File No. 070-09607
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------------------------
AMENDMENT NO. 2
TO FORM U-1
APPLICATION/DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
----------------------------------------------------
Conectiv
Delmarva Power & Light Company
Atlantic City Electric Company
800 King Street
Wilmington, DE 19899
(Name of companies filing this statement and addresses
of principal executive offices)
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Conectiv
(address above)
(Name of top registered holding company parent of declarant)
----------------------------------
Philip S. Reese
Treasurer
Conectiv
(address above)
(Name and addresses of agents for service)
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The Commission also is requested to send copies of any communications
in connection with this matter to:
John N. Estes III Peter F. Clark
Judith A. Center General Counsel
William C. Weeden Randall V. Griffin
Skadden, Arps, Slate, Meagher & Flom LLP Senior Counsel
1440 New York Avenue, N.W. Conectiv
Washington, D.C. 20005 (address above)
<PAGE>
I. DESCRIPTION OF THE PROPOSED TRANSACTION.............................. 1
A. Introduction................................................ 1
B. Description of the Parties ................................. 3
C. Description of the Peach Bottom Assets...................... 4
D. Background on the Transaction............................... 5
E. Benefits of the Transaction................................. 6
II. FEES, COMMISSIONS AND EXPENSES....................................... 9
III. APPLICABLE STATUTORY PROVISIONS...................................... 9
IV. OTHER REGULATORY APPROVAL............................................ 9
V. PROCEDURE............................................................10
VI. EXHIBITS AND FINANCIAL STATEMENTS....................................11
A. EXHIBITS....................................................11
B. FINANCIAL STATEMENTS........................................12
VII. INFORMATION AS TO ENVIRONMENTAL EFFECT...............................12
i
<PAGE>
The Application-Declaration, as previously filed, is hereby amended as follows:
I. DESCRIPTION OF THE PROPOSED TRANSACTION
A. Introduction
This Form U-1 Application/Declaration ("Application/Declaration")
seeks approvals pursuant to Section 12(d), of the Public Utility Holding Company
Act of 1935, as amended (the "Act"), and Rule 44 thereunder, relating to the
sale of certain utility assets by Conectiv, to PECO Energy Company ("PECO").
Specifically, Conectiv and its subsidiaries, Delmarva Power & Light Company
("DPL") and Atlantic City Electric Company ("ACE"), have proposed the joint sale
of a 7.51-percent (164 MW) ownership interest in the Peach Bottom Atomic Power
Station Units 2 and 3 ("Peach Bottom") to PECO, (the "Transaction"). PECO
presently owns 42.49 percent of Peach Bottom.
In exchange for their interests in Peach Bottom that are being sold to
PECO, ACE and DPL will each receive $2,550,000, plus 3.755 percent of the net
book value of the Nuclear Fuel Supplies as of the Closing Date and furthermore
PECO will assume various liabilities of ACE and DPL.1 The 3.755 percent of the
Nuclear Fuel Supplies which would qualify as Utility Assets (as defined in the
Act), as of the anticipated closing date would be worth approximately $10
million. It is estimated that the total proceeds from PECO to be shared by ACE
and DPL will be approximately $25.1 million. In addition, PECO will assume
essentially all of ACE and DPL's environmental and decommissioning liabilities
for Peach Bottom, in proportion to the ownership share being transferred. As
explained below, the Transaction is in the public interest and should be
approved as soon as practicable. The parties would like to complete the
Transaction as soon as possible and respectfully request Commission action by
May 10, 2000.
The sale to PECO is part of several interrelated transactions, whereby
PECO and a non-utility affiliate of Public Service Electric and Gas Company
("PSE&G") agreed to buy the interests of ACE and DPL in the various jointly
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1 Nuclear Fuel Supplies include the nuclear fuel assemblies in the reactor
core, natural uranium, converted uranium, enriched uranium and any other
form of any thereof, under contract or in inventory, and located at or in
transit to the Peach Bottom Station, as well as all nuclear fuel
constituents in all stages of the fuel cycle that are in the process of
production, conversion, enrichment or fabrication.
<PAGE>
owned nuclear plants ("Nuclear Assets").2 PECO will be purchasing a combined
7.51-percent ownership interest in Peach Bottom from ACE and DPL. The PSE&G
affiliate, PSEG Nuclear L.L.C. ("PSEG Nuclear"), also will be buying a combined
7.51-percent ownership interest in Peach Bottom from ACE and DPL.3 In addition,
PSEG Nuclear will be buying, in transactions that are separate from any
transaction for which this Application seeks approval, the additional minority
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2 ACE and DPL each own a minority ownership share in Salem Units 1 & 2, Salem
Peaking Unit, and Peach Bottom Units 2 and 3. Furthermore ACE is selling
its minority ownership share in Hope Creek Unit 1. Conectiv is conveying
all of their interests in the nuclear plants through a series of purchase
agreements dated as of September 27, 1999, which included agreements: by
and between ACE and PSEG Power LLC (relating to the Salem Station); by and
between DPL and PSEG Power LLC (relating to Salem Station); by and between
ACE and PSEG Power LLC (relating to Hope Creek Station); by and among ACE,
PECO Energy Company and PSEG Power LLC (relating to Peach Bottom Station);
by and among DPL, PECO Energy Company and PSEG Power LLC (relating to Peach
Bottom Station). The sales include the nuclear generating units themselves,
the nuclear decommissioning trust fund balances, nuclear fuel, and the
associated interests in land and other equipment, including the small
turbine at Salem that is primarily used for start-up and on-site power
needs.
3 Public Service Enterprise Group Incorporated (PSEG) is an exempt public
utility holding company. PSEG has two principal direct wholly-owned
subsidiaries: PSE&G and PSEG Energy Holdings Inc. PSE&G, a New Jersey
corporation, is an operating public utility company engaged principally in
the generation, transmission, distribution and sale of electric energy
service and in the transmission, distribution and sale of gas service in
New Jersey. PSE&G supplies electric and gas service in areas of New Jersey
in which approximately 5.5 million people, about 70% of the State's
population, reside. PSEG Power LLC ("PSEG Power") is a wholesale electric
generation and trading company operating in the Northeastern United States.
PSEG Power is a wholly owned subsidiary of Public Service Enterprise Group
that ACE and DPL expect will own all of the shares of PSEG Nuclear, PSEG
Fossil LLC and PSEG Energy Resources & Trade LLC. It is ACE and DPL's
understanding that at or before closing, PSEG Power will designate its
subsidiary, PSEG Nuclear, as the party which will actually receive the
ownership interests at closing. It is also ACE and DPL's understanding that
PSEG Nuclear ultimately will own all of PSE&G's nuclear facilities and will
operate those nuclear facilities for which PSE&G is currently the operator
(PSE&G may continue as operator for an interim period). PSEG Nuclear will
engage only in wholesale sales of electric power.
2
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ownership interests in other nuclear plants. In each of the PSEG Nuclear
transactions, however, the buyer is an exempt wholesale generator ("EWG").
Therefore, no Commission approval is required for those transactions under
Section 32 of the Act. In contrast, PECO is buying an ownership interest in
Peach Bottom, not through an EWG, but as an operating public utility. Commission
approval under Section 12(d) of the Act therefore is required for the sale to
PECO.
The New Jersey Board of Public Utilities ("NJBPU") must approve the sale of
ACE's interest in Peach Bottom. The Pennsylvania Public Utility Commission
("PaPUC") must approve the sale by ACE and DPL, and purchase by PECO, of the
Peach Bottom interests. The Virginia State Corporation Commission ("VSCC") will
review the proposed sale of Delmarva interests in the context of its overall
review of DPL's plan for the functional separation of generation assets from
transmission and distribution assets. Furthermore, pursuant to Section 32 of the
Act, all four of the state commissions that regulate ACE and DPL - the NJBPU,
Delaware Public Service Commission ("DPSC"), the Maryland Public Service
Commission ("MPSC"), and the VSCC - will be addressing the related transactions
in which an EWG owned by PSE&G will be buying interests in this and other
nuclear plants from ACE and DPL. The state commissions therefore will be well
informed regarding the proposed Peach Bottom transaction.
B. Description of the Parties
On March 1, 1998, Conectiv became a registered holding company under
the Act. Conectiv has two operating public utility subsidiaries: ACE and DPL.
ACE is a New Jersey corporation that distributes and sells electricity at retail
in southern New Jersey. ACE's retail service is regulated by the NJBPU. DPL is a
Delaware and Virginia corporation that distributes and sells electricity at
retail in portions of Delaware, Maryland and Virginia, and gas at retail in New
Castle County, Delaware. DPL's retail service is regulated by the DPSC, MPSC,
and the VSCC.
In addition, because of their ownership interest in Peach Bottom, both ACE
and DPL are subject to minimal regulation by the PaPUC. The PaPUC does not
regulate the electric rates of either ACE or DPL. Neither ACE nor DPL have any
retail utility customers in Pennsylvania, receive any gross operating revenue
for service rendered under a tariff filed with the PaPUC for intrastate service
within Pennsylvania, or operate any public utility facilities within
Pennsylvania. The PaPUC regulates ACE and DPL solely as holders of certificates
of public convenience and necessity regarding their partial interests in the
Peach Bottom plant, as well as certain other Pennsylvania generation assets.
3
<PAGE>
The Federal Energy Regulatory Commission ("FERC") also has regulatory
authority over the wholesale sales and transmission activities of DPL and ACE.
Excluding off-system sales not subject to price regulation, the percentage of
electric and gas utility operating revenues regulated by each regulatory
commission, for the year ended December 31, 1998, was as follows: NJBPU, 41.8%;
DPSC, 38.9%; MPSC, 14.5%; VSCC, 1.4%; and FERC, 3.4%.
Conectiv's total generation capacity is approximately 6,035 MW as of
December 31, 1998. The partial ownership interests in Peach Bottom being sold to
PECO provides approximately 2.7% of this capacity. DPL's and ACE's ownership
interests in the Nuclear Assets provided approximately 12% of Conectiv's total
installed capacity as of December 31, 1998. In 1998, kilowatt-hour output for
load from the jointly-owned Nuclear Assets provided 21% of the electricity used
by Conectiv's retail customers.
PECO is an electric and gas utility serving 1.5 million electric
customers in the five-county Philadelphia area and 400,000 natural gas customers
in four suburban counties.4 It is one of the nation's largest nuclear utility
operators, producing more than 33 billion kilowatt-hours of electricity in 1998
at its Limerick and Peach Bottom generating stations.
C. Description of the Peach Bottom Assets
The Peach Bottom nuclear power plant is located in York County,
Pennsylvania and has a summer capacity of 2,186 MW. ACE and DPL acquired their
interest in Peach Bottom on November 24, 1971, and they each own 164 MW, or 7.51
percent, of the plant. Conectiv as a whole therefore owns 328 MW, or 15.02
percent, half of which is being sold to PECO. The other co-owners of Peach
Bottom, PECO and PSE&G, each own approximately 42.49% of the facility.
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4 PECO is a section 3(a)(2) exempt holding company. PECO has three utility
subsidiaries, one of which PECO Energy Power Company is a registered
holding company solely by virtue of its ownership of Susquehanna Power
Company ("Susquehanna"), an electric utility company that operates in two
states; a section 3(a)(1) exemption is not available to PECO Energy Power
Company because its operations are spread over two states. Susquehanna was
incorporated in Maryland while PECO Energy Power Company was incorporated
in Pennsylvania and owns Susquehanna. The sole function of PECO Energy
Power Company and its single electric public-utility subsidiary,
Susquehanna, is to hold joint title to the Conowingo Hydro-Electric Project
of Maryland and Pennsylvania.
4
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The following chart sets forth the original acquisition value and the
book value of ACE and DPL's interest in Peach Bottom before and after the
write-down.5
<TABLE>
<CAPTION>
Value of Peach Bottom Assets
Company Plant in Actual Book Pro Forma
Service Value ($)6 Value As Of Without Third
December 31, Quarter Write
1999 ($)7 Down in Book
Value($)8
<S> <C> <C> <C>
Delmarva Power & Light 49,513,500 4,689,000 80,496,900
Company (DPL)
Atlantic City Electricity 47,400,500 4,705,000 72,413,700
Company (ACE)
Total Conectiv 96,914,000 9,394,000 152,910,600
</TABLE>
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5 The net book value of Peach Bottom and other plant-related assets including
inventories were written down to their estimated fair market value (net of
estimated selling costs) due to impairment. The write-down took place in
the third quarter of 1999. The extraordinary charge related to impaired
assets was determined in accordance with Statements of Financial Accounting
Standards ("SFAS") No. 121. The extraordinary charge was decreased by the
regulatory asset established for the amount of stranded costs expected to
be recovered through regulated electricity delivery rates.
6 This reflects the value recorded in 1974 on DPL and ACE's financial
statements for their respective ownership interest in Peach Bottom, as of
the in-service date of the facility.
7 This represents the 12/31/99 net book value per each Company's financial
statements which reflects a third quarter 1999 write-down to net realizable
value based on the purchase agreements of sale entered into that same
quarter. These agreements are attached hereto as Exhibit B-1 and Exhibit
B-2 respectively.
8 This is a pro forma amount representing the net book value prior to the
third quarter 1999 write-down. This net book value prior to the third
quarter 1999 write-down is greater than the Plant in Service Value due to
several capital projects that have been undertaken since the Plant was put
in service.
5
<PAGE>
D. Background on the Transaction
As the Commission is well aware, the electric utility industry is in
the midst of a fundamental restructuring at both the federal and state levels.
The states in which Conectiv operates have been part of this effort. In
particular, New Jersey began retail choice on August 1, 1999. Delaware began
phasing in retail choice on October 1, 1999. Maryland is scheduled to begin
retail choice on July 1, 2000. Virginia will begin phasing in retail choice on
January 1, 2002.
In light of these state utility restructuring initiatives, and the
evolving competitive marketplace, Conectiv made the strategic decision to divest
a substantial portion of its baseload generation assets, including its partial
ownership in Peach Bottom. Towards this end, ACE and DPL commenced the process
of auctioning their relatively small minority interests in these generation
assets during the early part of 1999. The companies envisioned two parallel
auctions - one involving the fossil plants, and the other involving nuclear
plants. The fossil auction has concluded; purchase agreements were signed with
the winning bidder on January 18, 2000. The closing process has commenced. This
Application relates to the sale of the nuclear plant.
As a threshold matter, ACE and DPL's minority interests in the Nuclear
Assets are subject to certain conditions contained in certain agreements among
the co-owners. Pursuant to these agreements, ACE and DPL have the right to
transfer their interests in the co-owned Nuclear Assets to non-co-owners,
subject to a right of first refusal by each of the co-owners. Because of this
right, and because PECO and PSE&G already owned interests in the Nuclear Assets
and were familiar with those units, PECO and PSE&G were the most logical buyers
for ACE and DPL's minority interests.
Notwithstanding this, the sale process for the nuclear power plants
initially took the form of an auction to meet the requirements imposed upon ACE
by the NJBPU. Standards for the auction were approved orally by the NJBPU at a
meeting on September 17, 1999, followed by a written order dated January 4,
2000. While DPL was not subject to regulation of NJBPU, it nevertheless adopted
the same standards for the sale of its interest in Peach Bottom.
On August 30, 1999, before Conectiv began opening and evaluating any
bids, PECO and PSE&G submitted a comprehensive proposal to purchase ACE and
DPL's interests in the Nuclear Assets. Specifically, PSEG Power offered to
acquire the combined ACE/DPL interests in Salem and also offered to purchase
ACE's interest in Hope Creek. PSEG Power and PECO each offered to purchase
one-half of the interests that ACE and DPL held in Peach Bottom.
6
<PAGE>
As a result of its analysis of the proposal, as well as an evaluation
of the prices, terms and conditions of recent comparable nuclear asset sales,
Conectiv postponed the auction and began negotiating with PECO and PSE&G
regarding the terms of an acquisition of the Peach Bottom interests. On
September 27, 1999, Conectiv reached agreement with PECO and PSE&G regarding the
terms governing the Transaction, cancelled the auction and entered into purchase
agreements between ACE and PECO and between DPL and PECO. These agreements are
attached hereto as Exhibit B-1 and Exhibit B-2 respectively.
ACE has sought approval from the NJBPU for the sale of its interests
to PECO and PSE&G, including approval of the process used to effect the sale.
E. Benefits of the Transaction
The Transaction should be approved because it is the result of
arm's-length negotiations and is in the public interest. Conectiv explored
potential avenues for disposing of the Peach Bottom ownership interests,
including conducting the initial stages of an auction. Conectiv concluded that
the terms offered by PECO were superior to what it was likely to achieve at
auction and negotiated those terms on an arm's-length basis in order to maximize
benefits for all of Conectiv's stakeholders.
Based upon the advice of a consulting firm hired to advise the
company (which included the delivery of a fairness opinion to Conectiv's board
of directors), who have reviewed several nuclear divestiture sales over the past
five years, management concluded that the Transaction presents both shareholders
and consumers with virtually unique benefits, in comparison to other nuclear
divestitures:
o Conectiv will avoid substantially all liability for the nuclear
decommissioning of Peach Bottom. In addition to removing its exposure to
the risk of future decommissioning costs, the Transaction will enable
Conectiv to avoid additional funding of the nuclear decommissioning trusts
which otherwise would likely have been required in a sale to a
non-co-owner.
o Conectiv's long-term exposure to the risk of potentially costly
environmental clean-up liability is minimized because PECO and PSE&G will
assume essentially all environmental liabilities associated with the
Nuclear Assets.9
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9 Conectiv will continue to assume liability for pre-closing offsite
environmental risks associated with the Nuclear Assets, though none have
been identified at this time.
7
<PAGE>
o Conectiv was not required by PECO to agree to any above-market purchased
power contracts. Such contracts have been required in certain nuclear
divestitures. Avoiding this burden directly benefits customers, because it
is the customers who would ultimately bear any increased costs.
o ACE, consistent with New Jersey state law, will apply the proceeds it
receives from the sale of the Nuclear Assets to partially offset stranded
costs it will recover from its retail customers in New Jersey.10
In addition to these specific advantages, the Transaction offers
substantive overall long-term benefits for Conectiv, adding new financial
strength and decreasing exposure to risk. As a result, Conectiv will be
well-positioned to compete in the energy marketplace. By selling approximately
708 megawatts of nuclear generation, Conectiv expects to raise cash for internal
uses, including debt repayment and new investments that more closely conform
with Conectiv's competitive strategy. Conectiv intends to retain certain
generation plants that it considers to be strategic to its energy business and
necessary to assure reliability for its customers as electricity markets become
more competitive.
In sum, the Transaction plainly benefits the interests that the Act
was designed to protect. It therefore should be approved as soon as practicable.
The parties would like to complete the Transaction as soon as possible, and
respectfully request Commission action by April 14, 2000.
F. Discussion of Rules 53 and 54
Rule 54 promulgated under the Act states that in determining whether
to approve the issue or sale of a security by a registered holding company for
purposes other than the acquisition of an Exempt Wholesale Generator ("EWG") or
a Foreign Utility Company ("FUCO"), or other transactions by such registered
holding company or its subsidiaries other than with respect to EWGs or FUCOs,
the Commission shall not consider the effect of the capitalization or earnings
of any subsidiary which is an EWG or a FUCO upon the registered holding company
system if Rules 53(a), (b), or (c) are satisfied. As demonstrated below, such
rules are satisfied.
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10 The Transaction should not affect DPL's retail rates. Retail rates in
Delaware and Maryland are frozen for three to four years. The VSCC retains
jurisdiction over DPL's retail rates in Virginia. DPL will use the proceeds
for various activities consistent with its corporate strategy.
8
<PAGE>
Conectiv complies with Rule 53(a)(1) for the reason that its aggregate
investment in EWGs and FUCOs does not exceed 50% of Conectiv's retained earnings
for the four most recent quarterly periods set forth on Conectiv's Form 10-K or
Form 10-Q. Conectiv and its subsidiaries will maintain books and records to
identify the investments in earnings from EWGs and FUCOs in which they directly
or indirectly hold an interest, thereby satisfying Rule 53(a)(2). The books and
records of each such entity will be kept in conformity with United States
generally accepted accounting principles ("GAAP"). The financial statements also
will be prepared according to GAAP. In addition, Conectiv undertakes to provide
the Commission access to such books and records and financial statements as the
Commission may request. Conectiv is in compliance with Rule 53(a)(3) which
requires that no more than two percent of the employees of Conectiv's domestic
public-utility companies render services, directly or indirectly, to any EWGs or
FUCOs in the Conectiv System.
Conectiv, in connection with any Form U-1 seeking approval of EWG or
FUCO financing, will submit copies of such Form U-1 and every certificate filed
pursuant to Rule 24 with every federal, state or local regulator having
jurisdiction over the retail rates of the public utility companies in the
Conectiv holding company system. Rule 53(a)(4) correspondingly will be
satisfied. None of the conditions described in Rule 53(b) exists with respect to
Conectiv, thereby satisfying Rule 53(b) and making Rule 53(c) inapplicable. Rule
53(d) also does not apply.
II. FEES, COMMISSIONS AND EXPENSES
The fees, commissions and expenses to be incurred, directly or
indirectly, by Conectiv or any associate company thereof in connection with the
proposed Transaction are estimated as follows:
Fees of Conectiv $ *
Fees of outside counsel............ $ *
Miscellaneous expenses $ *
----
TOTAL......................... $ *
* to be filed by amendment.
III. APPLICABLE STATUTORY PROVISIONS
The properties are utility assets within the meaning of the definition
in Section 2(a)(18) of the Act. Section 12(d) of the Act and Rule 44 under the
Act apply to the sale of the Peach Bottom interest in the ownership of electric
generating assets.
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If the Commission considers the proposed future transactions to
require any authorization, approval or exemption, under any section of the Act
for Rule or Regulation other than those cited herein above, such authorization,
approval or exemption is hereby requested.
IV. OTHER REGULATORY APPROVAL
The Transaction is subject to approval by other federal and state
agencies. On or about December 14, 1999, Conectiv filed a Pre-merger
Notification and Report Form with the Antitrust Division of the Department of
Justice ("DOJ") and the Federal Trade Commission (the "FTC") pursuant to the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended ("HSR Act"). On
January 4, 2000, Conectiv received early termination of the applicable waiting
period under the HSR Act. Termination was effective as of the phone call
received on that date. A copy of the application is attached, but written
confirmation of the termination will be provided by amendment.
Both the Nuclear Regulatory Commission and the FERC must approve the
Transaction. In addition, the NJBPU must approve the sale of ACE's interest in
Peach Bottom. The PaPUC must approve the purchase by PECO of interests by ACE
and DPL. The VSCC will be reviewing the Transaction in the broader context of
considering an overall plan for the functional separation of generation,
transmission and distribution activities. Copies of all of these applications
are attached.
V. PROCEDURE
Conectiv requests that the Commission issue and publish, not later
than April 14, 2000, the requisite notice under Rule 23 with respect to the
filing of this Application/Declaration. Conectiv further requests that such
notice specify a date no later than May 10, 2000 as the date after which the
Commission may issue an order approving the transaction addressed herein.
Conectiv (1) waives a recommended decision by a hearing officer or
other responsible officer of the Commission; (2) consents that the Staff of the
Division of Investment Management may assist in the preparation of the
Commission's order; and (3) requests that there be no waiting period between the
issuance of the Commission's order and its effectiveness.
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VI. EXHIBITS AND FINANCIAL STATEMENTS
A. EXHIBITS Tab
A-1 Not Applicable.....................................................
B-1 Purchase Agreement By And Among Atlantic City Electric Company,
PECO Energy Company and PSEG Power LLC, Dated as of
September 27, 1999.................................................
B-2 Purchase Agreement By And Among Delmarva Power & Light Company,
PECO Energy Company and PSEG Power LLC, Dated as of
September 27, 1999.................................................
C-1 Not Applicable.....................................................
D-1 NJ State Application...............................................
D-2 NJ State Order (to be filed by amendment)..........................
D-3 PA State Application...............................................
D-4 PA State Order (to be filed by amendment)..........................
D-5 VA State Application ..............................................
D-6 VA State Order (to be filed by amendment)..........................
D-7 FERC Application ..................................................
D-8 FERC Order (to be filed by amendment)..............................
D-9 NRC Application....................................................
D-10 NRC Order (to be filed by amendment)...............................
D-11 FTC Hart-Scott-Rodino Application..................................
D-12 FTC Hart-Scott-Rodino Approval (to be filed by amendment)..........
E-1 Not Applicable.....................................................
F-1 Opinion of Counsel (to be filed by amendment)......................
11
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G-1 Not Applicable ....................................................
H-1 Not Applicable.....................................................
I-1 Proposed Form of Notice............................................
B. FINANCIAL STATEMENTS
FS-1 Delmarva Power & Light Company Pro Forma Consolidated Statements
of Income..........................................................
FS-2 Delmarva Power & Light Company Pro Forma Consolidated Balance
Sheets ............................................................
FS-3 Atlantic City Electric Company Pro Forma Consolidated Statements
of Income..........................................................
FS-4 Atlantic City Electric Company Pro Forma Consolidated Balance
Sheets.............................................................
FS-5 Conectiv Pro Forma Consolidated Statements of Income for the
period ended September 30, 1999 ...................................
FS-6 Conectiv Pro Forma Consolidated Balance Sheets ....................
FS-7 Conectiv Consolidated Financial Data Schedule (include in
electronic submission only) (Exhibit FS-4 to Conectiv's
Post-Effective Amendment No. 7 to Form U-1 Declaration under
The Public Utility Holding Company Act of 1935, File no.
070-09095, and incorporated herein by reference) ..................
FS-8 Notes to Financial Statements .....................................
There have been no material changes, not in the ordinary course of
business, since the date of the financial statements filed herewith.
VII. INFORMATION AS TO ENVIRONMENTAL EFFECT
The proposed transactions do not involve major federal action having a
significant effect on the human environment. No other federal agency has
prepared or is preparing an environmental impact statement with respect to the
transaction.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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SIGNATURE
Pursuant to the requirements of the Act, the undersigned companies
have duly caused this amended Application/Declaration to be signed on its behalf
by the undersigned hereunto duly authorized.
Dated: April 14, 2000
Conectiv
----------------------------------------
By: /s/ Name
Title:
Delmarva Power & Light Company
----------------------------------------
By: /s/ Name
Title:
Atlantic City Electric Company
----------------------------------------
By: /s/ Name
Title:
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EXHIBIT I-1
SECURITIES AND EXCHANGE COMMISSION
Conectiv, a holding company registered under the Public Utility
Holding Company Act of 1935 (the "Act") located at 800 King Street, Wilmington,
DE 19899, and its subsidiaries has filed an Application-Declaration under
Sections 12(d) and Rule 44 of the Act.
Conectiv and its subsidiaries Delmarva Power & Light Company ("DPL")
and Atlantic City Electric Company ("ACE") have proposed the joint sale of a
7.51 percent (164 MW) ownership interest in the Peach Bottom Atomic Power
Station Units 2 and 3 ("Peach Bottom") to PECO Energy Company ("PECO"). PECO
presently owns approximately a 42.49 percent interest in Peach Bottom. In
exchange for their interests that are being sold to PECO in Peach Bottom, ACE
and DPL will each receive $2,550,000, plus 3.755 percent of the net book value
of the Nuclear Fuel Supplies as of the Closing Date. The estimated proceeds from
this transaction are expected to be approximately $25.1 million.
The Application-Declaration and any amendments thereto are available
for public inspection through the Commission's office of Public Reference.
Interested persons wishing to comment or request a hearing should submit their
views in writing by February 29, 2000, to the Secretary, Securities and Exchange
Commission, Washington, D.C. 20549, and serve a copy on the Applicant-Declarant
at the address specified above. Proof of service (by affidavit or, in the case
of an attorney at law, by certificate) should be filed with the request. Any
request for hearing shall identify specifically the issues of fact or law that
are disputed. A person who so requests will be notified of any hearing, if
ordered, and will receive a copy of any notice or order issued in this manner.
After said date, the Application-Declaration, as filed or as it may be amended,
may be permitted to become effective.
For the Commission by the Division of Investment Management, pursuant to
delegated authority.
Jonathan G. Katz
Secretary
14
<PAGE>
(ACE-PEACH BOTTOM)
CONFORMED
PURCHASE AGREEMENT
BY AND AMONG
ATLANTIC CITY ELECTRIC COMPANY,
PECO ENERGY COMPANY
AND
PSEG POWER LLC
DATED AS OF SEPTEMBER 27, 1999
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Table of Contents
Page
ARTICLE I
DEFINITIONS
1.1 Definitions..........................................................2
1.2 Certain Interpretive Matters........................................18
1.3 U.S. Dollars........................................................19
1.4 Seller's Interest in Purchased Assets...............................19
ARTICLE II
PURCHASE AND SALE
2.1 Transfer of Purchased Assets........................................20
2.2 Excluded Assets.....................................................21
2.3 Assumed Liabilities.................................................24
2.4 Excluded Liabilities................................................26
2.5 Control of Litigation...............................................28
2.6 Spent Nuclear Fuel Fees.............................................28
2.7 Department of Energy Decommissioning and
Decontamination Fees................................................29
ARTICLE III
THE CLOSING
3.1 Closing.............................................................29
3.2 Payment of PECO Purchase Price......................................30
3.3 Adjustment to PECO Nuclear Fuel Supply Payment......................30
3.4 Payment of PSEG Purchase Price......................................32
3.5 Adjustment to PSEG Nuclear Fuel Supply Payment......................32
3.6 Tax Reporting and Allocation of Purchase Prices.....................33
3.7 Prorations..........................................................35
3.8 Deliveries by Seller................................................37
3.9 Deliveries by PECO..................................................39
3.10 Deliveries by PSEG..................................................40
3.11 Relationship of this Agreement and Collateral
Agreement...........................................................41
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3.12 Owners Agreement to Govern..........................................42
3.13 Additional Agreements...............................................42
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
4.1 Organization, Qualification.........................................42
4.2 Authority...........................................................42
4.3 No Violations; Consents and Approvals...............................43
4.4 Permits.............................................................44
4.5 Seller's Qualified Decommissioning Funds............................44
4.6 Seller's Nonqualified Decommissioning Funds.........................46
4.7 Nuclear Law Matters.................................................47
4.8 Legal Proceedings...................................................47
4.9 Personal Property...................................................48
4.10 Real Property.......................................................48
4.11 Contracts...........................................................48
4.12 Certain Environmental Liabilities. .................................48
4.13 Undisclosed Liabilities.............................................49
4.14 Intellectual Property...............................................49
4.15 Taxes...............................................................49
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PECO
5.1 Organization; Qualification.........................................49
5.2 Authority...........................................................50
5.3 No Violations; Consents and Approvals...............................50
5.4 Buyer Permits.......................................................51
5.5 Nuclear Law Matters.................................................51
5.6 Legal Proceedings...................................................51
5.7 Qualified Buyer.....................................................52
5.8 Inspections.........................................................52
5.9 Regulation as a Utility.............................................52
5.10 Certain Environmental Liabilities...................................52
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PSEG
6.1 Organization; Qualification.........................................53
6.2 Authority...........................................................53
6.3 No Violations; Consents and Approvals...............................53
6.4 PSEG Permits........................................................54
6.5 Nuclear Law Matters.................................................54
6.6 Legal Proceedings...................................................55
6.7 Qualified Buyer.....................................................55
6.8 Inspections.........................................................55
6.9 Certain Environmental Liabilities...................................56
ARTICLE VII
COVENANTS OF THE PARTIES
7.1 Certain Buyers Covenants............................................56
7.2 Public Statements...................................................57
7.3 Further Assurances..................................................57
7.4 Consents and Approvals..............................................58
7.5 Certain Tax Matters.................................................60
7.6 Advice of Changes...................................................63
7.7 Risk of Loss........................................................63
7.8 Cooperation after Closing...........................................64
7.9 Decommissioning Funds...............................................65
7.10 Amendment to Seller's Agreements....................................67
7.11 Exclusivity.........................................................67
7.12 Insurance...........................................................67
ARTICLE VIII
CONDITIONS
8.1 Conditions to Obligation of Each Party..............................68
8.2 Conditions to Obligations of PECO..................................68
8.3 Conditions to Obligations of PSEG...................................70
8.4 Conditions to Obligation of Seller..................................72
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ARTICLE IX
INDEMNIFICATION AND ARBITRATION
9.1 Indemnification.....................................................74
9.2 Defense of Claims...................................................78
9.3 Arbitration.........................................................81
ARTICLE X
TERMINATION
10.1 Termination.........................................................83
10.2 Effect of Termination...............................................85
10.3 Additional Effects of Termination...................................85
ARTICLE XI
MISCELLANEOUS PROVISIONS
11.1 Amendment and Modification..........................................85
11.2 Expenses............................................................86
11.3 Fees and Commissions................................................86
11.4 Bulk Sales Laws.....................................................86
11.5 Waiver of Compliance................................................86
11.6 Survival............................................................87
11.7 Disclaimers.........................................................87
11.8 Notices.............................................................88
11.9 Assignment, No Third-Party Beneficiaries............................90
11.10 Governing Law, Forum, Service of Process............................91
11.11 Counterparts........................................................91
11.12 Entire Agreement....................................................91
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LIST OF EXHIBITS AND SCHEDULES
EXHIBITS
Exhibit A Amendment to Owners Agreement
Exhibit B Assignment Assumption Agreement
Exhibit C Bills of Sale
Exhibit D Seller Deeds
Exhibit E FIRPTA Affidavit
Exhibit F Opinions of Counsel to Seller
Exhibit G Opinions of Counsel to PECO
Exhibit H Opinions of Counsel to PSEG
SCHEDULES
1.1(118) Real Property
1.1(129) Seller's Agreements
4.3(a) No Violations
4.3(b) Seller's Required Regulatory Approvals
4.4(a) Seller Permits
4.4(b) Seller Transferable Permits
4.5(d) Liabilities Relating to Seller's Qualified Decommissioning Funds
4.5(f) Tax Liability of Seller's Qualified Decommissioning Funds
4.6(d) Liabilities Relating to Seller's Nonqualified Decommissioning
Funds
4.7 Nuclear Law Matters
4.8 Legal Proceedings
4.9 Encumbrances on Certain Personal Property
4.10 Encumbrances on Certain Real Property
4.11 Certain Seller's Agreements
4.12 Certain Seller Environmental Liabilities
4.15 Certain Tax Matters
5.3(a) PECO Defaults and Violations
5.3(b) PECO Required Regulatory Approvals
5.6(a) PECO Legal Proceedings
5.10 PECO Certain Environmental Liabilities
6.3(a) PSEG Defaults and Violations
6.3(b) PSEG Required Regulatory Approvals
6.6(a) PSEG Legal Proceedings
6.10 PSEG Certain Environmental Liabilities
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7.9(c) Decommissioning Funds Investment Manager Agreements and Policies
8.2(a)(i) Certain PECO Required Regulatory Approvals
8.3(a)(i) Certain PSEG Required Regulatory Approvals
8.3(a)(ii) Certain Affiliates
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PURCHASE AGREEMENT
(ACE - Peach Bottom)
PURCHASE AGREEMENT, dated as of September 27, 1999, by and between
Atlantic City Electric Company, a New Jersey corporation ("Seller"), PECO Energy
Company (formerly Philadelphia Electric Company), a Pennsylvania corporation
("PECO") and PSEG Power LLC, a Delaware limited liability company ("PSEG" and,
together with PECO, "Buyers"). Seller, PECO and PSEG may be referred to herein
individually as a "Party," and collectively as the "Parties."
W I T N E S S E T H
WHEREAS, Seller owns an undivided 7.51% interest as tenant in common
without the right of partition in the Peach Bottom Station (as defined below)
and certain properties and assets associated therewith and ancillary thereto;
WHEREAS, PECO desires to purchase and assume, and Seller desires to
sell and assign, or cause to be sold and assigned, one-half of all of Seller's
rights, title and interests in and to the Purchased Assets (as defined below)
and certain associated liabilities, upon the terms and conditions hereinafter
set forth in this Agreement;
WHEREAS, PSEG desires to purchase and assume, and Seller desires to
sell and assign, or cause to be sold and assigned, one-half of all of Seller's
rights, title and interests in and to the Purchased Assets (as defined below)
and certain associated liabilities, upon the terms and conditions hereinafter
set forth in this Agreement; and
WHEREAS, Public Service Enterprise Group Incorporated, a New Jersey
corporation and sole member of Buyer, has contemporaneously delivered a Guaranty
dated the date hereof to Seller, upon which Seller has relied in entering into
this Agreement.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants, representations, warranties and agreements set forth herein, and
intending to be legally bound hereby, the Parties hereby agree as follows:
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ARTICLE I
DEFINITIONS
1.1 Definitions. As used in this Agreement, the following capitalized
terms have the meanings specified in this Section 1.1.
(1) "Additional Agreements" means the Deeds, the Assignment and
Assumption Agreements, the Bills of Sale and the Amendment to Owners
Agreement.
(2) "Affiliate" has the meaning set forth in Rule 12b-2 of the General
Rules and Regulations promulgated under the Exchange Act.
(3) "Agreement" means this Purchase Agreement together with the
Schedules and Exhibits hereto.
(4) "Allocation" has the meaning set forth in Section 3.6.
(5) "Amendment to Owners Agreement" means the amendment to the Owners
Agreement among the signatories to the Owners Agreement, to be delivered at the
Closing, substantially in the form of Exhibit A.
(6) "Antitrust Laws" means the Sherman Act, the Clayton Act, the HSR
Act, the Federal Trade Commission Act, and all other Laws that are designed or
intended to prohibit, restrict or regulate actions having the purpose or effect
of monopolization or restraint of trade, in each case, as amended from time to
time.
(7) "Applicable Tax Law" has the meaning set forth in Section 3.6.
(8) "Assignment and Assumption Agreements" means the assignment and
assumption agreements between Seller and PECO and Seller and PSEG, to be
delivered at the Closing, substantially in the form of Exhibit B hereto,
pursuant to which Seller shall assign to each of PECO and PSEG one-half of
Seller's rights, title and interests in and to the Seller's Agreements, certain
intangible assets and certain other Purchased Assets, and each of PECO and PSEG
shall accept such assignments and assume the Assumed Liabilities.
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(9) "Assumed Decommissioning Liabilities" has the meaning set forth in
Section 2.3(d).
(10) "Assumed Liabilities" means all of the liabilities and obligations
of Seller, direct or indirect, known or unknown, asserted or unasserted,
absolute or contingent, accrued or unaccrued, which relate to the Purchased
Assets (other than Excluded Liabilities).
(11) "Assumed Nuclear Liabilities" has the meaning set forth in Section
2.3(e).
(12) "Assumed Spent Fuel Liabilities" has the meaning set forth in
Section 2.3(f).
(13) "Atomic Energy Act" means the Atomic Energy Act of 1954, as
amended from time to time, 42 U.S.C. Section 2011 et seq.
(14) "Bills of Sale" means the bills of sale of Seller, to be delivered
at the Closing, substantially in the form of Exhibit C hereto.
(15) "Budget Period" has the meaning set forth in Section 7.1(b).
(16) "Business Day" means any day other than Saturday, Sunday and any
day on which banking institutions in the State of New York are authorized or
required by Law or other governmental action to close.
(17) "Buyers" has the meaning set forth in the preamble to this
Agreement.
(18) "Buyers' Indemnitee" has the meaning set forth in Section 9.1(c).
(19) "Buyers' Insurance Policies" means all insurance policies with
respect to the ownership, lease, maintenance or operation of the Peach Bottom
Station, including the Purchased Assets, including all liability, property
damage and business interruption policies in respect thereof, for which PECO,
PSEG or their respective Affiliates is liable for payment of the premium and
related charges on behalf of itself and the other parties to the Owners
Agreement.
(20) "Buyers' Qualified Decommissioning Funds" means, collectively, the
trust funds that are designated as "nuclear decommissioning reserve funds" under
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Code Section 468A for the Peach Bottom Station held, with respect to PECO,
pursuant to the Trust Agreement between PECO and Mellon Bank, N.A., dated
February 22, 1994 and, with respect to PSEG, pursuant to the Amended Master
Decommissioning Trust Agreement between Public Service Electric & Gas Company
and Mellon Bank, N.A., dated as of January 1, 1996.
(21) "Byproduct Material" means any radioactive material (except
Special Nuclear Material) yielded in, or made radioactive by, exposure to the
radiation incident to the process of producing or utilizing Special Nuclear
Material.
(22) "CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended from time to time.
(23) "Closing" has the meaning set forth in Section 3.1.
(24) "Closing Date" has the meaning set forth in Section 3.1.
(25) "Code" means the Internal Revenue Code of 1986, as amended from
time to time, and any regulations promulgated thereunder from time to time.
(26) "Collateral Agreement" means the purchase agreement dated as of
the date hereof among DP&L and Buyers, relating to the sale by DP&L to Buyers of
certain properties and assets at the Peach Bottom Station.
(27) "Commercial Arbitration Rules" has the meaning set forth in
Section 9.3(c).
(28) "Commercially Reasonable Efforts" means efforts by a Party which
are designed to enable a Party, directly or indirectly, to satisfy a condition
to, or otherwise assist in the consummation of, the transactions contemplated by
this Agreement and which do not require the performing Party to expend funds or
assume liabilities other than expenditures and liabilities which are customary
and reasonable in nature and amount in the context of the transactions
contemplated by this Agreement.
(29) "Confidentiality Agreements" means, together, (i) the
Confidentiality Agreement, dated August 6, 1999, as amended, between Conectiv
and PSEG Energy Holdings, an Affiliate of PSEG, and (ii) the Confidentiality
Agreement, dated July 9, 1999 between Conectiv and PECO.
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(30) "Courts" has the meaning set forth in Section 11.10.
(31) "CSFB" has the meaning set forth in Section 11.3.
(32) "Decommissioning" means to remove the Peach Bottom Station from
service and restore the Sites, in accordance with applicable Law, including (a)
the dismantlement, decontamination, storage or entombment of the Peach Bottom
Station, in whole or in part, and any reduction or removal, whether before or
after termination of the NRC Licenses for the Peach Bottom Station, of
radioactivity at the Sites relating to the Peach Bottom Station and (b) all
activities necessary for the retirement, dismantlement and decontamination of
the Peach Bottom Station to comply with all Laws, including Nuclear Laws and
Environmental Laws, including the requirements of the Atomic Energy Act and the
NRC's rules, regulations, orders and pronouncements thereunder, the NRC Licenses
for the Peach Bottom Station and related decommissioning plans.
(33) "Decommissioning Costs" means the costs of Decommissioning the
Peach Bottom Station in accordance with all applicable Laws, including Nuclear
Laws and Environmental Laws.
(34) "Decommissioning Funds" means, collectively, the Seller's
Qualified Decommissioning Funds and the Seller's Nonqualified Decommissioning
Funds.
(35) "Deeds" means the special warranty deeds, as customarily used in
the Commonwealth of Pennsylvania, substantially in the form of Exhibit D hereto,
pursuant to which Seller will convey all of its rights, title and interests in
the Real Property to PECO, to the extent of the PECO Interest, and to PSEG, to
the extent of the PSEG Interest.
(36) "Defined Expenses" has the meaning set forth in Section 7.1(b).
(37) "Department of Energy" means the United States Department of
Energy, and any successor agency thereto.
(38) "Department of Energy Decommissioning and Decontamination Fees"
means all fees related to the Department of Energy's special assessment of
utilities for the Uranium Enrichment Decontamination and Decommissioning Fund
pursuant to Sections 1801, 1802 and 1803 of the Atomic Energy Act (42 U.S.C.
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2297g et seq.), and the Department of Energy's implementing regulations at 10
CFR Part 766, and any similar fees assessed under amended or superseding
statutes or regulations applicable to separative work units purchased from the
Department of Energy in order to decontaminate and decommission the Department
of Energy's gaseous diffusion enrichment facilities.
(39) "Department of Energy Standard Contract" means the Contract for
Disposal of Spent Nuclear Fuel and/or High-Level Radioactive Waste, No.
DE-CR01-83NE 44405 with respect to the Peach Bottom Station, dated as of June 1,
1983, between the United States of America, represented by the United States
Department of Energy, and PECO.
(40) "Direct Claim" has the meaning set forth in Section 9.2(d).
(41) "DP&L" means Delmarva Power & Light Company, a Delaware and
Virginia corporation.
(42) "Encumbrances" means any and all mortgages, pledges, liens,
claims, security interests, conditional and installment sale agreements,
easements, activity and use limitations, exceptions, rights-of-way, deed
restrictions, defects of title, encumbrances and charges of any kind.
(43) "Environmental Claims" has the meaning set forth in Section
9.1(d).
(44) "Environmental Condition" means the presence or Release to the
environment, whether at the Sites or otherwise, of Hazardous Substances,
including any migration of Hazardous Substances through air, soil or groundwater
at, to or from the Sites or at, to or from any Off-Site Location, regardless of
when such presence or Release occurred or is discovered.
(45) "Environmental Laws" means all (a) Laws, in each case, as amended
from time to time, relating to pollution or protection of the environment,
natural resources or human health and safety, including Laws relating to
Releases or threatened Releases of Hazardous Substances or otherwise relating to
the manufacture, formulation, generation, processing, distribution, use,
treatment, storage, Release, transport, Remediation, abatement, cleanup or
handling of Hazardous Substances, (b) Laws with regard to recordkeeping,
notification, disclosure and reporting requirements respecting Hazardous
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Substances and (c) Laws relating to the management or use of natural resources;
but shall not include Nuclear Laws.
(46) "Environmental Permits" means all permits, registrations,
certifications, franchises, certificates, licenses and other authorizations,
consents and approvals of any Governmental Authorities with respect to or under
Environmental Laws.
(47) "Estimated PECO Nuclear Fuel Supply Amount" has the meaning set
forth in Section 3.2(b).
(48) "Estimated PSEG Nuclear Fuel Supply Amount" has the meaning set
forth in Section 3.4(b).
(49) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, and the rules and regulations promulgated thereunder
from time to time.
(50) "Excluded Assets" has the meaning set forth in Section 2.2.
(51) "Excluded Liabilities" has the meaning set forth in Section 2.4.
(52) "FERC" means the United States Federal Energy Regulatory
Commission, and any successor agency thereto.
(53) "Final Allocation" has the meaning set forth in Section 3.6.
(54) "FIRPTA Affidavit" means the Foreign Investment in Real Property
Tax Act Certification and Affidavit of Seller, to be delivered at the Closing,
substantially in the form of Exhibit E hereto.
(55) "Fuel Supplies" means, collectively, the Nuclear Fuel Supplies,
and fuel oil supplies, in each case, for use at the Peach Bottom Station.
(56) "Fund Tax Loss" has the meaning set forth in Section 7.5(g).
(57) "Governmental Authority" means any foreign, federal, state, local
or other governmental, executive, legislative, judicial, regulatory or
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administrative agency, court, commission, department, board, or other
governmental subdivision, legislature, tribunal, government-owned corporation or
other governmental authority.
(58) "Hazardous Substances" means (a) any petrochemical or petroleum
products, oil or coal ash, radioactive materials, radon gas, asbestos in any
form that is or could become friable, urea formaldehyde foam insulation and
transformers or other equipment that contain dielectric fluid which may contain
polychlorinated biphenyls, (b) any chemicals, materials or substances defined as
or included in the definition of "hazardous substances," "hazardous wastes,"
"hazardous materials," "hazardous constituents," "restricted hazardous
materials," "extremely hazardous substances," "toxic substances,"
"contaminants," "pollutants," "toxic pollutants" or words of similar meaning and
regulatory effect under any Environmental Law and (c) any other chemical,
material or substance, exposure to which is prohibited, limited or regulated by
any Environmental Law; but shall not include Nuclear Material to the extent
regulated under Nuclear Laws.
(59) "High-Level Waste" means (a) irradiated nuclear reactor fuel, (b)
liquid wastes resulting from the operation of the first cycle solvent extraction
system, or its equivalent, and the concentrated wastes from subsequent
extraction cycles, or their equivalent, in a facility for reprocessing
irradiated reactor fuel and (c) solids into which such liquid wastes have been
converted.
(60) "High-Level Waste Repository" means a facility subject to the
licensing and regulatory authority of the NRC, and which is designed,
constructed and operated by or on behalf of the Department of Energy for the
storage and disposal of Spent Nuclear Fuel and other High-Level Waste in
accordance with the requirements set forth in the Nuclear Waste Policy Act.
(61) "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended from time to time.
(62) "Income Tax" means any Tax imposed by any Governmental Authority
(a) based upon, measured by or calculated with respect to gross or net income,
profits or receipts (including municipal gross receipt Taxes, capital gains
Taxes and minimum Taxes) or (b) based upon, measured by or calculated with
respect to multiple bases (including corporate franchise taxes) if one or more
of such bases is described in clause (a), in each case together with any
interest, penalties or additions attributable to such Tax.
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(63) "Indemnifiable Loss" has the meaning set forth in Section 9.1(a).
(64) "Indemnifying Party" has the meaning set forth in Section
9.1(g)(i).
(65) "Indemnitee" has the meaning set forth in Section 9.1(c).
(66) "Independent Accounting Firm" means such nationally recognized,
independent accounting firm as is mutually appointed by Seller and Buyer for
purposes of this Agreement.
(67) "Inspection " means all tests, reviews, examinations, inspections,
investigations, verifications, samplings and similar activities conducted by any
Buyer or its Representatives with respect to the Purchased Assets prior to the
Closing.
(68) "Inventories" means materials, spare parts, capital spare parts,
consumable supplies and chemical inventories relating to the operation of the
Peach Bottom Station; but shall not include Fuel Supplies.
(69) "Knowledge" means the actual knowledge of the directors and
executive officers of the specified Person, which directors and executive
officers are charged with responsibility for the particular function after
reasonable inquiry by them of selected employees of such Persons whom they
believe, in good faith, to be the persons responsible for the subject matter of
the inquiry, as of the date of this Agreement, or, with respect to any
certificate delivered pursuant to this Agreement, the date of delivery of such
certificate.
(70) "Laws" means all laws, statutes, rules, regulations and ordinances
of any Governmental Authority.
(71) "Low-Level Waste" means radioactive material that (a) is not
High-Level Waste, Spent Nuclear Fuel or Byproduct Material, and (b) the NRC
classifies as low-level radioactive waste.
(72) "Material Adverse Effect" means any change in or effect on the
Peach Bottom Station or any portion thereof (other than the Decommissioning
Funds) that is materially adverse to the operation or condition (financial or
otherwise) of the Peach Bottom Station, taken as a whole, including a shutdown
thereof that is materially adverse to the operation or condition (financial or
otherwise) of the Peach Bottom Station, but excluding (a) any change or effect
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generally affecting the international, national, regional or local electric
industry as a whole and not specific to the Peach Bottom Station (other than any
change or effect affecting the nuclear electric industry generally), (b) any
change or effect resulting from changes in the international, national, regional
or local wholesale or retail markets for electricity, including any change in or
effect on the structure, operating agreements, operations or procedures of
Pennsylvania-New Jersey-Maryland Interconnection L.L.C. or its control area, (c)
any change or effect resulting from changes in the international, national,
regional or local markets for any fuel (whether nuclear or otherwise) used at
the Peach Bottom Station, (d) any change or effect resulting from changes in the
North American, national, regional or local electricity transmission systems or
operations thereof, (e) any change or effect to the extent constituting or
involving an Excluded Asset or an Excluded Liability and (f) any change or
effect which is cured (including by payment of money) before the earlier of the
Closing and the termination of this Agreement pursuant to Section 10.1.
