
(iii) the representations and warranties of the
Guarantor which are set forth in the Guarantee Agreement shall be true and
correct as of the date of the Guarantee Agreement and as of the Closing Date, as
if made at and as of such time (except to the extent expressly made as of an
earlier date, in which case as of such date), except where the failure of such
representations and warranties to be so true and correct (without giving effect
to any limitation as to "materiality" or "Guarantor Material Adverse Effect" set
forth therein) would not, individually or in the aggregate, create a Guarantor
Material Adverse Effect (as defined therein);
(iv) Seller shall have received a certificate
from an authorized officer of the Guarantor, dated the Closing Date, to the
effect that, to the best of such officer's Knowledge, the conditions set forth
in Sections 8.3(f)(ii) and (iii) have been satisfied;
(v) Seller shall have received an opinion from
Troutman Sanders LLP or other counsel reasonably acceptable to Seller, dated the
Closing Date, and reasonably satisfactory in form and substance to Seller
covering the matters set forth in Exhibit M.
(g) Buyer shall have delivered to Seller all such other
instruments as shall, in the reasonable opinion of the Seller and its counsel,
be (i) necessary for the Buyer to assume the Assumed Obligations in accordance
with this Agreement or (ii) required to consummate the transactions contemplated
by the Agreement.
(h) Panda shall have consented to a Novation of the Panda
PPA satisfactory in form and substance to Seller, or Seller shall have received
an order from the MDPSC determining that the transactions contemplated by
Section II of Schedule 2.4 hereto with respect to the Panda PPA do not violate
the Panda PPA, which order shall have become final and non-appealable, and which
is satisfactory in form and substance to Seller.
<PAGE> 45
ARTICLE IX
Employee Matters
SECTION 9.1 Employee Matters.
(a) Buyer shall offer employment, effective as of the
Closing Date, to all employees of Seller employed at the Generating Facilities
and the Support Operations as of the Closing Date who are covered by the IBEW
Collective Bargaining Agreement, including those employees absent from active
service due to illness or leave of absence, whether paid or unpaid, other than
those employees on long term disability as of the Closing Date who have received
written notice from Seller approving requests for long term disability as of the
Closing Date (the "Union Employees"), pursuant to and in accordance with the
IBEW Collective Bargaining Agreement and applicable law. Each Union Employee who
becomes employed by Buyer pursuant to this Section 9.1(a) is referred to herein
as a "Transferred Union Employee".
(b) Any Union Employee who refuses an offer of employment
from Buyer made in accordance with the terms of this Section 9.1 shall be
treated by Seller as a terminated employee and shall not be entitled to any
severance or other benefits from Buyer in connection therewith.
(c) Buyer shall provide benefits to Transferred Union
Employees substantially equivalent to those provided under the IBEW Collective
Bargaining Agreement. In doing so, Buyer may use different providers, establish
its own benefit plans or use its existing plans. There shall be no duplication
of benefits. Buyer shall recognize service with Seller for purposes of
eligibility and vesting and benefit calculations in any benefit plan, program,
or fringe benefit arrangement. For purposes of health care coverage, Buyer shall
waive all limitations regarding pre-existing condition exclusions, actively at
work exclusions and waiting periods for Transferred Union Employees. During the
calendar year in which Closing occurs, all health care expenses incurred by
Transferred Union Employees that were qualified to be taken into account for
purposes of satisfying any deductible or out-of-pocket limit under Seller's
health care plans shall be taken into account for purposes of satisfying any
deductible or out-of-pocket limit under Buyer's health care plans for such
calendar year. Buyer shall give all Transferred Union Employees full credit for
all vacation, sick leave or comp time benefits accrued and not used as of the
Closing. The Buyer shall provide substantially equivalent retiree medical
benefits to the Transferred Union Employees only with no duplication of benefits
and such benefits shall be subject to any limitations in existing plan documents
and the IBEW Collective Bargaining Agreement and related documents.