(73) "Mortgage Indenture" means the Indenture, dated January 15, 1937,
made and entered into by and between ACE and Irving Trust Company, a corporation
of the State of New York, as amended.
(74) "NEIL" means Nuclear Electric Insurance Limited, and any successor
entity thereto.
(75) "Net Book Value" means, as of any date and with respect to any
asset or property, an amount equal to the original cost of such asset or
property less applicable depreciation and amortization, calculated and presented
in accordance with methods and procedures historically applied by PECO in the
preparation of monthly statements delivered to Seller under the Owners Agreement
prior to the date hereof.
(76) "NRC" means the Nuclear Regulatory Commission, as established by
Section 201 of the Energy Reorganization Act of 1974, 42 U.S.C. Section 5841, as
amended, and any successor agency thereto.
(77) "NRC Licenses" means, together, Facility Operating License No.
DPR-44 with respect to Unit 2 at the Peach Bottom Station and Facility Operating
License No. DPR-56 with respect to Unit 3 at the Peach Bottom Station, in each
case, issued by the NRC to Seller, PECO, DP&L and PSE&G Utility, as amended.
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(78) "Nuclear Fuel Supplies" means the nuclear fuel assemblies in the
reactor core, natural uranium, converted uranium, enriched uranium and any other
form of any thereof, under contract or in inventory, and located at or in
transit to the Peach Bottom Station, as well as all nuclear fuel constituents in
all stages of the fuel cycle which are in the process of production, conversion,
enrichment or fabrication.
(79) "Nuclear Laws" means, collectively, in each case, as amended from
time to time, (a) all Laws relating to: the regulation of nuclear power plants,
Nuclear Materials and the transportation and storage of Nuclear Materials; the
regulation of nuclear fuel; the enrichment of uranium; the disposal and storage
of High-Level Waste, and Spent Nuclear Fuel, and contracts for and payments into
the Nuclear Waste Fund; (b) the Atomic Energy Act of 1954 (42 U.S.C. Section
2011 et seq.); (c) the Energy Reorganization Act of 1974 (42 U.S.C. Section 5801
et seq.); (d) the Convention on the Physical Protection of Nuclear Material
Implementation Act of 1982 (Public Law 97 - 351; 96 STAT. 1663); (e) the Foreign
Assistance Act of 1961 (22 U.S.C. Section 2429 et seq.); (f) the Nuclear
Non-Proliferation Act of 1978 (22 U.S.C. Section 3201); (g) the Low-Level
Radioactive Waste Policy Act (42 U.S.C. Section 2021b et seq.); (h) the Nuclear
Waste Policy Act; (i) the Low-Level Radioactive Waste Policy Amendments Act of
1985 (42 U.S.C. Section 2021d, 471); (j) the Energy Policy Act of 1992 (42
U.S.C. Section 13201 et seq.); (k) the Pennsylvania Radiation Protection Act (35
P.S. Section 7110.101 et seq.); (l) the Appalachian States Low-Level Radioactive
Waste Compact Act (35 P.S. Section 7125.1 et seq.); and (m) the Pennsylvania
Low-Level Radioactive Waste Disposal Act (35 P.S. Section 7130.101 et seq.); but
shall not include Environmental Laws.
(80) "Nuclear Materials" means Source Material, Special Nuclear
Material, Low-Level Waste, High-Level Waste, Byproduct Material and Spent
Nuclear Fuel.
(81) "Nuclear Waste Fund" means the fund established by the Department
of Energy under the Nuclear Waste Policy Act in which the Spent Nuclear Fuel
Fees to be used for the design, construction and operation of a High-Level Waste
Repository and other activities related to the storage and disposal of Spent
Nuclear Fuel or High-Level Waste are deposited.
(82) "Nuclear Waste Policy Act" means the Nuclear Waste Policy Act of
1982, as amended from time to time (42 U.S.C. Section 10101 et seq.).
(83) "Off-Site Location" means any real property other than the Sites.
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(84) "Owners Agreement" means the Owners Agreement for Peach Bottom No.
2 and No. 3 Nuclear Units, dated as of November 24, 1971, as amended, by and
between Seller, DP&L, PECO and PSE&G Utility.
(85) "PaPUC" means the Pennsylvania Public Utility Commission, and any
successor agency thereto.
(86) "Party" and "Parties" have the respective meanings set forth in
the preamble to this Agreement.
(87) "Peach Bottom Interest" means Seller's undivided 7.51% interest as
tenant in common without the right of partition in the Peach Bottom Station.
(88) "Peach Bottom Station" means the generating station described in
the Owners Agreement described in Section 1.1(84).
(89) "PECO" has the meaning set forth in the preamble to this
Agreement.
(90) "PECO Closing Nuclear Fuel Supply Amount" has the meaning set
forth in Section 3.3(a).
(91) "PECO Closing Payment" has the meaning set forth in Section 3.2(c)
(92) "PECO Closing Statement" has the meaning set forth in Section
3.3(a).
(93) "PECO Interest" means one-half of the Peach Bottom Interest,
constituting a 3.755% undivided interest as tenant in common without the right
of partition in the Peach Bottom Station.
(94) "PECO NRC Applications" means whatever actions may be necessary or
appropriate to request and obtain the PECO NRC Approvals.
(95) "PECO NRC Approvals" means the consent of the NRC pursuant to
Section 184 of the Atomic Energy Act and 10 C.F.R. Section 50.80 to the transfer
of the Purchased Assets to PECO, NRC approval of all conforming administrative
license amendments associated with such transfers, NRC consent to the transfer
of, and approval of any related amendments to, any nuclear materials licenses
associated with such transfers and any other NRC consents and approvals required
<PAGE>
in connection with the consummation of the transactions contemplated by this
Agreement.
(96) "PECO Nuclear Permits" has the meaning set forth in Section
5.5(b).
(97) "PECO Permits" has the meaning set forth in Section 5.4.
(98) "PECO Purchase Price" has the meaning set forth in Section 3.2(a)
(99) "PECO Required Regulatory Approvals" has the meaning set forth in
Section 5.3(b).
(100) "Permitted Encumbrances" means: (a) such Encumbrances as arise
under any Seller's Agreement; (b) with respect to any period before the Closing,
Encumbrances created by the Mortgage Indenture; (c) statutory liens for Taxes or
other charges or assessments of Governmental Authorities not yet due or
delinquent or the validity of which is being challenged in good faith by
appropriate proceedings provided that the aggregate amount being so contested
does not exceed $100,000 or Seller has provided Buyers adequate security with
respect thereto, in form and substance satisfactory to Buyers; (d) mechanics',
carriers', workers', repairers' and other similar liens arising or incurred in
the ordinary course of business relating to obligations as to which there is no
default on the part of Buyer; (e) such zoning, entitlement, conservation
restriction and other land use and environmental regulations by Governmental
Authorities as (i) do not materially detract from the value of any Purchased
Asset as currently used, or materially interfere with the present use of any
Purchased Asset or (ii) would not, individually or in the aggregate, have a
Material Adverse Effect; and (f) such non-monetary easements, activity and use
limitations, exceptions, rights of way, deed restrictions, covenants and
conditions and defects of title as (i) do not materially detract from the value
of the Real Property as currently used or materially interfere with the present
use of the Real Property or (ii) would not, individually or in the aggregate,
have a Material Adverse Effect.
(101) "Person" means any individual, partnership, limited liability
company, joint venture, corporation, trust, unincorporated organization, other
business association or Governmental Authority.
(102) "Prime Rate" has the meaning set forth in Section 3.3(c).
(103) "PSEG" has the meaning set forth in the preamble of this
Agreement.
<PAGE>
(104) "PSEG Closing Nuclear Fuel Supply Amount" has the meaning set
forth in Section 3.5(a).
(105) "PSEG Closing Payment" has the meaning set forth in Section
3.4(c)
(106) "PSEG Closing Statement" has the meaning set forth in Section
3.5(a).
(107) "PSEG Interest" means one-half of the Peach Bottom Interest,
constituting a 3.755% undivided interest as tenant in common without the right
of partition in the Peach Bottom Station.
(108) "PSEG NRC Applications" means whatever actions may be necessary
or appropriate to request and obtain the PSEG NRC Approvals.
(109) "PSEG NRC Approvals" means the consent of the NRC pursuant to
Section 184 of the Atomic Energy Act and 10 C.F.R. Section 50.80 to the transfer
of the Purchased Assets to PSEG, NRC approval of all conforming administrative
license amendments associated with such transfers, NRC consent to the transfer
of, and approval of any related amendments to, any nuclear materials licenses
associated with such transfers and any other NRC consents and approvals required
in connection with the consummation of the transactions contemplated by this
Agreement.
(110) "PSEG Nuclear Permits" has the meaning set forth in Section
6.5(b).
(111) "PSEG Permits" has the meaning set forth in Section 6.4.
(112) "PSEG Purchase Price" has the meaning set forth in Section
3.4(a).
(113) "PSEG Required Regulatory Approvals" has the meaning set forth in
Section 6.3(b).
(114) "PSE&G Utility" means Public Service Electric & Gas Company, a
New Jersey corporation.
<PAGE>
(115) "PUHCA" means the Public Utility Holding Company Act of 1935, as
amended from time to time, and the rules and regulations promulgated thereunder
from time to time.
(116) "Purchased Assets" means all of Seller's rights, title and
interests, of whatever kind and nature, whether tangible or intangible, in and
to all assets (except for the Excluded Assets) constituting or used and
necessary for the operation of the Peach Bottom Station or any portion thereof,
together with all goodwill relating thereto.
(117) "PURTA" has the meaning set forth in Section 3.7(c).
(118) "Real Property" means all real property (including all buildings
and other improvements thereon and all appurtenances thereto) underlying or used
in connection with the Peach Bottom Station, all as more particularly set forth
on Schedule 1.1(118).
(119) "Regulatory Termination" has the meaning set forth in Section
10.3.
(120) "Release" means any release, spill, leak, discharge, disposal of,
pumping, pouring, emitting, emptying, injecting, leaching, dumping, depositing,
dispersing, allowing to escape or migrate into or through the environment
(including ambient air, surface water, groundwater, land surface and subsurface
strata) or within any building, structure, facility or fixture.
(121) "Remediation" or "Remediate" means action of any kind to address
an Environmental Condition or a Release or threatened Release of Hazardous
Substances or the presence of Hazardous Substances at the Sites or an Off-Site
Location, including the following activities to the extent they relate to,
result from or arise out of the presence of a Hazardous Substance at the Sites
or an Off-Site Location: (a) monitoring, investigation, assessment, treatment,
cleanup, containment, removal, mitigation, response or restoration work; (b)
obtaining any permits, consents, approvals or authorizations of any Governmental
Authority necessary to conduct any such activity; (c) preparing and implementing
any plans or studies for any such activity; (d) obtaining a written notice from
a Governmental Authority with jurisdiction over the Sites or an Off-Site
Location under Environmental Laws that no material additional work is required
by such Governmental Authority; (e) the use, implementation, application,
installation, operation or maintenance of removal actions on the Sites or an
<PAGE>
Off-Site Location, remedial technologies applied to the surface or subsurface
soils, excavation and treatment or disposal of soils at an Off-Site Location,
systems for long-term treatment of surface water or groundwater, engineering
controls or institutional controls; and (f) any other activities reasonably
determined by a Party to be necessary or appropriate or required under
Environmental Laws to address an Environmental Condition or a Release of
Hazardous Substances or the presence of Hazardous Substances at the Sites or an
Off-Site Location.
(122) "Representatives" of a Person means, collectively, such Person's
Affiliates and its and their respective directors, officers, partners, members,
employees, representatives, agents, advisors (including accountants, legal
counsel, environmental consultants and financial advisors), parent entities and
other controlling Persons.
(123) "SEC" means the United States Securities and Exchange Commission,
and any successor agency thereto.
(124) "Securities Act" means the Securities Act of 1933, as amended
from time to time, and the rules and regulations promulgated thereunder from
time to time.
(125) "Seller" has the meaning set forth in the preamble to this
Agreement.
(126) "Seller Nuclear Permits" has the meaning set forth in Section
4.7.
(127) "Seller Permits" has the meaning set forth in Section 4.4.
(128) "Seller Tax Loss" has the meaning set forth in Section 7.5(g).
(129) "Seller's Agreements" means, collectively, the contracts,
agreements, arrangements, licenses and leases of any nature, which shall be
assigned pursuant to Section 2.1(f), (i) to which Seller is a party, each of
which is set forth in Schedule 1.1(129), and (ii) entered into by either Buyer,
for and on behalf of Seller, whether under the Owners Agreement or otherwise,
and by or to which Seller or the Purchased Assets is or are bound or subject, in
each case, relating to the ownership, lease, maintenance or operation of the
Purchased Assets.
(130) "Seller's Indemnitee" has the meaning set forth in Section
9.1(a).
<PAGE>
(131) "Seller's Insurance Policies" means all insurance policies with
respect to the ownership, lease, maintenance or operation of the Purchased
Assets, including all liability, property damage and business interruption
policies in respect thereof, for which solely Seller or its Affiliates (as
opposed to Buyer or its Affiliates) are liable for the payment of premiums and
related charges.
(132) "Seller's Nonqualified Decommissioning Funds" means the trust
funds that are designated as nonqualified decommissioning funds for the Peach
Bottom Station and held pursuant to the Trust Agreement.
(133) "Seller's Qualified Decommissioning Funds" means the trust funds
that are designated as "nuclear decommissioning reserve funds" under Code
Section 468A for the Peach Bottom Station and held pursuant to the Trust
Agreement.
(134) "Seller's Required Regulatory Approvals" has the meaning set
forth in Section 4.3(b).
(135) "Sites" means the Real Property forming a part, or used or usable
in connection with the operation, of the Peach Bottom Station, including any
real property used for the disposal of solid or hazardous waste that is included
in the Real Property. Any reference to the Sites shall include the surface and
subsurface elements, to the extent owned by Seller, including the soil and
groundwater present at the Sites, and any reference to materials or conditions
"at the Sites", including Hazardous Substances and Environmental Conditions,
shall include all materials and conditions "at, on, in, upon, over, across,
under or within" the Sites.
(136) "Source Material" means: (a) uranium or thorium, or any
combination thereof, in any physical or chemical form or (b) ores which contain
by weight one-twentieth of one percent (0.05%) or more of (i) uranium, (ii)
thorium or (iii) any combination thereof; but shall not include Special Nuclear
Material.
(137) "Special Nuclear Material" means plutonium, uranium-233, uranium
enriched in the isotope-233 or in the isotope-235, and any other material that
the NRC determines to be "Special Nuclear Material", and any material
artificially enriched by any of the foregoing materials or isotopes; but shall
not include Source Material.
(138) "Spent Nuclear Fuel" means nuclear fuel that has been withdrawn
from a nuclear reactor following irradiation and has not been chemically
<PAGE>
separated into its constituent elements by reprocessing, including the Special
Nuclear Material, Byproduct Material, Source Material and other radioactive
materials associated with nuclear fuel assemblies.
(139) "Spent Nuclear Fuel Fees" means the fees assessed on electricity
generated and sold at the Peach Bottom Station pursuant to the Department of
Energy Standard Contract, as provided in Section 302 of the Nuclear Waste Policy
Act and 10 C.F.R. Part 961, as amended from time to time.
(140) "Subsequent Transaction" has the meaning set forth in Section
10.3.
(141) "Subsidiary", when used in reference to any Person, means any
entity of which outstanding securities or interests having ordinary voting power
to elect a majority of the board of directors or other governing body performing
similar functions of such entity are owned directly or indirectly by such
Person.
(142) "Tangible Personal Property" has the meaning set forth in Section
2.1(e).
(143) "Tax" or "Taxes" means all taxes, surtaxes, charges, fees,
levies, penalties and other assessments imposed by any Governmental Authority,
including income, gross receipts, excise, property, sales, transfer, use,
franchise, special franchise, payroll, recording, withholding, social security,
gross receipts, license, stamp, occupation, employment or other taxes, including
any interest, penalties or additions attributable thereto or any liability for
taxes incurred by reason of joining in the filing of any consolidated, combined
or unitary Tax Returns, in each case including any interest, penalties or
additions attributable thereto; provided, however, that "Taxes" shall not
include sewer rents or charges for water.
(144) "Tax Benefit" has the meaning set forth in Section 9.1(e).
(145) "Tax Cost" has the meaning set forth in Section 9.1(e).
(146) "Tax Return" means any return, report, information return,
declaration, claim for refund, or other document, together with all amendments
and supplements thereto (including all related or supporting information),
required to be supplied to any Governmental Authority responsible for the
administration of Laws governing Taxes.
<PAGE>
(147) "Termination Date" has the meaning set forth in Section 10.1(b).
(148) "Third-Party Claim" has the meaning set forth in Section 9.2(a).
(149) "Transferable Permits" means all those Seller Permits, including
Seller's Nuclear Permits (and all applications pertaining thereto), which are
transferable under applicable Laws by Seller to PECO or PSEG, as the case may
be, with or without a filing with, notice to, consent or approval of any
Governmental Authority.
(150) "Transfer Taxes" means any property transfer or gains tax, sales
tax, conveyance fee, use tax, stamp tax, stock transfer tax or other similar
tax, including any related penalties, interest and additions to tax.
(151) "Trust Agreement" means the Atlantic City Electric Company First
Amended and Restated Master Decommissioning Trust Agreement for Hope Creek
Nuclear Generating Station, Peach Bottom Atomic Power Station and Salem Nuclear
Generating Station dated December 30, 1994, as amended.
(152) "USEPA" means the United States Environmental Protection Agency,
and any successor agency thereto.
1.2 Certain Interpretive Matters. The Article, Section and Schedule
headings contained in this Agreement are solely for the purpose of reference,
are not part of the agreement of the Parties and shall not in any way affect the
meaning of this Agreement. The term "includes" or "including" shall mean
"including without limitation." The words "hereof", "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement.
Other capitalized terms used in this Agreement and not defined in Section 1.1
shall have the meanings assigned to them elsewhere in this Agreement. Unless the
context otherwise requires, the definitions contained in this Agreement are
applicable to the singular as well as the plural forms of such terms and to the
masculine as well as to the feminine and neuter genders of such term. Any
agreement, instrument, statute, regulation, rule or order defined or referred to
herein or in any agreement or instrument that is referred to herein means such
agreement, instrument, statute, regulation, rule or order as from time to time
amended, modified or supplemented, including (in the case of agreements or
instruments) by waiver or consent and (in the case of statutes, regulations,
rules or orders) by succession of comparable successor statutes, regulations,
<PAGE>
rules or orders and references to all attachments thereto and instruments
incorporated therein. References to a Section, Article, Exhibit or Schedule
shall mean a Section, Article, Exhibit or Schedule of this Agreement.
1.3 U.S. Dollars. When used herein, the term "dollars" and the symbol
"$" refer to the lawful currency of the United States of America.
1.4 Seller's Interest in Purchased Assets. The Parties acknowledge and
agree that Seller owns and holds an undivided seven and fifty-one hundredths
percent (7.51%) interest as tenant in common without the right of partition in
the Peach Bottom Station, and that the PECO Interest and the PSEG Interest each
constitute one-half of such undivided interest. The Parties further acknowledge
and agree that the PECO Interest and the PSEG Interest together constitute all
of Seller's rights, title and interest in, to and under the Purchased Assets.
The Parties agree that all references in this Agreement to Seller's rights,
title and interests in, to and under the Purchased Assets, and rights,
liabilities and obligations in connection therewith, shall be construed in this
context. Each Party acknowledges and agrees that (i) the assumption and
agreement to pay, perform or otherwise discharge, from and after the Closing
Date, one-half of the Assumed Liabilities by each of PECO and PSEG (that is, by
PECO, to the extent of the PECO Interest, and by PSEG, to the extent of the PSEG
Interest) shall be several and not joint, and (ii) notwithstanding the
foregoing, from and after the Closing Date, Seller shall have no further
liability or obligation in respect of any Assumed Liability.
ARTICLE II
PURCHASE AND SALE
2.1 Transfer of Purchased Assets. Upon the terms and subject to the
conditions set forth in this Agreement, at the Closing, (i) Seller shall sell,
assign, convey, transfer and deliver to PECO, and PECO shall purchase, assume
and acquire from Seller, free and clear of all Encumbrances, except for
Permitted Encumbrances, the Purchased Assets, but only to the extent of the PECO
Interest, and (ii) Seller shall sell, assign, convey, transfer and deliver to
PSEG, and PSEG shall purchase, assume and acquire from Seller, free and clear of
all Encumbrances, except for Permitted Encumbrances, the Purchased Assets, but
only to the extent of the PSEG Interest, in each case, as in existence on the
Closing Date, including the following Purchased Assets:
<PAGE>
(a) The Real Property;
(b) The Inventories;
(c) The Nuclear Materials held pursuant to the NRC Licenses;
(d) The Fuel Supplies;
(e) All machinery (mobile or otherwise), equipment (including
computer hardware and software and communications equipment), vehicles, tools,
spare parts, fixtures, furniture, furnishings and other personal property
located at or in transit to the Peach Bottom Station or used and necessary for
the operation of the Peach Bottom Station, in each case, on the Closing Date
(collectively, the "Tangible Personal Property");
(f) Subject to the receipt of necessary consents and
approvals, the Seller's Agreements;
(g) Subject to the receipt of necessary consents and
approvals, the Transferable Permits and all of Seller's rights, title and
interests in and to any other permits, registrations, franchises, certificates,
licenses and other authorizations, consents and approvals of Governmental
Authorities relating to the ownership, lease, maintenance or operation of the
Peach Bottom Station or any portion thereof;
(h) Seller's Nonqualified Decommissioning Funds as of the
Closing Date, including all income, interest and other earnings accrued thereon,
together with all required accounting and other records;
(i) Seller's Qualified Decommissioning Funds as of the Closing
Date, including all income, interest and other earnings accrued thereon,
together with all required accounting and other records;
(j) All books, operating records, operating, safety and
maintenance manuals, engineering design plans, blueprints and as-built plans,
specifications, procedures and similar items of Seller relating specifically to
the Peach Bottom Station (subject to the right of Seller to retain copies of
same for its use) other than such items which are proprietary to third parties
and accounting records;
<PAGE>
(k) All unexpired, transferable warranties and guarantees from
third parties arising out of, in respect of, or in connection with, (i) any item
of Real Property or personal property, or interest therein, included in the
Purchased Assets or (ii) the Assumed Liabilities;
(l) All claims of Seller relating to or pertaining to the
Department of Energy's defaults under the Department of Energy Standard Contract
(including all claims for failure by the Department of Energy to take Spent
Nuclear Fuel) accrued prior to, on or after the Closing Date, whether relating
to periods prior to, on or after the Closing Date, and all other claims of
Seller against the Department of Energy with respect to, arising out of or in
connection with the Purchased Assets, other than the claims described in Section
2.2(j); and
(m) The rights of Seller in, to and under all causes of action
against third parties with respect to, arising out of or in connection with
Seller's rights, title and interests in and to the Purchased Assets or the
Assumed Liabilities, or any portion thereof, whether accruing prior to, on or
after the Closing Date, other than any such causes of action as constitute
Excluded Assets or Excluded Liabilities, whether received as payment or credit
against future liabilities, in each case, relating to any period prior to, on or
after the Closing Date.
2.2 Excluded Assets. Notwithstanding anything to the contrary in this
Agreement, nothing in this Agreement shall constitute or be construed as
requiring Seller to sell, assign, convey, transfer or deliver, and neither PECO
nor PSEG shall be entitled to purchase or acquire, any right, title or interest
in, to or under the following assets and properties which are associated with
the Purchased Assets, but which are hereby specifically excluded from the
definition of Purchased Assets (collectively, the "Excluded Assets"):
(a) All certificates of deposit, shares of stock, securities,
bonds, debentures, evidences of indebtedness, and interests in joint ventures,
partnerships, limited liability companies and other entities, including account
balances under Seller's Insurance Policies and the right, title and interest of
Seller in, to and under account balances held by NEIL under Buyers' Insurance
Policies, but excluding such assets comprising the Decommissioning Funds;
<PAGE>
(b) All Seller's Insurance Policies and the right, title and
interest of Seller in, to and under account balances held by NEIL under Buyers'
Insurance Policies;
(c) All cash, cash equivalents, bank deposits, accounts and
notes receivable (trade or otherwise), and prepaid expenses, including premiums
and account balances under Seller's Insurance Policies and the right, title and
interest of Seller in, to and under account balances held by NEIL under Buyers'
Insurance Policies, and any income, sales, payroll or other Tax receivables (in
each case, whether held by Seller or any third party, including Buyers under the
Owners Agreement), but excluding such assets comprising the Decommissioning
Funds;
(d) The right, title and interest of Seller in, to and under
all intellectual property, including the names "Atlantic City Electric Company",
"ACE" or any derivation thereof, as well as any related or similar name, or any
other trade names, trademarks, service marks, corporate names and logos, or any
part, derivation, colorable imitation or combination thereof;
(e) All tariffs, agreements and arrangements with Persons
other than Buyers to which Seller is a party for the purchase or sale of
electric capacity or energy, or for the purchase of transmission, distribution
or ancillary services;
(f) Other than with respect to the Decommissioning Funds, all
Tax refunds or credits (including refunds or credits of real property Taxes paid
or due with respect to the Peach Bottom Station or any related Real Property),
which refunds or credits are owed to Seller with respect to periods prior to the
Closing Date, whether directly or indirectly, under the Owners Agreement or
otherwise regardless of when actually paid (which refunds or credits shall be
net to Seller of all reasonable out-of-pocket costs and expenses (including
legal fees) incurred by Buyers in connection with obtaining the portion of such
Tax refund or credit owed to Seller);
(g) The minute books, stock transfer books, corporate seal and
other corporate records of Seller;
(h) The right, title and interest of Seller in, to and under
all contracts, agreements, arrangements, licenses and leases of any nature,
other than the Seller's Agreements;
<PAGE>
(i) All other assets and properties owned or leased by Seller
which are not used and necessary for the operation of the Peach Bottom Station
or any portion thereof;
(j) All claims of Seller relating to or pertaining to any
refund or credit received on or after the Closing Date by PECO, as operator of
the Peach Bottom Station, or its successors or permitted assigns, of all or any
part of Department of Energy Decommissioning and Decontamination Fees for which
Seller is or was liable; provided that Seller shall not have any right to pursue
such claims separately, but shall be entitled to pursue such claims solely by
joint action with PECO and any other interested parties approved by Buyers, such
action to be controlled by PECO in its sole discretion; provided, also that if
PECO shall receive any such refund or credit on or after the Closing Date of all
or any part of such Department of Energy Decommissioning and Decontamination
Fees, Seller's claim to a portion of such refund shall be limited to the amount
of such refund or credit multiplied by a fraction, (i) the numerator of which is
the amount of Decommissioning and Decontamination Fees with respect to the Peach
Bottom Station paid by Seller or on Seller's behalf, and (ii) the denominator of
which is the amount of Decommissioning and Decontamination Fees with respect to
the Peach Bottom Station paid by all of the parties to the Owners Agreement or
on their behalf; and provided, further, that the aforesaid claims shall
constitute Excluded Assets (rather than Purchased Assets) after the Closing only
if Seller shall continue to pay after the Closing its proportionate share of the
costs and expenses (including reasonable legal fees) of pursuing any such claims
(but not Department of Energy Decommissioning and Decontamination Fees), such
proportionate share to be determined as if Seller had not transferred its
rights, title and interests in and to the Purchased Assets to Buyers; and
(k) The right, title and interest of Seller in, to and under
this Agreement, the Collateral Agreement and the Additional Agreements.
2.3 Assumed Liabilities. At the Closing (i) PECO shall assume and agree
to pay, perform and otherwise discharge, without recourse to Seller (other than
as set forth herein or in the Owners Agreement, as amended by the Amendment to
Owners Agreement), in accordance with the terms and subject to the conditions
set forth herein, the Assumed Liabilities, but only to the extent of the PECO
Interest, and (ii) PSEG shall assume and agree to pay, perform and otherwise
discharge, without recourse to Seller (other than as set forth herein or in the
Owners Agreement, as amended by the Amendment to Owners Agreement), in
<PAGE>
accordance with the terms and subject to the conditions set forth herein, the
Assumed Liabilities, but only to the extent of the PSEG Interest, in each case,
including those set forth below; provided that nothing set forth in this Section
2.3 shall require Buyers to assume any liabilities or obligations that are
expressly excluded pursuant to Section 2.4:
(a) All liabilities and obligations of Seller arising on or
after the Closing Date under the Seller's Agreements and the Transferable
Permits in accordance with the terms thereof, except, in each case, to the
extent such liabilities and obligations, but for a breach or default by Seller,
would have been paid, performed or otherwise discharged prior to the Closing
Date;
(b) All liabilities and obligations of Seller in respect of
Taxes for which any Buyer is liable pursuant to Section 7.5 hereof;
(c) Other than those set forth in Section 2.4(g), all
liabilities and obligations of Seller arising under or relating to Environmental
Laws or relating to any claim in respect of Environmental Conditions or
Hazardous Substances, whether based on common law or Environmental Laws, whether
relating to the Sites or any Off-Site Location, in either case, whether such
liabilities or obligations are known or unknown, contingent or accrued,
including (i) any violation or alleged violation of Environmental Laws with
respect to the ownership, lease, maintenance or operation of any of the
Purchased Assets, including any fines or penalties that arise in connection with
the ownership, lease, maintenance or operation of the Purchased Assets prior to,
on or after the Closing Date, and the costs associated with correcting any such
violations; (ii) loss of life, injury to Persons or property or damage to
natural resources (whether or not such loss, injury or damage arose or was made
manifest before the Closing Date or arises or becomes manifest prior to, on or
after the Closing Date), in each case, caused (or allegedly caused) by any
Environmental Condition or the presence or Release of Hazardous Substances at,
on, in, under, or migrating from the Purchased Assets prior to, on or after the
Closing Date, including any Environmental Condition or Hazardous Substances
contained in building materials at or adjacent to the Purchased Assets or in the
soil, surface water, sediments, groundwater, landfill cells, or in other
environmental media at or near the Purchased Assets; (iii) the investigation or
Remediation (whether or not such investigation or Remediation commenced before
the Closing Date or commences on or after the Closing Date) of any Environmental
Condition or Hazardous Substances that are present or have been Released prior
to, on or after the Closing Date at, on, in, under or migrating from the
Purchased Assets or in the soil, surface water, sediments, groundwater, landfill
<PAGE>
cells or in other environmental media at or adjacent to the Purchased Assets;
(iv) loss of life, injury to persons or property or damage to natural resources
(whether or not such loss, injury or damage arose or was made manifest before
the Closing Date or arises or becomes manifest on or after the Closing Date)
caused or allegedly caused by the disposal, storage, transportation, discharge,
Release or recycling of Hazardous Substances at an Off-Site Location, or the
arrangement for such activities, prior to, on or after the Closing Date, in
connection with the ownership, lease, maintenance or operation of the Purchased
Assets; and (v) the investigation or Remediation (whether or not such
investigation or Remediation commenced before the Closing Date or commences on
or after the Closing Date) of Hazardous Substances that are disposed, stored,
transported, discharged, Released, recycled at an Off-Site Location, or the
arrangement for such activities, prior to, on or after the Closing Date, in
connection with the ownership, lease, maintenance or operation of the Purchased
Assets;
(d) All liabilities and obligations of Seller in respect of
Decommissioning the Peach Bottom Station, and the Decommissioning Costs relating
thereto, whether arising prior to, on or after the Closing Date (collectively,
"Assumed Decommissioning Liabilities");
(e) Other than as set forth in Section 2.4(h), all liabilities
and obligations of Seller arising under or relating to Nuclear Laws, and all
liabilities and obligations of Seller arising under or relating to Nuclear
Materials or to any claim in respect thereof, whether based on Nuclear Laws,
Environmental Laws, common law or otherwise (excluding liabilities and
obligations for Department of Energy Decommissioning and Decontamination Fees,
which are governed by Section 2.7), whether such liabilities or obligations are
known or unknown, contingent or accrued, in each case, arising or occurring
prior to, on or after the Closing Date, including all asserted or unasserted
liabilities or obligations to third parties (including employees) for personal
injury or tort, or any other theory of liability, arising out of the ownership,
lease, maintenance or operation of the Purchased Assets prior to, on or after
the Closing Date, including liabilities and obligations arising out of or
resulting from the transportation, treatment, storage or disposal of Nuclear
Materials, including liabilities and obligations arising out of or resulting
from a "nuclear incident" or "precautionary evacuation" (as such terms are
defined in the Atomic Energy Act) at the Peach Bottom Station, or any other
licensed nuclear reactor site in the United States, or in the course of the
transportation of Nuclear Materials to or from the Peach Bottom Station, or any
other such site prior to, on or after the Closing Date, including liability for
all deferred premiums assessed in connection with such a nuclear incident or
<PAGE>
precautionary evacuation under any applicable NRC or industry retrospective
rating plan or insurance policy, including any mutual insurance pools
established in compliance with the requirements imposed under Section 170 of the
Atomic Energy Act and 10 C.F.R. Part 140 or 10 C.F.R. Section 50.54(w),
including all liabilities and obligations of Seller for retrospective premium
obligations under Seller's Insurance Policies or Buyers' Insurance Policies
(collectively, "Assumed Nuclear Liabilities");
(f) All liabilities and obligations of Seller in respect of
Spent Nuclear Fuel, including Spent Nuclear Fuel Fees, whether such liability or
obligation is known or unknown, contingent or accrued, and whether arising or
occurring prior to, on or after the Closing Date, except as specified in Section
2.6 (collectively, "Assumed Spent Fuel Liabilities"); and
(g) With respect to the Purchased Assets, any Tax that may be
imposed on Seller by any Governmental Authority on the ownership, lease,
maintenance, operation, or use of the Purchased Assets on or after the Closing
Date, except for any Income Tax attributable to income (including proceeds
representing the Purchase Price or proceeds of asset sales) received by Seller
and any Transfer Taxes for which Seller is liable pursuant to Section 7.5.
2.4 Excluded Liabilities. Notwithstanding anything to the contrary in
Section 2.3, Buyers shall not assume or be obligated to pay, perform or
otherwise discharge the following liabilities or obligations of Seller (the
"Excluded Liabilities"):
(a) Any liabilities or obligations of Seller arising out of,
in respect of, or in connection with, any Excluded Assets or other assets of
Seller which are not Purchased Assets;
(b) Any liabilities or obligations of Seller arising out of,
in respect of, or in connection with, Taxes attributable to the Purchased Assets
for taxable periods, or portions thereof, ending before the Closing Date, except
for Transfer Taxes and Taxes for which any Buyer is liable pursuant to Section
7.5;
(c) Any liabilities or obligations of Seller accruing under
any of the Seller's Agreements prior to the Closing Date;
(d) Any payment obligations of Seller under the Owners
Agreement, as amended by the Amendment to Owners Agreement, for goods delivered
<PAGE>
or services rendered or liabilities incurred prior to the Closing Date, except
for such obligations for which Buyers or any other Person (other than Seller)
are liable under the Owners Agreement, as amended by the Amendment to Owners
Agreement;
(e) Any and all asserted or unasserted liabilities or
obligations to third parties (including employees of Seller) for personal injury
or tort, or similar causes of action relating to Seller's acts or omissions in
connection with the ownership of the Purchased Assets arising during or
attributable to the period prior to the Closing Date, other than liabilities or
obligations assumed by Buyers under Sections 2.3(c) and (e);
(f) Any fines or similar penalties imposed by and payable to
any Governmental Authority under applicable Law (as in effect prior to the
Closing Date, notwithstanding any provision hereof to the contrary) with respect
to the Purchased Assets resulting from (i) an investigation, proceeding, request
for information or inspection before or by a Governmental Authority directly
relating to actions or omissions by Seller prior to the Closing Date or (ii)
violations of applicable Law (as in effect prior to the Closing Date,
notwithstanding any provision hereof to the contrary), wilful misconduct or
gross negligence directly relating to actions or omissions by Seller prior to
the Closing Date;
(g) Any liabilities or obligations of Seller arising under or
relating to any claim in respect of Environmental Conditions or Hazardous
Substances, in each case, relating to the Purchased Assets, but only to the
extent relating to any Off-Site Location and of which Seller has Knowledge prior
to the Closing Date; and
(h) Any liabilities or obligations of Seller arising under or
relating to Nuclear Laws, and any liabilities or obligations of Seller arising
under or relating to Nuclear Materials or to any claim in respect thereof,
whether based on Nuclear Laws, Environmental Laws, common law or otherwise, in
connection with the ownership, lease, maintenance or operation of the Purchased
Assets, but only to the extent relating to any written assessment by any
Governmental Authority prior to the Closing Date with respect to any Nuclear
Incident (as defined in the Atomic Energy Act) occurring prior to the Closing
Date, which assessment exceeds the aggregate amount of the policy limits under
all applicable Buyers' Insurance Policies.
<PAGE>
2.5 Control of Litigation.
(a) The Parties acknowledge and agree that, from and after the
Closing Date, Seller shall be entitled exclusively to control, defend and settle
any suit, action or proceeding, and any investigation arising out of or related
to any Excluded Assets or Excluded Liabilities, so long as such control, defense
or settlement does not unreasonably interfere with Buyers' operation of the
Peach Bottom Station; and Buyers agree to cooperate fully in connection
therewith provided, however, that Seller shall reimburse Buyers for all
reasonable costs and expenses incurred in providing such cooperation.
(b) The Parties acknowledge and agree that, from and after the
Closing Date, Buyers shall be entitled exclusively to control, defend and settle
any suit, action or proceeding, and any investigation arising out of or related
to any Purchased Assets or Assumed Liabilities, so long as such control, defense
or settlement does not unreasonably interfere with Seller's ownership of the
Excluded Assets or with the Excluded Liabilities; and Seller agrees to cooperate
fully in connection herewith, provided, however, that PECO or PSEG, as the case
may be, shall reimburse Seller for all reasonable costs and expenses incurred in
providing such cooperation to PECO or to PSEG, as the case may be.
2.6 Spent Nuclear Fuel Fees. Seller, to the extent of the Peach Bottom
Interest, shall be liable for and pay, pursuant to the Owners Agreement, all
Spent Nuclear Fuel Fees in effect prior to the Closing Date with respect to its
share of electricity generated at and sold from the Peach Bottom Station prior
to the Closing Date, and Buyers shall have no liability or obligation in respect
thereof. PECO, to the extent of the PECO Interest, and PSEG, to the extent of
the PSEG Interest, shall be liable for and pay all Spent Nuclear Fuel Fees with
respect to its share of electricity generated at and sold from the Peach Bottom
Station from and after the Closing Date, together with all additional Spent
Nuclear Fees that are assessed or become effective on or after the Closing Date,
whether assessed with respect to electricity generated at and sold from the
Peach Bottom Station prior to, on or after the Closing Date, and Seller shall
have no further liability or obligation in respect thereof. Without limiting the
liability of Buyers under Sections 2.3(e) and (f), from and after the Closing
Date, PECO, to the extent of the PECO Interest, and PSEG, to the extent of the
PSEG Interest, shall assume title to, and such liabilities and obligations as
Seller may have for the storage and disposal of, Spent Nuclear Fuel presently
stored at the Peach Bottom Station (including any such fuel which may have been
used in connection with generating Seller's share of electricity at the Peach
<PAGE>
Bottom Station). From and after the Closing Date, Buyers shall have all rights
of recovery from third parties and the Department of Energy relating to, arising
from or in connection with the Department of Energy's failure to take Spent
Nuclear Fuel.
2.7 Department of Energy Decommissioning and Decontamination Fees.
Seller, to the extent of the Peach Bottom Interest, shall be liable for and pay,
pursuant to the Owners Agreement, its pro rata share of Department of Energy
Decommissioning and Decontamination Fees prior to the Closing Date, and,
thereafter, PECO, to the extent of the PECO Interest, and PSEG, to the extent of
the PSEG Interest, shall be liable for and pay, and Seller shall have no
liability for, such Department of Energy Decommissioning and Decontamination
Fees, together with all additional assessments for Department of Energy
Decommissioning and Decontamination Fees that become effective on or after the
Closing Date, whether assessed with respect to any period occurring prior to, on
or after the Closing Date.
ARTICLE III
THE CLOSING
3.1 Closing. Upon the terms and subject to the satisfaction of the
conditions contained in Article VIII, the sale, assignment, conveyance, transfer
and delivery of Seller's rights, title and interests in and to the Purchased
Assets by Seller to Buyers, and the purchase, assumption and acquisition by
Buyers of the Purchased Assets and the Assumed Liabilities, and the consummation
of the other transactions contemplated hereby, shall take place at a closing
(the "Closing ") to be held at the offices of Skadden, Arps, Slate, Meagher &
Flom LLP, One Rodney Square, Wilmington, Delaware, at 10:00 a.m. local time, or
at such other time and location as may be agreed upon in writing among Buyers
and Seller, within five (5) Business Days following the date on which the last
of the conditions precedent to the Closing set forth in Sections 8.1(a), 8.2(a),
8.3(a) and 8.4(a) of this Agreement, shall have been satisfied or, to the extent
permitted by applicable Law, waived by the Party for whose benefit such
conditions precedent exist. The date on which the Closing actually occurs is
hereinafter called the "Closing Date." The Closing shall be effective for all
purposes as of 12:01 a.m., New York City time, on the Closing Date.
<PAGE>
3.2 Payment of PECO Purchase Price.
(a) Upon the terms and subject to the satisfaction of the
conditions set forth in this Agreement, in consideration of the aforesaid sale,
assignment, conveyance, transfer and delivery of the Purchased Assets, to the
extent of the PECO Interest, PECO shall, at the Closing, (i) pay, or cause to be
paid, to Seller cash in an amount equal to the sum of (A) $2,550,000 plus (B)
3.755% of the Net Book Value, as of the Closing Date, of the Nuclear Fuel
Supplies (the "PECO Purchase Price") and (ii) assume and agree to pay, perform
or otherwise discharge the Assumed Liabilities, to the extent of the PECO
Interest.
(b) At least five (5) Business Days prior to the Closing Date,
PECO shall provide to Seller a written estimate of 3.755% of the Net Book Value,
as of the Closing Date, of the Nuclear Fuel Supplies (the "Estimated PECO
Nuclear Fuel Supply Amount"), which shall be certified in writing by an
appropriate officer of PECO.
(c) At the Closing, in furtherance but not in duplication of
Section 3.2(a), PECO shall pay to Seller cash in an aggregate amount equal to
the sum of (i) $2,550,000 plus (ii) the Estimated PECO Nuclear Fuel Supply
Amount (the "PECO Closing Payment"). The PECO Closing Payment shall be paid to
Seller by PECO at the Closing by wire transfer of immediately available funds to
the account of Seller designated by Seller at least two (2) Business Days prior
to the Closing Date.
3.3 Adjustment to PECO Nuclear Fuel Supply Payment.
(a) Within sixty (60) days after the Closing Date, PECO shall
deliver to Seller, at PECO's sole cost and expense, a statement (the "PECO
Closing Statement") setting forth 3.755% of the Net Book Value, as of the
Closing Date, of the Nuclear Fuel Supplies (the "PECO Closing Nuclear Fuel
Supply Amount"), together with a calculation of the PECO Purchase Price.
Concurrently with the delivery of the PECO Closing Statement, PECO shall furnish
to Seller such documents and other records as may be reasonably requested by
Seller in order to confirm the information and calculation set forth in the PECO
Closing Statement.
(b) In the event that Seller is in disagreement with the PECO
Closing Nuclear Fuel Supply Amount, and in the event that the aggregate amount
<PAGE>
of such disagreements exceeds $50,000, Seller shall, within ten (10) Business
Days after receipt of the PECO Closing Statement, notify PECO of such
disagreements setting forth with specificity the nature and amounts thereof. In
the event that Seller is in disagreement with only a portion of the PECO Closing
Nuclear Fuel Supply Amount, PECO or Seller, as the case may be, shall pay all
undisputed amounts in the manner set forth in Section 3.3(c); and all other
amounts shall be paid at such time as all disagreements are resolved in
accordance with this Section 3.3(b). If (i) the aggregate amount of the
disagreements referred to in this Section 3.3(b) does not exceed $50,000 or (ii)
Seller fails to notify PECO of all disagreements within the ten (10) Business
Day period provided for herein, then the PECO Closing Nuclear Fuel Supply
Amount, as delivered by PECO pursuant to Section 3.3(a), shall be final, binding
and conclusive on the Parties. If Seller is in disagreement with the PECO
Closing Nuclear Fuel Supply Amount and notifies PECO within such ten (10)
Business Day period, then the Parties shall promptly attempt to resolve such
disagreements by negotiation. If the Parties are unable to resolve such
disagreements within thirty (30) days following such notice of disagreement by
Seller, then the Parties shall appoint an Independent Accounting Firm within
forty-five (45) days following such notice, which shall review the PECO Closing
Statement and determine the PECO Closing Nuclear Fuel Supply Amount. Resolution
of any disagreements shall be made by the Independent Accounting Firm in a
writing addressed to all Parties within thirty (30) days following referral to
it by the Parties of such disagreements in accordance with this Agreement. The
findings of such Independent Accounting Firm shall be final, binding and
conclusive on the Parties. All costs and fees of the Independent Accounting Firm
shall be borne equally by Seller and PECO.
(c) No later than the fifth (5th) Business Day following the
determination of the PECO Closing Nuclear Fuel Supply Amount pursuant to Section
3.3(b), either (i) PECO shall pay to Seller the amount, if any, by which the
PECO Purchase Price exceeds the PECO Closing Payment, or (ii) Seller shall pay
to PECO the amount, if any, by which the PECO Closing Payment exceeds the PECO
Purchase Price, in either case, together with simple interest accruing on such
payment at the Prime Rate (as defined below) from the Closing Date through and
including the date of payment, by wire transfer of immediately available funds
to an account designated by the receiving Party. As used herein, "Prime Rate"
means, as of any date, the prime rate as published in The Wall Street Journal on
such date or, if not published on such date, on the most recent date of
publication.
<PAGE>
3.4 Payment of PSEG Purchase Price.
(a) Upon the terms and subject to the satisfaction of the
conditions set forth in this Agreement, in consideration of the aforesaid sale,
assignment, conveyance, transfer and delivery of the Purchased Assets, to the
extent of the PSEG Interest, PSEG shall, at the Closing, (i) pay, or cause to be
paid, to Seller cash in an amount equal to the sum of (A) $2,550,000 plus (B)
3.755% of the Net Book Value, as of the Closing Date, of the Nuclear Fuel
Supplies (the "PSEG Purchase Price") and (ii) assume and agree to pay, perform
or otherwise discharge the Assumed Liabilities, to the extent of the PSEG
Interest.
(b) At least five (5) Business Days prior to the Closing Date,
PECO shall provide to Seller, a written estimate of 3.755% of the Net Book
Value, as of the Closing Date, of the Nuclear Fuel Supplies (the "Estimated PSEG
Nuclear Fuel Supply Amount"), which shall be certified in writing by an
appropriate officer of PECO.
(c) At the Closing, in furtherance but not in duplication of
Section 3.4(a), PSEG shall pay to Seller cash in an aggregate amount equal to
the sum of (i) $2,550,000 plus (ii) the Estimated PSEG Nuclear Fuel Supply
Amount (the "PSEG Closing Payment"). The PSEG Closing Payment shall be paid to
Seller by PSEG at the Closing by wire transfer of immediately available funds to
the account of Seller designated by Seller at least two (2) Business Days prior
to the Closing Date.
3.5 Adjustment to PSEG Nuclear Fuel Supply Payment.
(a) Within sixty (60) days after the Closing Date, PECO shall
deliver to Seller at PSEG's sole cost and expense, a statement (the "PSEG
Closing Statement") setting forth 3.755% of the Net Book Value, as of the
Closing Date, of the Nuclear Fuel Supplies (the "PSEG Closing Nuclear Fuel
Supply Amount"), together with a calculation of the PSEG Purchase Price.
Concurrently with the delivery of the PSEG Closing Statement, PECO, at PSEG's
sole cost and expense, shall furnish to Seller such documents and other records
as may be reasonably requested by Seller in order to confirm the information and
calculation set forth in the PSEG Closing Statement.
(b) In the event that Seller is in disagreement with the PSEG
Closing Nuclear Fuel Supply Amount, and in the event that the aggregate amount
of such disagreements exceeds $50,000, Seller shall, within ten (10) Business
<PAGE>
Days after receipt of the PSEG Closing Statement, notify PSEG of such
disagreements setting forth with specificity the nature and amounts thereof. In
the event that Seller is in disagreement with only a portion of the PSEG Closing
Nuclear Fuel Supply Amount, PSEG or Seller, as the case may be, shall pay all
undisputed amounts in the manner set forth in Section 3.5(c); and all other
amounts shall be paid at such time as all disagreements are resolved in
accordance with this Section 3.5(b). If (i) the aggregate amount of the
disagreements referred to in this Section 3.5(b) does not exceed $50,000 or (ii)
Seller fails to notify PSEG of all disagreements within the ten (10) Business
Day period provided for herein, then the PSEG Closing Nuclear Fuel Supply
Amount, as delivered by PSEG pursuant to Section 3.5(a), shall be final, binding
and conclusive on the Parties. If Seller is in disagreement with the PSEG
Closing Nuclear Fuel Supply Amount and notifies PSEG within such ten (10)
Business Day period, then the Parties shall promptly attempt to resolve such
disagreements by negotiation. If the Parties are unable to resolve such
disagreements within thirty (30) days following such notice of disagreement by
Seller, then the Parties shall appoint an Independent Accounting Firm within
forty-five (45) days following such notice, which shall review the PSEG Closing
Statement and determine the PSEG Closing Nuclear Fuel Supply Amount. Resolution
of any disagreements shall be made by the Independent Accounting Firm in a
writing addressed to all Parties within thirty (30) days following referral to
it by the Parties of such disagreements in accordance with this Agreement. The
findings of such Independent Accounting Firm shall be final, binding and
conclusive on the Parties. All costs and fees of the Independent Accounting Firm
shall be borne equally by Seller and PSEG.
(c) No later than the fifth (5th) Business Day following the
determination of the PSEG Closing Nuclear Fuel Supply Amount pursuant to Section
3.5(b), either (i) PSEG shall pay to Seller the amount, if any, by which the
PSEG Purchase Price exceeds the PSEG Closing Payment, or (ii) Seller shall pay
to PSEG the amount, if any, by which the PSEG Closing Payment exceeds the PSEG
Purchase Price, in either case, together with simple interest accruing on such
payment at the Prime Rate (as defined below) from the Closing Date through and
including the date of payment, by wire transfer of immediately available funds
to an account designated by the receiving Party.
3.6 Tax Reporting and Allocation of Purchase Prices. Buyers and Seller
shall treat the transactions contemplated by Article II as the acquisition by
Buyers of a trade or business for all United States federal income tax purposes
and agree that no portion of such transactions will be treated in whole or in
<PAGE>
part as a payment for services (or future services) for United States federal
income tax purposes. Prior to the Closing Date, Buyers and Seller shall allocate
between items which are "real estate" and items which are personal property or
"permanently attached machinery and equipment in an industrial plant", as those
terms are used in the Pennsylvania realty transfer tax statute, Act of July 2,
1996 P.L. 318, as amended, and the regulations promulgated pursuant thereto by
the Pennsylvania Department of Revenue at Chapter 91 of the Pennsylvania Code.
Buyers shall deliver to Seller at the Closing a preliminary allocation among the
Purchased Assets of the PECO Purchase Price and the PSEG Purchase Price and such
other consideration paid to Seller pursuant to this Agreement and, as soon as
practicable following the Closing (but in any event within ten (10) Business
Days following the final determination of the PECO Closing Nuclear Fuel Supply
Amount and the PSEG Closing Nuclear Fuel Supply Amount), PECO shall prepare and
deliver to Seller a final allocation of the PECO Purchase Price and additional
consideration described in the preceding clause, and the post-closing
adjustments pursuant to Section 3.3(b), among the Purchased Assets, and PSEG
shall deliver to Seller a final allocation of the PSEG Purchase Price and the
additional consideration described in the preceding clause, and the post-closing
adjustments pursuant to Section 3.5(b), among the Purchased Assets (each, an
"Allocation"). Each Allocation shall be consistent with Section 1060 of the Code
and the regulations thereunder ("Applicable Tax Law"). Seller hereby agrees to
accept PECO's and PSEG's Allocation unless Seller determines that any such
Allocation (including any valuations and the determination of the PECO Purchase
Price, the PSEG Purchase Price or other consideration) was not prepared in
accordance with Applicable Tax Law. If Seller so determines, Seller shall within
twenty (20) Business Days thereafter propose any changes necessary to cause the
Allocation to be prepared in accordance with Applicable Tax Law. Within ten (10)
Business Days following delivery of such proposed changes, PECO or PSEG, as the
case may be, shall provide Seller with a statement of any objections to such
proposed changes, together with a reasonably detailed explanation of the reasons
therefor. If PECO or PSEG, as the case may be, and Seller are unable to resolve
any disputed objections within ten (10) Business Days thereafter, such
objections shall be referred to the Independent Accounting Firm, who shall
determine the Allocation (including any valuations and the determination of the
PECO Purchase Price, the PSEG Purchase Price or other consideration). The
Independent Accounting Firm shall be instructed to deliver to PECO or PSEG, as
the case may be, and Seller a written determination of the proper allocation of
such disputed items within twenty (20) Business Days. Such determination shall
be final, conclusive and binding upon the Parties for all purposes, and the
Allocation shall be so adjusted (the Allocation, including the adjustment, if
<PAGE>
any, to be referred to as the "Final Allocation"). The fees and disbursements of
the Independent Accounting Firm attributable to any Allocation shall be shared
equally by PECO or PSEG, as the case may be, and Seller. Each of PECO, PSEG 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 purpose in a manner consistent with the
Final Allocation. Each of PECO, PSEG and Seller agrees to promptly provide the
other Parties 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 PECO, PSEG and
Seller shall timely notify the other Parties and each shall timely provide the
other Parties with reasonable assistance in the event of an examination, audit
or other proceeding regarding the Final Allocation.
3.7 Prorations.
(a) Buyers and Seller agree that, except as otherwise provided
in this Agreement, all of the items customarily prorated relating to the
ownership, lease, maintenance and operation of the Purchased Assets, including
those listed below (but not including Income Taxes), shall be prorated as of the
Closing Date, without any duplication of payment under the Owners Agreement, as
amended by the Amendment to Owners Agreement with Seller liable to the extent
such items relate to any period prior to the Closing Date, and PECO, to the
extent of the PECO Interest, and PSEG, to the extent of the PSEG Interest,
liable to the extent such items relate to any period on or after the Closing
Date (measured in the same units used to compute the item in question, or
otherwise measured by calendar days):
(i) Personal property, real estate (including
PURTA) and occupancy Taxes, assessments and other charges, if any, on or arising
out of, in respect of, or in connection with, the ownership, lease, maintenance
or operation of the Purchased Assets;
(ii) Rent, Taxes and all other items (including
prepaid services and goods not included in Inventories), in each case, payable
by or to Seller under any of the Seller's Agreements assigned to and assumed by
Buyers;
(iii) Any permit, license, registration, compliance
assurance fees or other fees arising out of, in respect of, or in connection
with, any Transferable Permit;
<PAGE>
(iv) Sewer rents and charges for water, telephone,
electricity and other utilities arising out of, in respect of, or in connection
with, the Purchased Assets;
(v) Insurance premiums paid on or with respect to
the ownership, lease, maintenance or operation of the Purchased Assets, to the
extent payable under the Buyer's Insurance Policies;
(vi) Spent Nuclear Fuel Fees, in the manner
contemplated by Section 2.6;
(vii) Department of Energy Decommissioning and
Decontamination Fees, in the manner contemplated by Section 2.7; and
(viii)Prepaid operating and maintenance expenses,
whether arising under the Owners Agreement or otherwise.
(b) Seller, on the one hand, and PECO, to the extent of the
PECO Interest, and PSEG, to the extent of the PSEG Interest, on the other hand,
as the case may be, shall promptly reimburse the other Party or Parties that
portion of any amount paid by such other Party or Parties to the extent relating
to the period for which Seller or Buyers, as the case may be, is liable under
Section 3.7(a), in each case, upon presentation of a statement setting forth in
reasonable detail the nature and amount of any such payment. In connection with
the prorations set forth in Section 3.7(a), if actual figures are not available
on the Closing Date, the proration shall be calculated based upon the respective
amounts accrued through the Closing Date or paid for the most recent year or
other appropriate period for which such amounts paid are available. All prorated
amounts shall be recalculated and paid to the appropriate Party within sixty
(60) days after the date that the previously unavailable actual figures become
available. Seller and Buyers shall furnish each other with such documents and
other records as may be reasonably requested in order to confirm all proration
calculations made pursuant to this Section 3.7. Notwithstanding anything to the
contrary herein, no proration shall be made under this Section 3.7 with respect
to (i) real property Tax refunds that are Excluded Assets under Section 2.2(h)
or (ii) Taxes payable by Buyers pursuant to Section 7.5(a).
(c) To the extent of the Peach Bottom Interest, Seller shall
be responsible for any Pennsylvania public utility realty tax pursuant to 72
P.S. Section 8102-A ("PURTA"), additional PURTA assessments pursuant to 72 P.S.
Section 8104-A, or any successor tax or fee assessed on the Purchased Assets
relating to years ending prior to the Closing Date. In addition, pursuant to the
Owners Agreement, Seller shall reimburse PECO, to the extent of the PECO
Interest, and PSEG, to the extent of the PSEG Interest, in accordance with this
Section 3.7(c), for its proportionate share of PURTA, additional PURTA
assessments or any successor tax or fee levied or assessed, with respect to the
Purchased Assets, for the year in which the Closing occurs. The proration shall
be based upon the number of days within the Closing year that Seller owned the
Purchased Assets. For example, if the Closing were to occur on December 1, 1999,
and $1,000,000 in PURTA, additional PURTA assessments or any successor tax or
fee were levied or assessed with respect to the Peach Bottom Station for 1999,
then Seller's proportionate share of such tax or fee would be calculated by
multiplying (i) the product obtained by multiplying $1,000,000 by a fraction,
the numerator of which is the amount of calendar days in 1999 which Seller owned
the Purchased Assets (335), and the denominator of which is the amount of days
in 1999 (365), by (ii) 0.0751. Therefore, the aggregate amount of Seller's
proportionate share to be reimbursed to Buyers will be $1,000,000 multiplied by
335/365, or $917,808.20 multiplied by 0.0751, or $68,927.40. The reimbursement
payable by Seller to PECO, to the extent of the PECO Interest, and PSEG, to the
extent of the PSEG Interest, hereunder shall be paid by Seller within sixty (60)
days after Seller's receipt from PECO of documentation showing the imposition of
PURTA, additional PURTA assessment, or any successor tax or fee on the Peach
Bottom Station in the Closing year. Seller, at its own expense, shall have the
right to contest or appeal with any Tax authority any amounts due under this
Section 3.7(c). Notwithstanding any provision herein to the contrary, in
determining the amount payable by Seller to PECO and PSEG, as the case may be,
under this Section 3.7(c), Seller shall be credited for all previous payments by
Seller in respect of PURTA for the Closing year paid to PECO or PSEG, as the
case may be under Section 3.7(a) or the Owners Agreement.
3.8 Deliveries by Seller. At the Closing, Seller shall deliver, or
cause to be delivered, the following to Buyers:
(a) The Deeds, duly executed by Seller and in recordable form,
subject only to Permitted Encumbrances, and any owner's affidavits or similar
documents reasonably required by PECO's and PSEG's title insurance company;
(b) The Bills of Sale, duly executed by Seller;
<PAGE>
(c) The Assignment and Assumption Agreements, duly executed by
Seller;
(d) Evidence, in form and substance reasonably satisfactory to
Buyers and their respective counsel, of Seller's receipt of (i) the Seller's
Required Regulatory Approvals and (ii) the consents and approvals set forth on
Schedule 4.3(a);
(e) The opinions of counsel to Seller to the effect set forth
in Exhibit G hereto, subject to customary limitations and qualifications;
(f) A Certificate of Good Standing with respect to Seller, as
of a recent date, issued by the Secretary of State of the State of New Jersey;
(g) To the extent available, originals of all Seller's
Agreements to which Seller is a party and Transferable Permits issued to Seller
and, if not available, true and correct copies thereof;
(h) A certificate addressed to each Buyer dated the Closing
Date executed by the duly authorized officers of Seller to the effect that, to
such officers' Knowledge, the conditions set forth in Sections 8.2(b) and (c)
and 8.3(b) and (c) have been satisfied by Seller and that each of the
representations and warranties of Seller made in this Agreement are true and
correct in all material respects as though made at and as of the Closing Date;
(i) The Amendment to Owners Agreement, duly executed by
Seller;
(j) A FIRPTA Affidavit to each Buyer, duly executed by Seller;
(k) Copies, certified by the Secretary or Assistant Secretary
of Seller, of corporate resolutions authorizing the execution and delivery of
this Agreement, each Additional Agreement to which Seller is a party and all of
the other agreements and instruments, in each case, to be executed and delivered
by Seller in connection herewith;
(l) A certificate of the Secretary or Assistant Secretary of
Seller identifying the name and title and bearing the signatures of the officers
of Seller authorized to execute and deliver this Agreement, each Additional
<PAGE>
Agreement to which Seller is a party and the other agreements and instruments
contemplated hereby;
(m) All such other agreements, documents, instruments and
writings as shall, in the reasonable opinion of either Buyer and its counsel, be
necessary to sell, assign, convey, transfer and deliver all of Seller's rights,
title and interests in and to the Purchased Assets, to PECO, to the extent of
the PECO Interest, and to PSEG, to the extent of the PSEG Interest, in
accordance with this Agreement and, where necessary or desirable, in recordable
form, provided that Seller shall not be required to prepare or obtain any
survey, abstract, title opinion or title insurance policy with respect to the
Real Property; and
(n) All such other agreements, documents, instruments and
writings as are required to be delivered by Seller at or prior to the Closing
Date pursuant to this Agreement or otherwise reasonably required in connection
herewith.
3.9 Deliveries by PECO. At the Closing, PECO shall deliver, or cause to
be delivered, the following to Seller:
(a) The PECO Closing Payment, by wire transfer of immediately
available funds to the account of Seller designated by Seller at least two (2)
Business Days prior to the Closing Date;
(b) The Assignment and Assumption Agreement, duly executed by
PECO;
(c) The Amendment to Owners Agreement, duly executed by PECO;
(d) Copies, certified by the Secretary or Assistant Secretary
of PECO, of resolutions authorizing the execution and delivery of this
Agreement, each Additional Agreement to which PECO is a party and all of the
agreements and instruments, in each case, to be executed and delivered by PECO
in connection herewith;
(e) A certificate of the Secretary or Assistant Secretary of
PECO identifying the name and title and bearing the signatures of the officers
of PECO authorized to execute and deliver this Agreement, each Additional
Agreement to which PECO is a party and the other agreements contemplated hereby;
<PAGE>
(f) Certificates of insurance required pursuant to 10 C.F.R.
Parts 50 and 140;
(g) Evidence, in form and substance reasonably satisfactory to
Seller and its counsel, of PECO's receipt of the PECO Required Regulatory
Approvals;
(h) The opinions of counsel to PECO to the effect set forth in
Exhibit H hereto, subject to customary limitations and qualifications;
(i) A Certificate of Good Standing with respect to PECO, as of
a recent date, issued by the Secretary of State of the state of organization of
PECO;
(j) A certificate dated the Closing Date executed by the duly
authorized officers of PECO to the effect that, to such officers' Knowledge, the
conditions set forth in Sections 8.4(b) and (c) have been satisfied by PECO and
that each of the representations and warranties of PECO made in this Agreement
are true and correct in all material respects as though made at and as of the
Closing Date;
(k) All such other agreements, documents, instruments and
writings as shall, in the reasonable opinion of Seller and its counsel, be
necessary for PECO to purchase and acquire Seller's rights, title and interests
in and to the Purchased Assets, to the extent of the PECO Interest, and to
assume the Assumed Liabilities, to the extent of the PECO Interest, in each
case, in accordance with this Agreement and, where necessary or desirable, in
recordable form; and
(l) All such other agreements, documents, instruments and
writings as are required to be delivered by PECO at or prior to the Closing Date
pursuant to this Agreement or otherwise reasonably required in connection
herewith.
3.10 Deliveries by PSEG. At the Closing, PSEG shall deliver, or cause
to be delivered, the following to Seller:
(a) The PSEG Closing Payment, by wire transfer of immediately
available funds to the account of Seller designated by Seller at least two (2)
Business Days prior to the Closing Date;
<PAGE>
(b) The Assignment and Assumption Agreement, duly executed by
PSEG;
(c) The Amendment to Owners Agreement, duly executed by PSEG;
(d) Copies, certified by the Secretary or Assistant Secretary
of PSEG, of resolutions authorizing the execution and delivery of this
Agreement, each Additional Agreement to which PSEG is a party and all of the
agreements and instruments, in each case, to be executed and delivered by PSEG
in connection herewith;
(e) A certificate of the Secretary or Assistant Secretary of
PSEG identifying the name and title and bearing the signatures of the officers
of PSEG authorized to execute and deliver this Agreement, each Additional
Agreement to which PSEG is a party and the other agreements contemplated hereby;
(f) Evidence, in form and substance reasonably satisfactory to
Seller and its counsel, of PSEG's receipt of the PSEG Required Regulatory
Approvals;
(g) The opinions of counsel to PSEG to the effect set forth in
Exhibit H hereto, subject to customary limitations and qualifications;
(h) A Certificate of Good Standing with respect to PSEG, as of
a recent date, issued by the Secretary of State of the state of organization of
PSEG;
(i) A certificate dated the Closing Date executed by the duly
authorized officers of PSEG to the effect that, to such officers' Knowledge, the
conditions set forth in Sections 8.4(f) and (g) have been satisfied by PSEG and
that each of the representations and warranties of PSEG made in this Agreement
are true and correct in all material respects as though made at and as of the
Closing Date;
(j) All such other agreements, documents, instruments and
writings as shall, in the reasonable opinion of Seller and its counsel, be
necessary for PSEG to purchase and acquire Seller's rights, title and interests
in and to the Purchased Assets, to the extent of the PSEG Interest, and to
assume the Assumed Liabilities, to the extent of the PSEG Interest, in each
case, in accordance with this Agreement and, where necessary or desirable, in
recordable form; and
<PAGE>
(k) All such other agreements, documents, instruments and
writings as are required to be delivered by PSEG at or prior to the Closing Date
pursuant to this Agreement or otherwise reasonably required in connection
herewith.
3.11 Relationship of this Agreement and Collateral Agreement. The
transactions contemplated by this Agreement, together with the transactions
contemplated by the Collateral Agreement, are intended by the Parties to be
consummated substantially simultaneously; and if any of the transactions
contemplated hereby or by the Collateral Agreement are not consummated on the
Closing Date in accordance with the terms and subject to the conditions set
forth herein and therein, as applicable, then each Party shall take, or cause to
be taken, all actions, and do, or cause to be done, all things, in each case,
that are necessary to dissolve and invalidate all transactions contemplated
hereby; provided, however, that if the failure to consummate the transactions
contemplated hereby or by the Collateral Agreement results from a default or
breach of a party under this Agreement or the Collateral Agreement, then nothing
in the foregoing shall preclude or limit the rights or remedies of any Party in
connection with such default or breach.
3.12 Owners Agreement to Govern. The Parties agree that, except as
otherwise expressly provided in Section 7.1 of this Agreement, the Parties'
ownership, lease, maintenance and operation prior to the Closing Date of the
Peach Bottom Station shall be governed by the Owners Agreement.
3.13 Additional Agreements. The Parties acknowledge that the Additional
Agreements shall be executed and delivered on or before the Closing Date, and
each Party shall execute and deliver, in connection with the Closing, each
Additional Agreement to which it is to be a party, substantially in the form of
each Additional Agreement attached hereto.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyers as follows:
4.1 Organization, Qualification. Seller is a corporation duly
incorporated, validly existing and in good standing under the Laws of the State
<PAGE>
of New Jersey and has all requisite corporate power and authority to own, lease
and operate its assets and properties and to carry on its business as it is now
being conducted.
4.2 Authority. Seller has full corporate power and authority to execute
and deliver this Agreement and each Additional Agreement to which it is a party
and to consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement and each such Additional Agreement by
Seller and the consummation by Seller of the transactions contemplated hereby
and thereby have been duly and validly authorized by all necessary corporate
action required on the part of Seller, and no other corporate proceeding on the
part of Seller is necessary to authorize this Agreement and each of the
Additional Agreements to which Seller is a party or to consummate the
transactions contemplated hereby or thereby. This Agreement has been duly and
validly executed and delivered by Seller and constitutes, and upon the execution
and delivery by Seller of each Additional Agreement to which it is a party, each
such Additional Agreement will constitute, the legal, valid and binding
obligation of Seller, enforceable against Seller in accordance with its terms.
4.3 No Violations; Consents and Approvals
(a) Except as set forth in Schedule 4.3(a), and subject to
obtaining any Seller's Required Regulatory Approvals, none of the execution,
delivery and performance of this Agreement, the execution, delivery and
performance of the Additional Agreements, or the consummation by Seller of the
transactions contemplated hereby and thereby will (i) conflict with or result in
any breach of any provision of the Articles of Incorporation or Bylaws of
Seller; (ii) result in a default (or give rise to any right of termination,
cancellation or acceleration) under any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, license, lease, agreement or other
instrument or obligation to which Seller is a party or by which it, or any of
the Purchased Assets, may be bound (other than the Seller's Agreements referred
to in clause (ii) of the definition thereof), except for such defaults (or
rights of termination, cancellation or acceleration) as to which requisite
waivers or consents have been obtained or that would not, individually or in the
aggregate, have a Material Adverse Effect; or (iii) constitute violations of any
Law, order, judgment or decree applicable to Seller or any of its assets,
including the Purchased Assets, which violations, individually or in the
aggregate, would have a Material Adverse Effect.
<PAGE>
(b) Except for consents, approvals, filings and notices (i)
required under the HSR Act, or (ii) set forth in Schedule 4.3(b) (the consents,
approvals, filings and notices referred to in clause (ii) of this sentence are
collectively referred to herein as the "Seller's Required Regulatory
Approvals"), no consent, authorization or approval of, declaration, filing or
registration with, or notice to, any Governmental Authority is necessary for the
execution and delivery by Seller of this Agreement and the Additional Agreements
or the consummation by Seller of the transactions contemplated hereby or
thereby, other than (i) such consents, authorizations, approvals, declarations,
filings, registrations with and notices which, if not obtained or made, would
not, individually or in the aggregate, have a Material Adverse Effect, or
prevent Seller from performing its material obligations under this Agreement or
the Additional Agreements; and (ii) such consents, authorizations, approvals,
declarations, filings, registrations with or notices which become applicable to
Seller or the Purchased Assets as a result of the status of PECO or PSEG (or any
of their respective Affiliates) or as a result of any other facts that
specifically relate to the business or activities in which PECO or PSEG (or any
of their respective Affiliates) is or proposes to be engaged.
4.4 Permits. Prior to the Closing Date, Seller will hold all permits,
registrations, franchises, certificates, licenses and other authorizations,
consents and approvals of all Governmental Authorities that Seller requires in
order to own any of the Purchased Assets (collectively, "Seller Permits"),
except for (a) Seller Nuclear Permits (which are governed by Section 4.7) and
(b) such failures to hold or comply with such Seller Permits as would not,
individually or in the aggregate, have a Material Adverse Effect or would not,
individually as in the aggregate, materially impair Seller's ability to
consummate the transactions contemplated hereby. Schedule 4.4(a) sets forth a
complete list, as of the date hereof, of all Seller Permits issued to Seller
through the date hereof. Schedule 4.4(b) sets forth a complete list, as of the
date hereof, of all Transferable Permits issued to Seller through the date
hereof.
4.5 Seller's Qualified Decommissioning Funds.
(a) Each of Seller's Qualified Decommissioning Funds is a
trust validly existing and in good standing under the laws of the Commonwealth
of Pennsylvania with all requisite authority to conduct its affairs as it now
does. Seller has heretofore delivered to Buyers a copy of the Trust Agreement as
in effect on the date of this Agreement. Seller agrees to furnish Buyers with
copies of all amendments of the Trust Agreement adopted after the date of this
<PAGE>
Agreement promptly after each such amendment has been adopted. Each of Seller's
Qualified Decommissioning Funds satisfies the requirements necessary to be
treated as a "Nuclear Decommissioning Reserve Fund" within the meaning of Code
Section 468A(a) and as a "nuclear decommissioning fund" and a "qualified nuclear
decommissioning fund" within the meaning of Treas. Reg. Section 1.468A-1(b)(3).
Each of Seller's Qualified Decommissioning Funds is in compliance in all
material respects with all applicable rules and regulations of the NRC, New
Jersey Board of Public Utilities and the Internal Revenue Service. The Seller's
Qualified Decommissioning Funds have not engaged in any acts of "self-dealing"
as defined in Treas. Reg. Section 1.468A-5(b)(2). No "excess contribution" as
defined in Treas. Reg. Section 1.468A-5(c)(2)(ii) has been made to Seller's
Qualified Decommissioning Funds which has not been withdrawn within the period
provided under Treas. Reg. Section 1.468A-5(c)(2)(i) for withdrawals of excess
contributions to be made without resulting in a disqualification of such funds
under Treas. Reg. Section 1.468A-5(c)(1). Seller has made timely and valid
elections to make annual contributions to the Seller's Qualified Decommissioning
Funds since the formation of such trusts. Seller has delivered, or will deliver
prior to the Closing, copies of such elections to Buyers.
(b) Subject to the receipt of Seller's Required Regulatory
Approvals and amendment of the Trust Agreement, Seller has all requisite
authority to cause the assets of the Seller's Qualified Decommissioning Funds to
be transferred in accordance with the provisions of this Agreement.
(c) Seller or the trustees of each of the Seller's Qualified
Decommissioning Funds have filed or caused to be filed with the NRC, the
Internal Revenue Service and any state or local authority all material forms,
statements, reports, documents (including all exhibits, amendments and
supplements thereto) required to be filed by either of them. Seller has
delivered, or will deliver prior to the Closing, to Buyers a copy of the
schedule of ruling amounts most recently issued by the Internal Revenue Service
for each of the Seller's Qualified Decommissioning Funds, a copy of the request
that was filed to obtain such schedule of ruling amounts and a copy of any
pending request for a revised ruling amounts, in each case together with all
exhibits, amendments and supplements thereto. As of the Closing, Seller will
have timely filed all requests for revised schedules of ruling amounts for
Seller's Qualified Decommissioning Funds to the extent required by and in
accordance with Treas. Reg. Section 1.468A-3(i). Seller shall furnish Buyers
with copies of such request for revised schedules of ruling amounts, together
with all exhibits, amendments and supplementals thereto, promptly after they
have been filed with the Internal Revenue Service. Any amounts contributed to
<PAGE>
Seller's Qualified Decommissioning Funds while such requests are pending before
the Internal Revenue Service and which turn out to be in excess of the
applicable amounts provided in the schedule of ruling amounts issued by the
Internal Revenue Service will be withdrawn from the Seller's Qualified
Decommissioning Funds within the period provided under Treas. Reg. Section
1.468A-5(c)(2)(i) for withdrawals of excess contributions to be made without
resulting in a disqualification of the Funds under Treas. Reg. Section
1.468A-5(c)(1). There are no interim rate orders that may be retroactively
adjusted or retroactive adjustments to interim rate orders that may affect
amounts that may be contributed to Seller's Qualified Decommissioning Funds or
may require distributions to be made from the Seller's Qualified Decommissioning
Funds.
(d) Seller has made or prior to the Closing will make
available to Buyers the balance sheet for each of the Seller's Qualified
Decommissioning Funds as of March 31, 1999 and as of the fourth Business Day
before Closing, as prepared by the trustee of Seller's Qualified Decommissioning
Fund in the ordinary course and consistent with past practice. Seller has made,
or prior to the Closing will make, available to Buyers information from which
Buyers can determine the Tax Basis of all assets in Seller's Qualified
Decommissioning Funds as of the fourth Business Day before Closing. There are no
liabilities (whether absolute, accrued, contingent or otherwise and whether due
or to become due), including any acts of "self-dealing" as defined in Treas.
Reg. Section 1.468A-5(b)(2) or agency or other legal proceedings that may
materially affect the financial position of each of the Seller's Qualified
Decommissioning Funds other than those that are disclosed on Schedule 4.5(d).
(e) Seller has made or prior to the Closing will make
available to Buyers all contracts and agreements to which the trustee of each of
the Seller's Qualified Decommissioning Funds, in its capacity as such, is a
party.
(f) Each of the Seller's Qualified Decommissioning Funds has
filed all Tax Returns required to be filed and all Taxes shown to be due on such
Tax Returns have been paid in full. Except as shown in Schedule 4.5(f), no
notice of deficiency or assessment has been received from any taxing authority
with respect to liability for Taxes or the Seller's Qualified Decommissioning
Funds which have not been fully paid or finally settled, and any such deficiency
shown in such Schedule 4.5(f) is being contested in good faith through
appropriate proceedings. Except as set forth in Schedule 4.5(f), there are no
outstanding agreements or waivers extending the applicable statutory periods of
limitations for Taxes associated with each of the Seller's Qualified
Decommissioning Funds for any period.
<PAGE>
(g) To the extent Seller has pooled the assets of the Seller's
Qualified Decommissioning Funds for investment purposes in periods prior to
Closing, such pooling arrangement is a partnership for federal income tax
purposes and Seller has filed all Tax Returns required to be filed with respect
to such pooling arrangement for such periods or the pooling arrangement has
elected out of partnership status, and the distributive or allocable share of
any income, gain or loss of such pooling arrangement is includable in the income
of Seller's Qualified Decommissioning Funds.
4.6 Seller's Nonqualified Decommissioning Funds.
(a) Each of Seller's Nonqualified Decommissioning Funds is a
trust validly existing and in good standing under the laws of the Commonwealth
of Pennsylvania with all requisite authority to conduct its affairs as it now
does. Each of Seller's Nonqualified Decommissioning Funds is in compliance in
all material respects with all applicable rules and regulations of the NRC and
the New Jersey Board of Public Utilities.
(b) Subject only to receipt of the Seller's Required
Regulatory Approvals and amendment of the Trust Agreement, Seller has all
requisite authority to cause the assets of the Seller's Nonqualified
Decommissioning Funds to be transferred to Buyers' nonqualified decommissioning
funds in accordance with the provisions of this Agreement and amendment of the
Trust Agreement.
(c) Seller or the trustee of the Seller's Nonqualified
Decommissioning Funds have filed or caused to be filed with the NRC and any
state or local authority all material forms, statements, reports, documents
(including all exhibits, amendments and supplements thereto) required to be
filed by either of them.
(d) Seller has made or prior to the Closing will make
available to Buyers the balance sheet for each of Seller's Nonqualified
Decommissioning Funds as of March 31, 1999 and as of the fourth Business Day
before Closing, as prepared by the trustee of Seller's Nonqualified
Decommissioning Fund in the ordinary course and consistent with past practice.
There are no liabilities (whether absolute, accrued, contingent or otherwise and
whether due or to become due) including agency or other legal proceedings that
may materially affect the financial position of Seller's Nonqualified
Decommissioning Funds other than those, if any, that are disclosed on Schedule
4.6(d).
<PAGE>
(e) Seller has made or prior to the Closing will make
available to Buyers all contracts and agreements to which the trustee of the
Seller's Nonqualified Decommissioning Funds, in its capacity as such, is a
party.
(f) To the extent Seller has pooled the assets of Seller's
Nonqualified Decommissioning Funds for investment purposes in periods prior to
closing, such pooling arrangement is not an association taxable as a corporation
for federal income tax purposes.
4.7 Nuclear Law Matters. Seller is a licensed co-owner, but not an
operator, of the Peach Bottom Station. Subject to this fact, and except as set
forth in Schedule 4.7, prior to the Closing Date, Seller will hold all Seller
Permits in respect of Nuclear Laws that Seller requires in order to own its
rights, title and interests in and to the Purchased Assets (collectively,
"Seller Nuclear Permits").
4.8 Legal Proceedings. Except as set forth in Schedule 4.8, there is no
claim, action, proceeding or investigation pending, or to Seller's Knowledge,
threatened against or relating to Seller or its Affiliates before any court,
arbitrator or Governmental Authority, which could, individually or in the
aggregate, reasonably be expected to result, or has resulted, in (a) the
institution of legal proceedings to prohibit or restrain the performance of this
Agreement or any of the Additional Agreements, or the consummation of the
transactions contemplated hereby or thereby, (b) a claim against Buyers or their
respective Affiliates for damages as a result of Seller entering into this
Agreement or any of the Additional Agreements, or the consummation by Seller of
the transactions contemplated hereby or thereby, (c) a material impairment of
Seller's ability to perform its obligations under this Agreement or any of the
Additional Agreements, or (d) a Material Adverse Effect. Except as set forth in
Schedule 4.8, Seller is not subject to any outstanding judgments, decrees or
orders of any court, arbitrator or Governmental Authority that would,
individually or in aggregate, have a Material Adverse Effect.
4.9 Personal Property. Seller has such title to all personal property
included in the Purchased Assets as arises by reason of Seller's rights under
the Owners Agreement and owns such personal property free and clear of all
Encumbrances created by Seller, except for Permitted Encumbrances and the
Encumbrances set forth on Schedule 4.9.
<PAGE>
4.10 Real Property. Except as set forth on Schedule 4.10, Seller owns
good, valid and marketable fee simple title to the Peach Bottom Interest in the
Real Property described by metes and bounds in the deed listed in Schedule
1.1(118), subject only to Permitted Encumbrances.
4.11 Contracts. Except as disclosed in Schedule 4.11, (i) each Seller's
Agreement listed on Schedule 1.1(129) constitutes a legal, valid and binding
obligation of Seller and, to Seller's Knowledge, constitutes a valid and binding
obligation of the other parties thereto, (ii) to Seller's Knowledge is in full
force and effect, and (iii) may be transferred to Buyers as contemplated by this
Agreement without the consent of the other parties thereto and will continue in
full force and effect thereafter, in each case without breaching the terms
thereof or resulting in the forfeiture or impairment of any rights thereunder,
except for such breaches, forfeitures or impairments which would not,
individually or in the aggregate, have a Material Adverse Effect.
4.12 Certain Environmental Liabilities. Except as set forth on Schedule
4.12, there are no liabilities or obligations arising under or relating to
Environmental Laws or relating to any claim with respect to Environmental
Conditions or Hazardous Substances with respect to the Purchased Assets, in any
case, which relate to any Off-Site Location and of which Seller has Knowledge.
4.13 Undisclosed Liabilities. Except for liabilities and obligations
specifically referred to in Section 2.3(a) through (g) or Section 2.4(a) through
(h), or on Schedule 4.3(a), 4.9 or 4.10, the Purchased Assets are not, to the
Knowledge of Seller, subject to any material liability or obligation that has
arisen solely as a result of an act or omission by Seller (other than Permitted
Encumbrances).
4.14 Intellectual Property. Seller does not own or otherwise have any
right to use any patent, trade name, trademark, service mark or other
intellectual property that is used in and necessary for the operation of the
Peach Bottom Station, other than such as may be included in the Purchased
Assets.
4.15 Taxes. With respect to the Purchased Assets (i) all income Tax
Returns required to be filed have been filed, and (ii) all income Taxes shown to
be due on such income Tax Returns have been paid in full. Except as set forth in
Schedule 4.15, no notice of deficiency or assessment has been received from any
taxing authority with respect to liabilities for income Taxes of Seller in
respect of the Purchased Assets, which have not been fully paid or finally
<PAGE>
settled, and any such deficiency shown in such Schedule 4.15 is being contested
in good faith through appropriate proceedings. Except as set forth in Schedule
4.15, there are no outstanding agreements or waivers extending the applicable
statutory periods of limitations for income Taxes associated with the Purchased
Assets for any period. Schedule 4.15 sets forth the taxing jurisdictions in
which Seller owns assets or conducts business that require a notification to a
taxing authority of the transactions contemplated by this Agreement, if the
failure to make such notification, or obtain Tax clearances in connection
therewith, would either require Buyers to withhold any portion of the Purchased
Price or would subject Buyers to any liability for any income Taxes of Seller.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PECO
PECO hereby represents and warrants to Seller as follows:
5.1 Organization; Qualification. PECO is a corporation duly formed,
validly existing and in good standing under the Laws of the Commonwealth of
Pennsylvania and has all requisite corporate power and authority to own, lease
and operate its assets and properties and to carry on its business as it is now
being conducted.
5.2 Authority. PECO has full corporate power and authority to execute
and deliver this Agreement and each Additional Agreement to which it is a party
and to consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement by PECO and each such Additional
Agreement to which PECO is a party and the consummation of the transactions
contemplated hereby and thereby by PECO have been duly and validly authorized by
all necessary corporate action required on the part of PECO and no other
proceedings on the part of PECO are necessary to authorize this Agreement or
each of the Additional Agreements or to consummate the transactions contemplated
hereby or thereby. This Agreement has been duly and validly executed and
delivered by PECO and constitutes, and upon the execution and delivery by PECO
of each Additional Agreement to which it is a party, each such Additional
Agreement will constitute, the legal, valid and binding obligation of PECO,
enforceable against PECO in accordance with its terms.
<PAGE>
5.3 No Violations; Consents and Approvals
(a) Except as set forth in Schedule 5.3(a), and subject to
obtaining any PECO's Required Regulatory Approvals, none of the execution,
delivery or performance of this Agreement, the execution, delivery and
performance of the Additional Agreements or the consummation by PECO of the
transactions contemplated hereby and thereby will (i) conflict with or result in
any breach of any provision of the certificate of incorporation or bylaws (or
similar governing documents) of PECO, (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, lease,
agreement or other instrument or obligation to which PECO is a party, except for
such defaults (or rights of termination, cancellation or acceleration) as to
which requisite waivers or consents have been obtained or that would not,
individually or in the aggregate, have a Material Adverse Effect; or (iii)
constitute violations of any Law, order, judgment or decree applicable to PECO,
which violations, individually or in the aggregate, would have a Material
Adverse Effect.
(b) Except for consents, approvals, filings and notices (i)
required under the HSR Act, or (ii) set forth in Schedule 5.3(b) (the consents,
approvals, filings and notices referred to in clause (ii) of this sentence are
collectively referred to herein as the "PECO Required Regulatory Approvals"), no
consent, authorization or approval of, declaration, filing or registration with,
or notice to, any Governmental Authority is necessary for the execution and
delivery by PECO of this Agreement and the Additional Agreements or the
consummation by PECO of the transactions contemplated hereby and thereby, other
than (i) such consents, authorizations, approvals, declarations, filings,
registrations with, or notices, which, if not obtained or made, would not,
individually or in the aggregate, have a Material Adverse Effect or prevent PECO
from performing its material obligations under this Agreement or the Additional
Agreements and (ii) such consents, authorizations, approvals, declarations,
filings, registrations with, or notices which become applicable to PECO as a
result of the specific regulatory status of Seller (or any of its Affiliates) or
as a result of any other facts that specifically relate to the business or
activities in which Seller (or any of its Affiliates) is or proposes to be
engaged.
5.4 Buyer Permits. Prior to and on the Closing Date, subject to the
receipt of the PECO Required Regulatory Approvals, PECO will hold all permits,
certificates, licenses and other authorizations of all Governmental Authorities
<PAGE>
that PECO requires in order to own, lease, maintain and operate the Peach Bottom
Station, including the Purchased Assets (collectively, "PECO Permits"), except,
in each case, for (a) PECO Nuclear Permits (which are governed by Section 5.5)
and (b) such failures to hold or comply with such PECO Permits as would not
result in a Material Adverse Effect or would not, individually or in the
aggregate, materially impair PECO's ability to consummate the transactions
contemplated hereby.
5.5 Nuclear Law Matters.
(a) PECO is a licensed co-owner, and the licensed operator, of
the Peach Bottom Station.
(b) Prior to and on the Closing Date, subject to the receipt
of the PECO Required Regulatory Approvals, PECO will hold all PECO Permits in
respect of Nuclear Laws that PECO requires in order to own, lease, maintain and
operate the Peach Bottom Station, including, on the Closing Date, the Purchased
Assets (collectively, "PECO Nuclear Permits").
5.6 Legal Proceedings.
(a) Except as set forth in Schedule 5.6(a), there is no
action, proceeding or investigation pending or, to PECO's Knowledge, threatened
against or relating to PECO or its Affiliates before any court, arbitrator or
Governmental Authority, which could, individually or in the aggregate,
reasonably be expected to result, or has resulted, in (i) the institution of
legal proceedings to prohibit or restrain the performance of this Agreement or
any of the Additional Agreements, or the consummation of the transactions
contemplated hereby or thereby, (ii) a claim against Seller or its Affiliates
for damages as a result of PECO entering into this Agreement or any of the
Additional Agreements, or the consummation by PECO of the transactions
contemplated hereby or thereby, (iii) a material impairment of PECO's ability to
perform its obligations under this Agreement or any of the Additional
Agreements, or (iv) a Material Adverse Effect. Except as set forth in Schedule
5.6(a), PECO is not subject to any outstanding judgments, decrees or orders of
any court, arbitrator or Governmental Authority that would, individually or in
the aggregate, have a Material Adverse Effect.
(b) As of the date of this Agreement, to PECO's Knowledge,
there is no action, proceeding or investigation involving an amount in dispute
in excess of $1 million pending or threatened against any third party (other
<PAGE>
than those referred to in Section 2.1(l) or 2.2(j)) with respect to the
ownership, lease, operation or maintenance of the Peach Bottom Station.
5.7 Qualified Buyer. As of the date of this Agreement, to the Knowledge
of PECO, there is no fact, circumstance, event or condition reasonably expected
to impair PECO's ability, on the Closing Date, to obtain all PECO Permits,
including PECO Nuclear Permits and Environmental Permits, necessary for PECO to
own, lease, maintain and operate the Peach Bottom Station, including on the
Closing Date, the Purchased Assets.
5.8 Inspections. PECO has, prior to its execution and delivery of this
Agreement, had full opportunity to conduct to its satisfaction Inspections of
the Purchased Assets. PECO acknowledges, after such review and Inspections, that
no further investigation is necessary for purposes of acquiring Seller's rights,
title and interests in and to the Purchased Assets for PECO's intended use.
5.9 Regulation as a Utility. PECO is a public utility holding company
under PUHCA, exempt from all provisions of PUHCA other than Section 9(a)(2).
PECO is an "electric utility" within the meaning of 10 C.F.R. Section 50.2.
5.10 Certain Environmental Liabilities. Except as set forth on Schedule
5.10, there are no liabilities or obligations arising under or relating to
Environmental Laws or relating to any claim in respect to Environmental
Conditions or Hazardous Substances with respect to the Purchased Assets, in any
case, which relate to any Off-Site Location and of which PECO has Knowledge.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PSEG
PSEG hereby represents and warrants to Seller as follows:
6.1 Organization; Qualification. PSEG is a limited liability company
duly formed, validly existing and in good standing under the Laws of the State
of Delaware and has all requisite power and authority to own, lease and operate
its assets and properties and to carry on its business as it is now being
conducted. PSEG is, or by the Closing Date will be, qualified to do business in
the Commonwealth of Pennsylvania.
<PAGE>
6.2 Authority. PSEG has full power and authority to execute and deliver
this Agreement and each Additional Agreement to which it is a party and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement by PSEG and each such Additional Agreement to which
PSEG is a party and the consummation of the transactions contemplated hereby and
thereby by PSEG have been duly and validly authorized by all necessary action
required on the part of PSEG and no other proceedings on the part of PSEG are
necessary to authorize this Agreement or each of the Additional Agreements or to
consummate the transactions contemplated hereby or thereby. This Agreement has
been duly and validly executed and delivered by PSEG and constitutes, and upon
the execution and delivery by PSEG of each Additional Agreement to which it is a
party, each such Additional Agreement will constitute, the legal, valid and
binding obligation of PSEG, enforceable against PSEG in accordance with its
terms.
6.3 No Violations; Consents and Approvals
(a) Except as set forth in Schedule 6.3(a), and subject to
obtaining any PSEG Required Regulatory Approvals, none of the execution,
delivery or performance of this Agreement, the execution, delivery and
performance of the Additional Agreements or the consummation by PSEG of the
transactions contemplated hereby and thereby will (i) conflict with or result in
any breach of any provision of the certificate of formation or operating
agreement (or similar governing documents) of PSEG, (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, lease, agreement or other instrument or obligation to which PSEG is a
party, except for such defaults (or rights of termination, cancellation or
acceleration) as to which requisite waivers or consents have been obtained or
that would not, individually or in the aggregate, have a Material Adverse
Effect; or (iii) constitute violations of any Law, order, judgment or decree
applicable to PSEG, which violations, individually or in the aggregate, would
have a Material Adverse Effect.
(b) Except for consents, approvals, filings and notices (i)
required under the HSR Act, or (ii) set forth in Schedule 6.3(b) (the consents,
approvals, filings and notices referred to in clause (ii) of this sentence are
collectively referred to herein as the "PSEG Required Regulatory Approvals"), no
consent, authorization or approval of, declaration, filing or registration with,
or notice to, any Governmental Authority is necessary for the execution and
<PAGE>
delivery by PSEG of this Agreement and the Additional Agreements or the
consummation by PSEG of the transactions contemplated hereby and thereby, other
than (i) such consents, authorizations, approvals, declarations, filings,
registrations with, or notices, which, if not obtained or made, would not,
individually or in the aggregate, have a Material Adverse Effect or prevent PSEG
from performing its material obligations under this Agreement or the Additional
Agreements and (ii) such consents, authorizations, approvals, declarations,
filings, registrations with, or notices which become applicable to PSEG as a
result of the specific regulatory status of Seller (or any of its Affiliates) or
as a result of any other facts that specifically relate to the business or
activities in which Seller (or any of its Affiliates) is or proposes to be
engaged.
6.4 PSEG Permits. Prior to and on the Closing Date, subject to the
receipt of the PSEG Required Regulatory Approvals, PSEG will hold all permits,
certificates, licenses and other authorizations of all Governmental Authorities
that PSEG requires in order to own the Peach Bottom Station, including the
Purchased Assets (collectively, "PSEG Permits"), except, in each case, for (a)
PSEG Nuclear Permits (which are governed by Section 6.5) and (b) such failures
to hold or comply with such PSEG Permits as would not result in a Material
Adverse Effect or would not, individually or in the aggregate, materially impair
PSEG's ability to consummate the transactions contemplated hereby.
6.5 Nuclear Law Matters.
(a) PSE&G Utility is a licensed co-owner of the Peach Bottom
Station.
(b) Prior to and on the Closing Date, subject to the receipt
of the PSEG Required Regulatory Approvals, PSEG will hold all PSEG Permits in
respect of Nuclear Laws that PSEG requires in order to own the Peach Bottom
Station, including, on the Closing Date, the Purchased Assets (collectively,
"PSEG Nuclear Permits").
6.6 Legal Proceedings.
(a) Except as set forth in Schedule 6.6(a), there is no
action, proceeding or investigation pending or, to PSEG's Knowledge, threatened
against or relating to PSEG or its Affiliates before any court, arbitrator or
Governmental Authority, which could, individually or in the aggregate,
reasonably be expected to result, or has resulted, in (i) the institution of
<PAGE>
legal proceedings to prohibit or restrain the performance of this Agreement or
any of the Additional Agreements, or the consummation of the transactions
contemplated hereby or thereby, (ii) a claim against Seller or its Affiliates
for damages as a result of PSEG entering into this Agreement or any of the
Additional Agreements, or the consummation by PSEG of the transactions
contemplated hereby or thereby, (iii) a material impairment of PSEG's ability to
perform its obligations under this Agreement or any of the Additional
Agreements, or (iv) a Material Adverse Effect. Except as set forth in Schedule
6.6(a), PSEG is not subject to any outstanding judgments, decrees or orders of
any court, arbitrator or Governmental Authority that would, individually or in
the aggregate, have a Material Adverse Effect.
(b) As of the date of this Agreement, to PSEG's Knowledge
there is no action, proceeding or investigation involving an amount in dispute
in excess of $1 million pending or threatened against any third party (other
than those referred to in Section 2.1(l) or 2.2(j)) with respect to the
ownership, lease, operation or maintenance of the Peach Bottom Station.
6.7 Qualified Buyer. As of the date of this Agreement, to the Knowledge
of PSEG, there is no fact, circumstance, event or condition reasonably expected
to impair PSEG's ability, on or prior to the Closing Date, to be qualified under
applicable Law to obtain all PSEG Permits, including PSEG Nuclear Permits and
Environmental Permits, necessary for PSEG to own the Peach Bottom Station,
including on the Closing Date, the Purchased Assets.
6.8 Inspections. PSEG has, prior to its execution and delivery of this
Agreement, had full opportunity to conduct to its satisfaction Inspections of
the Purchased Assets. PSEG acknowledges, after such review and Inspections, that
no further investigation is necessary for purposes of acquiring Seller's rights,
title and interests in and to the Purchased Assets for PSEG's intended use.
6.9 Certain Environmental Liabilities. Except as set forth on Schedule
6.10, there are no liabilities or obligations arising under or relating to
Environmental Laws or relating to any claim in respect to Environmental
Conditions or Hazardous Substances with respect to the Purchased Assets, in any
case, which relate to any Off-Site Location and of which PSEG has Knowledge.
<PAGE>
ARTICLE VII
COVENANTS OF THE PARTIES
7.1 Certain Buyers Covenants.
(a) Notwithstanding any provision of the Owners Agreement to
the contrary, PECO, to the extent of the PECO Interest, and PSEG, to the extent
of the PSEG Interest, shall reimburse Seller for all costs and expenses relating
to Inventories at the Peach Bottom Station for which Seller is liable, whether
under the Owners Agreement or otherwise, between September 1, 1999 and the
Closing Date to the extent that the amount of such costs and expenses exceeds
the product obtained by multiplying (i) the average monthly costs and expenses
for Inventories at the Peach Bottom Station for which Seller was liable during
the twelve-month period ended August 31, 1999, by (ii) the number of months
(including partial months, prorated on a daily basis) between September 1, 1999
and the Closing Date. Any such reimbursement payable by PECO or PSEG to Seller
pursuant to this Section 7.1(a) should be paid in the manner contemplated by
Section 3 of the Amendment to Owners Agreement.
(b) On or prior to October 12, 1999, PECO shall, and PSEG
shall use its Commercially Reasonable Efforts to cause PECO to, provide Seller
with a statement setting forth in reasonable detail the aggregate forecasted
budget (the "Peach Bottom Station Budget") for capital expenditures (other than
Nuclear Fuel Supplies), and operations and maintenance expenses (whether
ordinary course or otherwise) for the Peach Bottom Station (together, "Defined
Expenses"), for the period commencing on September 1, 1999 and ending on
September 30, 2000 (the "Budget Period"). For the Budget Period, the Defined
Expenses, as reflected on the Peach Bottom Station Budget, shall not be in
excess of $370 million. Notwithstanding any provision of the Owners Agreement to
the contrary, the amount of Defined Expenses allocable to the Peach Bottom
Interest from and after September 1, 1999 shall be reduced to the extent that
the amount of such Defined Expenses exceeds, in the aggregate, the product
obtained by multiplying (i) $28.57 million, times (ii) the number of months
(including partial months, prorated on a daily basis) which have elapsed prior
to the Closing Date, times (iii) 1.05, times (iv) 0.0751. The amount of such
reduction is referred to as the "Defined Expenses Excess." The Defined Expenses
Excess shall be taken into account for purposes of and as set forth in Section 3
of the Amendment to Owners Agreement.
7.2 Public Statements. Except as required by applicable Law, any
Governmental Authority or applicable rules of any national securities exchange,
<PAGE>
in which event the Parties shall consult with each other in advance, prior to
the Closing Date, no press release or other public announcement, statement or
comment relating to this Agreement, the Additional Agreements or the
transactions contemplated by this Agreement shall be issued, made or permitted
to be issued or made by any Party or its Representatives without the prior
written consent of the other Party (which approval shall not be unreasonably
withheld or delayed).
7.3 Further Assurances.
(a) Subject to the terms and conditions of this Agreement,
each Party shall use its Commercially Reasonable Efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, all things necessary, proper
or advisable under Law to consummate and make effective the purchase, sale,
assignment, conveyance, transfer and delivery of the Purchased Assets and the
assumption of the Assumed Liabilities pursuant to this Agreement as soon as
practicable. Such actions shall include, without limitation, each Party using
its Commercially Reasonable Efforts to ensure satisfaction of the conditions
precedent to its obligations hereunder, including obtaining all necessary
consents, approvals, and authorizations of third parties and Governmental
Authorities required to be obtained in order to consummate the transactions
hereunder, and to effectuate a transfer of the Transferable Permits to PECO or
PSEG, as the case may be, and providing access to such books and records of the
other Party as may reasonably be requested for such purpose. No Party shall,
without the prior written consent of the other Party, take or fail to take any
action, which would reasonably be expected to prevent or materially impede,
interfere with or delay the transactions contemplated by this Agreement;
provided that the good faith exercise of any approval rights or discretion
provided for in this Agreement shall not be deemed in violation of the
requirements of this Section 7.3(a).
(b) Without limiting the generality of Section 7.3(a):
(i) In the event that any part of Seller's rights, title
and interests in and to Purchased Assets shall not have been assigned, conveyed,
transferred or delivered to PECO or PSEG at the Closing, Seller shall, subject
to Section 7.3(b)(ii), use Commercially Reasonable Efforts after the Closing to
assign, convey, transfer or deliver such rights, title and interests to PECO or
PSEG, as the case may be as promptly as practicable.