<PAGE> 46
(d) Buyer may, but shall not be required to, offer
employment, effective as of the Closing Date, to employees of Seller (other than
Union Employees) who are (i) employed at the Generating Facilities or (ii)
corporate support personnel engaged in the Support Operations (collectively, the
"Non-Union Employees" and, together with Union Employees, "Employees"). Within
sixty (60) days after the date hereof, Buyer shall notify Seller as to the
identity of those Non-Union Employees to whom it intends to offer employment,
provided that, during such period, Seller shall, upon reasonable notice and to
the extent not disruptive to the operation of the Auctioned Assets, provide
Buyer with reasonable access to Non-Union Employees and, to the extent permitted
by applicable law, their respective Transferred Employee Records. In the event
that Buyer does not make a Qualified Offer to any Non-Union Employees, the Buyer
shall be solely responsible for the payment to such Non-Union Employees of all
severance costs payable under the Seller's 1998 Reorganization Severance Plan
(treating the consummation of the sale of the Auctioned Assets hereunder as an
event entitling such Non-Union Employee to severance benefits thereunder). The
Buyer shall have no other obligations with respect to any Non-Union Employees to
which it does not make a Qualified Offer. Each Non-Union Employee who becomes
employed by Buyer pursuant to this Section 9.1(d) shall be referred to herein as
a "Transferred Non-Union Employee" and, together with Transferred Union
Employees, the "Transferred Employees." Any offer of employment to a Non-Union
Employee that satisfies all of the following requirements is referred to herein
as a "Qualified Offer":
(1) Buyer shall pay and provide such Transferred
Non-Union Employee annual compensation, bonus and other incentive opportunities
(the "Total Cash Compensation") at a rate substantially equivalent to such
Transferred Non-Union Employee's Total Cash Compensation in the most recent
calendar year ending prior to the Closing (which shall include cash compensation
in respect of such calendar year paid or payable after such calendar year).
(2) The location of such Transferred Non-Union
Employee's workplace must be within a fifty (50) mile radius of the District of
Columbia metropolitan area; provided, however, that if any Non-Union Employee's
commute to the Buyer's workplace following the Closing will be increased by more
than fifty (50) miles (as compared to the number of miles traveled by such
Non-Union Employee to the Seller's work place immediately prior to the Closing),
the Buyer shall be required to pay such Non-Union Employee a $3,500 relocation
allowance.
(e) Buyer shall provide benefits to Transferred Non-Union
Employees substantially equivalent to those provided by Seller as of the Closing
Date. In doing so, Buyer may use different providers, establish its own benefit
plans or use its existing plans. There shall be no duplication of benefits.
Buyer shall recognize service with Seller for purposes of eligibility and
vesting and benefit calculations in
<PAGE> 47
any benefit plan, program, or fringe benefit arrangement. For purposes of health
care coverage, Buyer shall waive all limitations regarding pre-existing
condition exclusions, actively at work exclusions and waiting periods for
Transferred Non-Union Employees. During the calendar year in which Closing
occurs, all health care expenses incurred by Transferred Non-Union Employees
that were qualified to be taken into account for purposes of satisfying any
deductible or out-of-pocket limit under Seller's health care plans shall be
taken into account for purposes of satisfying any deductible or out-of-pocket
limit under Buyer's health care plans for such calendar year. Buyer shall give
all Transferred Non-Union Employees full credit for all vacation, sick leave or
comp time benefits accrued and not used as of the Closing. The Buyer shall
provide substantially equivalent retiree medical benefits to the Transferred
Non-Union Employees only with no duplication of benefits and such benefits shall
be subject to any limitations in existing plan documents.
SECTION 9.2 Pension Plans. With respect to each Transferred
Employee's accrued benefit (based on service and compensation as of the Closing
Date) (the "Closing Date Benefits"), Seller shall, effective as of the Closing
Date, amend the General Retirement Plan ("Seller's Pension Plan") to (i)
recognize service with Buyer for purposes of vesting the Closing Date Benefits
in such Seller's Pension Plan; (ii) recognize service with Buyer toward
eligibility for receipt of subsidized early retirement and optional benefit
forms with respect to the Closing Date Benefits under Seller's Pension Plan;
(iii) provide that retirement from Buyer's service shall be deemed retirement
from active employment with Seller for purposes of eligibility for receipt of
subsidized early retirement and optional benefit forms with respect to the
Closing Date Benefits under Seller's Pension Plan; and (iv) provide that Closing
Date Benefits cannot commence until the earlier of such Transferred Employee's
actual retirement from Buyer's employment or attainment of age 65. The pension
plan of Buyer ("Buyer's Pension Plan") shall recognize all prior service with
Seller for purposes of eligibility for participation, vesting, early retirement
subsidies and benefit accrual for Transferred Employees, and may offset the
Closing Date Benefits from benefit accruals thereunder. Buyer and Seller shall
provide each other with such records and information as may be necessary or
appropriate to carry out their respective obligations under this Section 9.2 for
the purposes of administration of Buyer's Pension Plan and Seller's Pension
Plan.
SECTION 9.3 Buyer's Savings Plan. As soon as practicable, and in any
event within 90 days after the Closing Date, Buyer shall establish a defined
contribution pension plan (or plans) and trust (or trusts) intended to qualify
under Sections 401(a) and 501(a) of the Code or amend an existing plan or plans
satisfying