<PAGE>
(ii) To the extent that Seller's rights under any Seller's
Agreement may not be assigned without the consent, approval or authorization of
any third party which consent, approval or authorization has not been obtained
by the Closing Date, this Agreement shall not constitute an agreement to assign
such right if an attempted assignment would constitute a breach of such Seller's
Agreement or violate any applicable Law and Seller, at its sole cost and
expense, shall use Commercially Reasonable Efforts to obtain any such required
consents, approvals or authorizations as promptly as practicable. If any
consent, approval or authorization to an assignment of any Seller's Agreement
shall not be obtained, or if any attempted assignment would be ineffective or
would impair PECO's or PSEG's rights and obligations under such Seller's
Agreement, such that PECO or PSEG would not, subject to the terms and conditions
hereof, acquire and assume the benefit and detriment of all such rights and
obligations, Seller, at PECO's or PSEG's option, as the case may be, and to the
fullest extent permitted by Law and such Seller's Agreement, shall, after the
Closing Date, appoint PECO or PSEG, as the case may be, to be Seller's agent
with respect to such Seller's Agreement, and, to the maximum extent permitted by
Law and such Seller's Agreement enter into such reasonable arrangements with
PECO or PSEG, as the case may be, or take such other actions as are necessary to
provide PECO or PSEG, as the case may be, with the same or substantially similar
rights and obligations of such Seller's Agreement as, PECO or PSEG, as the case
may be, may reasonably request.
7.4 Consents and Approvals. Without limiting the generality of
Section 7.3(a):
(a) As promptly as practicable after the date of this
Agreement, Seller, PECO and PSEG shall each file or cause to be filed with the
Federal Trade Commission and the United States Department of Justice all
notifications required to be filed under the HSR Act and the rules and
regulations promulgated thereunder, as amended from time to time, with respect
to the transactions contemplated hereby and by the Additional Agreements. The
Parties shall use their Commercially Reasonable Efforts to respond promptly to
any requests for additional information made by, either of such agencies, and to
cause the applicable waiting period under the HSR Act relating to the Purchased
Assets to terminate or expire at the earliest possible date after the date of
filing of such notification. PECO and PSEG shall each pay one-half of all filing
fees payable under the HSR Act but each Party shall bear its own costs and
expenses of the preparation of any filing.
<PAGE>
(b) As promptly as practicable after the date of this
Agreement, Seller, PECO and PSEG shall take, or cause to be taken, all actions,
and do, or cause to be done, all things necessary, proper or advisable under
applicable Laws to obtain all required consents and approvals of the PaPUC, the
SEC and all other Governmental Authorities, and make all other filings and give
all other notices required to be made prior to the Closing with respect to the
transactions contemplated hereby and by the Additional Agreements. The Parties
shall respond promptly to any requests for additional information made by such
Persons, and use their respective Commercially Reasonable Efforts to cause all
such consents and approvals to be obtained or waived at the earliest possible
date after the date of filing. Each Party will bear its own costs of the
preparation of any such filing or notice.
(c) Seller, PECO and PSEG shall cooperate with each other and
promptly prepare and file notifications with, and request Tax clearances from,
state and local taxing authorities in jurisdictions in which a portion of the
Purchase Price may be required to be withheld or in which PECO or PSEG would
otherwise be liable for any Tax liabilities of Seller pursuant to state or local
Tax Law.
(d) Without limiting the generality of Section 7.4(b), as
promptly as practicable after the date of this Agreement, PECO and PSEG shall
make all filings required by the Federal Power Act, individually or jointly with
Seller, as reasonably determined by the Parties. Prior to filing any application
with the FERC, PECO and PSEG shall submit each such application to Seller for
review and comment and shall incorporate into such application all revisions
reasonably requested. If any filing is rejected by the FERC, PECO and PSEG shall
petition the FERC for rehearing or permission to re-submit an application with
the FERC, provided that, in either case, such action has been approved by
Seller.
(e) Without limiting the generality of Section 7.4(b), as
promptly as practicable after the date hereof, Seller and PECO shall jointly
submit the PECO NRC Applications requesting the PECO NRC Approvals. Seller and
PECO shall respond promptly to any requests for additional information made by
the NRC, cooperate in connection with any presentation or proceeding associated
with such PECO NRC Applications and use their respective Commercially Reasonable
Efforts to cause the PECO NRC Approvals to be obtained at the earliest
practicable date after the date of filing. Seller and PECO each shall bear its
own costs relating to the PECO NRC Applications and shall pay one-half of all
NRC fees payable in connection with the PECO NRC Applications and the PECO NRC
<PAGE>
Approvals, provided that, notwithstanding the foregoing, PECO shall, at its sole
expense, comply with all conditions and requirements imposed by the NRC relating
to the amount, including the sufficiency and adequacy, of the Decommissioning
Funds and similar such external trust funds of PECO.
(f) Without limiting the generality of Section 7.4(b), as
promptly as practicable after the date hereof, Seller and PSEG shall jointly
submit the PSEG NRC Applications requesting the PSEG NRC Approvals. Seller and
PSEG shall respond promptly to any requests for additional information made by
the NRC, cooperate in connection with any presentation or proceeding associated
with such PSEG NRC Applications and use their respective Commercially Reasonable
Efforts to cause the PSEG NRC Approvals to be obtained at the earliest
practicable date after the date of filing. Seller and PSEG each shall bear its
own costs relating to the PSEG NRC Applications and shall pay one-half of all
NRC fees payable in connection with the PSEG NRC Applications and the PSEG NRC
Approvals, provided that, notwithstanding the foregoing, PSEG shall, at its sole
expense, comply with all conditions and requirements imposed by the NRC relating
to the amount, including the sufficiency and adequacy, of the Decommissioning
Funds and similar such external trust funds of PSEG.
7.5 Certain Tax Matters.
(a) All Transfer Taxes incurred in connection with this
Agreement and the Additional Agreements, and the transactions contemplated
hereby and thereby (including (i) sales Tax on the sale or purchase of the
Purchased Assets imposed by the Commonwealth of Pennsylvania, and (ii) Transfer
Taxes or conveyance fees on conveyances of interests in real and/or personal
property imposed by the Commonwealth of Pennsylvania or any county or
municipality therein) shall be borne equally by Seller, on the one hand, and
Buyers, on the other hand. Seller, at its expense, shall prepare and file, to
the extent required by, or permissible under, applicable Law, all necessary Tax
Returns and other documentation with respect to all such, Transfer Taxes, and,
if required by Law, PECO or PSEG, as the case may be, shall join in the
execution of all such Tax Returns and other documentation. Prior to the Closing
Date, to the extent applicable, Buyers shall provide to Seller appropriate
certificates of Tax exemption from each applicable Governmental Authority.
<PAGE>
(b) With respect to Taxes to be prorated in accordance with
Section 3.7, PECO to the extent of the PECO Interest, and PSEG, to the extent of
the PSEG Interest, shall prepare and timely file all Tax Returns required to be
filed after the Closing Date with respect to the Purchased Assets, if any, and
shall duly and timely pay all such Taxes shown to be due on such Tax Returns.
PECO's and PSEG's preparation of such Tax Returns shall be subject to Seller's
approval, which approval shall not be unreasonably withheld or delayed. PECO and
PSEG shall make each such Tax Return available for Seller's review and approval
(which approval shall not be unreasonably withheld or delayed) no later than
fifteen (15) Business Days prior to the due date for filing such Tax Return, it
being understood that Seller's failure to approve any such Tax Return shall not
limit any Buyer's obligation to timely file such Tax Return and duly and timely
pay all Taxes shown to be due thereon. Seller shall, to the extent required by
Law, join in the execution of any such Tax Returns.
(c) Seller and PECO, with respect to Tax Returns relating to
the PECO Interest, and Seller and PSEG, with respect to Tax Returns relating to
the PSEG Interest, shall provide the other with such assistance as may
reasonably be requested by the other Party in connection with the preparation of
any Tax Return, audit or other examination, or any proceeding, by or before any
Governmental Authority relating to liability for Taxes, and each Party shall
retain and provide the requesting Party with all books and records or other
information which may be relevant to such Tax Return, audit, examination or
proceeding. All books, records and information obtained pursuant to this Section
7.5(c) or pursuant to any other Section hereof that provides for the sharing of
books, records and information or review of any Tax Return or other instrument
relating to Taxes shall be kept confidential by the parties hereto in accordance
with the terms and conditions set forth in the Confidentiality Agreement.
(d) Seller and PECO, to the extent of the PECO Interest, and
Seller and PSEG, to the extent of the PSEG Interest, shall cooperate and provide
each other with such assistance as may be reasonably requested by the other
Party in connection with obtaining private letter rulings from the Internal
Revenue Service pertaining to the transfers of the Decommissioning Funds
contemplated by this Agreement. Without limiting the generality of the
foregoing, Seller and each Buyer shall use its best efforts to obtain a private
letter ruling from the Internal Revenue Service determining that the transfer of
assets from Seller's Qualified Decommissioning Funds to the Buyers' Qualified
Decommissioning Funds of such Buyer is a disposition that satisfies the
<PAGE>
requirements of Treas. Reg. Section 1.468A-6(b) or Treas. Reg. Section
1.468A-(6)(g)(1). Neither Seller nor any Buyer shall take any action that would
cause (i) such transfer to fail to satisfy the requirements of Treas. Reg.
Section 1.468A-6(b) or Treas. Reg. Section 1.468A-6(g)(1) or (ii) Seller and
such Buyer to fail to obtain such private letter ruling.
(e) In the event that a dispute (other than with respect to
the Decommissioning Funds) arises among Seller, PECO or PSEG regarding Taxes or
any amount due under this Section 7.5, the Parties to such dispute shall attempt
in good faith to resolve such dispute and any agreed upon amount shall be
promptly paid to the appropriate Party. If any such dispute is not resolved
within thirty (30) days after notice thereof is given to any Party, upon the
written request of any Party, the Parties to such dispute shall submit the
dispute to an Independent Accounting Firm for resolution, which resolution shall
be final, binding and conclusive on such Parties. Notwithstanding anything in
this Agreement to the contrary, the fees and expenses of the Independent
Accounting Firm in resolving the dispute shall be borne equally by the Parties
to such dispute. Any payment required to be made as a result of the resolution
by the Independent Accounting Firm of any such dispute shall be made within five
(5) Business Days after such resolution, together with any interest determined
by the Independent Accounting Firm to be appropriate.
(f) If, Seller, PECO or PSEG receives a refund of Taxes in
respect of the Purchased Assets (other than with respect to the Decommissioning
Funds) for a taxable period including the Closing Date, PECO or PSEG, as the
case may be shall pay to Seller the portion of any such refund attributable to
the portion of the taxable period prior to the Closing Date, and Seller shall
pay PECO, to the extent of the PECO Interest, and PSEG, to the extent of the
PSEG Interest, the portion of any such refund attributable to the portion of
such taxable period on and after the Closing Date.
(g) From and after the Closing Date, PECO, to the extent of
the PECO Interest, PSEG, to the extent of the PSEG Interest, and, to the extent
permitted by applicable Law, their respective Buyers' Qualified Decommissioning
Funds shall indemnify, defend and hold harmless the Seller's Qualified
Decommissioning Funds from and against any and all Indemnifiable Losses asserted
against or suffered by the Seller's Qualified Decommissioning Funds relating to,
resulting from or arising out of the imposition of any federal, state or local
Tax on any income or gain recognized by the Seller's Qualified Decommissioning
Funds as the result of transfers contemplated by this Agreement of the assets in
the Seller's Qualified Decommissioning Funds to the Buyers' Qualified
<PAGE>
Decommissioning Funds not qualifying under Treas. Reg. Section 1.468A-6 (each, a
"Fund Tax Loss") (other than those Fund Tax Losses that occur directly as a
result of Seller's conduct or a breach of Seller's representations and
warranties set forth in Section 4.5). From and after the Closing Date, PECO, to
the extent of the PECO Interest, and PSEG, to the extent of the PSEG Interest,
shall indemnify, defend and hold harmless Seller's Indemnitees from and against
any and all Indemnifiable Losses asserted against or suffered by any Seller's
Indemnitee relating to, resulting from or arising out of the imposition on any
of Seller's Indemnitees of any federal, state or local Tax in connection with
any income or gain recognized by any of the Seller's Qualified Decommissioning
Funds to the extent such Tax was not paid by any of the Seller's Qualified
Decommissioning Funds as the result of transfers contemplated by this Agreement
of the assets in the Seller's Qualified Decommissioning Funds to the Buyers'
Qualified Decommissioning Funds not qualifying under Treas. Reg. Section
1.468A-6 (each, a "Seller Tax Loss") (other than those Seller Tax Losses that
occur directly as a result of Seller's conduct or a breach of Seller's
representations and warranties set forth in Section 4.5). PECO, to the extent of
the PECO Interest, and PSEG, to the extent of the PSEG Interest, shall pay the
amount of any Fund Tax Loss or Seller Tax Loss within ten (10) days of receipt
of written notice setting forth with reasonable specificity the nature and
amount of such Fund Tax Loss or Seller Tax Loss.
7.6 Advice of Changes. Prior to the Closing, each Party shall advise
the other Parties in writing with respect to any matter arising after the date
of this Agreement of which that Party obtains Knowledge and which, if existing
or occurring on or prior to the date of this Agreement, would have been required
to be set forth in this Agreement, including any of the Schedules hereto. Seller
may at any time notify Buyers, in writing, of any fact, event, circumstance or
condition that constitutes or results in a breach of any of its representations
and warranties in Article IV; provided, however, that no such notice shall
constitute a supplement or amendment of any Schedule hereto. No supplement or
amendment of any Schedule made pursuant to this Section shall be deemed to cure
any breach of any representation or warranty made in this Agreement unless the
Parties agree thereto in writing.
7.7 Risk of Loss. From the date hereof through (but not including) the
Closing Date, all risk of loss or damage to the assets or properties included in
the Purchased Assets (other than the Decommissioning Funds) shall be borne by
Seller. Notwithstanding any provision hereof to the contrary, subject to Section
10.1(h), if, before the Closing Date, all or any portion of the Purchased Assets
is (i) condemned or taken by eminent domain or is the subject of a pending or
<PAGE>
threatened condemnation or taking which has not been consummated or (ii) damaged
or destroyed by fire or other casualty, Seller shall notify Buyers promptly in
writing of such fact, and (x) in the case of a condemnation or taking, Seller
shall assign or pay, as the case may be, any proceeds thereof to PECO, to the
extent of the PECO Interest, and to PSEG, to the extent of the PSEG Interest, at
the Closing and (y) in the case of a fire or other casualty, Seller shall either
restore such damage or assign the insurance proceeds therefor (and pay the
amount of any deductible and/or self-insured amount in respect of such casualty)
to PECO, to the extent of the PECO Interest, and to PSEG, to the extent of the
PSEG Interest, at the Closing. Notwithstanding the foregoing, if such
condemnation, taking, damage, destruction or other casualty results in a
Material Adverse Effect, Buyers and Seller shall negotiate to settle the loss
resulting from such condemnation, taking, damage, destruction or other casualty
(and such negotiation shall include the negotiation of a fair and equitable
reduction of the Purchase Price). If no such settlement can be agreed upon
within sixty (60) days after Seller has notified Buyers of such casualty or
loss, then PECO and PSEG, on the one hand, or Seller on the other hand, may
terminate this Agreement pursuant to Section 10.1(h).
7.8 Cooperation after Closing. From and after the Closing Date, Seller
shall have access to and rights to copy all books and records, and other
documents, relating to the Purchased Assets to the extent that such access may
reasonably be required by Seller in connection with matters relating to or
affected by the ownership, lease, maintenance or operation of the Purchased
Assets prior to the Closing Date. Such access shall be afforded by PECO and PSEG
upon receipt of reasonable advance notice and during normal business hours.
Seller shall be solely responsible for all costs or expenses incurred by Seller
or Buyers pursuant to this Section 7.8. Notwithstanding the foregoing, Buyers
shall not have any obligation to Seller under this Agreement to maintain any
books, records or other documents relating to the ownership, lease, maintenance
or operation of the Purchased Assets prior to the Closing Date beyond seven (7)
years from the Closing Date, except to the extent that such books and records,
or other documents, are required to be maintained under applicable Law. If PECO
or PSEG, as the case may be, shall desire to dispose of any of such books and
records, or other documents, that may relate to ownership, lease, maintenance or
operation of the Purchased Assets prior to the Closing Date, PECO or PSEG, as
the case may be, shall, prior to such disposition, give to Seller a reasonable
opportunity, but in no event less than sixty (60) days, at Seller's expense, to
segregate and remove such books and records, or other documents, as Seller may
select.
<PAGE>
7.9 Decommissioning Funds.
(a) At the Closing, Seller will direct the trustee and
investment managers of Seller's Qualified Decommissioning Funds for the Peach
Bottom Station to transfer one-half of each asset in such funds to the
respective trustee of each Buyers' Qualified Decommissioning Funds for the Peach
Bottom Station; provided, however, that, upon the written request of the trustee
of Seller's Qualified Decommissioning Funds, Buyers shall cause the trustee of
the Buyers' Qualified Decommissioning Funds to reimburse promptly, but in no
event later than thirty (30) days after such notice (with respect to expenses)
and the due date (with respect to income taxes), the trustee of Seller's
Qualified Decommissioning Funds for expenses associated with the transfer of the
assets and the termination of such funds and any related income taxes due with
respect to such funds for the period prior to Closing. To the extent that the
trustee and investment managers of Seller's Qualified Decommissioning Funds are
unable to divide an asset in such fund in half, the trustee of such funds shall
liquidate such asset and transfer one-half of the proceeds to the respective
trustee of each Buyers' Qualified Decommissioning Funds for the Peach Bottom
Station. If Buyers do not obtain a private letter ruling from the Internal
Revenue Service determining that the transfer of Seller's Qualified
Decommissioning Funds to Buyers' Qualified Decommissioning Funds of any Buyer
satisfies the requirements of Treas. Reg. Section 1.468A-6(b) or Treas. Reg.
Section 1.468A-6(g)(1), then Seller shall transfer the assets in Seller's
Qualified Decommissioning Funds to such trust(s) as directed by such Buyer at
least two (2) Business Days prior to the Closing Date.
(b) At the Closing, Seller will direct the trustee and
investment managers of Seller's Nonqualified Decommissioning Funds for the Peach
Bottom Station to transfer one-half of each asset in such funds to the trustee
of each Buyer's nonqualified decommissioning funds for the Peach Bottom Station;
provided, however, that, upon the written request of the trustee of Seller's
Nonqualified Decommissioning Funds, Buyers shall cause the trustee of each
Buyer's nonqualified decommissioning funds to reimburse promptly, but in no
event later than thirty (30) days after such notice, the trustee of Seller's
Nonqualified Decommissioning Funds for expenses associated with the transfer of
the assets and the termination of such funds. To the extent that the trustee and
investment managers of Seller's Nonqualified Decommissioning Funds are unable to
divide an asset in such fund in half, the trustee and investment managers of
such funds shall liquidate such asset and transfer one-half of the proceeds to
the respective trustee of each Buyers' nonqualified decommissioning funds for
the Peach Bottom Station.
<PAGE>
(c) Schedule 7.9(c) sets forth a true and correct list of all
investment manager agreements and investment management policies relating to the
Trust Agreement and the Decommissioning Funds. Prior to the earlier of the
Closing Date and any date on which this Agreement is terminated pursuant to
Section 10.1, except as required by applicable Law, Seller shall not amend,
modify or change any investment manager agreement or investment management
policy relating to the Trust Agreement or the Decommissioning Funds, whether
orally or in writing, nor appoint a successor investment manager without the
prior written consent of Buyers (which consent shall not be unreasonably
withheld or delayed).
(d) To the extent not prohibited by the terms of the Trust
Agreement, Seller shall (i) instruct the trustee and investment managers of the
Decommissioning Funds to manage, invest and maintain the assets and properties
held by the Decommissioning Funds in a manner consistent with suggestions
provided in writing by Buyers to Seller from time to time and (ii) afford Buyers
the opportunity, as reasonably requested, to review information regarding the
management, investment and maintenance of the Decommissioning Funds; provided
that neither Seller, the trustee nor any investment manager of the
Decommissioning Funds shall be required to take, or fail to take, any action
pursuant to this Section 7.9(d) if either Seller, such trustee or any such
investment manager, in the exercise of its reasonable judgment, shall determine
in good faith that effecting any such suggestion would reasonably be expected to
(x) constitute a breach or violation of any other provision of this Agreement,
or impair the ability of any Party to perform its obligations hereunder or
consummate the transactions contemplated hereby, (y) constitute a breach or
violation of its certificate of incorporation or bylaws, or similar governing
documents, of any applicable Law, or applicable order, decree or judgment, or of
any other contract, agreement or other arrangement to which it is a party or by
or to which it or its assets or properties are bound or subject, including any
agreement between Seller and such trustee or any investment manager, and any
investment policy that is effective on the date hereof with respect to the
Decommissioning Funds, or (z) result in an adverse effect on Seller, its
businesses, assets or properties, including the Decommissioning Funds, or their
respective conditions (financial or otherwise); and provided further, that each
Buyer shall maintain the confidentiality of any information reviewed pursuant to
clause (ii) above in accordance with the terms and conditions set forth in the
Confidentiality Agreement to which it is a party.
<PAGE>
(e) Subject to applicable Law and to the extent not prohibited
by the Trust Agreement, immediately prior to the Closing, Seller shall withdraw
from the Seller's Nonqualified Decommissioning Funds an amount equal to all
amounts in respect of contributions made by Seller to the Decommissioning Funds
during the period commencing on April 1, 1999 and ending on the Closing Date,
provided that, in the event that such withdrawal is not permitted by applicable
Law or the Trust Agreement, then promptly, but in no event later than thirty
(30) days, after the Closing Date, PECO, to the extent of the PECO Interest, and
PSEG, to the extent of the PSEG Interest, shall reimburse to Seller all such
amounts, by wire transfer of immediately available funds to an account
designated by Seller. The Decommissioning Funds shall retain all income,
interest and other earnings accrued on the Decommissioning Funds as of Closing.
Seller shall furnish to Buyers such documents and other records as may be
reasonably requested by Buyers in order to confirm the amount of the withdrawal
provided for in this Section 7.9(e), as well as all income, interest and other
earnings accrued on the Decommissioning Funds between the date hereof and the
Closing Date.
(f) To the extent permitted by applicable Law and the terms of
the Trust Agreement, Seller shall, after the date hereof, not contribute
additional amounts to the Decommissioning Funds.
7.10 Amendment to Seller's Agreements. From and after the date hereof
and prior to the Closing Date, Seller shall not enter into any Seller's
Agreement as a party, or modify, amend, extend or voluntarily terminate, prior
to the respective expiration date, any Seller's Agreement to which Seller is a
party or any of the Transferable Permits issued to Seller, in any material
respect.
7.11 Exclusivity. Effective as of the date of this Agreement through
and until the earlier to occur of the termination of this Agreement and the
Closing, Seller shall not market its rights, title or interests in the Purchased
Assets to any other Person, or accept or pursue any other offers or bids for
Seller's rights, title or interests in and to the Purchased Assets, provided
this provision is not applicable to assets of the Decommissioning Funds to the
extent sold in accordance with Section 7.9.
7.12 Insurance.
(a) PECO shall obtain and maintain the insurance required
pursuant to 10 C.F.R. Parts 50 and 140, and in accordance with all Nuclear Laws
for so long as PECO shall be the licensed operator of the Peach Bottom Station;
<PAGE>
provided that this provision is not intended to grant to Seller rights or
interests in any such insurance.
(b) Seller shall use its Commercially Reasonable Efforts to
assist Buyers in making any claims relating to pre-Closing periods against
Seller's Insurance Policies that may provide coverage related to the Assumed
Liabilities. Buyers shall use their Commercially Reasonable Efforts to assist
Seller in making any claims relating to pre-Closing periods against Buyers'
Insurance Policies that may provide coverage related to the Excluded
Liabilities.
ARTICLE VIII
CONDITIONS
8.1 Conditions to Obligation of Each Party. The respective obligations
of each Party hereto to effect the transactions contemplated by this Agreement
shall be subject to the satisfaction at or prior to the Closing of the following
conditions:
(a) The waiting period under the HSR Act applicable to the
consummation of the transactions contemplated hereby shall have expired or been
terminated; and
(b) No preliminary or permanent injunction or other order or
decree by any Governmental Authority which prevents the consummation of the
transactions contemplated hereby or by the Additional Agreements shall have been
issued and remain in effect (each Party agreeing to use its Commercially
Reasonable Efforts to have any such injunction, order or decree lifted), and no
Law shall be in effect which prohibits the consummation of the transactions
contemplated hereby or thereby.
8.2 Conditions to Obligations of PECO. The obligations of PECO to
effect the transactions contemplated by this Agreement shall be subject to the
satisfaction (or the waiver in writing, to the extent permitted by applicable
Law, by PECO) at or prior to the Closing of the following conditions:
(a) (i) PECO shall have received all of the PECO Required
Regulatory Approvals and, except as set forth in Schedule 8.2(a)(i), in form and
substance reasonably satisfactory to PECO (including adverse conditions relating
<PAGE>
to PECO or the Purchased Assets), and all conditions to effectiveness prescribed
therein or otherwise by Law shall have been satisfied; provided, however, that
if at the time any PECO Required Regulatory Approval is obtained, PECO
reasonably expects a request for rehearing or a challenge thereto to be filed or
if a request for rehearing or a challenge thereto has been filed, in each case,
which, if successful, would cause such PECO Required Regulatory Approval to be
reversed, stayed, enjoined, set aside, annulled, suspended or, except as set
forth in Schedule 8.2(a)(i), modified in such manner as to result in such PECO
Required Regulatory Approval not being reasonably satisfactory as set forth
above, then PECO may by notice to Seller within five (5) Business Days after
receipt of such PECO Required Regulatory Approval, delay the Closing Date until
the time for requesting rehearing has expired or until such challenge is
decided, in each case, whether or not any appeal thereof is pending; and (ii)
Seller shall have received all of Seller's Required Regulatory Approvals and
PECO shall have received evidence thereof, in form and substance reasonably
satisfactory to PECO.
(b) Seller shall have in all material respects performed and
complied with the covenants and agreements contained in this Agreement which are
required to be performed and complied with by Seller on or prior to the Closing
Date;
(c) The representations and warranties of Seller set forth in
this Agreement shall be true and correct as of the date of this Agreement and as
of the Closing Date as though made at and as of such time (other than
representations and warranties that are made as of a specific date which shall
have been true and correct as of such date), except where the failure 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, have a Material Adverse Effect;
(d) PECO shall have received a certificate from an authorized
officer of Seller, dated the Closing Date, to the effect that, to such officer's
Knowledge, the conditions set forth in Sections 8.2(b) and (c) have been
satisfied by Seller;
(e) Seller shall have delivered, or caused to be delivered, to
PECO at the Closing, Seller's closing deliveries set forth in Section 3.8;
(f) The lien of the Mortgage Indenture on the Purchased Assets
and any other Encumbrance (other than Permitted Encumbrances) on the Purchased
<PAGE>
Assets, including the Nuclear Fuel Supplies, arising under or through Seller
shall have been released and any documents necessary to evidence such release
shall have been delivered to PECO;
(g) The Collateral Agreement shall be in full force and effect
and the valid and binding obligation of each party thereto (other than PECO);
and all conditions to the obligations of all parties to the Collateral Agreement
to consummate the transactions contemplated thereby shall have been satisfied
or, to the extent permitted by applicable Law, waived;
(h) There shall not have occurred and be continuing a Material
Adverse Effect;
(i) PECO shall have received a title report or commitment with
respect to the Real Property that does not include any exceptions other than
Permitted Encumbrances and such matters as a current survey of the Real Property
may show; and
(j) PECO shall have received a private letter ruling issued by
the Internal Revenue Service to the effect that PECO will not recognize gain or
otherwise take into account any income for federal income tax purposes by reason
of the transfer of the assets of the Seller's Nonqualified Decommissioning Funds
to the nonqualified decommissioning funds of PECO.
8.3 Conditions to Obligations of PSEG. The obligations of PSEG to
effect the transactions contemplated by this Agreement shall be subject to the
satisfaction (or the waiver in writing, to the extent permitted by applicable
Law, by PSEG) at or prior to the Closing of the following conditions:
(a) (i) PSEG shall have received all of the PSEG Required
Regulatory Approvals and, except as set forth in Schedule 8.3(a)(i), in form and
substance reasonably satisfactory to PSEG (including adverse conditions relating
to PSEG, the Affiliates of PSEG listed in Schedule 8.3(a)(ii) or the Purchased
Assets), and all conditions to effectiveness prescribed therein or otherwise by
Law shall have been satisfied; provided, however, that if at the time any PSEG
Required Regulatory Approval is obtained, PSEG reasonably expects a request for
rehearing or a challenge thereto to be filed or if a request for rehearing or a
challenge thereto has been filed, in each case, which, if successful, would
cause such PSEG Required Regulatory Approval to be reversed, stayed, enjoined,
<PAGE>
set aside, annulled, suspended or, except as set forth in Schedule 8.3(a)(i),
modified in such manner as to result in such PSEG Required Regulatory Approval
not being reasonably satisfactory as set forth above, then PSEG may by notice to
Seller within five (5) Business Days after receipt of such PSEG Required
Regulatory Approval, delay the Closing Date until the time for requesting
rehearing has expired or until such challenge is decided, in each case, whether
or not any appeal thereof is pending; and (ii) Seller shall have received all of
Seller's Required Regulatory Approvals and PSEG shall have received evidence
thereof, in form and substance reasonably satisfactory to PSEG.
(b) Seller shall have in all material respects performed and
complied with the covenants and agreements contained in this Agreement which are
required to be performed and complied with by Seller on or prior to the Closing
Date;
(c) The representations and warranties of Seller set forth in
this Agreement shall be true and correct as of the date of this Agreement and as
of the Closing Date as though made at and as of such time (other than
representations and warranties that are made as of a specific date which shall
have been true and correct as of such date), except where the failure to be so
true and correct (without giving effect to any limitation as to "materiality" or
"Material Adverse Effect" set forth herein) would not, individually or in the
aggregate, have a Material Adverse Effect;
(d) PSEG shall have received a certificate from an authorized
officer of Seller, dated the Closing Date, to the effect that, to such officer's
Knowledge, the conditions set forth in Sections 8.3(b) and (c) have been
satisfied by Seller;
(e) Seller shall have delivered, or caused to be delivered, to
PSEG at the Closing, Seller's closing deliveries set forth in Section 3.8;
(f) The lien of the Mortgage Indenture on the Purchased Assets
and any other Encumbrance (other than Permitted Encumbrances) on the Purchased
Assets, including the Nuclear Fuel Supplies, arising under or through Seller
shall have been released and any documents necessary to evidence such release
shall have been delivered to PSEG;
(g) The Collateral Agreement shall be in full force and effect
and the valid and binding obligation of each party thereto (other than PSEG);
and all conditions to the obligations of all parties to the Collateral Agreement
<PAGE>
to consummate the transactions contemplated thereby shall have been satisfied
or, to the extent permitted by applicable Law, waived;
(h) There shall not have occurred and be continuing a Material
Adverse Effect;
(i) PSEG shall have received a title report or commitment with
respect to the Real Property that does not include any exceptions other than
Permitted Encumbrances and such matters as a current survey of the Real Property
may show; and
(j) PSEG shall have received a private letter ruling issued by
the Internal Revenue Service to the effect that PSEG will not recognize any gain
or otherwise take into account any income for federal income tax purposes by
reason of the transfer of the assets of the Seller's Nonqualified
Decommissioning Funds to the nonqualified decommissioning funds of PSEG.
8.4 Conditions to Obligation of Seller. The obligation of Seller to
effect the transactions contemplated by this Agreement shall be subject to the
satisfaction (or the waiver in writing, to the extent permitted by applicable
Law, by Seller) at or prior to the Closing of the following conditions:
(a) (i) Seller shall have received all of the Seller's
Required Regulatory Approvals, in form and substance reasonably satisfactory to
Seller (including adverse conditions relating to Seller's or the Purchased
Assets), and all conditions to effectiveness prescribed therein or otherwise by
Law shall have been satisfied; provided, however, that if at the time any
Seller's Required Regulatory Approval is obtained, Seller reasonably expects a
request for rehearing or a challenge thereto to be filed or if a request for
rehearing or a challenge thereto has been filed, in each case, which, if
successful, would cause such Seller's Required Regulatory Approval to be
reversed, stayed, enjoined, set aside, annulled, suspended or modified in such
manner as to result in such Seller's Required Regulatory Approval not being
reasonably satisfactory as set forth above, then Seller may by notice to Buyers
within five (5) Business Days after receipt of such Seller's Required Regulatory
Approval, delay the Closing Date until the time for requesting rehearing has
expired or until such challenge is decided, in each case, whether or not any
appeal thereof is pending; and (ii) PECO shall have received all of the PECO
Required Regulatory Approvals and Seller shall have received evidence thereof,
in form and substance reasonably satisfactory to Seller; and (iii) PSEG shall
<PAGE>
have received all of the PSEG Required Regulatory Approvals and Seller shall
have received evidence thereof, in form and substance reasonably satisfactory to
Seller;
(b) PECO shall have in all material respects performed and
complied with the covenants and agreements contained in this Agreement which are
required to be performed and complied with by PECO on or prior to the Closing
Date;
(c) The representations and warranties of PECO set forth in
this Agreement shall be true and correct as of the date of this Agreement and as
of the Closing Date as though made at and as of such time (other than
representations and warranties that are made as of a specific date which shall
have been true and correct as of such date) except where the failure 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, have a Material Adverse Effect;
(d) Seller shall have received a certificate from an
authorized officer of PECO, dated the Closing Date, to the effect that, to each
such officer's Knowledge, the conditions set forth in Sections 8.4(b) and (c)
have been satisfied by PECO;
(e) PECO shall have delivered, or caused to be delivered, to
Seller at the Closing, PECO's closing deliveries set forth in Section 3.9;
(f) PSEG shall have in all material respects performed and
complied with the covenants and agreements contained in this Agreement which are
required to be performed and complied with by PSEG on or prior to the Closing
Date;
(g) The representations and warranties of PSEG set forth in
this Agreement shall be true and correct as of the date of this Agreement and as
of the Closing Date as though made at and as of such time (other than
representations and warranties that are made as of a specific date which shall
have been true and correct as of such date) except where the failure 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, have a Material Adverse Effect;
(h) Seller shall have received a certificate from an
authorized officer of PSEG, dated the Closing Date, to the effect that, to each
<PAGE>
such officer's Knowledge, the conditions set forth in Sections 8.4(f) and (g)
have been satisfied by PSEG;
(i) PSEG shall have delivered, or caused to be delivered, to
Seller at the Closing, PSEG's closing deliveries set forth in Section 3.10;
(j) The Collateral Agreement shall be in full force and effect
and the valid and binding obligation of each party thereto (other than Seller);
and all conditions to the obligations of all parties to the Collateral Agreement
to consummate the transactions contemplated thereby shall have been satisfied
or, to the extent permitted by applicable Law, waived; and
(k) Seller shall have received a private letter ruling issued
by the Internal Revenue Service to the effect that Seller will be allowed
current ordinary deductions for federal income tax purposes for any amounts
treated as realized by Seller, or otherwise recognized as income to Seller, as a
result of Buyers' assumption of the Assumed Decommissioning Liabilities.
ARTICLE IX
INDEMNIFICATION AND ARBITRATION
9.1 Indemnification.
(a) From and after the Closing, PECO shall indemnify, defend
and hold harmless Seller and its Representatives (each, a "Seller's Indemnitee")
from and against any and all claims, demands, suits, losses, liabilities,
penalties, damages, obligations, payments, costs and expenses (including the
cost and expense of any action, suit, proceeding, assessment, judgment,
settlement or compromise relating thereto and reasonable attorneys' fees and
reasonable disbursements in connection therewith) and including costs and
expenses incurred in connection with investigations and settlement proceedings
(each, an "Indemnifiable Loss") asserted against or suffered by any Seller's
Indemnitee relating to, resulting from or arising out of or in connection with
(i) any breach by PECO of any representation or warranty of PECO contained in
this Agreement; (ii) any breach by PECO of any covenant or agreement of PECO set
forth in this Agreement; (iii) to the extent of the PECO Interest, the Assumed
Liabilities; or (iv) to the extent of the PECO Interest, any Third-Party Claim
<PAGE>
against any Seller's Indemnitee to the extent arising out of or in connection
with PECO's ownership, lease, maintenance or operation of any of the Purchased
Assets on or after the Closing Date (other than to the extent such Third-Party
Claim constitutes an Excluded Liability); provided, however, that PECO shall be
liable pursuant to clauses (i) and (ii) of Section 9.1 (a) only for
Indemnifiable Losses for which any Seller's Indemnitee gives written notice to
PECO (setting forth with reasonable specificity the nature and amount of the
Indemnifiable Loss) during the period for which such representations,
warranties, covenants or agreements survive the Closing in accordance with
Section 11.6.
(b) From and after the Closing, PSEG shall indemnify, defend
and hold harmless each Seller's Indemnitee from and against any and all
Indemnifiable Losses asserted against or suffered by any Seller's Indemnitee
relating to, resulting from or arising out of or in connection with (i) any
breach by PSEG of any representation or warranty of PSEG contained in this
Agreement; (ii) any breach by PSEG of any covenant or agreement of PSEG set
forth in this Agreement; (iii) to the extent of the PSEG Interest, the Assumed
Liabilities; or (iv) to the extent of PSEG Interest, any Third-Party Claim
against any Seller's Indemnitee to the extent arising out of or in connection
with PSEG's ownership, lease, maintenance or operation of any of the Purchased
Assets on or after the Closing Date (other than to the extent such Third-Party
Claim constitutes an Excluded Liability); provided, however, that PSEG shall be
liable pursuant to clauses (i) and (ii) of Section 9.1 (b) only for
Indemnifiable Losses for which any Seller's Indemnitee gives written notice to
PSEG (setting forth with reasonable specificity the nature and amount of the
Indemnifiable Loss) during the period for which such representations,
warranties, covenants or agreements survive the Closing in accordance with
Section 11.6.
(c) From and after the Closing, Seller shall indemnify, defend
and hold harmless Buyers and their respective Representatives (each, a "Buyers'
Indemnitee" and, together with Seller's Indemnitees, an "Indemnitee") from and
against any and all Indemnifiable Losses asserted against or suffered by any
Buyers' Indemnitee in any way relating to, resulting from or arising out of or
in connection with (i) any breach by Seller of any covenant or agreement of
Seller set forth in this Agreement; (ii) any breach by Seller of any
representation or warranty of Seller contained in this Agreement; (iii) the
Excluded Liabilities; (iv) any Third-Party Claim against any Buyers' Indemnitee
to the extent arising out of or in connection with Seller's ownership or
operation of the Excluded Assets (other than to the extent such Third-Party
Claim constitutes an Assumed Liability); provided, however, that Seller shall be
liable pursuant to clause (i) and (ii) of this Section 9.1(c) only for
Indemnifiable Losses for which any Buyers' Indemnitee gives written notice to
<PAGE>
Seller (setting forth with reasonable specificity the nature and amount of the
Indemnifiable Loss) during the period for which such covenants or agreements
survive the Closing in accordance with Section 11.6.
(d) In furtherance, and not in limitation, of the provisions
set forth in Section 9.1(c), without any further action required by any Person,
from and after the Closing Date, each of PECO and PSEG shall be deemed to
release, hold harmless and forever discharge Seller from any and all
Indemnifiable Losses of any kind or character, whether known or unknown,
contingent or accrued, arising under or relating to Environmental Laws, or
relating to any claim in respect of any Environmental Condition or Hazardous
Substance, whether based on common law or Environmental Laws relating to the
Purchased Assets ("Environmental Claims") (other than those described in Section
2.4(g)). In furtherance of, and to the extent set forth in, the foregoing, each
of PECO and PSEG shall, at Closing, irrevocably waive any and all rights and
benefits with respect to such Environmental Claims that it now has or in the
future may have conferred upon it by virtue of any Law or common law principle,
which provides that a general release does not extend to claims which a party
does not know or suspect to exist in its favor at the time of executing the
release, if knowledge of such claims would have materially affected such party's
settlement with the obligor. In this connection, each of PECO and PSEG hereby
acknowledges that it is aware that factual matters now unknown to it may have
given, or hereafter may give, rise to Environmental Claims that are presently
unknown, unanticipated and unsuspected, and Buyers further agree that the
release from and after the Closing provided for in this Section 9.1(d) has been
negotiated and agreed upon in light of that awareness, and each of PECO and PSEG
nevertheless hereby intends, effective from and after the Closing, irrevocably
to release, hold harmless and forever discharge Seller from all such
Environmental Claims to the extent provided and in the manner contemplated by
this paragraph.
(e) Any Indemnifiable Loss shall be (i) net of the dollar
amount of any insurance or other proceeds actually receivable by the Indemnitee
or any of its Affiliates with respect to the Indemnifiable Loss, (ii) reduced to
take account of any Tax Benefit realized by the Indemnitee arising from the
incurrence or payment of such Indemnifiable Loss (a "Tax Benefit" meaning for
this purpose the positive excess of the Tax liability of Indemnitee without
regard to such Indemnifiable Loss over the Tax liability of such Indemnitee
taking into account such Indemnifiable Loss, with all other circumstances
remaining unchanged), and (iii) increased to take account of any Tax Cost
incurred by Indemnitee arising from the receipt of indemnity payments hereunder
<PAGE>
(grossed up for such increase) (a "Tax Cost" meaning for this purpose the
positive excess of the Tax liability of such Indemnitee taking such indemnity
payment into account over the Tax liability of such Indemnitee without regard to
such payment, with all other circumstances remaining unchanged).
(f) The rights and remedies of Seller, on the one hand, and
PECO and PSEG, on the other hand, under this Article IX are, solely as between
Seller and on the one hand, and PECO and PSEG, on the other hand, exclusive and
in lieu of any and all other rights and remedies which each of Seller and on the
one hand, and PECO and PSEG, on the other hand, may have under this Agreement,
under applicable Law, with respect to any Indemnifiable Loss, whether at common
law or in equity, including for declaratory, injunctive or monetary relief. The
indemnification obligations of the Parties set forth in this Article IX apply
only to matters arising out of this Agreement and the transactions contemplated
hereby, but do not extend to matters arising out of the Owners Agreement, the
Collateral Agreement or any of the Additional Agreements. Any Indemnifiable Loss
arising under or pursuant to the Owners Agreement, the Collateral Agreement or
any of the Additional Agreements shall be governed by the indemnification
obligations, if any, contained in such agreement under which the Indemnifiable
Loss arises.
(g) Notwithstanding anything to the contrary contained herein:
(i) No Party (including an Indemnitee) shall be
entitled to recover from any other Party (including any Party hereto required to
provide indemnification under this Agreement or any Additional Agreement (an
"Indemnifying Party")) for any liabilities, damages, obligations, payments,
losses, costs, or expenses under this Agreement any amount in excess of the
actual compensatory damages, court costs and reasonable attorney's and other
advisor fees suffered by such Party;
(ii) No Party shall have any liability or obligation
to indemnify under Section 9.1(a), 9.1(b) or 9.1(c), as the case may be, unless
and until the aggregate amount of Indemnifiable Losses for which such Party
would be liable thereunder, but for this provision, exceeds, together with all
such Indemnifiable Losses for which such Party is so liable under the Collateral
Agreement, $100,000, with respect to Seller, and $50,000, with respect to any
Buyer; provided that, thereafter, such Party shall be liable for all such
Indemnifiable Losses;
(iii) To the fullest extent permitted by Law, each of
PECO, PSEG and Seller hereby waives any right to recover punitive, incidental,
<PAGE>
special, exemplary and consequential damages arising in connection with or with
respect to this Agreement or any breach or violation hereof; provided that the
provisions of this clause (iii) shall not apply to indemnification for a
Third-Party Claim.
(h) An Indemnitee shall use Commercially Reasonable Efforts to
mitigate all losses, damages and the like relating to a claim under the
indemnification provisions in this Section 9.1, including availing itself of any
defenses, limitations, rights of contribution, claims against third Persons and
other rights at law or equity. For purposes of this Section 9.1(h), the
Indemnitee's Commercially Reasonable Efforts shall include the reasonable
expenditure of money to mitigate or otherwise reduce or eliminate any losses or
expenses for which indemnification would otherwise be due, and, in addition to
its other obligations hereunder, the Indemnifying Party shall reimburse the
Indemnitee for the Indemnitee's reasonable expenditures in undertaking the
mitigation.
(i) The expiration, termination or extinguishment of any
covenant or agreement shall not affect the Parties' obligations under Sections
9.1(a) through 9.1(c) hereof if the Indemnitee provided the Indemnifying Party
with proper notice of the claim or event for which indemnification is sought
prior to such expiration, termination or extinguishment.
9.2 Defense of Claims.
(a) If any Indemnitee receives notice of the assertion of any
claim or of the commencement of any suit, action or proceeding made or brought
by any Person who is not a Party to this Agreement or an Affiliate of a Party to
this Agreement (a "Third-Party Claim") with respect to which indemnification is
to be sought from an Indemnifying Party, the Indemnitee shall give such
Indemnifying Party reasonably prompt written notice thereof, but in no event
later than twenty (20) Business Days after the Indemnitee's receipt of notice of
such Third-Party Claim. Such notice shall describe the nature of the Third-Party
Claim in reasonable detail and shall indicate the estimated amount, if
practicable, of the Indemnifiable Loss that has been or may be incurred by the
Indemnitee. The Indemnifying Party shall have the right to participate in or, by
giving written notice to the Indemnitee, to elect to assume the defense of any
Third-Party Claim at such Indemnifying Party's expense and by such Indemnifying
Party's own counsel; provided that the counsel for the Indemnifying Party who
shall conduct the defense of such Third-Party Claim shall be reasonably
satisfactory to the Indemnitee. The Indemnitee shall cooperate in good faith in
such defense at such Indemnitee's own expense. If an Indemnifying Party elects
<PAGE>
to assume the defense of any Third-Party Claim, the Indemnitee shall (i)
cooperate in all reasonable respects with the Indemnifying Party in connection
with such defense, (ii) not admit any liability with respect to, or settle,
compromise or discharge, any Third-Party Claim without the Indemnifying Party's
prior written consent and (iii) agree to any settlement, compromise or discharge
of a Third-Party Claim which the Indemnifying Party may recommend and which by
its terms obligates the Indemnifying Party to pay the full amount of the
liability in connection with such Third-Party Claim and unconditionally releases
the Indemnitee completely in connection with such Third-Party Claim. In the
event that the Indemnifying Party shall assume the defense of any Third-Party
Claim, the Indemnitee shall be entitled to participate in (but not control) such
defense with its own counsel at its own expense. If the Indemnifying Party does
not assume the defense of any such Third-Party Claim, the Indemnitee may defend
the same in such manner as it may deem appropriate, including settling,
compromising or discharging such claim or litigation after giving notice to the
Indemnifying Party of the terms of the proposed settlement, compromise or
discharge and the Indemnifying Party will promptly reimburse the Indemnitee upon
written request. Anything contained in this Agreement to the contrary
notwithstanding, no Indemnifying Party shall be entitled to assume the defense
of any Third-Party Claim if such Third-Party Claim seeks an order, injunction or
other equitable relief or relief for other than monetary damages against the
Indemnitee which, if successful, would materially adversely affect the business
of the Indemnitee; provided that such Indemnifying Party shall continue to be
obligated to such Indemnitee pursuant to this Article IX for all Indemnifiable
Losses relating to, resulting from or arising out of such Third-Party Claim.
(b) If, within ten (10) Business Days after an Indemnitee
gives written notice to the Indemnifying Party of any Third-Party Claim, such
Indemnitee receives written notice from the Indemnifying Party that such
Indemnifying Party has elected to assume the defense of such Third-Party Claim
as provided in Section 9.2(a), the Indemnifying Party shall not be liable for
any costs, fees or expenses subsequently incurred by the Indemnitee in
connection with the defense, compromise or settlement thereof; provided,
however, that if the Indemnifying Party shall fail to take reasonable steps
necessary to defend diligently such Third-Party Claim within ten (10) Business
Days after receiving notice from the Indemnitee that the Indemnitee believes the
Indemnifying Party has failed to take such steps, the Indemnitee may assume its
own defense and the Indemnifying Party shall be liable for all reasonable costs,
fees and expenses thereof.
<PAGE>
(c) Without the prior written consent of the Indemnitee, the
Indemnifying Party shall not admit any liability with respect to, or enter into
any settlement, compromise or discharge of, or any voluntary consent decree,
order or injunction with respect to, any Third-Party Claim which would lead to
liability or create any financial or other obligation on the part of the
Indemnitee for which the Indemnitee is not entitled to indemnification
hereunder. If a firm offer is made to settle, compromise or discharge, or to
enter into any voluntary consent decree, order or injunction with respect to, a
Third-Party Claim, which offer would not lead to liability or the creation of
any financial or other obligation on the part of the Indemnitee for which the
Indemnitee is not entitled to indemnification hereunder, and the Indemnifying
Party desires to accept and agree to such offer, the Indemnifying Party shall
give written notice to the Indemnitee to that effect. If the Indemnitee fails to
consent to such firm offer within ten (10) Business Days after its receipt of
such notice, the Indemnifying Party shall be relieved of its obligations to
defend such Third-Party Claim and the Indemnitee may contest or defend such
Third-Party Claim. In such event, the maximum liability of the Indemnifying
Party as to such Third-Party Claim will be the amount of such settlement offer
plus reasonable costs and expenses paid or incurred by Indemnitee up to the date
of said notice.
(d) Subject to Section 9.3, any claim by an Indemnitee on
account of an Indemnifiable Loss which does not constitute a Third-Party Claim
(a "Direct Claim") shall be asserted by giving the Indemnifying Party reasonably
prompt written notice thereof, but in no event later than twenty (20) Business
Days after the Indemnitee becomes aware of such Direct Claim, stating the nature
of such claim in reasonable detail and indicating the estimated amount, if
practicable, of such Indemnifiable Loss; and the Indemnifying Party shall have a
period of twenty (20) Business Days within which to respond to such Direct
Claim. If the Indemnifying Party fails to respond during such twenty (20)
Business Day period, the Indemnifying Party shall be deemed to have accepted
such claim and, subject to this Article IX, shall promptly reimburse the
Indemnitee for the Indemnifiable Losses set forth in the Indemnitee's notice. If
the Indemnifying Party rejects such claim, subject to Section 9.3, the
Indemnitee shall be free to seek enforcement of its right to indemnification
under this Agreement.
(e) If the amount of any Indemnifiable Loss, at any time
subsequent to the making of an indemnity payment in respect thereof, is reduced
by recovery, settlement, compromise, discharge or otherwise under or pursuant to
any insurance coverage, or pursuant to any claim, recovery, settlement,
<PAGE>
compromise, discharge or payment by, from or against any other Person, the
amount of such reduction, less any costs, expenses or premiums incurred in
connection therewith (together with interest thereon from the date of payment
thereof at the Prime Rate) shall promptly be repaid by the Indemnitee to the
Indemnifying Party. Upon making any indemnity payment, the Indemnifying Party
shall, to the extent of such indemnity payment, be subrogated to all rights of
the Indemnitee against any third party in respect of the Indemnifiable Loss to
which the indemnity payment relates; provided, however, that (i) the
Indemnifying Party shall then be in compliance with its obligations under this
Agreement in respect of such Indemnifiable Loss and (ii) until the Indemnitee
recovers full payment of its Indemnifiable Loss, any and all claims of the
Indemnifying Party against any such third party on account of said indemnity
payment is hereby made expressly subordinated and subjected in right of payment
to the Indemnitee's rights against such third party. Without limiting the
generality or effect of any other provision hereof, each such Indemnitee and
Indemnifying Party shall duly execute upon request all instruments reasonably
necessary to evidence and perfect the above-described subrogation and
subordination rights, and otherwise cooperate in the prosecution of such claims
at the direction of the Indemnifying Party. Nothing in this Section 9.2(e) shall
be construed to require any Party hereto to obtain or maintain any insurance
coverage.
(f) A failure to give timely notice as provided in this
Section 9.2 shall not affect the rights or obligations of any Party hereunder
except to the extent that, as a result of such failure, the Party which was
entitled to receive such notice was actually prejudiced as a result of such
failure.
9.3 Arbitration.
(a) Notwithstanding any provision hereof to the contrary, in
the event of any dispute between Seller and, on the one hand and PECO or PSEG,
on the other hand, arising after the Closing (whether relating to facts, events
or circumstances occurring or existing prior to, on or after the Closing Date)
and relating to or arising out of any provision of this Agreement (other than
disputes arising under Section 2.3, 2.4, 3.2, 3.3, 3.4, 3.5, 3.6, 7.5,
9.1(a)(iii), 9.1(b)(iii) or 9.1(c)(iii)), the sole remedy available to any Party
is the dispute resolution procedure set forth in this Section 9.3; provided,
however, that any Party may seek a preliminary injunction or other provisional
judicial remedy if such action is necessary to prevent irreparable harm or
preserve the status quo, in which case all Parties involved in the dispute shall
nonetheless continue to pursue resolution of the dispute by means of this
<PAGE>
procedure. The Party asserting such dispute shall give written notice to the
other Parties involved in the dispute of the fact that a dispute has arisen
pursuant hereto. Such notice shall include (i) a statement setting forth in
reasonable detail the facts, events, circumstances, evidence and arguments
underlying such dispute and (ii) proposed arrangements for a meeting to attempt
to resolve the dispute to be held within sixty (60) days after such notice is
given. Within thirty (30) days after such notice is given, the other Party or
Parties hereto shall submit to the Party giving such notice a written summary
responding to such statement of facts, events, circumstances, evidence and
arguments contained in the notice and an acceptance of or proposed alternative
to the meeting arrangements set forth in the initial notice.
(b) The chief executive officers (or any other executive
officer or officers directly reporting to, and duly designated by, such chief
executive officers) of each Party involved in the dispute shall meet at a
mutually acceptable time and place to attempt to settle any dispute in good
faith; provided, however, that such meeting shall be held at the principal
offices of the Party receiving the notice of dispute unless otherwise agreed;
and provided further, that any such meeting shall be held no later than sixty
(60) days after the written notice of dispute is given pursuant to Section
9.3(a) hereof. Each Party shall bear its own costs and expenses with respect to
preparation for, attendance at and participation in such meeting.
(c) In the event that (i) a meeting has been held in
accordance with Section 9.3(b) and (ii) any such dispute of the kind referred to
in Section 9.3(a) shall have not been resolved at such meeting, then, upon the
written request of any Party involved in such dispute, the Parties shall submit
such dispute to binding arbitration pursuant to the Commercial Arbitration Rules
of the American Arbitration Association (the "Commercial Arbitration Rules"). In
the event that such dispute is submitted to arbitration pursuant to the
Commercial Arbitration Rules, then the arbitration tribunal shall be composed of
three arbitrators (one such arbitrator to be selected by each Seller, on the one
hand, and Buyers, on the other hand, within thirty (30) days after the meeting
held in accordance with Section 9.3(b) with the third such arbitrator, who shall
be a former U.S. District Court or U.S. Circuit Court of Appeals judge and shall
serve as chairperson of such tribunal, selected by the other two arbitrators or,
in the absence of agreement between such arbitrators (or between Buyers with
respect to the arbitrator to be selected by them), by the American Arbitration
Association). The venue of the arbitration shall be Wilmington, Delaware, the
language of the arbitration shall be English and the arbitration shall commence
no later than sixty (60) days after the meeting held in accordance with Section
9.3(b). The decision, judgment and order of the arbitration tribunal shall be
<PAGE>
final, binding and conclusive as to the Parties involved in such dispute, and
their respective Representatives, and may be entered in court of competent
jurisdiction. Other than the fees and expenses of the arbitrators, which shall
be shared equally by the Parties to the dispute, each Party shall bear its own
costs and expenses (including attorneys' fees and expenses) relating to the
arbitration.
ARTICLE X
TERMINATION
10.1 Termination.
(a) This Agreement may be terminated at any time prior to the
Closing by mutual written consent of the Parties.
(b) This Agreement may be terminated by Seller, on the one
hand, or PECO and PSEG acting together, on the other hand, upon written notice
to the other Party, (i) at any time prior to the Closing if any court of
competent jurisdiction shall have issued an order, judgment or decree
permanently restraining, enjoining or otherwise prohibiting the Closing, and
such order, judgment or decree shall have become final and nonappealable; (ii)
at any time prior to the Closing if any Law shall have been enacted or issued by
any Governmental Authority which, directly or indirectly, prohibits the
consummation of the transactions contemplated by this Agreement, by any
Additional Agreement or the Collateral Agreement; or (iii) at any time after the
first anniversary of the date of this Agreement if the Closing shall not have
occurred on or before such date (the "Termination Date").
(c) This Agreement may be terminated by PECO, upon written
notice to Seller, if any of the PECO Required Regulatory Approvals, the receipt
of which is a condition to the obligation of PECO to consummate the Closing as
set forth in Section 8.2(a), shall have been denied (and a petition for
rehearing or refiling of an application initially denied without prejudice shall
also have been denied), and such denial was not caused by or the result of a
breach of this Agreement by PECO, or if the PECO Required Regulatory Approvals,
other than those set forth in Schedule 8.2(a), shall have been granted but are
not in form and substance reasonably satisfactory to PECO (including adverse
conditions relating to PECO or the Purchased Assets).
<PAGE>
(d) This Agreement may be terminated by PSEG, upon written
notice to Seller, if any of the PSEG Required Regulatory Approvals, the receipt
of which is a condition to the obligation of PSEG to consummate the Closing as
set forth in Section 8.3(a), shall have been denied (and a petition for
rehearing or refiling of an application initially denied without prejudice shall
also have been denied), and such denial was not caused by or the result of a
breach of this Agreement by PSEG, or if the PSEG Required Regulatory Approvals,
other than those set forth in Schedule 8.3(a)(i), shall have been granted but
are not in form and substance reasonably satisfactory to PSEG (including adverse
conditions relating to PSEG, the Affiliates of PSEG listed in Schedule
8.2(a)(ii) or the Purchased Assets).
(e) This Agreement may be terminated by Seller, upon written
notice to Buyers, if any of the Seller's Required Regulatory Approvals, the
receipt of which is a condition to the obligation of Seller to consummate the
Closing as set forth in Section 8.4(a), shall have been denied (and a petition
for rehearing or refiling of an application initially denied without prejudice
shall also have been denied), and such denial was not caused by or the result of
a breach of this Agreement by Seller, or shall have been granted but are not in
form and substance reasonably satisfactory to Seller (including adverse
conditions relating to Seller or the Purchased Assets).
(f) Except as otherwise provided in this Agreement, this
Agreement may be terminated by PECO and PSEG acting together, upon written
notice to Seller, if there has been a breach by Seller of any covenant,
agreement, representation or warranty contained in this Agreement, which has
resulted in a Material Adverse Effect and such violation or breach is not cured
by the earlier of the Closing Date or the date thirty (30) days after receipt by
Seller of notice specifying in reasonable detail the nature of such breach,
unless Buyers shall have previously waived such breach
(g) Except as otherwise provided in this Agreement, this
Agreement may be terminated by Seller, upon written notice to PECO and PSEG, if
there has been a breach by PECO or PSEG of any covenant, agreement,
representation or warranty contained in this Agreement, which has resulted in a
Material Adverse Effect and such violation or breach is not cured by the earlier
of the Closing Date or the date thirty (30) days after receipt by Buyers of
notice specifying in reasonable detail the nature of such breach, unless Seller
shall have previously waived such breach.
<PAGE>
(h) This Agreement may be terminated by Seller, on the one
hand, or PECO and PSEG acting together, on the other hand, upon written notice
to the other Party, in accordance with the provisions of Section 7.7, provided
that the Party seeking to so terminate shall have complied in all material
respects with its obligations under Section 7.7.
10.2 Effect of Termination. Upon termination of this Agreement prior to
the Closing pursuant to Section 10.1, this Agreement shall be null and void and
of no further force or effect (except that the provisions set forth in this
Section 10.2 and Article XI, and the Confidentiality Agreements, shall remain in
full force and effect in accordance with their respective terms); and no Party
shall have any further liability or obligation under this Agreement (other than
for any willful breach of its obligations hereunder). If this Agreement is
terminated as provided herein, all filings, applications and other submissions
made pursuant to this Agreement, to the extent practicable, shall be withdrawn
from the agency or other Person to which they were made.
10.3 Additional Effects of Termination. In the event that this
Agreement is terminated by Buyers pursuant to (i) Section 10.1(b)(iii) due to
the failure to satisfy the condition set forth in Section 8.2(a) or 8.3(a) or
(ii) Section 10.1(c) or (d), in each case due to the inclusion of an adverse
condition in any PECO Required Regulatory Approval or in any PSEG Required
Regulatory Approval (each, a "Regulatory Termination"), then, notwithstanding
any provision hereof or of the Owners Agreement, as may then be in effect, to
the contrary, upon any exercise by PECO, PSEG or PSE&G Utility of its rights
under Section 26.3 of the Owners Agreement, PECO, PSEG or PSE&G Utility shall
exercise such rights in such manner as to acquire the Peach Bottom Interest
pursuant to a transaction (the "Subsequent Transaction") on terms and conditions
that are no less favorable to Seller than those set forth in this Agreement;
provided that the Subsequent Transaction shall provide for the termination of
PECO's and PSEG's or PSE&G Utility's, as the case may be, rights under Section
26.3 of the Owners Agreement upon the occurrence of a Regulatory Termination
involving a PECO Required Regulatory Approval or a PSEG Required Regulatory
Approval, as the case may be, of such Subsequent Transaction prior to the
consummation thereof.
<PAGE>
ARTICLE XI
MISCELLANEOUS PROVISIONS
11.1 Amendment and Modification. Subject to applicable Law, this
Agreement may be amended, supplemented or otherwise modified only by written
agreement entered into by the Parties.
11.2 Expenses. Except to the extent provided herein, whether or not the
transactions contemplated hereby are consummated, all costs, fees and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be borne by the Party incurring such costs, fees and expenses,
including the fees and commissions referred to in Section 11.3. Notwithstanding
the foregoing, in no event shall Seller bear or be liable for the payment of any
costs, fees or expenses (other than attorneys' fees and expenses and the fees
and commissions referred to in Section 11.3) incurred by Seller to obtain any
approval of FERC or the NRC Approvals included among the PECO Required
Regulatory Approvals, PSEG Required Regulatory Approvals or Seller's Required
Regulatory Approvals, or to transfer the Decommissioning Funds to Buyer at the
Closing, to the extent that the aggregate amount of such costs, fees and
expenses exceeds, together with all such costs, fees and expenses which Seller
bears or is liable for under the Collateral Agreement, $200,000; and Buyers
shall equally bear and be liable to the extent of any such excess.
11.3 Fees and Commissions. Seller, on the one hand, and PECO and PSEG,
on the other hand, represent and warrant to the other that, except for Credit
Suisse First Boston, Inc. ("CSFB") and Reed/Navigant Consulting Group, which are
acting for and at the expense of Seller, no broker, finder or other Person is
entitled to any brokerage fees, commissions or finder's fees in connection with
the transactions contemplated hereby by reason of any action taken by such Party
or its Representatives. Seller shall pay or otherwise discharge all such
brokerage fees, commissions and finder's fees so incurred by Seller.
11.4 Bulk Sales Laws. Buyers hereby acknowledge that, notwithstanding
anything in this Agreement to the contrary, Seller will not comply with the
provisions of the bulk sales laws of any jurisdiction in connection with the
transactions contemplated by this Agreement and Buyers hereby irrevocably waive
compliance by Seller with the provisions of the bulk sales laws of all
jurisdictions.
<PAGE>
11.5 Waiver of Compliance. To the extent permitted by applicable Law,
any failure of any of the Parties to comply with any obligation, covenant,
agreement or condition set forth herein may be waived by the Party entitled to
the benefit thereof only by a written instrument signed by such Party, but any
such waiver shall not operate as a waiver of, or estoppel with respect to, any
prior or subsequent failure to comply therewith. The failure of a Party to this
Agreement to assert any of its rights under this Agreement or otherwise shall
not constitute a waiver of such rights.
11.6 Survival.
(a) The representations and warranties given or made by any
Party or in any certificate or other writing furnished in connection herewith
shall survive the Closing for a period of one (1) year after the Closing Date
and shall thereafter terminate and be of no further force or effect, except that
(i) all representations and warranties relating to Taxes and Tax Returns,
including those set forth in Sections 4.5 and 4.6, shall survive the Closing for
the period of the applicable statutes of limitation plus any extensions or
waivers thereof, and (ii) any representation or warranty as to which a claim
(including a contingent claim) shall have been asserted during the survival
period shall continue in effect with respect to such claim until such claim
shall have been finally resolved or settled. Each Party shall be entitled to
rely upon the representations and warranties of the other Party set forth
herein, notwithstanding any investigation or audit conducted before or after the
Closing Date or the decision of any Party to complete the Closing.
(b) The covenants and agreements of the Parties contained in
this Agreement, including those set forth in Article IX and Section 7.5, shall
survive the Closing in accordance with their respective terms.
11.7 Disclaimers. EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES SET
FORTH IN ARTICLE IV, THE PURCHASED ASSETS ARE SOLD "AS IS, WHERE IS", AND SELLER
EXPRESSLY DISCLAIMS ALL OTHER REPRESENTATIONS AND WARRANTIES OF ANY KIND OR
NATURE, EXPRESS OR IMPLIED, AS TO SELLER, THE PURCHASED ASSETS. WITHOUT LIMITING
THE GENERALITY OF THE FOREGOING, EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES
SET FORTH IN ARTICLE IV OR IN THE DEEDS, SELLER EXPRESSLY DISCLAIMS ALL OTHER
REPRESENTATIONS AND WARRANTIES REGARDING LIABILITIES, OWNERSHIP, LEASE,
MAINTENANCE AND OPERATION OF THE PURCHASED ASSETS, THE TITLE, CONDITION, VALUE
<PAGE>
OR QUALITY OF THE PURCHASED ASSETS OR THE PROSPECTS (FINANCIAL AND OTHERWISE),
RISKS AND OTHER INCIDENTS OF THE PURCHASED ASSETS; AND SELLER EXPRESSLY
DISCLAIMS ALL REPRESENTATIONS AND WARRANTIES OF MERCHANTABILITY, USAGE,
SUITABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE WITH RESPECT TO THE PURCHASED
ASSETS, OR ANY PART THEREOF, OR AS TO THE WORKMANSHIP THEREOF, OR THE ABSENCE OF
ANY DEFECTS THEREIN, WHETHER LATENT OR PATENT, OR COMPLIANCE WITH ENVIRONMENTAL
REQUIREMENTS, OR THE APPLICABILITY OF ANY REQUIREMENTS OF ANY GOVERNMENTAL
AUTHORITY, INCLUDING ANY NUCLEAR LAWS OR ENVIRONMENTAL LAWS. EXCEPT AS OTHERWISE
EXPRESSLY PROVIDED HEREIN, SELLER FURTHER EXPRESSLY DISCLAIMS ALL
REPRESENTATIONS AND WARRANTIES REGARDING THE ABSENCE OF HAZARDOUS SUBSTANCES OR
LIABILITY OR POTENTIAL LIABILITY ARISING UNDER NUCLEAR LAWS OR ENVIRONMENTAL
LAWS WITH RESPECT TO THE PURCHASED ASSETS. WITHOUT LIMITING THE GENERALITY OF
THE FOREGOING, EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN OR IN THE DEEDS,
SELLER EXPRESSLY DISCLAIMS ALL REPRESENTATIONS AND WARRANTIES OF ANY KIND
REGARDING THE CONDITION OF THE PURCHASED ASSETS AND NO SCHEDULE OR EXHIBIT TO
THIS AGREEMENT, NOR ANY OTHER MATERIAL OR INFORMATION PROVIDED, OR
COMMUNICATIONS MADE, BY SELLER OR ITS REPRESENTATIVES, INCLUDING ANY BROKER OR
INVESTMENT BANKER, WILL CAUSE OR CREATE ANY SUCH REPRESENTATION OR WARRANTY,
EXPRESS OR IMPLIED, AS TO THE TITLE, CONDITION, VALUE OR QUALITY OF THE
PURCHASED ASSETS.
11.8 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given on the day when delivered personally or by
facsimile transmission (with confirmation), on the next Business Day when
delivered to a nationally recognized overnight courier or five (5) Business Days
after deposited as registered or certified mail (return receipt requested), in
each case, postage prepaid, addressed to the recipient Party at its address set
forth below (or at such other address or facsimile number for a Party as shall
be specified by like notice; provided, however, that any notice of a change of
address or facsimile number shall be effective only upon receipt thereof):
<PAGE>
(a) If to Seller, to:
Atlantic City Electric Company
In care of Conectiv
800 King Street
P.O. Box 231
Wilmington, Delaware 19899
Attention: Chairman
Facsimile: (302) 429-3367
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
One Rodney Square
Wilmington, Delaware 19801
Attention: Steven J. Rothschild, Esquire
Facsimile: (302) 651-3001
(b) If to PECO, to:
PECO Energy Company
965 Chesterbrook Blvd. 61A-3
Wayne, Pennsylvania 19087-5691
Attention: Charles P. Lewis, Vice President
Facsimile: (610) 640-6611
with a copy to:
Morgan, Lewis & Bockius, LLP
1701 Market Street
Philadelphia, Pennsylvania 19103-2921
Attention: Howard L. Meyers, Esq.
Facsimile: (215) 963-5299
<PAGE>
(c) If to PSEG, to:
PSEG Power LLC
80 Park Plaza
T-5A
P.O. Box 570
Newark, New Jersey 07101
Attention: Harold W. Borden
Vice President and General Counsel
Facsimile: (973) 639-0741
with a copy to:
Steptoe & Johnson LLP
1330 Connecticut Avenue, NW
Washington, DC 20036
Attention: Filiberto Agusti, Esquire
Facsimile: (202) 429-3902
11.9 Assignment, No Third-Party Beneficiaries. This Agreement shall be
binding upon and inure to the benefit of the Parties and their respective
successors and permitted assigns, and, except as set forth in this Section 11.9,
neither this Agreement nor any of the rights, interests, obligations or remedies
hereunder shall be assigned by any Party hereto without the prior written
consent of the other Parties, nor is this Agreement intended to confer upon any
other Person any rights, interests, obligations or remedies hereunder. This
Agreement shall create no third-party beneficiary rights of any kind in any
Representative or former employee of Seller or Buyers. Notwithstanding the
foregoing, (a) Seller may assign any or all of its rights, interests,
obligations and remedies hereunder to one or more Affiliates of Seller;
provided, however, that no such assignment shall relieve or discharge Seller
from any of its obligations hereunder; (b) PECO may (i) assign any or all of its
rights, interests, obligations and remedies hereunder to one or more Affiliates
of PECO, provided that each such Affiliate shall, at the time of such
assignment, be qualified under applicable Law to obtain all PECO Permits,
including PECO Nuclear Permits and Environmental Permits, necessary for such
Affiliate to own, lease, maintain and operate the Peach Bottom Station,
including, on the Closing Date, the Purchased Assets, or (ii) assign, transfer,
pledge or otherwise dispose of its rights and interest in this Agreement to a
<PAGE>
trustee, lending institution or other Person for financing purposes, including
upon or pursuant to the exercise of remedies under such financing or
refinancing, or by way of assignments, transfers, conveyances or dispositions in
lieu thereof; provided, however, that no such assignment, transfer, pledge,
conveyance or disposition pursuant to this Section 11.9(b) shall (A) impair or
materially delay the consummation of the transactions contemplated hereby or (B)
relieve or discharge PECO from any of its obligations hereunder, and (c) PSEG
may (i) assign any or all of its rights, interests, obligations and remedies
hereunder to one or more Affiliates of PSEG, provided that each such Affiliate
shall, at the time of such assignment, be qualified under applicable Law to
obtain all PSEG Permits, including PSEG Nuclear Permits and Environmental
Permits, necessary for such Affiliate to own, lease, maintain and operate the
Peach Bottom Station, including, on the Closing Date, the Purchased Assets, (ii)
assign, transfer, pledge or otherwise dispose of its rights and interest in this
Agreement to a trustee, lending institution or other Person for financing
purposes, including upon or pursuant to the exercise of remedies under such
financing or refinancing, or by way of assignments, transfers, conveyances or
dispositions in lieu thereof, or (iii) assign to any Affiliate of PSEG such
Purchased Assets as are not material in the aggregate and as may be necessary to
assure that the Purchased Assets may be operated as an exempt wholesale
generator under Section 32(g) of PUHCA; provided, however, that no such
assignment, transfer, pledge, conveyance or disposition pursuant to this Section
11.9(c) shall (A) impair or materially delay consummation of the transactions
contemplated hereby or (B) relieve or discharge PSEG from any of its obligations
hereunder.
11.10 Governing Law, Forum, Service of Process. This Agreement shall be
governed by and construed in accordance with the laws of the Commonwealth of
Pennsylvania (without giving effect to conflicts of law principles) as to all
matters, including validity, construction, effect, performance and remedies.
Venue in any and all suits, actions and proceedings related to the subject
matter of this Agreement shall be in the state and federal courts located in and
for the Commonwealth of Pennsylvania (the "Courts"), which shall have exclusive
jurisdiction for such purpose, and the Parties hereby irrevocably submit to the
exclusive jurisdiction of such Courts and irrevocably waive the defense of an
inconvenient forum to the maintenance of any such suit, action or proceeding.
Service of process may be made in any manner recognized by such Courts. Each of
the Parties hereby irrevocably waives its right to a jury trial in any suit,
action or proceeding arising out of any dispute in connection with this
Agreement or the transactions contemplated hereby. Nothing in this Section 11.10
<PAGE>
is intended to modify or expand the terms and provisions of Section 9.3 with
respect to the rights of the Parties to seek judicial remedy of any dispute
relating to or arising out of any provision of this Agreement.
11.11 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
11.12 Entire Agreement. This Agreement (including the Schedules and
Exhibits), together with the Confidentiality Agreements, embodies the entire
agreement and understanding of the Parties hereto in respect of the transactions
contemplated by this Agreement and the Additional Agreements and supersede all
prior agreements and understandings among the Parties with respect to such
transactions. There are no representations, warranties, covenants or agreements
between or among the Parties with respect to the subject matter set forth in
such agreements, other than those expressly set forth or referred to herein or
therein. Without limiting the generality of the foregoing, Buyers hereby
acknowledge and agree that there are no representations, warranties, covenants
or agreements among the Parties with respect to the subject matter set forth in
such agreements contained in any material made available to Buyer pursuant to
the terms of the Confidentiality Agreements (including the Offering Memorandum
dated July 2, 1999, previously provided to Buyers by or on behalf of Seller,
Reed/Navigant Consulting Group and CSFB).
[SIGNATURE PAGE FOLLOWS]
<PAGE>
IN WITNESS WHEREOF, Seller and Buyers have caused this Purchase
Agreement to be duly executed and delivered by their respective duly authorized
officers as of the date first written above.
ATLANTIC CITY ELECTRIC COMPANY
By: /s/ Thomas S. Shaw
-----------------------------------
Name: Thomas S. Shaw
----------------------------------
Title: Executive Vice President
---------------------------------
PECO ENERGY COMPANY
By: /s/ Paul E. Haviland
-----------------------------------
Name: Paul E. Haviland
---------------------------------
Title: Vice President - Corporate
Development
--------------------------------
PSEG POWER LLC
By: /s/ Robert W. Metcalfe
-----------------------------------
Name: Robert W. Metcalfe
---------------------------------
Title: Vice President - Development
--------------------------------
(ACE/PEACH BOTTOM)
<PAGE>
EXHIBIT A
TO PURCHASE AGREEMENT
AMENDMENT TO OWNERS AGREEMENT
(Peach Bottom)
THIS AMENDMENT TO OWNERS AGREEMENT, dated as of _________, __, 2000
(this "Amendment"), by and among Atlantic City Electric Company, a New Jersey
corporation ("ACE"), Delmarva Power & Light Company, a Delaware and Virginia
corporation ("DP&L"), PECO Energy Company (formerly Philadelphia Electric
Company), a Pennsylvania corporation ("PECO"), Public Service Electric & Gas
Company, a New Jersey corporation ("PSE&G Utility"), and PSEG Power LLC, a
Delaware limited liability company ("PSEG Power"). ACE, DP&L, PECO, PSE&G
Utility and PSEG Power are referred to individually as a "Party" and
collectively as the "Parties".
W I T N E S S E T H
WHEREAS, the Parties collectively own, or, in the case of PSE&G
Utility, owned, all of the ownership interests in the Station (as defined in the
hereinafter described Owners Agreement), and have entered into the Owners
Agreement for Peach Bottom No. 2 and 3 Nuclear Units, dated as of November 24,
1971, as amended (the "Owners Agreement");
WHEREAS, pursuant to the Owners Agreement, ACE, DP&L, PECO and PSE&G
Utility have agreed to certain terms and conditions in connection with or
relating to the Station, as set forth therein;
WHEREAS, pursuant to the Purchase Agreement, dated as of September [ ],
1999 (the "ACE Purchase Agreement"), made by and among ACE, PECO and PSEG Power,
ACE has agreed to sell to each of PECO and PSEG Power, and each of PECO and PSEG
Power has agreed to purchase, one-half of the Purchased Assets (as defined in
the ACE Purchase Agreement), and each of PECO and PSEG Power has agreed to
assume the Assumed Liabilities (as defined in the ACE Purchase Agreement), in
each case, to the extent, and subject to and upon the terms and conditions, set
forth in the ACE Purchase Agreement;
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<PAGE>
WHEREAS, pursuant to the Purchase Agreement, dated as of September [ ],
1999 (the "DP&L Purchase Agreement" and, together with the ACE Purchase
Agreement, the "Purchase Agreements"), made by and among DP&L, PECO and PSEG
Power, DP&L has agreed to sell to each of PECO and PSEG Power, and each of PECO
and PSEG Power has agreed to purchase, one-half of the Purchased Assets (as
defined in the DP&L Purchase Agreement), and each of PECO and PSEG Power has
agreed to assume the Assumed Liabilities (as defined in the DP&L Purchase
Agreement), in each case, to the extent, and subject to and upon the terms and
conditions, set forth in the DP&L Purchase Agreement; and
WHEREAS, pursuant to the Purchase Agreements, the Parties have agreed
to execute and deliver this Amendment at the Closing.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants, representations, warranties and agreements set forth herein, and
intending to be legally bound hereby, the Parties hereby agree as follows:
1. Defined Terms. Capitalized terms used but not defined in this
Amendment shall have their respective meanings specified in the Purchase
Agreements.
2. Amendment. Except as set forth in this Amendment, effective as of
12:01 a.m. on the Closing Date:
(a) This Amendment terminates all rights of ACE and DP&L under
the Owners Agreement to station output and neither ACE nor DP&L shall have any
further right or entitlement thereto.
(b) The ownership interests set forth in Section 2.1 of the
Owners Agreement shall be deemed deleted and replaced with the following:
PECO: 50%
PSE&G Utility
and PSEG Power1: 50%
- --------------
1 Form of amendment will be revised to reflect the ownership status on the
Closing Date.
A-2
<PAGE>
(c) All references to "signatories" in the Owners Agreement
shall mean PECO, PSE&G Utility and PSEG Power, and all references to "ACE" and
"DPL" in the Owners Agreement shall be deemed deleted.
3. Reconciliation.
3.1 Within ninety (90) days following the Closing Date, PECO
shall deliver to (a) ACE a statement setting forth, with a reasonable amount of
supporting detail, (i) the amount of ACE's proportionate share (determined in
accordance with the Owners Agreement, and reduced by the amount of the Defined
Expenses Excess, as calculated in accordance with Section 7.1 of the ACE
Purchase Agreement) of all capital expenditures and operations and maintenance
expenses (whether ordinary course or otherwise) for the Station, relating to
periods prior to the Closing Date and not previously paid by ACE, and (ii) the
amount of any unused portion of any prepayments and advances made by ACE to
PECO, including, but not limited to prepayments and advances for stores,
Inventories, insurance, emergency preparedness fees, and working capital
advances, and (b) DP&L a statement setting forth, with a reasonable amount of
supporting detail, (i) the amount of DP&L's proportionate share (determined in
accordance with the Owners Agreement, and reduced by the amount of the Defined
Expenses Excess, as calculated in accordance with Section 7.1 of the DP&L
Purchase Agreement) of all capital expenditures and operations and maintenance
expenses (whether ordinary course or otherwise) for the Station, relating to
periods prior to the Closing Date and not previously paid by DP&L, and (ii) the
amount of any unused portion of any prepayments and advances made by DP&L to
PECO, including, but not limited to prepayments and advances for stores,
Inventories, insurance, emergency preparedness fees, and working capital
advances. The calculation of amounts payable under this Section 3.1 shall be
made in accordance with accounting methods and practices historically used by
PECO under the Owners Agreement.
3.2 No later than thirty (30) days after ACE's receipt of the
statement described in Section 3.1(a), subject to Section 5 hereof, (a) ACE
shall pay to PECO the amount, if any, by which the amount described in Section
3.1(a)(i) exceeds the amount described in Section 3.1(a)(ii), or (b) PECO shall
pay to ACE the amount, if any, by which the amount described in Section
3.1(a)(ii) exceeds the amount described in Section 3.1(a)(i).
3.3 No later than thirty (30) days after DP&L's receipt of the
statement described in Section 3.1(b), subject to Section 5 hereof, (a) DP&L
A-3
<PAGE>
shall pay to PECO the amount, if any, by which the amount described in Section
3.1(b)(i) exceeds the amount described in Section 3.1(b)(ii), or (b) PECO shall
pay to DP&L the amount, if any, by which the amount described in Section
3.1(b)(ii) exceeds the amount described in Section 3.1(b)(i).
3.4 In the event that the amount of any capital expenditure or
operations and maintenance expense shall not be finally known or determined as
of the date when the statements described in Section 3.1 are delivered, PECO
shall deliver to ACE and DP&L statements setting forth, with a reasonable amount
of supporting detail, ACE's and DP&L's respective shares of such additional
expenditures or expenses when they are finally known or determined, and, subject
to Section 5 hereof, each of ACE and DP&L shall pay the amount due from it to
PECO within thirty (30) days after its receipt of such statement. ACE's and
DP&L's respective obligations under this Section 3.4 shall terminate on May 31
in the year following the year in which the Closing Date occurs (other than
obligations for payments due on statements received by such entity prior to such
May 31).
3.5 Within the thirty (30) day payment periods described in
Sections 3.2, 3.3 and 3.4, PECO shall afford ACE, DP&L and their Representatives
the opportunity, as reasonably requested, to review the work papers and other
records and documentation used by PECO in preparing the statements described in
such Sections 3.1 and 3.4.
4. Special Release.
4.1 PECO, PSE&G Utility and PSEG Power each hereby
unconditionally and irrevocably releases, acquits and forever discharges ACE,
DP&L and their respective Affiliates, shareholders, officers, directors,
employees, agents, representatives, successors and assigns (collectively, the
"Seller Parties"), effective as of the date hereof, of and from any and all
claims, demands, debts, losses, costs, expenses, proceedings, judgments,
damages, actions, causes of action, suits, contracts, agreements, obligations,
accounts and liabilities of any kind or character whatsoever, known or unknown,
suspected or unsuspected, in contract or in tort, at law or in equity, that
PECO, PSE&G Utility or PSEG Power alone or with any other Person had, now has,
or might hereafter have against the Seller Parties or any of them jointly and/or
severally, for or by reason of any matters, circumstance, event, action,
omission, cause or thing whatsoever occurring or existing before, on or after
the date hereof, arising under or relating to the Owners Agreement, or any
matters that could be raised in any litigation in connection with the Owners
A-4
<PAGE>
Agreement, other than (a) the obligations set forth in Section 3 of this
Amendment and (b) ACE's and DP&L's respective representations, warranties,
covenants, agreements and other obligations under the Purchase Agreements,
subject to the terms and conditions set forth therein, including without
limitation, those related to the Excluded Liabilities.
4.2 ACE and DP&L each hereby unconditionally and irrevocably
releases, acquits and forever discharges PECO, PSE&G Utility, PSEG Power and
their respective Affiliates, shareholders, officers, directors, employees,
agents, representatives, successors and assigns (collectively, the "Remaining
Parties"), effective as of the date hereof, of and from any and all claims,
demands, debts, losses, costs, expenses, proceedings, judgments, damages,
actions, causes of action, suits, contracts, agreements, obligations, accounts
and liabilities of any kind or character whatsoever, known or unknown, suspected
or unsuspected, in contract or in tort, at law or in equity, that ACE or DP&L
alone or with any other Person had, now has, or might hereafter have against the
Remaining Parties or any of them jointly and/or severally, for or by reason of
any matters, circumstance, event, action, omission, cause or thing whatsoever
occurring or existing before, on or after the date hereof, arising under or
relating to the Owners Agreement, or any matters that could be raised in any
litigation in connection with the Owners Agreement, other than (a) the
obligations set forth in Section 3 of this Amendment and (b) PECO's and PSEG
Power's respective representations, warranties, covenants, agreements and other
obligations under the Purchase Agreements, subject to the terms and conditions
set forth therein, including without limitation, those related to the Assumed
Liabilities.
5. Arbitration.
5.1 Notwithstanding any provision hereof to the contrary, in
the event of any dispute between the Parties or any of them relating to or
arising out of any provision of this Amendment, the sole remedy available to any
Party is the dispute resolution procedure set forth in this Section 5; provided,
however, that either Party may seek a preliminary injunction or other
provisional judicial remedy if such action is necessary to prevent irreparable
harm or preserve the status quo, in which case the Parties shall nonetheless
continue to pursue resolution of the dispute by means of this procedure. The
Party asserting such dispute (the "Asserting Party") shall give written notice
to the other Party to the dispute (the "Other Party") of the fact that a dispute
has arisen pursuant hereto. Such notice shall include (i) a statement setting
forth in reasonable detail the facts, events, circumstances, evidence and
arguments underlying such dispute and (ii) proposed arrangements for a meeting
to attempt to resolve the dispute to be held within sixty (60) days after such
A-5
<PAGE>
notice is given. Within thirty (30) days after such notice is given, the Other
Party hereto shall submit to the Asserting Party a written summary responding to
such statement of facts, events, circumstances, evidence and arguments contained
in the notice and an acceptance of or proposed alternative to the meeting
arrangements set forth in the initial notice.
5.2 The chief executive officers (or any other executive
officer or officers directly reporting to, and duly designated by, such chief
executive officers) of the Asserting Party and the Other Party shall meet at a
mutually acceptable time and place to attempt to settle any dispute in good
faith; provided, however, that such meeting shall be held at the principal
offices of the Other Party unless otherwise agreed; and provided further, that
any such meeting shall be held no later than sixty (60) days after the written
notice of dispute is given pursuant to Section 5.1 hereof. Each Party shall bear
its own costs and expenses with respect to preparation for, attendance at and
participation in such meeting.
5.3 In the event that (i) a meeting has been held in
accordance with Section 5.2, and (ii) the dispute shall have not been resolved
at such meeting, then, upon request by either the Asserting Party or the Other
Party, the Asserting Party and the Other Party shall submit such dispute to
binding arbitration pursuant to the Commercial Arbitration Rules of the American
Arbitration Association (the "Commercial Arbitration Rules"). In the event that
such dispute is submitted to arbitration pursuant to the Commercial Arbitration
Rules, then the arbitration tribunal shall be composed of three arbitrators (one
such arbitrator to be selected by the Asserting Party, the second such
arbitrator to be selected by the Other Party, in each case, within thirty (30)
days after the meeting is held in accordance with Section 5.2, with the third
such arbitrator, who shall be a former U.S. District Court or U.S. Circuit Court
of Appeals judge and shall serve as chairperson of such tribunal, selected by
the other two arbitrators or, in the absence of their agreement, by the American
Arbitration Association). The venue of the arbitration shall be Wilmington,
Delaware, the language of the arbitration shall be English and the arbitration
shall commence no later than sixty (60) days after the meeting held in
accordance with Section 5.2. The decision, judgment and order of the arbitration
tribunal shall be final, binding and conclusive as to the Parties involved in
such dispute, and their respective Representatives, and may be entered in court
of competent jurisdiction. Other than the fees and expenses of the arbitrators,
which shall be shared equally by the Parties involved in the dispute, each Party
to the dispute shall bear its own costs and expenses (including attorneys' fees
and expenses) relating to the arbitration.
A-6
<PAGE>
6. Miscellaneous.
6.1 Amendment and Modification. Subject to applicable Laws,
this Amendment may be amended, supplemented or otherwise modified only by
written agreement entered into by the Parties.
6.2 Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the Commonwealth of Pennsylvania
(without giving effect to conflicts of law principles) as to all matters,
including validity, construction, effect, performance and remedies.
6.3 Counterparts. This Amendment may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
6.4 Severability. If any term or other provision of this
Amendment is determined by a court of competent jurisdiction to be invalid,
illegal or incapable of being enforced by any rule of law or public policy, all
other conditions and provisions of this Amendment shall nevertheless remain in
full force and effect. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the Parties shall negotiate
in good faith to modify this Amendment so as to effect the original intent of
the Parties as closely as possible to the fullest extent permitted by Law in an
acceptable manner to the end that the transactions contemplated hereby are
fulfilled to the extent possible.
6.5 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given on the day when delivered
personally or by facsimile transmission (with confirmation), on the next
Business Day when delivered to a nationally recognized overnight courier or five
(5) Business Days after deposited as registered or certified mail (return
receipt requested), in each case, postage prepaid, addressed to the recipient
Party at its address set forth below (or at such other address or facsimile
number for a Party as shall be specified by like notice; provided, however, that
any notice of a change of address or facsimile number shall be effective only
upon receipt thereof):
A-7
<PAGE>
(a) If to ACE or DP&L, to such Party:
In care of Conectiv
800 King Street
P.O. Box 231
Wilmington, Delaware 19899
Attention: Chairman
Facsimile: (302) 429-3367
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
One Rodney Square
Wilmington, Delaware 19801
Attention: Steven J. Rothschild, Esquire
Facsimile: (302) 651-3001
(b) If to PECO, to:
PECO Energy Company - Nuclear
965 Chesterbrook Blvd 61A-3
Wayne, Pennsylvania 19087-5691
Attention: Charles P. Lewis,
Vice President
Facsimile: (610) 640-6611
with a copy to:
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, Pennsylvania 19103-2921
Attention: Howard L. Meyers, Esquire
Facsimile: (215) 963-5299
A-8
<PAGE>
(c) If to PSE&G Utility or PSEG Power, to:
PSEG Power LLC
80 Park Plaza
T-5A
P.O. Box 570
Newark, New Jersey 07101
Attention: Harold W. Borden,
Vice President and General Counsel
Facsimile: (973) 639-0741
with a copy to:
Steptoe & Johnson LLP
1330 Connecticut Avenue, NW
Washington, DC 20036
Attention: Filiberto Agusti, Esquire
Facsimile: (202) 429-3902
6.6 Construction. The Article and Section headings contained
in this Amendment are solely for the purpose of reference, are not part of the
agreement of the Parties and shall not in any way affect the meaning or of this
Amendment. The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Amendment shall refer to this Amendment as a whole and
not to any particular provision of this Amendment. References to a Section shall
mean a Section of this Amendment.
6.7 Several Liability. Notwithstanding anything herein to the
contrary, all agreements of PECO, PSE&G Utility and PSEG Power hereunder shall
be several and not joint, and all agreements of ACE and DP&L shall be several
and not joint.
6.8 No Other Modifications. Except as herein modified, as
between PECO and PSE&G Utility and PSEG Power, the terms and provisions of the
Owners Agreement shall remain unmodified and shall remain in full force and
effect.
A-9
<PAGE>
6.9 Assignment. This Amendment shall inure to the benefit of,
and be binding upon, the Parties and their respective successors and permitted
assigns.
[SIGNATURE PAGE FOLLOWS]
A-10
<PAGE>
IN WITNESS WHEREOF, the Parties have caused this Amendment to Owners
Agreement to be duly executed and delivered by their respective duly authorized
officers as of the date first written above.
ATLANTIC CITY ELECTRIC COMPANY
By: __________________________________
Name: ________________________________
Title: _________________________________
DELMARVA POWER & LIGHT COMPANY
By: __________________________________
Name: ________________________________
Title: _______________________________
PECO ENERGY COMPANY
By: __________________________________
Name: ________________________________
Title: _______________________________
PUBLIC SERVICE ELECTRIC & GAS COMPANY
By: __________________________________
Name: ________________________________
Title: _______________________________
PSEG POWER LLC
By: __________________________________
Name: ________________________________
Title: _______________________________
A-11
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(DP&L-PEACH BOTTOM)
CONFORMED
PURCHASE AGREEMENT
BY AND AMONG
DELMARVA POWER & LIGHT COMPANY,
PECO ENERGY COMPANY
AND
PSEG POWER LLC
DATED AS OF SEPTEMBER 27, 1999
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Table of Contents
Page
ARTICLE I
DEFINITIONS
1.1 Definitions...........................................................2
1.2 Certain Interpretive Matters.........................................18
1.3 U.S. Dollars.........................................................19
1.4 Seller's Interest in Purchased Assets................................19
ARTICLE II
PURCHASE AND SALE
2.1 Transfer of Purchased Assets.........................................20
2.2 Excluded Assets......................................................21
2.3 Assumed Liabilities..................................................24
2.4 Excluded Liabilities.................................................26
2.5 Control of Litigation................................................28
2.6 Spent Nuclear Fuel Fees..............................................28
2.7 Department of Energy Decommissioning and
Decontamination Fees...............................................29
ARTICLE III
THE CLOSING
3.1 Closing..............................................................29
3.2 Payment of PECO Purchase Price.......................................30
3.3 Adjustment to PECO Nuclear Fuel Supply Payment.......................30
3.4 Payment of PSEG Purchase Price.......................................32
3.5 Adjustment to PSEG Nuclear Fuel Supply Payment.......................32
3.6 Tax Reporting and Allocation of Purchase Prices......................33
3.7 Prorations...........................................................35
3.8 Deliveries by Seller.................................................37
3.9 Deliveries by PECO...................................................39
3.10 Deliveries by PSEG...................................................40
3.11 Relationship of this Agreement and Collateral
Agreement..........................................................41
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3.12 Owners Agreement to Govern...........................................42
3.13 Additional Agreements................................................42
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
4.1 Organization, Qualification..........................................42
4.2 Authority............................................................42
4.3 No Violations; Consents and Approvals................................43
4.4 Permits..............................................................44
4.5 Seller's Qualified Decommissioning Funds.............................44
4.6 Seller's Nonqualified Decommissioning Funds..........................46
4.7 Nuclear Law Matters..................................................47
4.8 Legal Proceedings....................................................48
4.9 Personal Property....................................................48
4.10 Real Property........................................................48
4.11 Contracts............................................................48
4.12 Certain Environmental Liabilities. ..................................48
4.13 Undisclosed Liabilities..............................................49
4.14 Intellectual Property................................................49
4.15 Taxes................................................................49
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PECO
5.1 Organization; Qualification..........................................50
5.2 Authority............................................................50
5.3 No Violations; Consents and Approvals................................50
5.4 Buyer Permits........................................................51
5.5 Nuclear Law Matters..................................................51
5.6 Legal Proceedings....................................................52
5.7 Qualified Buyer......................................................52
5.8 Inspections..........................................................52
5.9 Regulation as a Utility..............................................53
5.10 Certain Environmental Liabilities....................................53
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PSEG
6.1 Organization; Qualification..........................................53
6.2 Authority............................................................53
6.3 No Violations; Consents and Approvals................................54
6.4 PSEG Permits.........................................................54
6.5 Nuclear Law Matters..................................................55
6.6 Legal Proceedings....................................................55
6.7 Qualified Buyer......................................................56
6.8 Inspections..........................................................56
6.9 Certain Environmental Liabilities....................................56
ARTICLE VII
COVENANTS OF THE PARTIES
7.1 Certain Buyers Covenants.............................................56
7.2 Public Statements....................................................57
7.3 Further Assurances...................................................57
7.4 Consents and Approvals...............................................59
7.5 Certain Tax Matters..................................................61
7.6 Advice of Changes....................................................63
7.7 Risk of Loss.........................................................64
7.8 Cooperation after Closing............................................64
7.9 Decommissioning Funds................................................65
7.10 Amendment to Seller's Agreements.....................................67
7.11 Exclusivity..........................................................67
7.12 Insurance............................................................68
ARTICLE VIII
CONDITIONS
8.1 Conditions to Obligation of Each Party...............................68
8.2 Conditions to Obligations of PECO. .................................69
8.3 Conditions to Obligations of PSEG....................................70
8.4 Conditions to Obligation of Seller...................................72
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ARTICLE IX
INDEMNIFICATION AND ARBITRATION
9.1 Indemnification......................................................74
9.2 Defense of Claims....................................................78
9.3 Arbitration..........................................................81
ARTICLE X
TERMINATION
10.1 Termination..........................................................83
10.2 Effect of Termination................................................85
10.3 Additional Effects of Termination....................................85
ARTICLE XI
MISCELLANEOUS PROVISIONS
11.1 Amendment and Modification...........................................85
11.2 Expenses.............................................................86
11.3 Fees and Commissions.................................................86
11.4 Bulk Sales Laws......................................................86
11.5 Waiver of Compliance.................................................86
11.6 Survival.............................................................87
11.7 Disclaimers..........................................................87
11.8 Notices..............................................................88
11.9 Assignment, No Third-Party Beneficiaries.............................90
11.10 Governing Law, Forum, Service of Process.............................91
11.11 Counterparts.........................................................91
11.12 Entire Agreement.....................................................91
iv
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LIST OF EXHIBITS AND SCHEDULES
EXHIBITS
Exhibit A Amendment to Owners Agreement
Exhibit B Assignment Assumption Agreement
Exhibit C Bills of Sale
Exhibit D Seller Deeds
Exhibit E FIRPTA Affidavit
Exhibit F Opinions of Counsel to Seller
Exhibit G Opinions of Counsel to PECO
Exhibit H Opinions of Counsel to PSEG
SCHEDULES
1.1(118) Real Property
1.1(129) Seller's Agreements
4.3(a) No Violations
4.3(b) Seller's Required Regulatory Approvals
4.4(a) Seller Permits
4.4(b) Seller's Transferable Permits
4.5(d) Liabilities Relating to Seller's Qualified Decommissioning Funds
4.5(f) Tax Liability of Seller's Qualified Decommissioning Funds
4.6(d) Liabilities Relating to Seller's Nonqualified Decommissioning
Funds
4.7 Nuclear Law Matters
4.8 Legal Proceedings
4.9 Encumbrances on Certain Personal Property
4.10 Encumbrances on Certain Real Property
4.11 Certain Seller's Agreements
4.12 Certain Environmental Liabilities
4.15 Tax Matters 5.3(a) PECO Defaults and Violations
5.3(b) PECO Required Regulatory Approvals
5.6(a) PECO Legal Proceedings
5.10 PECO Certain Environmental Liabilities
6.3(a) PSEG Defaults and Violations
6.3(b) PSEG Required Regulatory Approvals
6.6(a) PSEG Legal Proceedings
6.10 PSEG Certain Environmental Liabilities
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7.9(c) Decommissioning Funds Investment Manager Agreements and Policies
8.2(a)(i) Certain PECO Required Regulatory Approvals
8.3(a)(i) Certain PSEG Required Regulatory Approvals
8.3(a)(ii) Certain Affiliates
vi
<PAGE>
PURCHASE AGREEMENT
(DP&L-Peach Bottom)
PURCHASE AGREEMENT, dated as of September 27, 1999, by and between
Delmarva Power & Light Company, a Delaware and Virginia corporation ("Seller"),
PECO Energy Company (formerly Philadelphia Electric Company), a Pennsylvania
corporation ("PECO") and PSEG Power LLC, a Delaware limited liability company
("PSEG" and, together with PECO, "Buyers"). Seller, PECO and PSEG may be
referred to herein individually as a "Party," and collectively as the "Parties."
W I T N E S S E T H
WHEREAS, Seller owns an undivided 7.51% interest as tenant in common
without the right of partition in the Peach Bottom Station (as defined below)
and certain properties and assets associated therewith and ancillary thereto;
WHEREAS, PECO desires to purchase and assume, and Seller desires to
sell and assign, or cause to be sold and assigned, one-half of all of Seller's
rights, title and interests in and to the Purchased Assets (as defined below)
and certain associated liabilities, upon the terms and conditions hereinafter
set forth in this Agreement;
WHEREAS, PSEG desires to purchase and assume, and Seller desires to
sell and assign, or cause to be sold and assigned, one-half of all of Seller's
rights, title and interests in and to the Purchased Assets (as defined below)
and certain associated liabilities, upon the terms and conditions hereinafter
set forth in this Agreement; and
WHEREAS, Public Service Enterprise Group Incorporated, a New Jersey
corporation and sole member of Buyer, has contemporaneously delivered a Guaranty
dated the date hereof to Seller, upon which Seller has relied in entering into
this Agreement.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants, representations, warranties and agreements set forth herein, and
intending to be legally bound hereby, the Parties hereby agree as follows:
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ARTICLE I
DEFINITIONS
1.1 Definitions. As used in this Agreement, the following capitalized
terms have the meanings specified in this Section 1.1.
(1) "ACE" means Atlantic City Electric Company, a New Jersey
corporation.
(2) "Additional Agreements" means the Deeds, the Assignment and
Assumption Agreements, the Bills of Sale and the Amendment to Owners
Agreement.
(3) "Affiliate" has the meaning set forth in Rule 12b-2 of the General
Rules and Regulations promulgated under the Exchange Act.
(4) "Agreement" means this Purchase Agreement together with the
Schedules and Exhibits hereto.
(5) "Allocation" has the meaning set forth in Section 3.6.
(6) "Amendment to Owners Agreement" means the amendment to the Owners
Agreement among the signatories to the Owners Agreement, to be delivered at the
Closing, substantially in the form of Exhibit A.
(7) "Antitrust Laws" means the Sherman Act, the Clayton Act, the HSR
Act, the Federal Trade Commission Act, and all other Laws that are designed or
intended to prohibit, restrict or regulate actions having the purpose or effect
of monopolization or restraint of trade, in each case, as amended from time to
time.
(8) "Applicable Tax Law" has the meaning set forth in Section 3.6.
(9) "Assignment and Assumption Agreements" means the assignment and
assumption agreements between Seller and PECO and Seller and PSEG, to be
delivered at the Closing, substantially in the form of Exhibit B hereto,
pursuant to which Seller shall assign to each of PECO and PSEG one-half of
Seller's rights, title and interests in and to the Seller's Agreements, certain
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intangible assets and certain other Purchased Assets, and each of PECO and PSEG
shall accept such assignments and assume the Assumed Liabilities.
(10) "Assumed Decommissioning Liabilities" has the meaning set forth in
Section 2.3(d).
(11) "Assumed Liabilities" means all of the liabilities and obligations
of Seller, direct or indirect, known or unknown, asserted or unasserted,
absolute or contingent, accrued or unaccrued, which relate to the Purchased
Assets (other than Excluded Liabilities).
(12) "Assumed Nuclear Liabilities" has the meaning set forth in Section
2.3(e).
(13) "Assumed Spent Fuel Liabilities" has the meaning set forth in
Section 2.3(f).
(14) "Atomic Energy Act" means the Atomic Energy Act of 1954, as
amended from time to time, 42 U.S.C. Section 2011 et seq.
(15) "Bills of Sale" means the bills of sale of Seller, to be delivered
at the Closing, substantially in the form of Exhibit C hereto.
(16) "Budget Period" has the meaning set forth in Section 7.1(b).
(17) "Business Day" means any day other than Saturday, Sunday and any
day on which banking institutions in the State of New York are authorized or
required by Law or other governmental action to close.
(18) "Buyers" has the meaning set forth in the preamble to this
Agreement.
(19) "Buyers' Indemnitee" has the meaning set forth in Section 9.1(c).
(20) "Buyers' Insurance Policies" means all insurance policies with
respect to the ownership, lease, maintenance or operation of the Peach Bottom
Station, including the Purchased Assets, including all liability, property
damage and business interruption policies in respect thereof, for which PECO,
PSEG or their respective Affiliates is liable for payment of the premium and
related charges on behalf of itself and the other parties to the Owners
Agreement.
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(21) "Buyers' Qualified Decommissioning Funds" means, collectively, the
trust funds that are designated as "nuclear decommissioning reserve funds" under
Code Section 468A for the Peach Bottom Station held, with respect to PECO,
pursuant to the Trust Agreement between PECO and Mellon Bank, N.A., dated
February 22, 1994 and, with respect to PSEG, pursuant to the Amended Master
Decommissioning Trust Agreement between Public Service Electric & Gas Company
and Mellon Bank, N.A., dated as of January 1, 1996.
(22) "Byproduct Material" means any radioactive material (except
Special Nuclear Material) yielded in, or made radioactive by, exposure to the
radiation incident to the process of producing or utilizing Special Nuclear
Material.
(23) "CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended from time to time.
(24) "Closing" has the meaning set forth in Section 3.1.
(25) "Closing Date" has the meaning set forth in Section 3.1.
(26) "Code" means the Internal Revenue Code of 1986, as amended from
time to time, and any regulations promulgated thereunder from time to time.
(27) "Collateral Agreement" means the purchase agreement dated as of
the date hereof among ACE and Buyers, relating to the sale by ACE to Buyers of
certain properties and assets at the Peach Bottom Station.
(28) "Commercial Arbitration Rules" has the meaning set forth in
Section 9.3(c).
(29) "Commercially Reasonable Efforts" means efforts by a Party which
are designed to enable a Party, directly or indirectly, to satisfy a condition
to, or otherwise assist in the consummation of, the transactions contemplated by
this Agreement and which do not require the performing Party to expend funds or
assume liabilities other than expenditures and liabilities which are customary
and reasonable in nature and amount in the context of the transactions
contemplated by this Agreement.
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(30) "Confidentiality Agreements" means, together, (i) the
Confidentiality Agreement, dated August 6, 1999, as amended, between Conectiv
and PSEG Energy Holdings, an Affiliate of PSEG, and (ii) the Confidentiality
Agreement, dated July 9, 1999 between Conectiv and PECO.
(31) "Courts" has the meaning set forth in Section 11.10.
(32) "CSFB" has the meaning set forth in Section 11.3.
(33) "Decommissioning" means to remove the Peach Bottom Station from
service and restore the Sites, in accordance with applicable Law, including (a)
the dismantlement, decontamination, storage or entombment of the Peach Bottom
Station, in whole or in part, and any reduction or removal, whether before or
after termination of the NRC Licenses for the Peach Bottom Station, of
radioactivity at the Sites relating to the Peach Bottom Station and (b) all
activities necessary for the retirement, dismantlement and decontamination of
the Peach Bottom Station to comply with all Laws, including Nuclear Laws and
Environmental Laws, including the requirements of the Atomic Energy Act and the
NRC's rules, regulations, orders and pronouncements thereunder, the NRC Licenses
for the Peach Bottom Station and related decommissioning plans.
(34) "Decommissioning Costs" means the costs of Decommissioning the
Peach Bottom Station in accordance with all applicable Laws, including Nuclear
Laws and Environmental Laws.
(35) "Decommissioning Funds" means, collectively, the Seller's
Qualified Decommissioning Funds and the Seller's Nonqualified Decommissioning
Funds.
(36) "Deeds" means the special warranty deeds, as customarily used in
the Commonwealth of Pennsylvania, substantially in the form of Exhibit D hereto,
pursuant to which Seller will convey all of its rights, title and interests in
the Real Property to PECO, to the extent of the PECO Interest, and to PSEG, to
the extent of the PSEG Interest.
(37) "Defined Expenses" has the meaning set forth in Section 7.1(b).
(38) "Department of Energy" means the United States Department of
Energy, and any successor agency thereto.
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(39) "Department of Energy Decommissioning and Decontamination Fees"
means all fees related to the Department of Energy's special assessment of
utilities for the Uranium Enrichment Decontamination and Decommissioning Fund
pursuant to Sections 1801, 1802 and 1803 of the Atomic Energy Act (42 U.S.C.
2297g et seq.), and the Department of Energy's implementing regulations at 10
CFR Part 766, and any similar fees assessed under amended or superseding
statutes or regulations applicable to separative work units purchased from the
Department of Energy in order to decontaminate and decommission the Department
of Energy's gaseous diffusion enrichment facilities.
(40) "Department of Energy Standard Contract" means the Contract for
Disposal of Spent Nuclear Fuel and/or High-Level Radioactive Waste, No.
DE-CR01-83NE 44405 with respect to the Peach Bottom Station, dated as of June 1,
1983, between the United States of America, represented by the United States
Department of Energy, and PECO.
(41) "Direct Claim" has the meaning set forth in Section 9.2(d).
(42) "Encumbrances" means any and all mortgages, pledges, liens,
claims, security interests, conditional and installment sale agreements,
easements, activity and use limitations, exceptions, rights-of-way, deed
restrictions, defects of title, encumbrances and charges of any kind.
(43) "Environmental Claims" has the meaning set forth in Section
9.1(d).
(44) "Environmental Condition" means the presence or Release to the
environment, whether at the Sites or otherwise, of Hazardous Substances,
including any migration of Hazardous Substances through air, soil or groundwater
at, to or from the Sites or at, to or from any Off-Site Location, regardless of
when such presence or Release occurred or is discovered.
(45) "Environmental Laws" means all (a) Laws, in each case, as amended
from time to time, relating to pollution or protection of the environment,
natural resources or human health and safety, including Laws relating to
Releases or threatened Releases of Hazardous Substances or otherwise relating to
the manufacture, formulation, generation, processing, distribution, use,
treatment, storage, Release, transport, Remediation, abatement, cleanup or
handling of Hazardous Substances, (b) Laws with regard to recordkeeping,
notification, disclosure and reporting requirements respecting Hazardous
<PAGE>
Substances and (c) Laws relating to the management or use of natural resources;
but shall not include Nuclear Laws.
(46) "Environmental Permits" means all permits, registrations,
certifications, franchises, certificates, licenses and other authorizations,
consents and approvals of any Governmental Authorities with respect to or under
Environmental Laws.
(47) "Estimated PECO Nuclear Fuel Supply Amount" has the meaning set
forth in Section 3.2(b).
(48) "Estimated PSEG Nuclear Fuel Supply Amount" has the meaning set
forth in Section 3.4(b).
(49) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, and the rules and regulations promulgated thereunder
from time to time.
(50) "Excluded Assets" has the meaning set forth in Section 2.2.
(51) "Excluded Liabilities" has the meaning set forth in Section 2.4.
(52) "FERC" means the United States Federal Energy Regulatory
Commission, and any successor agency thereto.
(53) "Final Allocation" has the meaning set forth in Section 3.6.
(54) "FIRPTA Affidavit" means the Foreign Investment in Real Property
Tax Act Certification and Affidavit of Seller, to be delivered at the Closing,
substantially in the form of Exhibit E hereto.
(55) "Fuel Supplies" means, collectively, the Nuclear Fuel Supplies,
and fuel oil supplies, in each case, for use at the Peach Bottom Station.
(56) "Fund Tax Loss" has the meaning set forth in Section 7.5(g).
(57) "Governmental Authority" means any foreign, federal, state, local
or other governmental, executive, legislative, judicial, regulatory or
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administrative agency, court, commission, department, board, or other
governmental subdivision, legislature, tribunal, government-owned corporation or
other governmental authority.
(58) "Hazardous Substances" means (a) any petrochemical or petroleum
products, oil or coal ash, radioactive materials, radon gas, asbestos in any
form that is or could become friable, urea formaldehyde foam insulation and
transformers or other equipment that contain dielectric fluid which may contain
polychlorinated biphenyls, (b) any chemicals, materials or substances defined as
or included in the definition of "hazardous substances," "hazardous wastes,"
"hazardous materials," "hazardous constituents," "restricted hazardous
materials," "extremely hazardous substances," "toxic substances,"
"contaminants," "pollutants," "toxic pollutants" or words of similar meaning and
regulatory effect under any Environmental Law and (c) any other chemical,
material or substance, exposure to which is prohibited, limited or regulated by
any Environmental Law; but shall not include Nuclear Material to the extent
regulated under Nuclear Laws.
(59) "High-Level Waste" means (a) irradiated nuclear reactor fuel, (b)
liquid wastes resulting from the operation of the first cycle solvent extraction
system, or its equivalent, and the concentrated wastes from subsequent
extraction cycles, or their equivalent, in a facility for reprocessing
irradiated reactor fuel and (c) solids into which such liquid wastes have been
converted.
(60) "High-Level Waste Repository" means a facility subject to the
licensing and regulatory authority of the NRC, and which is designed,
constructed and operated by or on behalf of the Department of Energy for the
storage and disposal of Spent Nuclear Fuel and other High-Level Waste in
accordance with the requirements set forth in the Nuclear Waste Policy Act.
(61) "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended from time to time.
(62) "Income Tax" means any Tax imposed by any Governmental Authority
(a) based upon, measured by or calculated with respect to gross or net income,
profits or receipts (including municipal gross receipt Taxes, capital gains
Taxes and minimum Taxes) or (b) based upon, measured by or calculated with
respect to multiple bases (including corporate franchise taxes) if one or more
of such bases is described in clause (a), in each case together with any
interest, penalties or additions attributable to such Tax.
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(63) "Indemnifiable Loss" has the meaning set forth in Section 9.1(a).
(64) "Indemnifying Party" has the meaning set forth in Section
9.1(g)(i).
(65) "Indemnitee" has the meaning set forth in Section 9.1(c).
(66) "Independent Accounting Firm" means such nationally recognized,
independent accounting firm as is mutually appointed by Seller and Buyer for
purposes of this Agreement.
(67) "Inspection " means all tests, reviews, examinations, inspections,
investigations, verifications, samplings and similar activities conducted by any
Buyer or its Representatives with respect to the Purchased Assets prior to the
Closing.
(68) "Inventories" means materials, spare parts, capital spare parts,
consumable supplies and chemical inventories relating to the operation of the
Peach Bottom Station; but shall not include Fuel Supplies.
(69) "Knowledge" means the actual knowledge of the directors and
executive officers of the specified Person, which directors and executive
officers are charged with responsibility for the particular function after
reasonable inquiry by them of selected employees of such Persons whom they
believe, in good faith, to be the persons responsible for the subject matter of
the inquiry, as of the date of this Agreement, or, with respect to any
certificate delivered pursuant to this Agreement, the date of delivery of such
certificate.
(70) "Laws" means all laws, statutes, rules, regulations and ordinances
of any Governmental Authority.
(71) "Low-Level Waste" means radioactive material that (a) is not
High-Level Waste, Spent Nuclear Fuel or Byproduct Material, and (b) the NRC
classifies as low-level radioactive waste.
(72) "Material Adverse Effect" means any change in or effect on the
Peach Bottom Station or any portion thereof (other than the Decommissioning
Funds) that is materially adverse to the operation or condition (financial or
otherwise) of the Peach Bottom Station, taken as a whole, including a shutdown
thereof that is materially adverse to the operation or condition (financial or
otherwise) of the Peach Bottom Station, but excluding (a) any change or effect
<PAGE>
generally affecting the international, national, regional or local electric
industry as a whole and not specific to the Peach Bottom Station (other than any
change or effect affecting the nuclear electric industry generally), (b) any
change or effect resulting from changes in the international, national, regional
or local wholesale or retail markets for electricity, including any change in or
effect on the structure, operating agreements, operations or procedures of
Pennsylvania-New Jersey-Maryland Interconnection L.L.C. or its control area, (c)
any change or effect resulting from changes in the international, national,
regional or local markets for any fuel (whether nuclear or otherwise) used at
the Peach Bottom Station, (d) any change or effect resulting from changes in the
North American, national, regional or local electricity transmission systems or
operations thereof, (e) any change or effect to the extent constituting or
involving an Excluded Asset or an Excluded Liability and (f) any change or
effect which is cured (including by payment of money) before the earlier of the
Closing and the termination of this Agreement pursuant to Section 10.1.
(73) "Mortgage" means the Mortgage and Deed of Trust, dated as of
October 1, 1934, between Seller and New York Trust Co., as amended.
(74) "NEIL" means Nuclear Electric Insurance Limited, and any successor
entity thereto.
(75) "Net Book Value" means, as of any date and with respect to any
asset or property, an amount equal to the original cost of such asset or
property less applicable depreciation and amortization, calculated and presented
in accordance with methods and procedures historically applied by PECO in the
preparation of monthly statements delivered to Seller under the Owners Agreement
prior to the date hereof.
(76) "NRC" means the Nuclear Regulatory Commission, as established by
Section 201 of the Energy Reorganization Act of 1974, 42 U.S.C. Section 5841, as
amended, and any successor agency thereto.
(77) "NRC Licenses" means, together, Facility Operating License No.
DPR-44 with respect to Unit 2 at the Peach Bottom Station and Facility Operating
License No. DPR-56 with respect to Unit 3 at the Peach Bottom Station, in each
case, issued by the NRC to Seller, PECO, ACE and PSE&G Utility, as amended.
(78) "Nuclear Fuel Supplies" means the nuclear fuel assemblies in the
reactor core, natural uranium, converted uranium, enriched uranium and any other
<PAGE>
form of any thereof, under contract or in inventory, and located at or in
transit to the Peach Bottom Station, as well as all nuclear fuel constituents in
all stages of the fuel cycle which are in the process of production, conversion,
enrichment or fabrication.
(79) "Nuclear Laws" means, collectively, in each case, as amended from
time to time, (a) all Laws relating to: the regulation of nuclear power plants,
Nuclear Materials and the transportation and storage of Nuclear Materials; the
regulation of nuclear fuel; the enrichment of uranium; the disposal and storage
of High-Level Waste, and Spent Nuclear Fuel, and contracts for and payments into
the Nuclear Waste Fund; (b) the Atomic Energy Act of 1954 (42 U.S.C. Section
2011 et seq.); (c) the Energy Reorganization Act of 1974 (42 U.S.C. Section 5801
et seq.); (d) the Convention on the Physical Protection of Nuclear Material
Implementation Act of 1982 (Public Law 97 - 351; 96 STAT. 1663); (e) the Foreign
Assistance Act of 1961 (22 U.S.C. Section 2429 et seq.); (f) the Nuclear
Non-Proliferation Act of 1978 (22 U.S.C. Section 3201); (g) the Low-Level
Radioactive Waste Policy Act (42 U.S.C. Section 2021b et seq.); (h) the Nuclear
Waste Policy Act; (i) the Low-Level Radioactive Waste Policy Amendments Act of
1985 (42 U.S.C. Section 2021d, 471); (j) the Energy Policy Act of 1992 (42
U.S.C. Section 13201 et seq.); (k) the Pennsylvania Radiation Protection Act (35
P.S. Section 7110.101 et seq.); (l) the Appalachian States Low-Level Radioactive
Waste Compact Act (35 P.S. Section 7125.1 et seq.); and (m) the Pennsylvania
Low-Level Radioactive Waste Disposal Act (35 P.S. Section 7130.101 et seq.); but
shall not include Environmental Laws.
(80) "Nuclear Materials" means Source Material, Special Nuclear
Material, Low-Level Waste, High-Level Waste, Byproduct Material and Spent
Nuclear Fuel.
(81) "Nuclear Waste Fund" means the fund established by the Department
of Energy under the Nuclear Waste Policy Act in which the Spent Nuclear Fuel
Fees to be used for the design, construction and operation of a High-Level Waste
Repository and other activities related to the storage and disposal of Spent
Nuclear Fuel or High-Level Waste are deposited.
(82) "Nuclear Waste Policy Act" means the Nuclear Waste Policy Act of
1982, as amended from time to time (42 U.S.C. Section 10101 et seq.).
(83) "Off-Site Location" means any real property other than the Sites.
(84) "Owners Agreement" means the Owners Agreement for Peach Bottom No.
2 and No. 3 Nuclear Units, dated as of November 24, 1971, as amended, by and
between Seller, ACE, PECO and PSE&G Utility.
<PAGE>
(85) "PaPUC" means the Pennsylvania Public Utility Commission, and any
successor agency thereto.
(86) "Party" and "Parties" have the respective meanings set forth in
the preamble to this Agreement.
(87) "Peach Bottom Interest" means Seller's undivided 7.51% interest as
tenant in common without the right of partition in the Peach Bottom Station.
(88) "Peach Bottom Station" means the generating station described in
the Owners Agreement described in Section 1.1(84).
(89) "PECO" has the meaning set forth in the preamble to this
Agreement.
(90) "PECO Closing Nuclear Fuel Supply Amount" has the meaning set
forth in Section 3.3(a).
(91) "PECO Closing Payment" has the meaning set forth in Section 3.2(c)
(92) "PECO Closing Statement" has the meaning set forth in Section
3.3(a).
(93) "PECO Interest" means one-half of the Peach Bottom Interest,
constituting a 3.755% undivided interest as tenant in common without the right
of partition in the Peach Bottom Station.
(94) "PECO NRC Applications" means whatever actions may be necessary or
appropriate to request and obtain the PECO NRC Approvals.
(95) "PECO NRC Approvals" means the consent of the NRC pursuant to
Section 184 of the Atomic Energy Act and 10 C.F.R. Section 50.80 to the transfer
of the Purchased Assets to PECO, NRC approval of all conforming administrative
license amendments associated with such transfers, NRC consent to the transfer
of, and approval of any related amendments to, any nuclear materials licenses
associated with such transfers and any other NRC consents and approvals required
in connection with the consummation of the transactions contemplated by this
Agreement.
<PAGE>
(96) "PECO Nuclear Permits" has the meaning set forth in Section
5.5(b).
(97) "PECO Permits" has the meaning set forth in Section 5.4.
(98) "PECO Purchase Price" has the meaning set forth in Section 3.2(a)
(99) "PECO Required Regulatory Approvals" has the meaning set forth in
Section 5.3(b).
(100) "Permitted Encumbrances" means: (a) such Encumbrances as arise
under any Seller's Agreement; (b) with respect to any period before the Closing,
Encumbrances created by the Mortgage; (c) statutory liens for Taxes or other
charges or assessments of Governmental Authorities not yet due or delinquent or
the validity of which is being challenged in good faith by appropriate
proceedings provided that the aggregate amount being so contested does not
exceed $100,000 or Seller has provided Buyers adequate security with respect
thereto, in form and substance satisfactory to Buyers; (d) mechanics',
carriers', workers', repairers' and other similar liens arising or incurred in
the ordinary course of business relating to obligations as to which there is no
default on the part of Buyer; (e) such zoning, entitlement, conservation
restriction and other land use and environmental regulations by Governmental
Authorities as (i) do not materially detract from the value of any Purchased
Asset as currently used, or materially interfere with the present use of any
Purchased Asset or (ii) would not, individually or in the aggregate, have a
Material Adverse Effect; and (f) such non-monetary easements, activity and use
limitations, exceptions, rights of way, deed restrictions, covenants and
conditions and defects of title as (i) do not materially detract from the value
of the Real Property as currently used or materially interfere with the present
use of the Real Property or (ii) would not, individually or in the aggregate,
have a Material Adverse Effect.
(101) "Person" means any individual, partnership, limited liability
company, joint venture, corporation, trust, unincorporated organization, other
business association or Governmental Authority.
(102) "Prime Rate" has the meaning set forth in Section 3.3(c).
(103) "PSEG" has the meaning set forth in the preamble of this
Agreement.
(104) "PSEG Closing Nuclear Fuel Supply Amount" has the meaning set
forth in Section 3.5(a).
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(105) "PSEG Closing Payment" has the meaning set forth in Section
3.4(c)
(106) "PSEG Closing Statement" has the meaning set forth in Section
3.5(a).
(107) "PSEG Interest" means one-half of the Peach Bottom Interest,
constituting a 3.755% undivided interest as tenant in common without the right
of partition in the Peach Bottom Station.
(108) "PSEG NRC Applications" means whatever actions may be necessary
or appropriate to request and obtain the PSEG NRC Approvals.
(109) "PSEG NRC Approvals" means the consent of the NRC pursuant to
Section 184 of the Atomic Energy Act and 10 C.F.R. Section 50.80 to the transfer
of the Purchased Assets to PSEG, NRC approval of all conforming administrative
license amendments associated with such transfers, NRC consent to the transfer
of, and approval of any related amendments to, any nuclear materials licenses
associated with such transfers and any other NRC consents and approvals required
in connection with the consummation of the transactions contemplated by this
Agreement.
(110) "PSEG Nuclear Permits" has the meaning set forth in Section
6.5(b).
(111) "PSEG Permits" has the meaning set forth in Section 6.4.
(112) "PSEG Purchase Price" has the meaning set forth in Section
3.4(a).
(113) "PSEG Required Regulatory Approvals" has the meaning set forth in
Section 6.3(b).
(114) "PSE&G Utility" means Public Service Electric & Gas Company, a
New Jersey corporation.
(115) "PUHCA" means the Public Utility Holding Company Act of 1935, as
amended from time to time, and the rules and regulations promulgated thereunder
from time to time.
<PAGE>
(116) "Purchased Assets" means all of Seller's rights, title and
interests, of whatever kind and nature, whether tangible or intangible, in and
to all assets (except for the Excluded Assets) constituting or used and
necessary for the operation of the Peach Bottom Station or any portion thereof,
together with all goodwill relating thereto.
(117) "PURTA" has the meaning set forth in Section 3.7(c).
(118) "Real Property" means all real property (including all buildings
and other improvements thereon and all appurtenances thereto) underlying or used
in connection with the Peach Bottom Station, all as more particularly set forth
on Schedule 1.1(118).
(119) "Regulatory Termination" has the meaning set forth in Section
10.3.
(120) "Release" means any release, spill, leak, discharge, disposal of,
pumping, pouring, emitting, emptying, injecting, leaching, dumping, depositing,
dispersing, allowing to escape or migrate into or through the environment
(including ambient air, surface water, groundwater, land surface and subsurface
strata) or within any building, structure, facility or fixture.
(121) "Remediation" or "Remediate" means action of any kind to address
an Environmental Condition or a Release or threatened Release of Hazardous
Substances or the presence of Hazardous Substances at the Sites or an Off-Site
Location, including the following activities to the extent they relate to,
result from or arise out of the presence of a Hazardous Substance at the Sites
or an Off-Site Location: (a) monitoring, investigation, assessment, treatment,
cleanup, containment, removal, mitigation, response or restoration work; (b)
obtaining any permits, consents, approvals or authorizations of any Governmental
Authority necessary to conduct any such activity; (c) preparing and implementing
any plans or studies for any such activity; (d) obtaining a written notice from
a Governmental Authority with jurisdiction over the Sites or an Off-Site
Location under Environmental Laws that no material additional work is required
by such Governmental Authority; (e) the use, implementation, application,
installation, operation or maintenance of removal actions on the Sites or an
Off-Site Location, remedial technologies applied to the surface or subsurface
soils, excavation and treatment or disposal of soils at an Off-Site Location,
systems for long-term treatment of surface water or groundwater, engineering
controls or institutional controls; and (f) any other activities reasonably
<PAGE>
determined by a Party to be necessary or appropriate or required under
Environmental Laws to address an Environmental Condition or a Release of
Hazardous Substances or the presence of Hazardous Substances at the Sites or an
Off-Site Location.
(122) "Representatives" of a Person means, collectively, such Person's
Affiliates and its and their respective directors, officers, partners, members,
employees, representatives, agents, advisors (including accountants, legal
counsel, environmental consultants and financial advisors), parent entities and
other controlling Persons.
(123) "SEC" means the United States Securities and Exchange Commission,
and any successor agency thereto.
(124) "Securities Act" means the Securities Act of 1933, as amended
from time to time, and the rules and regulations promulgated thereunder from
time to time.
(125) "Seller" has the meaning set forth in the preamble to this
Agreement.
(126) "Seller Nuclear Permits" has the meaning set forth in Section
4.7.
(127) "Seller Permits" has the meaning set forth in Section 4.4.
(128) "Seller Tax Loss" has the meaning set forth in Section 7.5(g).
(129) "Seller's Agreements" means, collectively, the contracts,
agreements, arrangements, licenses and leases of any nature, which shall be
assigned pursuant to Section 2.1(f), (i) to which Seller is a party, each of
which is set forth in Schedule 1.1(129), and (ii) entered into by either Buyer,
for and on behalf of Seller, whether under the Owners Agreement or otherwise,
and by or to which Seller or the Purchased Assets is or are bound or subject, in
each case, relating to the ownership, lease, maintenance or operation of the
Purchased Assets.
(130) "Seller's Indemnitee" has the meaning set forth in Section
9.1(a).
(131) "Seller's Insurance Policies" means all insurance policies with
respect to the ownership, lease, maintenance or operation of the Purchased
Assets, including all liability, property damage and business interruption
policies in respect thereof, for which solely Seller or its Affiliates (as
opposed to Buyer or its Affiliates) are liable for the payment of premiums and
related charges.
<PAGE>
(132) "Seller's Nonqualified Decommissioning Funds" means the trust
funds that are designated as nonqualified decommissioning funds for the Peach
Bottom Station and held pursuant to the Trust Agreement.
(133) "Seller's Qualified Decommissioning Funds" means the trust funds
that are designated as "nuclear decommissioning reserve funds" under Code
Section 468A for the Peach Bottom Station and held pursuant to the Trust
Agreement.
(134) "Seller's Required Regulatory Approvals" has the meaning set
forth in Section 4.3(b).
(135) "Sites" means the Real Property forming a part, or used or usable
in connection with the operation, of the Peach Bottom Station, including any
real property used for the disposal of solid or hazardous waste that is included
in the Real Property. Any reference to the Sites shall include the surface and
subsurface elements, to the extent owned by Seller, including the soil and
groundwater present at the Sites, and any reference to materials or conditions
"at the Sites", including Hazardous Substances and Environmental Conditions,
shall include all materials and conditions "at, on, in, upon, over, across,
under or within" the Sites.
(136) "Source Material" means: (a) uranium or thorium, or any
combination thereof, in any physical or chemical form or (b) ores which contain
by weight one-twentieth of one percent (0.05%) or more of (i) uranium, (ii)
thorium or (iii) any combination thereof; but shall not include Special Nuclear
Material.
(137) "Special Nuclear Material" means plutonium, uranium-233, uranium
enriched in the isotope-233 or in the isotope-235, and any other material that
the NRC determines to be "Special Nuclear Material", and any material
artificially enriched by any of the foregoing materials or isotopes; but shall
not include Source Material.
(138) "Spent Nuclear Fuel" means nuclear fuel that has been withdrawn
from a nuclear reactor following irradiation and has not been chemically
separated into its constituent elements by reprocessing, including the Special
Nuclear Material, Byproduct Material, Source Material and other radioactive
materials associated with nuclear fuel assemblies.
<PAGE>
(139) "Spent Nuclear Fuel Fees" means the fees assessed on electricity
generated and sold at the Peach Bottom Station pursuant to the Department of
Energy Standard Contract, as provided in Section 302 of the Nuclear Waste Policy
Act and 10 C.F.R. Part 961, as amended from time to time.
(140) "Subsequent Transaction" has the meaning set forth in Section
10.3.
(141) "Subsidiary", when used in reference to any Person, means any
entity of which outstanding securities or interests having ordinary voting power
to elect a majority of the board of directors or other governing body performing
similar functions of such entity are owned directly or indirectly by such
Person.
(142) "Tangible Personal Property" has the meaning set forth in Section
2.1(e).
(143) "Tax" or "Taxes" means all taxes, surtaxes, charges, fees,
levies, penalties and other assessments imposed by any Governmental Authority,
including income, gross receipts, excise, property, sales, transfer, use,
franchise, special franchise, payroll, recording, withholding, social security,
gross receipts, license, stamp, occupation, employment or other taxes, including
any interest, penalties or additions attributable thereto or any liability for
taxes incurred by reason of joining in the filing of any consolidated, combined
or unitary Tax Returns, in each case including any interest, penalties or
additions attributable thereto; provided, however, that "Taxes" shall not
include sewer rents or charges for water.
(144) "Tax Benefit" has the meaning set forth in Section 9.1(e).
(145) "Tax Cost" has the meaning set forth in Section 9.1(e).
(146) "Tax Return" means any return, report, information return,
declaration, claim for refund, or other document, together with all amendments
and supplements thereto (including all related or supporting information),
required to be supplied to any Governmental Authority responsible for the
administration of Laws governing Taxes.
(147) "Termination Date" has the meaning set forth in Section 10.1(b).
(148) "Third-Party Claim" has the meaning set forth in Section 9.2(a).
<PAGE>
(149) "Transferable Permits" means all those Seller Permits, including
Seller's Nuclear Permits (and all applications pertaining thereto), which are
transferable under applicable Laws by Seller to PECO or PSEG, as the case may
be, with or without a filing with, notice to, consent or approval of any
Governmental Authority.
(150) "Transfer Taxes" means any property transfer or gains tax, sales
tax, conveyance fee, use tax, stamp tax, stock transfer tax or other similar
tax, including any related penalties, interest and additions to tax.
(151) "Trust Agreement" means the Nuclear Decommissioning Master Trust
Agreement between Delmarva Power & Light Company and Mellon Bank, N.A., dated
December 1, 1995.
(152) "USEPA" means the United States Environmental Protection Agency,
and any successor agency thereto.
1.2 Certain Interpretive Matters. The Article, Section and Schedule
headings contained in this Agreement are solely for the purpose of reference,
are not part of the agreement of the Parties and shall not in any way affect the
meaning of this Agreement. The term "includes" or "including" shall mean
"including without limitation." The words "hereof", "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement.
Other capitalized terms used in this Agreement and not defined in Section 1.1
shall have the meanings assigned to them elsewhere in this Agreement. Unless the
context otherwise requires, the definitions contained in this Agreement are
applicable to the singular as well as the plural forms of such terms and to the
masculine as well as to the feminine and neuter genders of such term. Any
agreement, instrument, statute, regulation, rule or order defined or referred to
herein or in any agreement or instrument that is referred to herein means such
agreement, instrument, statute, regulation, rule or order as from time to time
amended, modified or supplemented, including (in the case of agreements or
instruments) by waiver or consent and (in the case of statutes, regulations,
rules or orders) by succession of comparable successor statutes, regulations,
rules or orders and references to all attachments thereto and instruments
incorporated therein. References to a Section, Article, Exhibit or Schedule
shall mean a Section, Article, Exhibit or Schedule of this Agreement.
<PAGE>
1.3 U.S. Dollars. When used herein, the term "dollars" and the symbol
"$" refer to the lawful currency of the United States of America.
1.4 Seller's Interest in Purchased Assets. The Parties acknowledge and
agree that Seller owns and holds an undivided seven and fifty-one hundredths
percent (7.51%) interest as tenant in common without the right of partition in
the Peach Bottom Station, and that the PECO Interest and the PSEG Interest each
constitute one-half of such undivided interest. The Parties further acknowledge
and agree that the PECO Interest and the PSEG Interest together constitute all
of Seller's rights, title and interest in, to and under the Purchased Assets.
The Parties agree that all references in this Agreement to Seller's rights,
title and interests in, to and under the Purchased Assets, and rights,
liabilities and obligations in connection therewith, shall be construed in this
context. Each Party acknowledges and agrees that (i) the assumption and
agreement to pay, perform or otherwise discharge, from and after the Closing
Date, one-half of the Assumed Liabilities by each of PECO and PSEG (that is, by
PECO, to the extent of the PECO Interest, and by PSEG, to the extent of the PSEG
Interest) shall be several and not joint, and (ii) notwithstanding the
foregoing, from and after the Closing Date, Seller shall have no further
liability or obligation in respect of any Assumed Liability.
ARTICLE II
PURCHASE AND SALE
2.1 Transfer of Purchased Assets. Upon the terms and subject to the
conditions set forth in this Agreement, at the Closing, (i) Seller shall sell,
assign, convey, transfer and deliver to PECO, and PECO shall purchase, assume
and acquire from Seller, free and clear of all Encumbrances, except for
Permitted Encumbrances, the Purchased Assets, but only to the extent of the PECO
Interest, and (ii) Seller shall sell, assign, convey, transfer and deliver to
PSEG, and PSEG shall purchase, assume and acquire from Seller, free and clear of
all Encumbrances, except for Permitted Encumbrances, the Purchased Assets, but
only to the extent of the PSEG Interest, in each case, as in existence on the
Closing Date, including the following Purchased Assets:
(a) The Real Property;
(b) The Inventories;
<PAGE>
(c) The Nuclear Materials held pursuant to the NRC Licenses;
(d) The Fuel Supplies;
(e) All machinery (mobile or otherwise), equipment (including
computer hardware and software and communications equipment), vehicles, tools,
spare parts, fixtures, furniture, furnishings and other personal property
located at or in transit to the Peach Bottom Station or used and necessary for
the operation of the Peach Bottom Station, in each case, on the Closing Date
(collectively, the "Tangible Personal Property");
(f) Subject to the receipt of necessary consents and
approvals, the Seller's Agreements;
(g) Subject to the receipt of necessary consents and
approvals, the Transferable Permits and all of Seller's rights, title and
interests in and to any other permits, registrations, franchises, certificates,
licenses and other authorizations, consents and approvals of Governmental
Authorities relating to the ownership, lease, maintenance or operation of the
Peach Bottom Station or any portion thereof;
(h) Seller's Nonqualified Decommissioning Funds as of the
Closing Date, including all income, interest and other earnings accrued thereon,
together with all required accounting and other records;
(i) Seller's Qualified Decommissioning Funds as of the Closing
Date, including all income, interest and other earnings accrued thereon,
together with all required accounting and other records;
(j) All books, operating records, operating, safety and
maintenance manuals, engineering design plans, blueprints and as-built plans,
specifications, procedures and similar items of Seller relating specifically to
the Peach Bottom Station (subject to the right of Seller to retain copies of
same for its use) other than such items which are proprietary to third parties
and accounting records;
(k) All unexpired, transferable warranties and guarantees from
third parties arising out of, in respect of, or in connection with, (i) any item
<PAGE>
of Real Property or personal property, or interest therein, included in the
Purchased Assets or (ii) the Assumed Liabilities;
(l) All claims of Seller relating to or pertaining to the
Department of Energy's defaults under the Department of Energy Standard Contract
(including all claims for failure by the Department of Energy to take Spent
Nuclear Fuel) accrued prior to, on or after the Closing Date, whether relating
to periods prior to, on or after the Closing Date, and all other claims of
Seller against the Department of Energy with respect to, arising out of or in
connection with the Purchased Assets, other than the claims described in Section
2.2(j); and
(m) The rights of Seller in, to and under all causes of action
against third parties with respect to, arising out of or in connection with
Seller's rights, title and interests in and to the Purchased Assets or the
Assumed Liabilities, or any portion thereof, whether accruing prior to, on or
after the Closing Date, other than any such causes of action as constitute
Excluded Assets or Excluded Liabilities, whether received as payment or credit
against future liabilities, in each case, relating to any period prior to, on or
after the Closing Date.
2.2 Excluded Assets. Notwithstanding anything to the contrary in this
Agreement, nothing in this Agreement shall constitute or be construed as
requiring Seller to sell, assign, convey, transfer or deliver, and neither PECO
nor PSEG shall be entitled to purchase or acquire, any right, title or interest
in, to or under the following assets and properties which are associated with
the Purchased Assets, but which are hereby specifically excluded from the
definition of Purchased Assets (collectively, the "Excluded Assets"):
(a) All certificates of deposit, shares of stock, securities,
bonds, debentures, evidences of indebtedness, and interests in joint ventures,
partnerships, limited liability companies and other entities, including account
balances under Seller's Insurance Policies and the right, title and interest of
Seller in, to and under account balances held by NEIL under Buyers' Insurance
Policies, but excluding such assets comprising the Decommissioning Funds;
(b) All Seller's Insurance Policies and the right, title and
interest of Seller in, to and under account balances held by NEIL under Buyers'
Insurance Policies;
<PAGE>
(c) All cash, cash equivalents, bank deposits, accounts and
notes receivable (trade or otherwise), and prepaid expenses, including premiums
and account balances under Seller's Insurance Policies and the right, title and
interest of Seller in, to and under account balances held by NEIL under Buyers'
Insurance Policies, and any income, sales, payroll or other Tax receivables (in
each case, whether held by Seller or any third party, including Buyers under the
Owners Agreement), but excluding such assets comprising the Decommissioning
Funds;
(d) The right, title and interest of Seller in, to and under
all intellectual property, including the names "Delmarva Power & Light Company",
"DP&L" or any derivation thereof, as well as any related or similar name, or any
other trade names, trademarks, service marks, corporate names and logos, or any
part, derivation, colorable imitation or combination thereof;
(e) All tariffs, agreements and arrangements with Persons
other than Buyers to which Seller is a party for the purchase or sale of
electric capacity or energy, or for the purchase of transmission, distribution
or ancillary services;
(f) Other than with respect to the Decommissioning Funds, all
Tax refunds or credits (including refunds or credits of real property Taxes paid
or due with respect to the Peach Bottom Station or any related Real Property),
which refunds or credits are owed to Seller with respect to periods prior to the
Closing Date, whether directly or indirectly, under the Owners Agreement or
otherwise regardless of when actually paid (which refunds or credits shall be
net to Seller of all reasonable out-of-pocket costs and expenses (including
legal fees) incurred by Buyers in connection with obtaining the portion of such
Tax refund or credit owed to Seller);
(g) The minute books, stock transfer books, corporate seal and
other corporate records of Seller;
(h) The right, title and interest of Seller in, to and under
all contracts, agreements, arrangements, licenses and leases of any nature,
other than the Seller's Agreements;
(i) All other assets and properties owned or leased by Seller
which are not used and necessary for the operation of the Peach Bottom Station
or any portion thereof;
<PAGE>
(j) All claims of Seller relating to or pertaining to any
refund or credit received on or after the Closing Date by PECO, as operator of
the Peach Bottom Station, or its successors or permitted assigns, of all or any
part of Department of Energy Decommissioning and Decontamination Fees for which
Seller is or was liable; provided that Seller shall not have any right to pursue
such claims separately, but shall be entitled to pursue such claims solely by
joint action with PECO and any other interested parties approved by Buyers, such
action to be controlled by PECO in its sole discretion; provided, also that if
PECO shall receive any such refund or credit on or after the Closing Date of all
or any part of such Department of Energy Decommissioning and Decontamination
Fees, Seller's claim to a portion of such refund shall be limited to the amount
of such refund or credit multiplied by a fraction, (i) the numerator of which is
the amount of Decommissioning and Decontamination Fees with respect to the Peach
Bottom Station paid by Seller or on Seller's behalf, and (ii) the denominator of
which is the amount of Decommissioning and Decontamination Fees with respect to
the Peach Bottom Station paid by all of the parties to the Owners Agreement or
on their behalf; and provided, further, that the aforesaid claims shall
constitute Excluded Assets (rather than Purchased Assets) after the Closing only
if Seller shall continue to pay after the Closing its proportionate share of the
costs and expenses (including reasonable legal fees) of pursuing any such claims
(but not Department of Energy Decommissioning and Decontamination Fees), such
proportionate share to be determined as if Seller had not transferred its
rights, title and interests in and to the Purchased Assets to Buyers; and
(k) The right, title and interest of Seller in, to and under
this Agreement, the Collateral Agreement and the Additional Agreements.
2.3 Assumed Liabilities. At the Closing (i) PECO shall assume and agree
to pay, perform and otherwise discharge, without recourse to Seller (other than
as set forth herein or in the Owners Agreement, as amended by the Amendment to
Owners Agreement), in accordance with the terms and subject to the conditions
set forth herein, the Assumed Liabilities, but only to the extent of the PECO
Interest, and (ii) PSEG shall assume and agree to pay, perform and otherwise
discharge, without recourse to Seller (other than as set forth herein or in the
Owners Agreement, as amended by the Amendment to Owners Agreement), in
accordance with the terms and subject to the conditions set forth herein, the
Assumed Liabilities, but only to the extent of the PSEG Interest, in each case,
including those set forth below; provided that nothing set forth in this Section
2.3 shall require Buyers to assume any liabilities or obligations that are
expressly excluded pursuant to Section 2.4:
<PAGE>
(a) All liabilities and obligations of Seller arising on or
after the Closing Date under the Seller's Agreements and the Transferable
Permits in accordance with the terms thereof, except, in each case, to the
extent such liabilities and obligations, but for a breach or default by Seller,
would have been paid, performed or otherwise discharged prior to the Closing
Date;
(b) All liabilities and obligations of Seller in respect of
Taxes for which any Buyer is liable pursuant to Section 7.5 hereof;
(c) Other than those set forth in Section 2.4(g), all
liabilities and obligations of Seller arising under or relating to Environmental
Laws or relating to any claim in respect of Environmental Conditions or
Hazardous Substances, whether based on common law or Environmental Laws, whether
relating to the Sites or any Off-Site Location, in either case, whether such
liabilities or obligations are known or unknown, contingent or accrued,
including (i) any violation or alleged violation of Environmental Laws with
respect to the ownership, lease, maintenance or operation of any of the
Purchased Assets, including any fines or penalties that arise in connection with
the ownership, lease, maintenance or operation of the Purchased Assets prior to,
on or after the Closing Date, and the costs associated with correcting any such
violations; (ii) loss of life, injury to Persons or property or damage to
natural resources (whether or not such loss, injury or damage arose or was made
manifest before the Closing Date or arises or becomes manifest prior to, on or
after the Closing Date), in each case, caused (or allegedly caused) by any
Environmental Condition or the presence or Release of Hazardous Substances at,
on, in, under, or migrating from the Purchased Assets prior to, on or after the
Closing Date, including any Environmental Condition or Hazardous Substances
contained in building materials at or adjacent to the Purchased Assets or in the
soil, surface water, sediments, groundwater, landfill cells, or in other
environmental media at or near the Purchased Assets; (iii) the investigation or
Remediation (whether or not such investigation or Remediation commenced before
the Closing Date or commences on or after the Closing Date) of any Environmental
Condition or Hazardous Substances that are present or have been Released prior
to, on or after the Closing Date at, on, in, under or migrating from the
Purchased Assets or in the soil, surface water, sediments, groundwater, landfill
cells or in other environmental media at or adjacent to the Purchased Assets;
(iv) loss of life, injury to persons or property or damage to natural resources
(whether or not such loss, injury or damage arose or was made manifest before
the Closing Date or arises or becomes manifest on or after the Closing Date)
caused or allegedly caused by the disposal, storage, transportation, discharge,
<PAGE>
Release or recycling of Hazardous Substances at an Off-Site Location, or the
arrangement for such activities, prior to, on or after the Closing Date, in
connection with the ownership, lease, maintenance or operation of the Purchased
Assets; and (v) the investigation or Remediation (whether or not such
investigation or Remediation commenced before the Closing Date or commences on
or after the Closing Date) of Hazardous Substances that are disposed, stored,
transported, discharged, Released, recycled at an Off-Site Location, or the
arrangement for such activities, prior to, on or after the Closing Date, in
connection with the ownership, lease, maintenance or operation of the Purchased
Assets;
(d) All liabilities and obligations of Seller in respect of
Decommissioning the Peach Bottom Station, and the Decommissioning Costs relating
thereto, whether arising prior to, on or after the Closing Date (collectively,
"Assumed Decommissioning Liabilities");
(e) Other than as set forth in Section 2.4(h), all liabilities
and obligations of Seller arising under or relating to Nuclear Laws, and all
liabilities and obligations of Seller arising under or relating to Nuclear
Materials or to any claim in respect thereof, whether based on Nuclear Laws,
Environmental Laws, common law or otherwise (excluding liabilities and
obligations for Department of Energy Decommissioning and Decontamination Fees,
which are governed by Section 2.7), whether such liabilities or obligations are
known or unknown, contingent or accrued, in each case, arising or occurring
prior to, on or after the Closing Date, including all asserted or unasserted
liabilities or obligations to third parties (including employees) for personal
injury or tort, or any other theory of liability, arising out of the ownership,
lease, maintenance or operation of the Purchased Assets prior to, on or after
the Closing Date, including liabilities and obligations arising out of or
resulting from the transportation, treatment, storage or disposal of Nuclear
Materials, including liabilities and obligations arising out of or resulting
from a "nuclear incident" or "precautionary evacuation" (as such terms are
defined in the Atomic Energy Act) at the Peach Bottom Station, or any other
licensed nuclear reactor site in the United States, or in the course of the
transportation of Nuclear Materials to or from the Peach Bottom Station, or any
other such site prior to, on or after the Closing Date, including liability for
all deferred premiums assessed in connection with such a nuclear incident or
precautionary evacuation under any applicable NRC or industry retrospective
rating plan or insurance policy, including any mutual insurance pools
established in compliance with the requirements imposed under Section 170 of the
Atomic Energy Act and 10 C.F.R. Part 140 or 10 C.F.R. Section 50.54(w),
including all liabilities and obligations of Seller for retrospective premium
<PAGE>
obligations under Seller's Insurance Policies or Buyers' Insurance Policies
(collectively, "Assumed Nuclear Liabilities");
(f) All liabilities and obligations of Seller in respect of
Spent Nuclear Fuel, including Spent Nuclear Fuel Fees, whether such liability or
obligation is known or unknown, contingent or accrued, and whether arising or
occurring prior to, on or after the Closing Date, except as specified in Section
2.6 (collectively, "Assumed Spent Fuel Liabilities"); and
(g) With respect to the Purchased Assets, any Tax that may be
imposed on Seller by any Governmental Authority on the ownership, lease,
maintenance, operation, or use of the Purchased Assets on or after the Closing
Date, except for any Income Tax attributable to income (including proceeds
representing the Purchase Price or proceeds of asset sales) received by Seller
and any Transfer Taxes for which Seller is liable pursuant to Section 7.5.
2.4 Excluded Liabilities. Notwithstanding anything to the contrary in
Section 2.3, Buyers shall not assume or be obligated to pay, perform or
otherwise discharge the following liabilities or obligations of Seller (the
"Excluded Liabilities"):
(a) Any liabilities or obligations of Seller arising out of,
in respect of, or in connection with, any Excluded Assets or other assets of
Seller which are not Purchased Assets;
(b) Any liabilities or obligations of Seller arising out of,
in respect of, or in connection with, Taxes attributable to the Purchased Assets
for taxable periods, or portions thereof, ending before the Closing Date, except
for Transfer Taxes and Taxes for which any Buyer is liable pursuant to Section
7.5;
(c) Any liabilities or obligations of Seller accruing under
any of the Seller's Agreements prior to the Closing Date;
(d) Any payment obligations of Seller under the Owners
Agreement, as amended by the Amendment to Owners Agreement, for goods delivered
or services rendered or liabilities incurred prior to the Closing Date, except
for such obligations for which Buyers or any other Person (other than Seller)
are liable under the Owners Agreement, as amended by the Amendment to Owners
Agreement;
<PAGE>
(e) Any and all asserted or unasserted liabilities or
obligations to third parties (including employees of Seller) for personal injury
or tort, or similar causes of action relating to Seller's acts or omissions in
connection with the ownership of the Purchased Assets arising during or
attributable to the period prior to the Closing Date, other than liabilities or
obligations assumed by Buyers under Sections 2.3(c) and (e);
(f) Any fines or similar penalties imposed by and payable to
any Governmental Authority under applicable Law (as in effect prior to the
Closing Date, notwithstanding any provision hereof to the contrary) with respect
to the Purchased Assets resulting from (i) an investigation, proceeding, request
for information or inspection before or by a Governmental Authority directly
relating to actions or omissions by Seller prior to the Closing Date or (ii)
violations of applicable Law (as in effect prior to the Closing Date,
notwithstanding any provision hereof to the contrary), wilful misconduct or
gross negligence directly relating to actions or omissions by Seller prior to
the Closing Date;
(g) Any liabilities or obligations of Seller arising under or
relating to any claim in respect of Environmental Conditions or Hazardous
Substances, in each case, relating to the Purchased Assets, but only to the
extent relating to any Off-Site Location and of which Seller has Knowledge prior
to the Closing Date; and
(h) Any liabilities or obligations of Seller arising under or
relating to Nuclear Laws, and any liabilities or obligations of Seller arising
under or relating to Nuclear Materials or to any claim in respect thereof,
whether based on Nuclear Laws, Environmental Laws, common law or otherwise, in
connection with the ownership, lease, maintenance or operation of the Purchased
Assets, but only to the extent relating to any written assessment by any
Governmental Authority prior to the Closing Date with respect to any Nuclear
Incident (as defined in the Atomic Energy Act) occurring prior to the Closing
Date, which assessment exceeds the aggregate amount of the policy limits under
all applicable Buyers' Insurance Policies.
2.5 Control of Litigation.
(a) The Parties acknowledge and agree that, from and after the
Closing Date, Seller shall be entitled exclusively to control, defend and settle
any suit, action or proceeding, and any investigation arising out of or related
to any Excluded Assets or Excluded Liabilities, so long as such control, defense
<PAGE>
or settlement does not unreasonably interfere with Buyers' operation of the
Peach Bottom Station; and Buyers agree to cooperate fully in connection
therewith provided, however, that Seller shall reimburse Buyers for all
reasonable costs and expenses incurred in providing such cooperation.
(b) The Parties acknowledge and agree that, from and after the
Closing Date, Buyers shall be entitled exclusively to control, defend and settle
any suit, action or proceeding, and any investigation arising out of or related
to any Purchased Assets or Assumed Liabilities, so long as such control, defense
or settlement does not unreasonably interfere with Seller's ownership of the
Excluded Assets or with the Excluded Liabilities; and Seller agrees to cooperate
fully in connection herewith, provided, however, that PECO or PSEG, as the case
may be, shall reimburse Seller for all reasonable costs and expenses incurred in
providing such cooperation to PECO or to PSEG, as the case may be.
2.6 Spent Nuclear Fuel Fees. Seller, to the extent of the Peach Bottom
Interest, shall be liable for and pay, pursuant to the Owners Agreement, all
Spent Nuclear Fuel Fees in effect prior to the Closing Date with respect to its
share of electricity generated at and sold from the Peach Bottom Station prior
to the Closing Date, and Buyers shall have no liability or obligation in respect
thereof. PECO, to the extent of the PECO Interest, and PSEG, to the extent of
the PSEG Interest, shall be liable for and pay all Spent Nuclear Fuel Fees with
respect to its share of electricity generated at and sold from the Peach Bottom
Station from and after the Closing Date, together with all additional Spent
Nuclear Fees that are assessed or become effective on or after the Closing Date,
whether assessed with respect to electricity generated at and sold from the
Peach Bottom Station prior to, on or after the Closing Date, and Seller shall
have no further liability or obligation in respect thereof. Without limiting the
liability of Buyers under Sections 2.3(e) and (f), from and after the Closing
Date, PECO, to the extent of the PECO Interest, and PSEG, to the extent of the
PSEG Interest, shall assume title to, and such liabilities and obligations as
Seller may have for the storage and disposal of, Spent Nuclear Fuel presently
stored at the Peach Bottom Station (including any such fuel which may have been
used in connection with generating Seller's share of electricity at the Peach
Bottom Station). From and after the Closing Date, Buyers shall have all rights
of recovery from third parties and the Department of Energy relating to, arising
from or in connection with the Department of Energy's failure to take Spent
Nuclear Fuel.
2.7 Department of Energy Decommissioning and Decontamination Fees.
Seller, to the extent of the Peach Bottom Interest, shall be liable for and pay,
<PAGE>
pursuant to the Owners Agreement, its pro rata share of Department of Energy
Decommissioning and Decontamination Fees prior to the Closing Date, and,
thereafter, PECO, to the extent of the PECO Interest, and PSEG, to the extent of
the PSEG Interest, shall be liable for and pay, and Seller shall have no
liability for, such Department of Energy Decommissioning and Decontamination
Fees, together with all additional assessments for Department of Energy
Decommissioning and Decontamination Fees that become effective on or after the
Closing Date, whether assessed with respect to any period occurring prior to, on
or after the Closing Date.
ARTICLE III
THE CLOSING
3.1 Closing. Upon the terms and subject to the satisfaction of the
conditions contained in Article VIII, the sale, assignment, conveyance, transfer
and delivery of Seller's rights, title and interests in and to the Purchased
Assets by Seller to Buyers, and the purchase, assumption and acquisition by
Buyers of the Purchased Assets and the Assumed Liabilities, and the consummation
of the other transactions contemplated hereby, shall take place at a closing
(the "Closing ") to be held at the offices of Skadden, Arps, Slate, Meagher &
Flom LLP, One Rodney Square, Wilmington, Delaware, at 10:00 a.m. local time, or
at such other time and location as may be agreed upon in writing among Buyers
and Seller, within five (5) Business Days following the date on which the last
of the conditions precedent to the Closing set forth in Sections 8.1(a), 8.2(a),
8.3(a) and 8.4(a) of this Agreement, shall have been satisfied or, to the extent
permitted by applicable Law, waived by the Party for whose benefit such
conditions precedent exist. The date on which the Closing actually occurs is
hereinafter called the "Closing Date." The Closing shall be effective for all
purposes as of 12:01 a.m., New York City time, on the Closing Date.
3.2 Payment of PECO Purchase Price.
(a) Upon the terms and subject to the satisfaction of the
conditions set forth in this Agreement, in consideration of the aforesaid sale,
assignment, conveyance, transfer and delivery of the Purchased Assets, to the
extent of the PECO Interest, PECO shall, at the Closing, (i) pay, or cause to be
paid, to Seller cash in an amount equal to the sum of (A) $2,550,000 plus (B)
3.755% of the Net Book Value, as of the Closing Date, of the Nuclear Fuel
<PAGE>
Supplies (the "PECO Purchase Price") and (ii) assume and agree to pay, perform
or otherwise discharge the Assumed Liabilities, to the extent of the PECO
Interest.
(b) At least five (5) Business Days prior to the Closing Date,
PECO shall provide to Seller a written estimate of 3.755% of the Net Book Value,
as of the Closing Date, of the Nuclear Fuel Supplies (the "Estimated PECO
Nuclear Fuel Supply Amount"), which shall be certified in writing by an
appropriate officer of PECO.
(c) At the Closing, in furtherance but not in duplication of
Section 3.2(a), PECO shall pay to Seller cash in an aggregate amount equal to
the sum of (i) $2,550,000 plus (ii) the Estimated PECO Nuclear Fuel Supply
Amount (the "PECO Closing Payment"). The PECO Closing Payment shall be paid to
Seller by PECO at the Closing by wire transfer of immediately available funds to
the account of Seller designated by Seller at least two (2) Business Days prior
to the Closing Date.
3.3 Adjustment to PECO Nuclear Fuel Supply Payment.
(a) Within sixty (60) days after the Closing Date, PECO shall
deliver to Seller, at PECO's sole cost and expense, a statement (the "PECO
Closing Statement") setting forth 3.755% of the Net Book Value, as of the
Closing Date, of the Nuclear Fuel Supplies (the "PECO Closing Nuclear Fuel
Supply Amount"), together with a calculation of the PECO Purchase Price.
Concurrently with the delivery of the PECO Closing Statement, PECO shall furnish
to Seller such documents and other records as may be reasonably requested by
Seller in order to confirm the information and calculation set forth in the PECO
Closing Statement.
(b) In the event that Seller is in disagreement with the PECO
Closing Nuclear Fuel Supply Amount, and in the event that the aggregate amount
of such disagreements exceeds $50,000, Seller shall, within ten (10) Business
Days after receipt of the PECO Closing Statement, notify PECO of such
disagreements setting forth with specificity the nature and amounts thereof. In
the event that Seller is in disagreement with only a portion of the PECO Closing
Nuclear Fuel Supply Amount, PECO or Seller, as the case may be, shall pay all
undisputed amounts in the manner set forth in Section 3.3(c); and all other
amounts shall be paid at such time as all disagreements are resolved in
accordance with this Section 3.3(b). If (i) the aggregate amount of the
disagreements referred to in this Section 3.3(b) does not exceed $50,000 or (ii)
<PAGE>
Seller fails to notify PECO of all disagreements within the ten (10) Business
Day period provided for herein, then the PECO Closing Nuclear Fuel Supply
Amount, as delivered by PECO pursuant to Section 3.3(a), shall be final, binding
and conclusive on the Parties. If Seller is in disagreement with the PECO
Closing Nuclear Fuel Supply Amount and notifies PECO within such ten (10)
Business Day period, then the Parties shall promptly attempt to resolve such
disagreements by negotiation. If the Parties are unable to resolve such
disagreements within thirty (30) days following such notice of disagreement by
Seller, then the Parties shall appoint an Independent Accounting Firm within
forty-five (45) days following such notice, which shall review the PECO Closing
Statement and determine the PECO Closing Nuclear Fuel Supply Amount. Resolution
of any disagreements shall be made by the Independent Accounting Firm in a
writing addressed to all Parties within thirty (30) days following referral to
it by the Parties of such disagreements in accordance with this Agreement. The
findings of such Independent Accounting Firm shall be final, binding and
conclusive on the Parties. All costs and fees of the Independent Accounting Firm
shall be borne equally by Seller and PECO.
(c) No later than the fifth (5th) Business Day following the
determination of the PECO Closing Nuclear Fuel Supply Amount pursuant to Section
3.3(b), either (i) PECO shall pay to Seller the amount, if any, by which the
PECO Purchase Price exceeds the PECO Closing Payment, or (ii) Seller shall pay
to PECO the amount, if any, by which the PECO Closing Payment exceeds the PECO
Purchase Price, in either case, together with simple interest accruing on such
payment at the Prime Rate (as defined below) from the Closing Date through and
including the date of payment, by wire transfer of immediately available funds
to an account designated by the receiving Party. As used herein, "Prime Rate"
means, as of any date, the prime rate as published in The Wall Street Journal on
such date or, if not published on such date, on the most recent date of
publication.
3.4 Payment of PSEG Purchase Price.
(a) Upon the terms and subject to the satisfaction of the
conditions set forth in this Agreement, in consideration of the aforesaid sale,
assignment, conveyance, transfer and delivery of the Purchased Assets, to the
extent of the PSEG Interest, PSEG shall, at the Closing, (i) pay, or cause to be
paid, to Seller cash in an amount equal to the sum of (A) $2,550,000 plus (B)
3.755% of the Net Book Value, as of the Closing Date, of the Nuclear Fuel
Supplies (the "PSEG Purchase Price") and (ii) assume and agree to pay, perform
or otherwise discharge the Assumed Liabilities, to the extent of the PSEG
Interest.
<PAGE>
(b) At least five (5) Business Days prior to the Closing Date,
PECO shall provide to Seller, a written estimate of 3.755% of the Net Book
Value, as of the Closing Date, of the Nuclear Fuel Supplies (the "Estimated PSEG
Nuclear Fuel Supply Amount"), which shall be certified in writing by an
appropriate officer of PECO.
(c) At the Closing, in furtherance but not in duplication of
Section 3.4(a), PSEG shall pay to Seller cash in an aggregate amount equal to
the sum of (i) $2,550,000 plus (ii) the Estimated PSEG Nuclear Fuel Supply
Amount (the "PSEG Closing Payment"). The PSEG Closing Payment shall be paid to
Seller by PSEG at the Closing by wire transfer of immediately available funds to
the account of Seller designated by Seller at least two (2) Business Days prior
to the Closing Date.
3.5 Adjustment to PSEG Nuclear Fuel Supply Payment.
(a) Within sixty (60) days after the Closing Date, PECO shall
deliver to Seller at PSEG's sole cost and expense, a statement (the "PSEG
Closing Statement") setting forth 3.755% of the Net Book Value, as of the
Closing Date, of the Nuclear Fuel Supplies (the "PSEG Closing Nuclear Fuel
Supply Amount"), together with a calculation of the PSEG Purchase Price.
Concurrently with the delivery of the PSEG Closing Statement, PECO, at PSEG's
sole cost and expense, shall furnish to Seller such documents and other records
as may be reasonably requested by Seller in order to confirm the information and
calculation set forth in the PSEG Closing Statement.
(b) In the event that Seller is in disagreement with the PSEG
Closing Nuclear Fuel Supply Amount, and in the event that the aggregate amount
of such disagreements exceeds $50,000, Seller shall, within ten (10) Business
Days after receipt of the PSEG Closing Statement, notify PSEG of such
disagreements setting forth with specificity the nature and amounts thereof. In
the event that Seller is in disagreement with only a portion of the PSEG Closing
Nuclear Fuel Supply Amount, PSEG or Seller, as the case may be, shall pay all
undisputed amounts in the manner set forth in Section 3.5(c); and all other
amounts shall be paid at such time as all disagreements are resolved in
accordance with this Section 3.5(b). If (i) the aggregate amount of the
disagreements referred to in this Section 3.5(b) does not exceed $50,000 or (ii)
Seller fails to notify PSEG of all disagreements within the ten (10) Business
Day period provided for herein, then the PSEG Closing Nuclear Fuel Supply
Amount, as delivered by PSEG pursuant to Section 3.5(a), shall be final,
<PAGE>
binding and conclusive on the Parties. If Seller is in disagreement with the
PSEG Closing Nuclear Fuel Supply Amount and notifies PSEG within such ten (10)
Business Day period, then the Parties shall promptly attempt to resolve such
disagreements by negotiation. If the Parties are unable to resolve such
disagreements within thirty (30) days following such notice of disagreement by
Seller, then the Parties shall appoint an Independent Accounting Firm within
forty-five (45) days following such notice, which shall review the PSEG Closing
Statement and determine the PSEG Closing Nuclear Fuel Supply Amount. Resolution
of any disagreements shall be made by the Independent Accounting Firm in a
writing addressed to all Parties within thirty (30) days following referral to
it by the Parties of such disagreements in accordance with this Agreement. The
findings of such Independent Accounting Firm shall be final, binding and
conclusive on the Parties. All costs and fees of the Independent Accounting Firm
shall be borne equally by Seller and PSEG.
(c) No later than the fifth (5th) Business Day following the
determination of the PSEG Closing Nuclear Fuel Supply Amount pursuant to Section
3.5(b), either (i) PSEG shall pay to Seller the amount, if any, by which the
PSEG Purchase Price exceeds the PSEG Closing Payment, or (ii) Seller shall pay
to PSEG the amount, if any, by which the PSEG Closing Payment exceeds the PSEG
Purchase Price, in either case, together with simple interest accruing on such
payment at the Prime Rate (as defined below) from the Closing Date through and
including the date of payment, by wire transfer of immediately available funds
to an account designated by the receiving Party.
3.6 Tax Reporting and Allocation of Purchase Prices. Buyers and Seller
shall treat the transactions contemplated by Article II as the acquisition by
Buyers of a trade or business for all United States federal income tax purposes
and agree that no portion of such transactions will be treated in whole or in
part as a payment for services (or future services) for United States federal
income tax purposes. Prior to the Closing Date, Buyers and Seller shall allocate
between items which are "real estate" and items which are personal property or
"permanently attached machinery and equipment in an industrial plant", as those
terms are used in the Pennsylvania realty transfer tax statute, Act of July 2,
1996 P.L. 318, as amended, and the regulations promulgated pursuant thereto by
the Pennsylvania Department of Revenue at Chapter 91 of the Pennsylvania Code.
Buyers shall deliver to Seller at the Closing a preliminary allocation among the
Purchased Assets of the PECO Purchase Price and the PSEG Purchase Price and such
other consideration paid to Seller pursuant to this Agreement and, as soon as
<PAGE>
practicable following the Closing (but in any event within ten (10) Business
Days following the final determination of the PECO Closing Nuclear Fuel Supply
Amount and the PSEG Closing Nuclear Fuel Supply Amount), PECO shall prepare and
deliver to Seller a final allocation of the PECO Purchase Price and additional
consideration described in the preceding clause, and the post-closing
adjustments pursuant to Section 3.3(b), among the Purchased Assets, and PSEG
shall deliver to Seller a final allocation of the PSEG Purchase Price and the
additional consideration described in the preceding clause, and the post-closing
adjustments pursuant to Section 3.5(b), among the Purchased Assets (each, an
"Allocation"). Each Allocation shall be consistent with Section 1060 of the Code
and the regulations thereunder ("Applicable Tax Law"). Seller hereby agrees to
accept PECO's and PSEG's Allocation unless Seller determines that any such
Allocation (including any valuations and the determination of the PECO Purchase
Price, the PSEG Purchase Price or other consideration) was not prepared in
accordance with Applicable Tax Law. If Seller so determines, Seller shall within
twenty (20) Business Days thereafter propose any changes necessary to cause the
Allocation to be prepared in accordance with Applicable Tax Law. Within ten (10)
Business Days following delivery of such proposed changes, PECO or PSEG, as the
case may be, shall provide Seller with a statement of any objections to such
proposed changes, together with a reasonably detailed explanation of the reasons
therefor. If PECO or PSEG, as the case may be, and Seller are unable to resolve
any disputed objections within ten (10) Business Days thereafter, such
objections shall be referred to the Independent Accounting Firm, who shall
determine the Allocation (including any valuations and the determination of the
PECO Purchase Price, the PSEG Purchase Price or other consideration). The
Independent Accounting Firm shall be instructed to deliver to PECO or PSEG, as
the case may be, and Seller a written determination of the proper allocation of
such disputed items within twenty (20) Business Days. Such determination shall
be final, conclusive and binding upon the Parties 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"). The fees and disbursements of
the Independent Accounting Firm attributable to any Allocation shall be shared
equally by PECO or PSEG, as the case may be, and Seller. Each of PECO, PSEG 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 purpose in a manner consistent with the
Final Allocation. Each of PECO, PSEG and Seller agrees to promptly provide the
other Parties 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 PECO, PSEG and
<PAGE>
Seller shall timely notify the other Parties and each shall timely provide the
other Parties with reasonable assistance in the event of an examination, audit
or other proceeding regarding the Final Allocation.
3.7 Prorations.
(a) Buyers and Seller agree that, except as otherwise provided
in this Agreement, all of the items customarily prorated relating to the
ownership, lease, maintenance and operation of the Purchased Assets, including
those listed below (but not including Income Taxes), shall be prorated as of the
Closing Date, without any duplication of payment under the Owners Agreement, as
amended by the Amendment to Owners Agreement with Seller liable to the extent
such items relate to any period prior to the Closing Date, and PECO, to the
extent of the PECO Interest, and PSEG, to the extent of the PSEG Interest,
liable to the extent such items relate to any period on or after the Closing
Date (measured in the same units used to compute the item in question, or
otherwise measured by calendar days):
(i) Personal property, real estate (including
PURTA) and occupancy Taxes, assessments and other charges, if any, on or arising
out of, in respect of, or in connection with, the ownership, lease, maintenance
or operation of the Purchased Assets;
(ii) Rent, Taxes and all other items (including
prepaid services and goods not included in Inventories), in each case, payable
by or to Seller under any of the Seller's Agreements assigned to and assumed by
Buyers;
(iii) Any permit, license, registration, compliance
assurance fees or other fees arising out of, in respect of, or in connection
with, any Transferable Permit;
(iv) Sewer rents and charges for water, telephone,
electricity and other utilities arising out of, in respect of, or in connection
with, the Purchased Assets;
(v) Insurance premiums paid on or with respect to
the ownership, lease, maintenance or operation of the Purchased Assets, to the
extent payable under the Buyer's Insurance Policies;
<PAGE>
(vi) Spent Nuclear Fuel Fees, in the manner
contemplated by Section 2.6;
(vii) Department of Energy Decommissioning and
Decontamination Fees, in the manner contemplated by Section 2.7; and
(viii)Prepaid operating and maintenance expenses,
whether arising under the Owners Agreement or otherwise.
(b) Seller, on the one hand, and PECO, to the extent of the
PECO Interest, and PSEG, to the extent of the PSEG Interest, on the other hand,
as the case may be, shall promptly reimburse the other Party or Parties that
portion of any amount paid by such other Party or Parties to the extent relating
to the period for which Seller or Buyers, as the case may be, is liable under
Section 3.7(a), in each case, upon presentation of a statement setting forth in
reasonable detail the nature and amount of any such payment. In connection with
the prorations set forth in Section 3.7(a), if actual figures are not available
on the Closing Date, the proration shall be calculated based upon the respective
amounts accrued through the Closing Date or paid for the most recent year or
other appropriate period for which such amounts paid are available. All prorated
amounts shall be recalculated and paid to the appropriate Party within sixty
(60) days after the date that the previously unavailable actual figures become
available. Seller and Buyers shall furnish each other with such documents and
other records as may be reasonably requested in order to confirm all proration
calculations made pursuant to this Section 3.7. Notwithstanding anything to the
contrary herein, no proration shall be made under this Section 3.7 with respect
to (i) real property Tax refunds that are Excluded Assets under Section 2.2(h)
or (ii) Taxes payable by Buyers pursuant to Section 7.5(a).
(c) To the extent of the Peach Bottom Interest, Seller shall
be responsible for any Pennsylvania public utility realty tax pursuant to 72
P.S. Section 8102- A ("PURTA"), additional PURTA assessments pursuant to 72 P.S.
Section 8104-A, or any successor tax or fee assessed on the Purchased Assets
relating to years ending prior to the Closing Date. In addition, pursuant to the
Owners Agreement, Seller shall reimburse PECO, to the extent of the PECO
Interest, and PSEG, to the extent of the PSEG Interest, in accordance with this
Section 3.7(c), for its proportionate share of PURTA, additional PURTA
assessments or any successor tax or fee levied or assessed, with respect to the
Purchased Assets, for the year in which the Closing occurs. The proration shall
be based upon the number of days within the Closing year that Seller owned the
<PAGE>
Purchased Assets. For example, if the Closing were to occur on December 1, 1999,
and $1,000,000 in PURTA, additional PURTA assessments or any successor tax or
fee were levied or assessed with respect to the Peach Bottom Station for 1999,
then Seller's proportionate share of such tax or fee would be calculated by
multiplying (i) the product obtained by multiplying $1,000,000 by a fraction,
the numerator of which is the amount of calendar days in 1999 which Seller owned
the Purchased Assets (335), and the denominator of which is the amount of days
in 1999 (365), by (ii) 0.0751. Therefore, the aggregate amount of Seller's
proportionate share to be reimbursed to Buyers will be $1,000,000 multiplied by
335/365, or $917,808.20 multiplied by 0.0751, or $68,927.40. The reimbursement
payable by Seller to PECO, to the extent of the PECO Interest, and PSEG, to the
extent of the PSEG Interest, hereunder shall be paid by Seller within sixty (60)
days after Seller's receipt from PECO of documentation showing the imposition of
PURTA, additional PURTA assessment, or any successor tax or fee on the Peach
Bottom Station in the Closing year. Seller, at its own expense, shall have the
right to contest or appeal with any Tax authority any amounts due under this
Section 3.7(c). Notwithstanding any provision herein to the contrary, in
determining the amount payable by Seller to PECO and PSEG, as the case may be,
under this Section 3.7(c), Seller shall be credited for all previous payments by
Seller in respect of PURTA for the Closing year paid to PECO or PSEG, as the
case may be under Section 3.7(a) or the Owners Agreement.
3.8 Deliveries by Seller. At the Closing, Seller shall deliver, or
cause to be delivered, the following to Buyers:
(a) The Deeds, duly executed by Seller and in recordable form,
subject only to Permitted Encumbrances, and any owner's affidavits or similar
documents reasonably required by PECO's and PSEG's title insurance company;
(b) The Bills of Sale, duly executed by Seller;
(c) The Assignment and Assumption Agreements, duly executed
by Seller;
(d) Evidence, in form and substance reasonably satisfactory to
Buyers and their respective counsel, of Seller's receipt of (i) the Seller's
Required Regulatory Approvals and (ii) the consents and approvals set forth on
Schedule 4.3(a);
<PAGE>
(e) The opinions of counsel to Seller to the effect set forth
in Exhibit G hereto, subject to customary limitations and qualifications;
(f) A Certificate of Good Standing with respect to Seller, as
of a recent date, issued by the Secretary of State of the State of Delaware and
the Commonwealth of Virginia;
(g) To the extent available, originals of all Seller's
Agreements to which Seller is a party and Transferable Permits issued to Seller
and, if not available, true and correct copies thereof;
(h) A certificate addressed to each Buyer dated the Closing
Date executed by the duly authorized officers of Seller to the effect that, to
such officers' Knowledge, the conditions set forth in Sections 8.2(b) and (c)
and 8.3(b) and (c) have been satisfied by Seller and that each of the
representations and warranties of Seller made in this Agreement are true and
correct in all material respects as though made at and as of the Closing Date;
(i) The Amendment to Owners Agreement, duly executed by
Seller;
(j) A FIRPTA Affidavit to each Buyer, duly executed by Seller;
(k) Copies, certified by the Secretary or Assistant Secretary
of Seller, of corporate resolutions authorizing the execution and delivery of
this Agreement, each Additional Agreement to which Seller is a party and all of
the other agreements and instruments, in each case, to be executed and delivered
by Seller in connection herewith;
(l) A certificate of the Secretary or Assistant Secretary of
Seller identifying the name and title and bearing the signatures of the officers
of Seller authorized to execute and deliver this Agreement, each Additional
Agreement to which Seller is a party and the other agreements and instruments
contemplated hereby;
(m) All such other agreements, documents, instruments and
writings as shall, in the reasonable opinion of either Buyer and its counsel, be
necessary to sell, assign, convey, transfer and deliver all of Seller's rights,
title and interests in and to the Purchased Assets, to PECO, to the extent of
<PAGE>
the PECO Interest, and to PSEG, to the extent of the PSEG Interest, in
accordance with this Agreement and, where necessary or desirable, in recordable
form, provided that Seller shall not be required to prepare or obtain any
survey, abstract, title opinion or title insurance policy with respect to the
Real Property; and
(n) All such other agreements, documents, instruments and
writings as are required to be delivered by Seller at or prior to the Closing
Date pursuant to this Agreement or otherwise reasonably required in connection
herewith.
3.9 Deliveries by PECO. At the Closing, PECO shall deliver, or cause to
be delivered, the following to Seller:
(a) The PECO Closing Payment, by wire transfer of immediately
available funds to the account of Seller designated by Seller at least two (2)
Business Days prior to the Closing Date;
(b) The Assignment and Assumption Agreement, duly executed by
PECO;
(c) The Amendment to Owners Agreement, duly executed by PECO;
(d) Copies, certified by the Secretary or Assistant Secretary
of PECO, of resolutions authorizing the execution and delivery of this
Agreement, each Additional Agreement to which PECO is a party and all of the
agreements and instruments, in each case, to be executed and delivered by PECO
in connection herewith;
(e) A certificate of the Secretary or Assistant Secretary of
PECO identifying the name and title and bearing the signatures of the officers
of PECO authorized to execute and deliver this Agreement, each Additional
Agreement to which PECO is a party and the other agreements contemplated hereby;
(f) Certificates of insurance required pursuant to 10 C.F.R.
Parts 50 and 140;
(g) Evidence, in form and substance reasonably satisfactory to
Seller and its counsel, of PECO's receipt of the PECO Required Regulatory
Approvals;
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(h) The opinions of counsel to PECO to the effect set forth in
Exhibit H hereto, subject to customary limitations and qualifications;
(i) A Certificate of Good Standing with respect to PECO, as of
a recent date, issued by the Secretary of State of the state of organization of
PECO;
(j) A certificate dated the Closing Date executed by the duly
authorized officers of PECO to the effect that, to such officers' Knowledge, the
conditions set forth in Sections 8.4(b) and (c) have been satisfied by PECO and
that each of the representations and warranties of PECO made in this Agreement
are true and correct in all material respects as though made at and as of the
Closing Date;
(k) All such other agreements, documents, instruments and
writings as shall, in the reasonable opinion of Seller and its counsel, be
necessary for PECO to purchase and acquire Seller's rights, title and interests
in and to the Purchased Assets, to the extent of the PECO Interest, and to
assume the Assumed Liabilities, to the extent of the PECO Interest, in each
case, in accordance with this Agreement and, where necessary or desirable, in
recordable form; and
(l) All such other agreements, documents, instruments and
writings as are required to be delivered by PECO at or prior to the Closing Date
pursuant to this Agreement or otherwise reasonably required in connection
herewith.
3.10 Deliveries by PSEG. At the Closing, PSEG shall deliver, or cause
to be delivered, the following to Seller:
(a) The PSEG Closing Payment, by wire transfer of immediately
available funds to the account of Seller designated by Seller at least two (2)
Business Days prior to the Closing Date;
(b) The Assignment and Assumption Agreement, duly executed by
PSEG;
(c) The Amendment to Owners Agreement, duly executed by PSEG;
(d) Copies, certified by the Secretary or Assistant Secretary
of PSEG, of resolutions authorizing the execution and delivery of this
<PAGE>
Agreement, each Additional Agreement to which PSEG is a party and all of the
agreements and instruments, in each case, to be executed and delivered by PSEG
in connection herewith;
(e) A certificate of the Secretary or Assistant Secretary of
PSEG identifying the name and title and bearing the signatures of the officers
of PSEG authorized to execute and deliver this Agreement, each Additional
Agreement to which PSEG is a party and the other agreements contemplated hereby;
(f) Evidence, in form and substance reasonably satisfactory to
Seller and its counsel, of PSEG's receipt of the PSEG Required Regulatory
Approvals;
(g) The opinions of counsel to PSEG to the effect set forth in
Exhibit H hereto, subject to customary limitations and qualifications;
(h) A Certificate of Good Standing with respect to PSEG, as of
a recent date, issued by the Secretary of State of the state of organization of
PSEG;
(i) A certificate dated the Closing Date executed by the duly
authorized officers of PSEG to the effect that, to such officers' Knowledge, the
conditions set forth in Sections 8.4(f) and (g) have been satisfied by PSEG and
that each of the representations and warranties of PSEG made in this Agreement
are true and correct in all material respects as though made at and as of the
Closing Date;
(j) All such other agreements, documents, instruments and
writings as shall, in the reasonable opinion of Seller and its counsel, be
necessary for PSEG to purchase and acquire Seller's rights, title and interests
in and to the Purchased Assets, to the extent of the PSEG Interest, and to
assume the Assumed Liabilities, to the extent of the PSEG Interest, in each
case, in accordance with this Agreement and, where necessary or desirable, in
recordable form; and
(k) All such other agreements, documents, instruments and
writings as are required to be delivered by PSEG at or prior to the Closing Date
pursuant to this Agreement or otherwise reasonably required in connection
herewith.
3.11 Relationship of this Agreement and Collateral Agreement. The
transactions contemplated by this Agreement, together with the transactions
contemplated by the Collateral Agreement, are intended by the Parties to be
<PAGE>
consummated substantially simultaneously; and if any of the transactions
contemplated hereby or by the Collateral Agreement are not consummated on the
Closing Date in accordance with the terms and subject to the conditions set
forth herein and therein, as applicable, then each Party shall take, or cause to
be taken, all actions, and do, or cause to be done, all things, in each case,
that are necessary to dissolve and invalidate all transactions contemplated
hereby; provided, however, that if the failure to consummate the transactions
contemplated hereby or by the Collateral Agreement results from a default or
breach of a party under this Agreement or the Collateral Agreement, then nothing
in the foregoing shall preclude or limit the rights or remedies of any Party in
connection with such default or breach.
3.12 Owners Agreement to Govern. The Parties agree that, except as
otherwise expressly provided in Section 7.1 of this Agreement, the Parties'
ownership, lease, maintenance and operation prior to the Closing Date of the
Peach Bottom Station shall be governed by the Owners Agreement.
3.13 Additional Agreements. The Parties acknowledge that the Additional
Agreements shall be executed and delivered on or before the Closing Date, and
each Party shall execute and deliver, in connection with the Closing, each
Additional Agreement to which it is to be a party, substantially in the form of
each Additional Agreement attached hereto.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyers as follows:
4.1 Organization, Qualification. Seller is a corporation duly
incorporated, validly existing and in good standing under the Laws of the State
of Delaware and the Commonwealth of Virginia and has all requisite corporate
power and authority to own, lease and operate its assets and properties and to
carry on its business as it is now being conducted.
4.2 Authority. Seller has full corporate power and authority to execute
and deliver this Agreement and each Additional Agreement to which it is a party
and to consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement and each such Additional Agreement by
<PAGE>
Seller and the consummation by Seller of the transactions contemplated hereby
and thereby have been duly and validly authorized by all necessary corporate
action required on the part of Seller, and no other corporate proceeding on the
part of Seller is necessary to authorize this Agreement and each of the
Additional Agreements to which Seller is a party or to consummate the
transactions contemplated hereby or thereby. This Agreement has been duly and
validly executed and delivered by Seller and constitutes, and upon the execution
and delivery by Seller of each Additional Agreement to which it is a party, each
such Additional Agreement will constitute, the legal, valid and binding
obligation of Seller, enforceable against Seller in accordance with its terms.
4.3 No Violations; Consents and Approvals
(a) Except as set forth in Schedule 4.3(a), and subject to
obtaining any Seller's Required Regulatory Approvals, none of the execution,
delivery and performance of this Agreement, the execution, delivery and
performance of the Additional Agreements, or the consummation by Seller of the
transactions contemplated hereby and thereby will (i) conflict with or result in
any breach of any provision of the Certificate or Articles of Incorporation or
Bylaws of Seller; (ii) result in a default (or give rise to any right of
termination, cancellation or acceleration) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, lease, agreement or
other instrument or obligation to which Seller is a party or by which it, or any
of the Purchased Assets, may be bound (other than the Seller's Agreements
referred to in clause (ii) of the definition thereof), except for such defaults
(or rights of termination, cancellation or acceleration) as to which requisite
waivers or consents have been obtained or that would not, individually or in the
aggregate, have a Material Adverse Effect; or (iii) constitute violations of any
Law, order, judgment or decree applicable to Seller or any of its assets,
including the Purchased Assets, which violations, individually or in the
aggregate, would have a Material Adverse Effect.
(b) Except for consents, approvals, filings and notices (i)
required under the HSR Act, or (ii) set forth in Schedule 4.3(b) (the consents,
approvals, filings and notices referred to in clause (ii) of this sentence are
collectively referred to herein as the "Seller's Required Regulatory
Approvals"), no consent, authorization or approval of, declaration, filing or
registration with, or notice to, any Governmental Authority is necessary for the
execution and delivery by Seller of this Agreement and the Additional Agreements
or the consummation by Seller of the transactions contemplated hereby or
<PAGE>
thereby, other than (i) such consents, authorizations, approvals, declarations,
filings, registrations with and notices which, if not obtained or made, would
not, individually or in the aggregate, have a Material Adverse Effect, or
prevent Seller from performing its material obligations under this Agreement or
the Additional Agreements; and (ii) such consents, authorizations, approvals,
declarations, filings, registrations with or notices which become applicable to
Seller or the Purchased Assets as a result of the status of PECO or PSEG (or any
of their respective Affiliates) or as a result of any other facts that
specifically relate to the business or activities in which PECO or PSEG (or any
of their respective Affiliates) is or proposes to be engaged.
4.4 Permits. Prior to the Closing Date, Seller will hold all permits,
registrations, franchises, certificates, licenses and other authorizations,
consents and approvals of all Governmental Authorities that Seller requires in
order to own any of the Purchased Assets (collectively, "Seller Permits"),
except for (a) Seller Nuclear Permits (which are governed by Section 4.7) and
(b) such failures to hold or comply with such Seller Permits as would not,
individually or in the aggregate, have a Material Adverse Effect or would not,
individually as in the aggregate, materially impair Seller's ability to
consummate the transactions contemplated hereby. Schedule 4.4(a) sets forth a
complete list, as of the date hereof, of all Seller Permits issued to Seller
through the date hereof. Schedule 4.4(b) sets forth a complete list, as of the
date hereof, of all Transferable Permits issued to Seller through the date
hereof.
4.5 Seller's Qualified Decommissioning Funds.
(a) Each of Seller's Qualified Decommissioning Funds is a
trust validly existing and in good standing under the laws of the Commonwealth
of Pennsylvania with all requisite authority to conduct its affairs as it now
does. Seller has heretofore delivered to Buyers a copy of the Trust Agreement as
in effect on the date of this Agreement. Seller agrees to furnish Buyers with
copies of all amendments of the Trust Agreement adopted after the date of this
Agreement promptly after each such amendment has been adopted. Each of Seller's
Qualified Decommissioning Funds satisfies the requirements necessary to be
treated as a "Nuclear Decommissioning Reserve Fund" within the meaning of Code
Section 468A(a) and as a "nuclear decommissioning fund" and a "qualified nuclear
decommissioning fund" within the meaning of Treas. Reg. Section 1.468A-1(b)(3).
Each of Seller's Qualified Decommissioning Funds is in compliance in all
material respects with all applicable rules and regulations of the NRC, the
Delaware Public Service Commission, the Maryland Public Service Commission, the
<PAGE>
Virginia State Corporation Commission and the Internal Revenue Service. The
Seller's Qualified Decommissioning Funds have not engaged in any acts of
"self-dealing" as defined in Treas. Reg. Section 1.468A-5(b)(2). No "excess
contribution" as defined in Treas. Reg. Section 1.468A-5(c)(2)(ii) has been made
to Seller's Qualified Decommissioning Funds which has not been withdrawn within
the period provided under Treas. Reg. Section 1.468A-5(c)(2)(i) for withdrawals
of excess contributions to be made without resulting in a disqualification of
such funds under Treas. Reg. Section 1.468A-5(c)(1). Seller has made timely and
valid elections to make annual contributions to the Seller's Qualified
Decommissioning Funds since the formation of such trusts. Seller has delivered,
or will deliver prior to the Closing, copies of such elections to Buyers.
(b) Subject to the receipt of Seller's Required Regulatory
Approvals and amendment of the Trust Agreement, Seller has all requisite
authority to cause the assets of the Seller's Qualified Decommissioning Funds to
be transferred in accordance with the provisions of this Agreement.
(c) Seller or the trustees of each of the Seller's Qualified
Decommissioning Funds have filed or caused to be filed with the NRC, the
Internal Revenue Service and any state or local authority all material forms,
statements, reports, documents (including all exhibits, amendments and
supplements thereto) required to be filed by either of them. Seller has
delivered, or will deliver prior to the Closing, to Buyers a copy of the
schedule of ruling amounts most recently issued by the Internal Revenue Service
for each of the Seller's Qualified Decommissioning Funds, a copy of the request
that was filed to obtain such schedule of ruling amounts and a copy of any
pending request for a revised ruling amounts, in each case together with all
exhibits, amendments and supplements thereto. As of the Closing, Seller will
have timely filed all requests for revised schedules of ruling amounts for
Seller's Qualified Decommissioning Funds to the extent required by and in
accordance with Treas. Reg. Section 1.468A-3(i). Seller shall furnish Buyers
with copies of such request for revised schedules of ruling amounts, together
with all exhibits, amendments and supplementals thereto, promptly after they
have been filed with the Internal Revenue Service. Any amounts contributed to
Seller's Qualified Decommissioning Funds while such requests are pending before
the Internal Revenue Service and which turn out to be in excess of the
applicable amounts provided in the schedule of ruling amounts issued by the
Internal Revenue Service will be withdrawn from the Seller's Qualified
Decommissioning Funds within the period provided under Treas. Reg. Section
1.468A-5(c)(2)(i) for withdrawals of excess contributions to be made without
resulting in a disqualification of the Funds under Treas. Reg. Section
1.468A-5(c)(1). There are no interim rate orders that may be retroactively
<PAGE>
adjusted or retroactive adjustments to interim rate orders that may affect
amounts that may be contributed to Seller's Qualified Decommissioning Funds or
may require distributions to be made from the Seller's Qualified Decommissioning
Funds.
(d) Seller has made or prior to the Closing will make
available to Buyers the balance sheet for each of the Seller's Qualified
Decommissioning Funds as of March 31, 1999 and as of the fourth Business Day
before Closing, as prepared by the trustee of Seller's Qualified Decommissioning
Fund in the ordinary course and consistent with past practice. Seller has made,
or prior to the Closing will make, available to Buyers information from which
Buyers can determine the Tax Basis of all assets in Seller's Qualified
Decommissioning Funds as of the fourth Business Day before Closing. There are no
liabilities (whether absolute, accrued, contingent or otherwise and whether due
or to become due), including any acts of "self-dealing" as defined in Treas.
Reg. Section 1.468A-5(b)(2) or agency or other legal proceedings that may
materially affect the financial position of each of the Seller's Qualified
Decommissioning Funds other than those that are disclosed on Schedule 4.5(d).
(e) Seller has made or prior to the Closing will make
available to Buyers all contracts and agreements to which the trustee of each of
the Seller's Qualified Decommissioning Funds, in its capacity as such, is a
party.
(f) Each of the Seller's Qualified Decommissioning Funds has
filed all Tax Returns required to be filed and all Taxes shown to be due on such
Tax Returns have been paid in full. Except as shown in Schedule 4.5(f), no
notice of deficiency or assessment has been received from any taxing authority
with respect to liability for Taxes or the Seller's Qualified Decommissioning
Funds which have not been fully paid or finally settled, and any such deficiency
shown in such Schedule 4.5(f) is being contested in good faith through
appropriate proceedings. Except as set forth in Schedule 4.5(f), there are no
outstanding agreements or waivers extending the applicable statutory periods of
limitations for Taxes associated with each of the Seller's Qualified
Decommissioning Funds for any period.
(g) To the extent Seller has pooled the assets of the Seller's
Qualified Decommissioning Funds for investment purposes in periods prior to
Closing, such pooling arrangement is a partnership for federal income tax
purposes and Seller has filed all Tax Returns required to be filed with respect
to such pooling arrangement for such periods or the pooling arrangement has
elected out of partnership status, and the distributive or allocable share of
<PAGE>
any income, gain or loss of such pooling arrangement is includable in the income
of Seller's Qualified Decommissioning Funds.
4.6 Seller's Nonqualified Decommissioning Funds.
(a) Each of Seller's Nonqualified Decommissioning Funds is a
trust validly existing and in good standing under the laws of the Commonwealth
of Pennsylvania with all requisite authority to conduct its affairs as it now
does. Each of Seller's Nonqualified Decommissioning Funds is in compliance in
all material respects with all applicable rules and regulations of the NRC, the
Delaware Public Service Commission, the Maryland Public Service Commission and
the Virginia State Corporation Commission.
(b) Subject only to receipt of the Seller's Required
Regulatory Approvals and amendment of the Trust Agreement, Seller has all
requisite authority to cause the assets of the Seller's Nonqualified
Decommissioning Funds to be transferred to Buyers' nonqualified decommissioning
funds in accordance with the provisions of this Agreement and amendment of the
Trust Agreement.
(c) Seller or the trustee of the Seller's Nonqualified
Decommissioning Funds have filed or caused to be filed with the NRC and any
state or local authority all material forms, statements, reports, documents
(including all exhibits, amendments and supplements thereto) required to be
filed by either of them.
(d) Seller has made or prior to the Closing will make
available to Buyers the balance sheet for each of Seller's Nonqualified
Decommissioning Funds as of March 31, 1999 and as of the fourth Business Day
before Closing, as prepared by the trustee of Seller's Nonqualified
Decommissioning Fund in the ordinary course and consistent with past practice.
There are no liabilities (whether absolute, accrued, contingent or otherwise and
whether due or to become due) including agency or other legal proceedings that
may materially affect the financial position of Seller's Nonqualified
Decommissioning Funds other than those, if any, that are disclosed on Schedule
4.6(d).
(e) Seller has made or prior to the Closing will make
available to Buyers all contracts and agreements to which the trustee of the
Seller's Nonqualified Decommissioning Funds, in its capacity as such, is a
party.
<PAGE>
(f) To the extent Seller has pooled the assets of Seller's
Nonqualified Decommissioning Funds for investment purposes in periods prior to
closing, such pooling arrangement is not an association taxable as a corporation
for federal income tax purposes.
4.7 Nuclear Law Matters. Seller is a licensed co-owner, but not an
operator, of the Peach Bottom Station. Subject to this fact, and except as set
forth in Schedule 4.7, prior to the Closing Date, Seller will hold all Seller
Permits in respect of Nuclear Laws that Seller requires in order to own its
rights, title and interests in and to the Purchased Assets (collectively,
"Seller Nuclear Permits").
4.8 Legal Proceedings. Except as set forth in Schedule 4.8, there is no
claim, action, proceeding or investigation pending, or to Seller's Knowledge,
threatened against or relating to Seller or its Affiliates before any court,
arbitrator or Governmental Authority, which could, individually or in the
aggregate, reasonably be expected to result, or has resulted, in (a) the
institution of legal proceedings to prohibit or restrain the performance of this
Agreement or any of the Additional Agreements, or the consummation of the
transactions contemplated hereby or thereby, (b) a claim against Buyers or their
respective Affiliates for damages as a result of Seller entering into this
Agreement or any of the Additional Agreements, or the consummation by Seller of
the transactions contemplated hereby or thereby, (c) a material impairment of
Seller's ability to perform its obligations under this Agreement or any of the
Additional Agreements, or (d) a Material Adverse Effect. Except as set forth in
Schedule 4.8, Seller is not subject to any outstanding judgments, decrees or
orders of any court, arbitrator or Governmental Authority that would,
individually or in aggregate, have a Material Adverse Effect.
4.9 Personal Property. Seller has such title to all personal property
included in the Purchased Assets as arises by reason of Seller's rights under
the Owners Agreement and owns such personal property free and clear of all
Encumbrances created by Seller, except for Permitted Encumbrances and the
Encumbrances set forth on Schedule 4.9.
4.10 Real Property. Except as set forth on Schedule 4.10, Seller owns
good, valid and marketable fee simple title to the Peach Bottom Interest in the
Real Property described by metes and bounds in the deed listed in Schedule
1.1(118), subject only to Permitted Encumbrances.
<PAGE>
4.11 Contracts. Except as disclosed in Schedule 4.11, (i) each Seller's
Agreement listed on Schedule 1.1(129) constitutes a legal, valid and binding
obligation of Seller and, to Seller's Knowledge, constitutes a valid and binding
obligation of the other parties thereto, (ii) to Seller's Knowledge is in full
force and effect, and (iii) may be transferred to Buyers as contemplated by this
Agreement without the consent of the other parties thereto and will continue in
full force and effect thereafter, in each case without breaching the terms
thereof or resulting in the forfeiture or impairment of any rights thereunder,
except for such breaches, forfeitures or impairments which would not,
individually or in the aggregate, have a Material Adverse Effect.
4.12 Certain Environmental Liabilities. Except as set forth on Schedule
4.12, there are no liabilities or obligations arising under or relating to
Environmental Laws or relating to any claim with respect to Environmental
Conditions or Hazardous Substances with respect to the Purchased Assets, in any
case, which relate to any Off-Site Location and of which Seller has Knowledge.
4.13 Undisclosed Liabilities. Except for liabilities and obligations
specifically referred to in Section 2.3(a) through (g) or Section 2.4(a) through
(h), or on Schedule 4.3(a), 4.9 or 4.10, the Purchased Assets are not, to the
Knowledge of Seller, subject to any material liability or obligation that has
arisen solely as a result of an act or omission by Seller (other than Permitted
Encumbrances).
4.14 Intellectual Property. Seller does not own or otherwise have any
right to use any patent, trade name, trademark, service mark or other
intellectual property that is used in and necessary for the operation of the
Peach Bottom Station, other than such as may be included in the Purchased
Assets.
4.15 Taxes. With respect to the Purchased Assets (i) all income Tax
Returns required to be filed have been filed, and (ii) all income Taxes shown to
be due on such income Tax Returns have been paid in full. Except as set forth in
Schedule 4.15, no notice of deficiency or assessment has been received from any
taxing authority with respect to liabilities for income Taxes of Seller in
respect of the Purchased Assets, which have not been fully paid or finally
settled, and any such deficiency shown in such Schedule 4.15 is being contested
in good faith through appropriate proceedings. Except as set forth in Schedule
4.15, there are no outstanding agreements or waivers extending the applicable
statutory periods of limitations for income Taxes associated with the Purchased
Assets for any period. Schedule 4.15 sets forth the taxing jurisdictions in
<PAGE>
which Seller owns assets or conducts business that require a notification to a
taxing authority of the transactions contemplated by this Agreement, if the
failure to make such notification, or obtain Tax clearances in connection
therewith, would either require Buyers to withhold any portion of the Purchased
Price or would subject Buyers to any liability for any income Taxes of Seller.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PECO
PECO hereby represents and warrants to Seller as follows:
5.1 Organization; Qualification. PECO is a corporation duly formed,
validly existing and in good standing under the Laws of the Commonwealth of
Pennsylvania and has all requisite corporate power and authority to own, lease
and operate its assets and properties and to carry on its business as it is now
being conducted.
5.2 Authority. PECO has full corporate power and authority to execute
and deliver this Agreement and each Additional Agreement to which it is a party
and to consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement by PECO and each such Additional
Agreement to which PECO is a party and the consummation of the transactions
contemplated hereby and thereby by PECO have been duly and validly authorized by
all necessary corporate action required on the part of PECO and no other
proceedings on the part of PECO are necessary to authorize this Agreement or
each of the Additional Agreements or to consummate the transactions contemplated
hereby or thereby. This Agreement has been duly and validly executed and
delivered by PECO and constitutes, and upon the execution and delivery by PECO
of each Additional Agreement to which it is a party, each such Additional
Agreement will constitute, the legal, valid and binding obligation of PECO,
enforceable against PECO in accordance with its terms.
5.3 No Violations; Consents and Approvals
(a) Except as set forth in Schedule 5.3(a), and subject to
obtaining any PECO's Required Regulatory Approvals, none of the execution,
delivery or performance of this Agreement, the execution, delivery and
<PAGE>
performance of the Additional Agreements or the consummation by PECO of the
transactions contemplated hereby and thereby will (i) conflict with or result in
any breach of any provision of the certificate of incorporation or bylaws (or
similar governing documents) of PECO, (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, lease,
agreement or other instrument or obligation to which PECO is a party, except for
such defaults (or rights of termination, cancellation or acceleration) as to
which requisite waivers or consents have been obtained or that would not,
individually or in the aggregate, have a Material Adverse Effect; or (iii)
constitute violations of any Law, order, judgment or decree applicable to PECO,
which violations, individually or in the aggregate, would have a Material
Adverse Effect.
(b) Except for consents, approvals, filings and notices (i)
required under the HSR Act, or (ii) set forth in Schedule 5.3(b) (the consents,
approvals, filings and notices referred to in clause (ii) of this sentence are
collectively referred to herein as the "PECO Required Regulatory Approvals"), no
consent, authorization or approval of, declaration, filing or registration with,
or notice to, any Governmental Authority is necessary for the execution and
delivery by PECO of this Agreement and the Additional Agreements or the
consummation by PECO of the transactions contemplated hereby and thereby, other
than (i) such consents, authorizations, approvals, declarations, filings,
registrations with, or notices, which, if not obtained or made, would not,
individually or in the aggregate, have a Material Adverse Effect or prevent PECO
from performing its material obligations under this Agreement or the Additional
Agreements and (ii) such consents, authorizations, approvals, declarations,
filings, registrations with, or notices which become applicable to PECO as a
result of the specific regulatory status of Seller (or any of its Affiliates) or
as a result of any other facts that specifically relate to the business or
activities in which Seller (or any of its Affiliates) is or proposes to be
engaged.
5.4 Buyer Permits. Prior to and on the Closing Date, subject to the
receipt of the PECO Required Regulatory Approvals, PECO will hold all permits,
certificates, licenses and other authorizations of all Governmental Authorities
that PECO requires in order to own, lease, maintain and operate the Peach Bottom
Station, including the Purchased Assets (collectively, "PECO Permits"), except,
in each case, for (a) PECO Nuclear Permits (which are governed by Section 5.5)
and (b) such failures to hold or comply with such PECO Permits as would not
result in a Material Adverse Effect or would not, individually or in the
aggregate, materially impair PECO's ability to consummate the transactions
contemplated hereby.
<PAGE>
5.5 Nuclear Law Matters.
(a) PECO is a licensed co-owner, and the licensed operator, of
the Peach Bottom Station.
(b) Prior to and on the Closing Date, subject to the receipt
of the PECO Required Regulatory Approvals, PECO will hold all PECO Permits in
respect of Nuclear Laws that PECO requires in order to own, lease, maintain and
operate the Peach Bottom Station, including, on the Closing Date, the Purchased
Assets (collectively, "PECO Nuclear Permits").
5.6 Legal Proceedings.
(a) Except as set forth in Schedule 5.6(a), there is no
action, proceeding or investigation pending or, to PECO's Knowledge, threatened
against or relating to PECO or its Affiliates before any court, arbitrator or
Governmental Authority, which could, individually or in the aggregate,
reasonably be expected to result, or has resulted, in (i) the institution of
legal proceedings to prohibit or restrain the performance of this Agreement or
any of the Additional Agreements, or the consummation of the transactions
contemplated hereby or thereby, (ii) a claim against Seller or its Affiliates
for damages as a result of PECO entering into this Agreement or any of the
Additional Agreements, or the consummation by PECO of the transactions
contemplated hereby or thereby, (iii) a material impairment of PECO's ability to
perform its obligations under this Agreement or any of the Additional
Agreements, or (iv) a Material Adverse Effect. Except as set forth in Schedule
5.6(a), PECO is not subject to any outstanding judgments, decrees or orders of
any court, arbitrator or Governmental Authority that would, individually or in
the aggregate, have a Material Adverse Effect.
(b) As of the date of this Agreement, to PECO's Knowledge,
there is no action, proceeding or investigation involving an amount in dispute
in excess of $1 million pending or threatened against any third party (other
than those referred to in Section 2.1(l) or 2.2(j)) with respect to the
ownership, lease, operation or maintenance of the Peach Bottom Station.
5.7 Qualified Buyer. As of the date of this Agreement, to the Knowledge
of PECO, there is no fact, circumstance, event or condition reasonably expected
to impair PECO's ability, on the Closing Date, to obtain all PECO Permits,
<PAGE>
including PECO Nuclear Permits and Environmental Permits, necessary for PECO to
own, lease, maintain and operate the Peach Bottom Station, including on the
Closing Date, the Purchased Assets.
5.8 Inspections. PECO has, prior to its execution and delivery of this
Agreement, had full opportunity to conduct to its satisfaction Inspections of
the Purchased Assets. PECO acknowledges, after such review and Inspections, that
no further investigation is necessary for purposes of acquiring Seller's rights,
title and interests in and to the Purchased Assets for PECO's intended use.
5.9 Regulation as a Utility. PECO is a public utility holding company
under PUHCA, exempt from all provisions of PUHCA other than Section 9(a)(2).
PECO is an "electric utility" within the meaning of 10 C.F.R. Section 50.2.
5.10 Certain Environmental Liabilities. Except as set forth on Schedule
5.10, there are no liabilities or obligations arising under or relating to
Environmental Laws or relating to any claim in respect to Environmental
Conditions or Hazardous Substances with respect to the Purchased Assets, in any
case, which relate to any Off-Site Location and of which PECO has Knowledge.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PSEG
PSEG hereby represents and warrants to Seller as follows:
6.1 Organization; Qualification. PSEG is a limited liability company
duly formed, validly existing and in good standing under the Laws of the State
of Delaware and has all requisite power and authority to own, lease and operate
its assets and properties and to carry on its business as it is now being
conducted. PSEG is, or by the Closing Date will be, qualified to do business in
the Commonwealth of Pennsylvania.
6.2 Authority. PSEG has full power and authority to execute and deliver
this Agreement and each Additional Agreement to which it is a party and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement by PSEG and each such Additional Agreement to which
PSEG is a party and the consummation of the transactions contemplated hereby and
<PAGE>
thereby by PSEG have been duly and validly authorized by all necessary action
required on the part of PSEG and no other proceedings on the part of PSEG are
necessary to authorize this Agreement or each of the Additional Agreements or to
consummate the transactions contemplated hereby or thereby. This Agreement has
been duly and validly executed and delivered by PSEG and constitutes, and upon
the execution and delivery by PSEG of each Additional Agreement to which it is a
party, each such Additional Agreement will constitute, the legal, valid and
binding obligation of PSEG, enforceable against PSEG in accordance with its
terms.
6.3 No Violations; Consents and Approvals
(a) Except as set forth in Schedule 6.3(a), and subject to
obtaining any PSEG Required Regulatory Approvals, none of the execution,
delivery or performance of this Agreement, the execution, delivery and
performance of the Additional Agreements or the consummation by PSEG of the
transactions contemplated hereby and thereby will (i) conflict with or result in
any breach of any provision of the certificate of formation or operating
agreement (or similar governing documents) of PSEG, (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, lease, agreement or other instrument or obligation to which PSEG is a
party, except for such defaults (or rights of termination, cancellation or
acceleration) as to which requisite waivers or consents have been obtained or
that would not, individually or in the aggregate, have a Material Adverse
Effect; or (iii) constitute violations of any Law, order, judgment or decree
applicable to PSEG, which violations, individually or in the aggregate, would
have a Material Adverse Effect.
(b) Except for consents, approvals, filings and notices (i)
required under the HSR Act, or (ii) set forth in Schedule 6.3(b) (the consents,
approvals, filings and notices referred to in clause (ii) of this sentence are
collectively referred to herein as the "PSEG Required Regulatory Approvals"), no
consent, authorization or approval of, declaration, filing or registration with,
or notice to, any Governmental Authority is necessary for the execution and
delivery by PSEG of this Agreement and the Additional Agreements or the
consummation by PSEG of the transactions contemplated hereby and thereby, other
than (i) such consents, authorizations, approvals, declarations, filings,
registrations with, or notices, which, if not obtained or made, would not,
individually or in the aggregate, have a Material Adverse Effect or prevent PSEG
from performing its material obligations under this Agreement or the Additional
<PAGE>
Agreements and (ii) such consents, authorizations, approvals, declarations,
filings, registrations with, or notices which become applicable to PSEG as a
result of the specific regulatory status of Seller (or any of its Affiliates) or
as a result of any other facts that specifically relate to the business or
activities in which Seller (or any of its Affiliates) is or proposes to be
engaged.
6.4 PSEG Permits. Prior to and on the Closing Date, subject to the
receipt of the PSEG Required Regulatory Approvals, PSEG will hold all permits,
certificates, licenses and other authorizations of all Governmental Authorities
that PSEG requires in order to own the Peach Bottom Station, including the
Purchased Assets (collectively, "PSEG Permits"), except, in each case, for (a)
PSEG Nuclear Permits (which are governed by Section 6.5) and (b) such failures
to hold or comply with such PSEG Permits as would not result in a Material
Adverse Effect or would not, individually or in the aggregate, materially impair
PSEG's ability to consummate the transactions contemplated hereby.
6.5 Nuclear Law Matters.
(a) PSE&G Utility is a licensed co-owner of the Peach Bottom
Station.
(b) Prior to and on the Closing Date, subject to the receipt
of the PSEG Required Regulatory Approvals, PSEG will hold all PSEG Permits in
respect of Nuclear Laws that PSEG requires in order to own the Peach Bottom
Station, including, on the Closing Date, the Purchased Assets (collectively,
"PSEG Nuclear Permits").
6.6 Legal Proceedings.
(a) Except as set forth in Schedule 6.6(a), there is no
action, proceeding or investigation pending or, to PSEG's Knowledge, threatened
against or relating to PSEG or its Affiliates before any court, arbitrator or
Governmental Authority, which could, individually or in the aggregate,
reasonably be expected to result, or has resulted, in (i) the institution of
legal proceedings to prohibit or restrain the performance of this Agreement or
any of the Additional Agreements, or the consummation of the transactions
contemplated hereby or thereby, (ii) a claim against Seller or its Affiliates
for damages as a result of PSEG entering into this Agreement or any of the
Additional Agreements, or the consummation by PSEG of the transactions
contemplated hereby or thereby, (iii) a material impairment of PSEG's ability to
<PAGE>
perform its obligations under this Agreement or any of the Additional
Agreements, or (iv) a Material Adverse Effect. Except as set forth in Schedule
6.6(a), PSEG is not subject to any outstanding judgments, decrees or orders of
any court, arbitrator or Governmental Authority that would, individually or in
the aggregate, have a Material Adverse Effect.
(b) As of the date of this Agreement, to PSEG's Knowledge
there is no action, proceeding or investigation involving an amount in dispute
in excess of $1 million pending or threatened against any third party (other
than those referred to in Section 2.1(l) or 2.2(j)) with respect to the
ownership, lease, operation or maintenance of the Peach Bottom Station.
6.7 Qualified Buyer. As of the date of this Agreement, to the Knowledge
of PSEG, there is no fact, circumstance, event or condition reasonably expected
to impair PSEG's ability, on or prior to the Closing Date, to be qualified under
applicable Law to obtain all PSEG Permits, including PSEG Nuclear Permits and
Environmental Permits, necessary for PSEG to own the Peach Bottom Station,
including on the Closing Date, the Purchased Assets.
6.8 Inspections. PSEG has, prior to its execution and delivery of this
Agreement, had full opportunity to conduct to its satisfaction Inspections of
the Purchased Assets. PSEG acknowledges, after such review and Inspections, that
no further investigation is necessary for purposes of acquiring Seller's rights,
title and interests in and to the Purchased Assets for PSEG's intended use.
6.9 Certain Environmental Liabilities. Except as set forth on Schedule
6.10, there are no liabilities or obligations arising under or relating to
Environmental Laws or relating to any claim in respect to Environmental
Conditions or Hazardous Substances with respect to the Purchased Assets, in any
case, which relate to any Off-Site Location and of which PSEG has Knowledge.
ARTICLE VII
COVENANTS OF THE PARTIES
7.1 Certain Buyers Covenants.
(a) Notwithstanding any provision of the Owners Agreement to
the contrary, PECO, to the extent of the PECO Interest, and PSEG, to the extent
<PAGE>
of the PSEG Interest, shall reimburse Seller for all costs and expenses relating
to Inventories at the Peach Bottom Station for which Seller is liable, whether
under the Owners Agreement or otherwise, between September 1, 1999 and the
Closing Date to the extent that the amount of such costs and expenses exceeds
the product obtained by multiplying (i) the average monthly costs and expenses
for Inventories at the Peach Bottom Station for which Seller was liable during
the twelve-month period ended August 31, 1999, by (ii) the number of months
(including partial months, prorated on a daily basis) between September 1, 1999
and the Closing Date. Any such reimbursement payable by PECO or PSEG to Seller
pursuant to this Section 7.1(a) should be paid in the manner contemplated by
Section 3 of the Amendment to Owners Agreement.
(b) On or prior to October 12, 1999, PECO shall, and PSEG
shall use its Commercially Reasonable Efforts to cause PECO to, provide Seller
with a statement setting forth in reasonable detail the aggregate forecasted
budget (the "Peach Bottom Station Budget") for capital expenditures (other than
Nuclear Fuel Supplies), and operations and maintenance expenses (whether
ordinary course or otherwise) for the Peach Bottom Station (together, "Defined
Expenses"), for the period commencing on September 1, 1999 and ending on
September 30, 2000 (the "Budget Period"). For the Budget Period, the Defined
Expenses, as reflected on the Peach Bottom Station Budget, shall not be in
excess of $370 million. Notwithstanding any provision of the Owners Agreement to
the contrary, the amount of Defined Expenses allocable to the Peach Bottom
Interest from and after September 1, 1999 shall be reduced to the extent that
the amount of such Defined Expenses exceeds, in the aggregate, the product
obtained by multiplying (i) $28.57 million, times (ii) the number of months
(including partial months, prorated on a daily basis) which have elapsed prior
to the Closing Date, times (iii) 1.05, times (iv) 0.0751. The amount of such
reduction is referred to as the "Defined Expenses Excess." The Defined Expenses
Excess shall be taken into account for purposes of and as set forth in Section 3
of the Amendment to Owners Agreement.
7.2 Public Statements. Except as required by applicable Law, any
Governmental Authority or applicable rules of any national securities exchange,
in which event the Parties shall consult with each other in advance, prior to
the Closing Date, no press release or other public announcement, statement or
comment relating to this Agreement, the Additional Agreements or the
transactions contemplated by this Agreement shall be issued, made or permitted
to be issued or made by any Party or its Representatives without the prior
written consent of the other Party (which approval shall not be unreasonably
withheld or delayed).
<PAGE>
7.3 Further Assurances.
(a) Subject to the terms and conditions of this Agreement,
each Party shall use its Commercially Reasonable Efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, all things necessary, proper
or advisable under Law to consummate and make effective the purchase, sale,
assignment, conveyance, transfer and delivery of the Purchased Assets and the
assumption of the Assumed Liabilities pursuant to this Agreement as soon as
practicable. Such actions shall include, without limitation, each Party using
its Commercially Reasonable Efforts to ensure satisfaction of the conditions
precedent to its obligations hereunder, including obtaining all necessary
consents, approvals, and authorizations of third parties and Governmental
Authorities required to be obtained in order to consummate the transactions
hereunder, and to effectuate a transfer of the Transferable Permits to PECO or
PSEG, as the case may be, and providing access to such books and records of the
other Party as may reasonably be requested for such purpose. No Party shall,
without the prior written consent of the other Party, take or fail to take any
action, which would reasonably be expected to prevent or materially impede,
interfere with or delay the transactions contemplated by this Agreement;
provided that the good faith exercise of any approval rights or discretion
provided for in this Agreement shall not be deemed in violation of the
requirements of this Section 7.3(a).
(b) Without limiting the generality of Section 7.3(a):
(i) In the event that any part of Seller's rights,
title and interests in and to Purchased Assets shall not have been assigned,
conveyed, transferred or delivered to PECO or PSEG at the Closing, Seller shall,
subject to Section 7.3(b)(ii), use Commercially Reasonable Efforts after the
Closing to assign, convey, transfer or deliver such rights, title and interests
to PECO or PSEG, as the case may be as promptly as practicable.
(ii) To the extent that Seller's rights under any
Seller's Agreement may not be assigned without the consent, approval or
authorization of any third party which consent, approval or authorization has
not been obtained by the Closing Date, this Agreement shall not constitute an
agreement to assign such right if an attempted assignment would constitute a
breach of such Seller's Agreement or violate any applicable Law and Seller, at
<PAGE>
its sole cost and expense, shall use Commercially Reasonable Efforts to obtain
any such required consents, approvals or authorizations as promptly as
practicable. If any consent, approval or authorization to an assignment of any
Seller's Agreement shall not be obtained, or if any attempted assignment would
be ineffective or would impair PECO's or PSEG's rights and obligations under
such Seller's Agreement, such that PECO or PSEG would not, subject to the terms
and conditions hereof, acquire and assume the benefit and detriment of all such
rights and obligations, Seller, at PECO's or PSEG's option, as the case may be,
and to the fullest extent permitted by Law and such Seller's Agreement, shall,
after the Closing Date, appoint PECO or PSEG, as the case may be, to be Seller's
agent with respect to such Seller's Agreement, and, to the maximum extent
permitted by Law and such Seller's Agreement enter into such reasonable
arrangements with PECO or PSEG, as the case may be, or take such other actions
as are necessary to provide PECO or PSEG, as the case may be, with the same or
substantially similar rights and obligations of such Seller's Agreement as, PECO
or PSEG, as the case may be, may reasonably request.
7.4 Consents and Approvals. Without limiting the generality of
Section 7.3(a):
(a) As promptly as practicable after the date of this
Agreement, Seller, PECO and PSEG shall each file or cause to be filed with the
Federal Trade Commission and the United States Department of Justice all
notifications required to be filed under the HSR Act and the rules and
regulations promulgated thereunder, as amended from time to time, with respect
to the transactions contemplated hereby and by the Additional Agreements. The
Parties shall use their Commercially Reasonable Efforts to respond promptly to
any requests for additional information made by, either of such agencies, and to
cause the applicable waiting period under the HSR Act relating to the Purchased
Assets to terminate or expire at the earliest possible date after the date of
filing of such notification. PECO and PSEG shall each pay one-half of all filing
fees payable under the HSR Act but each Party shall bear its own costs and
expenses of the preparation of any filing.
(b) As promptly as practicable after the date of this
Agreement, Seller, PECO and PSEG shall take, or cause to be taken, all actions,
and do, or cause to be done, all things necessary, proper or advisable under
applicable Laws to obtain all required consents and approvals of the PaPUC, the
SEC and all other Governmental Authorities, and make all other filings and give
all other notices required to be made prior to the Closing with respect to the
transactions contemplated hereby and by the Additional Agreements. The Parties
<PAGE>
shall respond promptly to any requests for additional information made by such
Persons, and use their respective Commercially Reasonable Efforts to cause all
such consents and approvals to be obtained or waived at the earliest possible
date after the date of filing. Each Party will bear its own costs of the
preparation of any such filing or notice.
(c) Seller, PECO and PSEG shall cooperate with each other and
promptly prepare and file notifications with, and request Tax clearances from,
state and local taxing authorities in jurisdictions in which a portion of the
Purchase Price may be required to be withheld or in which PECO or PSEG would
otherwise be liable for any Tax liabilities of Seller pursuant to state or local
Tax Law.
(d) Without limiting the generality of Section 7.4(b), as
promptly as practicable after the date of this Agreement, PECO and PSEG shall
make all filings required by the Federal Power Act, individually or jointly with
Seller, as reasonably determined by the Parties. Prior to filing any application
with the FERC, PECO and PSEG shall submit each such application to Seller for
review and comment and shall incorporate into such application all revisions
reasonably requested. If any filing is rejected by the FERC, PECO and PSEG shall
petition the FERC for rehearing or permission to re-submit an application with
the FERC, provided that, in either case, such action has been approved by
Seller.
(e) Without limiting the generality of Section 7.4(b), as
promptly as practicable after the date hereof, Seller and PECO shall jointly
submit the PECO NRC Applications requesting the PECO NRC Approvals. Seller and
PECO shall respond promptly to any requests for additional information made by
the NRC, cooperate in connection with any presentation or proceeding associated
with such PECO NRC Applications and use their respective Commercially Reasonable
Efforts to cause the PECO NRC Approvals to be obtained at the earliest
practicable date after the date of filing. Seller and PECO each shall bear its
own costs relating to the PECO NRC Applications and shall pay one-half of all
NRC fees payable in connection with the PECO NRC Applications and the PECO NRC
Approvals, provided that, notwithstanding the foregoing, PECO shall, at its sole
expense, comply with all conditions and requirements imposed by the NRC relating
to the amount, including the sufficiency and adequacy, of the Decommissioning
Funds and similar such external trust funds of PECO.
(f) Without limiting the generality of Section 7.4(b), as
promptly as practicable after the date hereof, Seller and PSEG shall jointly
<PAGE>
submit the PSEG NRC Applications requesting the PSEG NRC Approvals. Seller and
PSEG shall respond promptly to any requests for additional information made by
the NRC, cooperate in connection with any presentation or proceeding associated
with such PSEG NRC Applications and use their respective Commercially Reasonable
Efforts to cause the PSEG NRC Approvals to be obtained at the earliest
practicable date after the date of filing. Seller and PSEG each shall bear its
own costs relating to the PSEG NRC Applications and shall pay one-half of all
NRC fees payable in connection with the PSEG NRC Applications and the PSEG NRC
Approvals, provided that, notwithstanding the foregoing, PSEG shall, at its sole
expense, comply with all conditions and requirements imposed by the NRC relating
to the amount, including the sufficiency and adequacy, of the Decommissioning
Funds and similar such external trust funds of PSEG.
7.5 Certain Tax Matters.
(a) All Transfer Taxes incurred in connection with this
Agreement and the Additional Agreements, and the transactions contemplated
hereby and thereby (including (i) sales Tax on the sale or purchase of the
Purchased Assets imposed by the Commonwealth of Pennsylvania, and (ii) Transfer
Taxes or conveyance fees on conveyances of interests in real and/or personal
property imposed by the Commonwealth of Pennsylvania or any county or
municipality therein) shall be borne equally by Seller, on the one hand, and
Buyers, on the other hand. Seller, at its expense, shall prepare and file, to
the extent required by, or permissible under, applicable Law, all necessary Tax
Returns and other documentation with respect to all such, Transfer Taxes, and,
if required by Law, PECO or PSEG, as the case may be, shall join in the
execution of all such Tax Returns and other documentation. Prior to the Closing
Date, to the extent applicable, Buyers shall provide to Seller appropriate
certificates of Tax exemption from each applicable Governmental Authority.
(b) With respect to Taxes to be prorated in accordance with
Section 3.7, PECO to the extent of the PECO Interest, and PSEG, to the extent of
the PSEG Interest, shall prepare and timely file all Tax Returns required to be
filed after the Closing Date with respect to the Purchased Assets, if any, and
shall duly and timely pay all such Taxes shown to be due on such Tax Returns.
PECO's and PSEG's preparation of such Tax Returns shall be subject to Seller's
approval, which approval shall not be unreasonably withheld or delayed. PECO and
PSEG shall make each such Tax Return available for Seller's review and approval
(which approval shall not be unreasonably withheld or delayed) no later than
<PAGE>
fifteen (15) Business Days prior to the due date for filing such Tax Return, it
being understood that Seller's failure to approve any such Tax Return shall not
limit any Buyer's obligation to timely file such Tax Return and duly and timely
pay all Taxes shown to be due thereon. Seller shall, to the extent required by
Law, join in the execution of any such Tax Returns.
(c) Seller and PECO, with respect to Tax Returns relating to
the PECO Interest, and Seller and PSEG, with respect to Tax Returns relating to
the PSEG Interest, shall provide the other with such assistance as may
reasonably be requested by the other Party in connection with the preparation of
any Tax Return, audit or other examination, or any proceeding, by or before any
Governmental Authority relating to liability for Taxes, and each Party shall
retain and provide the requesting Party with all books and records or other
information which may be relevant to such Tax Return, audit, examination or
proceeding. All books, records and information obtained pursuant to this Section
7.5(c) or pursuant to any other Section hereof that provides for the sharing of
books, records and information or review of any Tax Return or other instrument
relating to Taxes shall be kept confidential by the parties hereto in accordance
with the terms and conditions set forth in the Confidentiality Agreement.
(d) Seller and PECO, to the extent of the PECO Interest, and
Seller and PSEG, to the extent of the PSEG Interest, shall cooperate and provide
each other with such assistance as may be reasonably requested by the other
Party in connection with obtaining private letter rulings from the Internal
Revenue Service pertaining to the transfers of the Decommissioning Funds
contemplated by this Agreement. Without limiting the generality of the
foregoing, Seller and each Buyer shall use its best efforts to obtain a private
letter ruling from the Internal Revenue Service determining that the transfer of
assets from Seller's Qualified Decommissioning Funds to the Buyers' Qualified
Decommissioning Funds of such Buyer is a disposition that satisfies the
requirements of Treas. Reg. Section 1.468A-6(b) or Treas. Reg. Section
1.468A-(6)(g)(1). Neither Seller nor any Buyer shall take any action that would
cause (i) such transfer to fail to satisfy the requirements of Treas. Reg.
Section 1.468A-6(b) or Treas. Reg. Section 1.468A-6(g)(1) or (ii) Seller and
such Buyer to fail to obtain such private letter ruling.
<PAGE>
(e) In the event that a dispute (other than with respect to
the Decommissioning Funds) arises among Seller, PECO or PSEG regarding Taxes or
any amount due under this Section 7.5, the Parties to such dispute shall attempt
in good faith to resolve such dispute and any agreed upon amount shall be
promptly paid to the appropriate Party. If any such dispute is not resolved
within thirty (30) days after notice thereof is given to any Party, upon the
written request of any Party, the Parties to such dispute shall submit the
dispute to an Independent Accounting Firm for resolution, which resolution shall
be final, binding and conclusive on such Parties. Notwithstanding anything in
this Agreement to the contrary, the fees and expenses of the Independent
Accounting Firm in resolving the dispute shall be borne equally by the Parties
to such dispute. Any payment required to be made as a result of the resolution
by the Independent Accounting Firm of any such dispute shall be made within five
(5) Business Days after such resolution, together with any interest determined
by the Independent Accounting Firm to be appropriate.
(f) If, Seller, PECO or PSEG receives a refund of Taxes in
respect of the Purchased Assets (other than with respect to the Decommissioning
Funds) for a taxable period including the Closing Date, PECO or PSEG, as the
case may be shall pay to Seller the portion of any such refund attributable to
the portion of the taxable period prior to the Closing Date, and Seller shall
pay PECO, to the extent of the PECO Interest, and PSEG, to the extent of the
PSEG Interest, the portion of any such refund attributable to the portion of
such taxable period on and after the Closing Date.
(g) From and after the Closing Date, PECO, to the extent of
the PECO Interest, PSEG, to the extent of the PSEG Interest, and, to the extent
permitted by applicable Law, their respective Buyers' Qualified Decommissioning
Funds shall indemnify, defend and hold harmless the Seller's Qualified
Decommissioning Funds from and against any and all Indemnifiable Losses asserted
against or suffered by the Seller's Qualified Decommissioning Funds relating to,
resulting from or arising out of the imposition of any federal, state or local
Tax on any income or gain recognized by the Seller's Qualified Decommissioning
Funds as the result of transfers contemplated by this Agreement of the assets in
the Seller's Qualified Decommissioning Funds to the Buyers' Qualified
Decommissioning Funds not qualifying under Treas. Reg. Section 1.468A-6 (each, a
"Fund Tax Loss") (other than those Fund Tax Losses that occur directly as a
result of Seller's conduct or a breach of Seller's representations and
warranties set forth in Section 4.5). From and after the Closing Date, PECO, to
the extent of the PECO Interest, and PSEG, to the extent of the PSEG Interest,
<PAGE>
shall indemnify, defend and hold harmless Seller's Indemnitees from and against
any and all Indemnifiable Losses asserted against or suffered by any Seller's
Indemnitee relating to, resulting from or arising out of the imposition on any
of Seller's Indemnitees of any federal, state or local Tax in connection with
any income or gain recognized by any of the Seller's Qualified Decommissioning
Funds to the extent such Tax was not paid by any of the Seller's Qualified
Decommissioning Funds as the result of transfers contemplated by this Agreement
of the assets in the Seller's Qualified Decommissioning Funds to the Buyers'
Qualified Decommissioning Funds not qualifying under Treas. Reg. Section
1.468A-6 (each, a "Seller Tax Loss") (other than those Seller Tax Losses that
occur directly as a result of Seller's conduct or a breach of Seller's
representations and warranties set forth in Section 4.5). PECO, to the extent of
the PECO Interest, and PSEG, to the extent of the PSEG Interest, shall pay the
amount of any Fund Tax Loss or Seller Tax Loss within ten (10) days of receipt
of written notice setting forth with reasonable specificity the nature and
amount of such Fund Tax Loss or Seller Tax Loss.
7.6 Advice of Changes. Prior to the Closing, each Party shall advise
the other Parties in writing with respect to any matter arising after the date
of this Agreement of which that Party obtains Knowledge and which, if existing
or occurring on or prior to the date of this Agreement, would have been required
to be set forth in this Agreement, including any of the Schedules hereto. Seller
may at any time notify Buyers, in writing, of any fact, event, circumstance or
condition that constitutes or results in a breach of any of its representations
and warranties in Article IV; provided, however, that no such notice shall
constitute a supplement or amendment of any Schedule hereto. No supplement or
amendment of any Schedule made pursuant to this Section shall be deemed to cure
any breach of any representation or warranty made in this Agreement unless the
Parties agree thereto in writing.
7.7 Risk of Loss. From the date hereof through (but not including) the
Closing Date, all risk of loss or damage to the assets or properties included in
the Purchased Assets (other than the Decommissioning Funds) shall be borne by
Seller. Notwithstanding any provision hereof to the contrary, subject to Section
10.1(h), if, before the Closing Date, all or any portion of the Purchased Assets
is (i) condemned or taken by eminent domain or is the subject of a pending or
threatened condemnation or taking which has not been consummated or (ii) damaged
or destroyed by fire or other casualty, Seller shall notify Buyers promptly in
writing of such fact, and (x) in the case of a condemnation or taking, Seller
shall assign or pay, as the case may be, any proceeds thereof to PECO, to the
extent of the PECO Interest, and to PSEG, to the extent of the PSEG Interest, at
<PAGE>
the Closing and (y) in the case of a fire or other casualty, Seller shall either
restore such damage or assign the insurance proceeds therefor (and pay the
amount of any deductible and/or self-insured amount in respect of such casualty)
to PECO, to the extent of the PECO Interest, and to PSEG, to the extent of the
PSEG Interest, at the Closing. Notwithstanding the foregoing, if such
condemnation, taking, damage, destruction or other casualty results in a
Material Adverse Effect, Buyers and Seller shall negotiate to settle the loss
resulting from such condemnation, taking, damage, destruction or other casualty
(and such negotiation shall include the negotiation of a fair and equitable
reduction of the Purchase Price). If no such settlement can be agreed upon
within sixty (60) days after Seller has notified Buyers of such casualty or
loss, then PECO and PSEG, on the one hand, or Seller on the other hand, may
terminate this Agreement pursuant to Section 10.1(h).
7.8 Cooperation after Closing. From and after the Closing Date, Seller
shall have access to and rights to copy all books and records, and other
documents, relating to the Purchased Assets to the extent that such access may
reasonably be required by Seller in connection with matters relating to or
affected by the ownership, lease, maintenance or operation of the Purchased
Assets prior to the Closing Date. Such access shall be afforded by PECO and PSEG
upon receipt of reasonable advance notice and during normal business hours.
Seller shall be solely responsible for all costs or expenses incurred by Seller
or Buyers pursuant to this Section 7.8. Notwithstanding the foregoing, Buyers
shall not have any obligation to Seller under this Agreement to maintain any
books, records or other documents relating to the ownership, lease, maintenance
or operation of the Purchased Assets prior to the Closing Date beyond seven (7)
years from the Closing Date, except to the extent that such books and records,
or other documents, are required to be maintained under applicable Law. If PECO
or PSEG, as the case may be, shall desire to dispose of any of such books and
records, or other documents, that may relate to ownership, lease, maintenance or
operation of the Purchased Assets prior to the Closing Date, PECO or PSEG, as
the case may be, shall, prior to such disposition, give to Seller a reasonable
opportunity, but in no event less than sixty (60) days, at Seller's expense, to
segregate and remove such books and records, or other documents, as Seller may
select.
<PAGE>
7.9 Decommissioning Funds.
(a) At the Closing, Seller will direct the trustee and
investment managers of Seller's Qualified Decommissioning Funds for the Peach
Bottom Station to transfer one-half of each asset in such funds to the
respective trustee of each Buyers' Qualified Decommissioning Funds for the Peach
Bottom Station; provided, however, that, upon the written request of the trustee
of Seller's Qualified Decommissioning Funds, Buyers shall cause the trustee of
the Buyers' Qualified Decommissioning Funds to reimburse promptly, but in no
event later than thirty (30) days after such notice (with respect to expenses)
and the due date (with respect to income taxes), the trustee of Seller's
Qualified Decommissioning Funds for expenses associated with the transfer of the
assets and the termination of such funds and any related income taxes due with
respect to such funds for the period prior to Closing. To the extent that the
trustee and investment managers of Seller's Qualified Decommissioning Funds are
unable to divide an asset in such fund in half, the trustee of such funds shall
liquidate such asset and transfer one-half of the proceeds to the respective
trustee of each Buyers' Qualified Decommissioning Funds for the Peach Bottom
Station. If Buyers do not obtain a private letter ruling from the Internal
Revenue Service determining that the transfer of Seller's Qualified
Decommissioning Funds to Buyers' Qualified Decommissioning Funds of any Buyer
satisfies the requirements of Treas. Reg. Section 1.468A-6(b) or Treas. Reg.
Section 1.468A-6(g)(1), then Seller shall transfer the assets in Seller's
Qualified Decommissioning Funds to such trust(s) as directed by such Buyer at
least two (2) Business Days prior to the Closing Date.
(b) At the Closing, Seller will direct the trustee and
investment managers of Seller's Nonqualified Decommissioning Funds for the Peach
Bottom Station to transfer one-half of each asset in such funds to the trustee
of each Buyer's nonqualified decommissioning funds for the Peach Bottom Station;
provided, however, that, upon the written request of the trustee of Seller's
Nonqualified Decommissioning Funds, Buyers shall cause the trustee of each
Buyer's nonqualified decommissioning funds to reimburse promptly, but in no
event later than thirty (30) days after such notice, the trustee of Seller's
Nonqualified Decommissioning Funds for expenses associated with the transfer of
the assets and the termination of such funds. To the extent that the trustee and
investment managers of Seller's Nonqualified Decommissioning Funds are unable to
divide an asset in such fund in half, the trustee and investment managers of
such funds shall liquidate such asset and transfer one-half of the proceeds to
the respective trustee of each Buyers' nonqualified decommissioning funds for
the Peach Bottom Station.
<PAGE>
(c) Schedule 7.9(c) sets forth a true and correct list of all
investment manager agreements and investment management policies relating to the
Trust Agreement and the Decommissioning Funds. Prior to the earlier of the
Closing Date and any date on which this Agreement is terminated pursuant to
Section 10.1, except as required by applicable Law, Seller shall not amend,
modify or change any investment manager agreement or investment management
policy relating to the Trust Agreement or the Decommissioning Funds, whether
orally or in writing, nor appoint a successor investment manager without the
prior written consent of Buyers (which consent shall not be unreasonably
withheld or delayed).
(d) To the extent not prohibited by the terms of the Trust
Agreement, Seller shall (i) instruct the trustee and investment managers of the
Decommissioning Funds to manage, invest and maintain the assets and properties
held by the Decommissioning Funds in a manner consistent with suggestions
provided in writing by Buyers to Seller from time to time and (ii) afford Buyers
the opportunity, as reasonably requested, to review information regarding the
management, investment and maintenance of the Decommissioning Funds; provided
that neither Seller, the trustee nor any investment manager of the
Decommissioning Funds shall be required to take, or fail to take, any action
pursuant to this Section 7.9(d) if either Seller, such trustee or any such
investment manager, in the exercise of its reasonable judgment, shall determine
in good faith that effecting any such suggestion would reasonably be expected to
(x) constitute a breach or violation of any other provision of this Agreement,
or impair the ability of any Party to perform its obligations hereunder or
consummate the transactions contemplated hereby, (y) constitute a breach or
violation of its certificate of incorporation or bylaws, or similar governing
documents, of any applicable Law, or applicable order, decree or judgment, or of
any other contract, agreement or other arrangement to which it is a party or by
or to which it or its assets or properties are bound or subject, including any
agreement between Seller and such trustee or any investment manager, and any
investment policy that is effective on the date hereof with respect to the
Decommissioning Funds, or (z) result in an adverse effect on Seller, its
businesses, assets or properties, including the Decommissioning Funds, or their
respective conditions (financial or otherwise); and provided further, that each
Buyer shall maintain the confidentiality of any information reviewed pursuant to
clause (ii) above in accordance with the terms and conditions set forth in the
Confidentiality Agreement to which it is a party.
<PAGE>
(e) Subject to applicable Law and to the extent not prohibited
by the Trust Agreement, immediately prior to the Closing, Seller shall withdraw
from the Seller's Nonqualified Decommissioning Funds an amount equal to all
amounts in respect of contributions made by Seller to the Decommissioning Funds
during the period commencing on April 1, 1999 and ending on the Closing Date,
provided that, in the event that such withdrawal is not permitted by applicable
Law or the Trust Agreement, then promptly, but in no event later than thirty
(30) days, after the Closing Date, PECO, to the extent of the PECO Interest, and
PSEG, to the extent of the PSEG Interest, shall reimburse to Seller all such
amounts, by wire transfer of immediately available funds to an account
designated by Seller. The Decommissioning Funds shall retain all income,
interest and other earnings accrued on the Decommissioning Funds as of Closing.
Seller shall furnish to Buyers such documents and other records as may be
reasonably requested by Buyers in order to confirm the amount of the withdrawal
provided for in this Section 7.9(e), as well as all income, interest and other
earnings accrued on the Decommissioning Funds between the date hereof and the
Closing Date.
(f) To the extent permitted by applicable Law and the terms of
the Trust Agreement, Seller shall, after the date hereof, not contribute
additional amounts to the Decommissioning Funds.
7.10 Amendment to Seller's Agreements. From and after the date hereof
and prior to the Closing Date, Seller shall not enter into any Seller's
Agreement as a party, or modify, amend, extend or voluntarily terminate, prior
to the respective expiration date, any Seller's Agreement to which Seller is a
party or any of the Transferable Permits issued to Seller, in any material
respect.
7.11 Exclusivity. Effective as of the date of this Agreement through
and until the earlier to occur of the termination of this Agreement and the
Closing, Seller shall not market its rights, title or interests in the Purchased
Assets to any other Person, or accept or pursue any other offers or bids for
Seller's rights, title or interests in and to the Purchased Assets, provided
this provision is not applicable to assets of the Decommissioning Funds to the
extent sold in accordance with Section 7.9.
7.12 Insurance.
(a) PECO shall obtain and maintain the insurance required
pursuant to 10 C.F.R. Parts 50 and 140, and in accordance with all Nuclear Laws
for so long as PECO shall be the licensed operator of the Peach Bottom Station;
<PAGE>
provided that this provision is not intended to grant to Seller rights or
interests in any such insurance.
(b) Seller shall use its Commercially Reasonable Efforts to
assist Buyers in making any claims relating to pre-Closing periods against
Seller's Insurance Policies that may provide coverage related to the Assumed
Liabilities. Buyers shall use their Commercially Reasonable Efforts to assist
Seller in making any claims relating to pre-Closing periods against Buyers'
Insurance Policies that may provide coverage related to the Excluded
Liabilities.
ARTICLE VIII
CONDITIONS
8.1 Conditions to Obligation of Each Party. The respective obligations
of each Party hereto to effect the transactions contemplated by this Agreement
shall be subject to the satisfaction at or prior to the Closing of the following
conditions:
(a) The waiting period under the HSR Act applicable to the
consummation of the transactions contemplated hereby shall have expired or been
terminated; and
(b) No preliminary or permanent injunction or other order or
decree by any Governmental Authority which prevents the consummation of the
transactions contemplated hereby or by the Additional Agreements shall have been
issued and remain in effect (each Party agreeing to use its Commercially
Reasonable Efforts to have any such injunction, order or decree lifted), and no
Law shall be in effect which prohibits the consummation of the transactions
contemplated hereby or thereby.
8.2 Conditions to Obligations of PECO. The obligations of PECO to
effect the transactions contemplated by this Agreement shall be subject to the
satisfaction (or the waiver in writing, to the extent permitted by applicable
Law, by PECO) at or prior to the Closing of the following conditions:
(a) (i) PECO shall have received all of the PECO Required
Regulatory Approvals and, except as set forth in Schedule 8.2(a)(i), in form and
substance reasonably satisfactory to PECO (including adverse conditions relating
<PAGE>
to PECO or the Purchased Assets), and all conditions to effectiveness prescribed
therein or otherwise by Law shall have been satisfied; provided, however, that
if at the time any PECO Required Regulatory Approval is obtained, PECO
reasonably expects a request for rehearing or a challenge thereto to be filed or
if a request for rehearing or a challenge thereto has been filed, in each case,
which, if successful, would cause such PECO Required Regulatory Approval to be
reversed, stayed, enjoined, set aside, annulled, suspended or, except as set
forth in Schedule 8.2(a)(i), modified in such manner as to result in such PECO
Required Regulatory Approval not being reasonably satisfactory as set forth
above, then PECO may by notice to Seller within five (5) Business Days after
receipt of such PECO Required Regulatory Approval, delay the Closing Date until
the time for requesting rehearing has expired or until such challenge is
decided, in each case, whether or not any appeal thereof is pending; and (ii)
Seller shall have received all of Seller's Required Regulatory Approvals and
PECO shall have received evidence thereof, in form and substance reasonably
satisfactory to PECO.
(b) Seller shall have in all material respects performed and
complied with the covenants and agreements contained in this Agreement which are
required to be performed and complied with by Seller on or prior to the Closing
Date;
(c) The representations and warranties of Seller set forth in
this Agreement shall be true and correct as of the date of this Agreement and as
of the Closing Date as though made at and as of such time (other than
representations and warranties that are made as of a specific date which shall
have been true and correct as of such date), except where the failure 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, have a Material Adverse Effect;
(d) PECO shall have received a certificate from an authorized
officer of Seller, dated the Closing Date, to the effect that, to such officer's
Knowledge, the conditions set forth in Sections 8.2(b) and (c) have been
satisfied by Seller;
(e) Seller shall have delivered, or caused to be delivered, to
PECO at the Closing, Seller's closing deliveries set forth in Section 3.8;
(f) The lien of the Mortgage on the Purchased Assets and any
other Encumbrance (other than Permitted Encumbrances) on the Purchased Assets,
<PAGE>
including the Nuclear Fuel Supplies, arising under or through Seller shall have
been released and any documents necessary to evidence such release shall have
been delivered to PECO;
(g) The Collateral Agreement shall be in full force and effect
and the valid and binding obligation of each party thereto (other than PECO);
and all conditions to the obligations of all parties to the Collateral Agreement
to consummate the transactions contemplated thereby shall have been satisfied
or, to the extent permitted by applicable Law, waived;
(h) There shall not have occurred and be continuing a Material
Adverse Effect;
(i) PECO shall have received a title report or commitment with
respect to the Real Property that does not include any exceptions other than
Permitted Encumbrances and such matters as a current survey of the Real Property
may show; and
(j) PECO shall have received a private letter ruling issued by
the Internal Revenue Service to the effect that PECO will not recognize gain or
otherwise take into account any income for federal income tax purposes by reason
of the transfer of the assets of the Seller's Nonqualified Decommissioning Funds
to the nonqualified decommissioning funds of PECO.
8.3 Conditions to Obligations of PSEG. The obligations of PSEG to
effect the transactions contemplated by this Agreement shall be subject to the
satisfaction (or the waiver in writing, to the extent permitted by applicable
Law, by PSEG) at or prior to the Closing of the following conditions:
(a) (i) PSEG shall have received all of the PSEG Required
Regulatory Approvals and, except as set forth in Schedule 8.3(a)(i), in form and
substance reasonably satisfactory to PSEG (including adverse conditions relating
to PSEG, the Affiliates of PSEG listed in Schedule 8.3(a)(ii) or the Purchased
Assets), and all conditions to effectiveness prescribed therein or otherwise by
Law shall have been satisfied; provided, however, that if at the time any PSEG
Required Regulatory Approval is obtained, PSEG reasonably expects a request for
rehearing or a challenge thereto to be filed or if a request for rehearing or a
challenge thereto has been filed, in each case, which, if successful, would
cause such PSEG Required Regulatory Approval to be reversed, stayed, enjoined,
<PAGE>
set aside, annulled, suspended or, except as set forth in Schedule 8.3(a)(i),
modified in such manner as to result in such PSEG Required Regulatory Approval
not being reasonably satisfactory as set forth above, then PSEG may by notice to
Seller within five (5) Business Days after receipt of such PSEG Required
Regulatory Approval, delay the Closing Date until the time for requesting
rehearing has expired or until such challenge is decided, in each case, whether
or not any appeal thereof is pending; and (ii) Seller shall have received all of
Seller's Required Regulatory Approvals and PSEG shall have received evidence
thereof, in form and substance reasonably satisfactory to PSEG.
(b) Seller shall have in all material respects performed and
complied with the covenants and agreements contained in this Agreement which are
required to be performed and complied with by Seller on or prior to the Closing
Date;
(c) The representations and warranties of Seller set forth in
this Agreement shall be true and correct as of the date of this Agreement and as
of the Closing Date as though made at and as of such time (other than
representations and warranties that are made as of a specific date which shall
have been true and correct as of such date), except where the failure to be so
true and correct (without giving effect to any limitation as to "materiality" or
"Material Adverse Effect" set forth herein) would not, individually or in the
aggregate, have a Material Adverse Effect;
(d) PSEG shall have received a certificate from an authorized
officer of Seller, dated the Closing Date, to the effect that, to such officer's
Knowledge, the conditions set forth in Sections 8.3(b) and (c) have been
satisfied by Seller;
(e) Seller shall have delivered, or caused to be delivered, to
PSEG at the Closing, Seller's closing deliveries set forth in Section 3.8;
(f) The lien of the Mortgage on the Purchased Assets and any
other Encumbrance (other than Permitted Encumbrances) on the Purchased Assets,
including the Nuclear Fuel Supplies, arising under or through Seller shall have
been released and any documents necessary to evidence such release shall have
been delivered to PSEG;
(g) The Collateral Agreement shall be in full force and effect
and the valid and binding obligation of each party thereto (other than PSEG);
and all conditions to the obligations of all parties to the Collateral Agreement
<PAGE>
to consummate the transactions contemplated thereby shall have been satisfied
or, to the extent permitted by applicable Law, waived;
(h) There shall not have occurred and be continuing a Material
Adverse Effect;
(i) PSEG shall have received a title report or commitment with
respect to the Real Property that does not include any exceptions other than
Permitted Encumbrances and such matters as a current survey of the Real Property
may show; and
(j) PSEG shall have received a private letter ruling issued by
the Internal Revenue Service to the effect that PSEG will not recognize any gain
or otherwise take into account any income for federal income tax purposes by
reason of the transfer of the assets of the Seller's Nonqualified
Decommissioning Funds to the nonqualified decommissioning funds of PSEG.
8.4 Conditions to Obligation of Seller. The obligation of Seller to
effect the transactions contemplated by this Agreement shall be subject to the
satisfaction (or the waiver in writing, to the extent permitted by applicable
Law, by Seller) at or prior to the Closing of the following conditions:
(a) (i) Seller shall have received all of the Seller's
Required Regulatory Approvals, in form and substance reasonably satisfactory to
Seller (including adverse conditions relating to Seller's or the Purchased
Assets), and all conditions to effectiveness prescribed therein or otherwise by
Law shall have been satisfied; provided, however, that if at the time any
Seller's Required Regulatory Approval is obtained, Seller reasonably expects a
request for rehearing or a challenge thereto to be filed or if a request for
rehearing or a challenge thereto has been filed, in each case, which, if
successful, would cause such Seller's Required Regulatory Approval to be
reversed, stayed, enjoined, set aside, annulled, suspended or modified in such
manner as to result in such Seller's Required Regulatory Approval not being
reasonably satisfactory as set forth above, then Seller may by notice to Buyers
within five (5) Business Days after receipt of such Seller's Required Regulatory
Approval, delay the Closing Date until the time for requesting rehearing has
expired or until such challenge is decided, in each case, whether or not any
appeal thereof is pending; and (ii) PECO shall have received all of the PECO
Required Regulatory Approvals and Seller shall have received evidence thereof,
in form and substance reasonably satisfactory to Seller; and (iii) PSEG shall
<PAGE>
have received all of the PSEG Required Regulatory Approvals and Seller shall
have received evidence thereof, in form and substance reasonably satisfactory to
Seller;
(b) PECO shall have in all material respects performed and
complied with the covenants and agreements contained in this Agreement which are
required to be performed and complied with by PECO on or prior to the Closing
Date;
(c) The representations and warranties of PECO set forth in
this Agreement shall be true and correct as of the date of this Agreement and as
of the Closing Date as though made at and as of such time (other than
representations and warranties that are made as of a specific date which shall
have been true and correct as of such date) except where the failure 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, have a Material Adverse Effect;
(d) Seller shall have received a certificate from an
authorized officer of PECO, dated the Closing Date, to the effect that, to each
such officer's Knowledge, the conditions set forth in Sections 8.4(b) and (c)
have been satisfied by PECO;
(e) PECO shall have delivered, or caused to be delivered, to
Seller at the Closing, PECO's closing deliveries set forth in Section 3.9;
(f) PSEG shall have in all material respects performed and
complied with the covenants and agreements contained in this Agreement which are
required to be performed and complied with by PSEG on or prior to the Closing
Date;
(g) The representations and warranties of PSEG set forth in
this Agreement shall be true and correct as of the date of this Agreement and as
of the Closing Date as though made at and as of such time (other than
representations and warranties that are made as of a specific date which shall
have been true and correct as of such date) except where the failure 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, have a Material Adverse Effect;
(h) Seller shall have received a certificate from an
authorized officer of PSEG, dated the Closing Date, to the effect that, to each
<PAGE>
such officer's Knowledge, the conditions set forth in Sections 8.4(f) and (g)
have been satisfied by PSEG;
(i) PSEG shall have delivered, or caused to be delivered, to
Seller at the Closing, PSEG's closing deliveries set forth in Section 3.10;
(j) The Collateral Agreement shall be in full force and effect
and the valid and binding obligation of each party thereto (other than Seller);
and all conditions to the obligations of all parties to the Collateral Agreement
to consummate the transactions contemplated thereby shall have been satisfied
or, to the extent permitted by applicable Law, waived; and
(k) Seller shall have received a private letter ruling issued
by the Internal Revenue Service to the effect that Seller will be allowed
current ordinary deductions for federal income tax purposes for any amounts
treated as realized by Seller, or otherwise recognized as income to Seller, as a
result of Buyers' assumption of the Assumed Decommissioning Liabilities.
ARTICLE IX
INDEMNIFICATION AND ARBITRATION
9.1 Indemnification.
(a) From and after the Closing, PECO shall indemnify, defend
and hold harmless Seller and its Representatives (each, a "Seller's Indemnitee")
from and against any and all claims, demands, suits, losses, liabilities,
penalties, damages, obligations, payments, costs and expenses (including the
cost and expense of any action, suit, proceeding, assessment, judgment,
settlement or compromise relating thereto and reasonable attorneys' fees and
reasonable disbursements in connection therewith) and including costs and
expenses incurred in connection with investigations and settlement proceedings
(each, an "Indemnifiable Loss") asserted against or suffered by any Seller's
Indemnitee relating to, resulting from or arising out of or in connection with
(i) any breach by PECO of any representation or warranty of PECO contained in
this Agreement; (ii) any breach by PECO of any covenant or agreement of PECO set
forth in this Agreement; (iii) to the extent of the PECO Interest, the Assumed
Liabilities; or (iv) to the extent of the PECO Interest, any Third-Party Claim
<PAGE>
against any Seller's Indemnitee to the extent arising out of or in connection
with PECO's ownership, lease, maintenance or operation of any of the Purchased
Assets on or after the Closing Date (other than to the extent such Third-Party
Claim constitutes an Excluded Liability); provided, however, that PECO shall be
liable pursuant to clauses (i) and (ii) of Section 9.1 (a) only for
Indemnifiable Losses for which any Seller's Indemnitee gives written notice to
PECO (setting forth with reasonable specificity the nature and amount of the
Indemnifiable Loss) during the period for which such representations,
warranties, covenants or agreements survive the Closing in accordance with
Section 11.6.
(b) From and after the Closing, PSEG shall indemnify, defend
and hold harmless each Seller's Indemnitee from and against any and all
Indemnifiable Losses asserted against or suffered by any Seller's Indemnitee
relating to, resulting from or arising out of or in connection with (i) any
breach by PSEG of any representation or warranty of PSEG contained in this
Agreement; (ii) any breach by PSEG of any covenant or agreement of PSEG set
forth in this Agreement; (iii) to the extent of the PSEG Interest, the Assumed
Liabilities; or (iv) to the extent of PSEG Interest, any Third-Party Claim
against any Seller's Indemnitee to the extent arising out of or in connection
with PSEG's ownership, lease, maintenance or operation of any of the Purchased
Assets on or after the Closing Date (other than to the extent such Third-Party
Claim constitutes an Excluded Liability); provided, however, that PSEG shall be
liable pursuant to clauses (i) and (ii) of Section 9.1 (b) only for
Indemnifiable Losses for which any Seller's Indemnitee gives written notice to
PSEG (setting forth with reasonable specificity the nature and amount of the
Indemnifiable Loss) during the period for which such representations,
warranties, covenants or agreements survive the Closing in accordance with
Section 11.6.
(c) From and after the Closing, Seller shall indemnify, defend
and hold harmless Buyers and their respective Representatives (each, a "Buyers'
Indemnitee" and, together with Seller's Indemnitees, an "Indemnitee") from and
against any and all Indemnifiable Losses asserted against or suffered by any
Buyers' Indemnitee in any way relating to, resulting from or arising out of or
in connection with (i) any breach by Seller of any covenant or agreement of
Seller set forth in this Agreement; (ii) any breach by Seller of any
representation or warranty of Seller contained in this Agreement; (iii) the
Excluded Liabilities; (iv) any Third-Party Claim against any Buyers' Indemnitee
to the extent arising out of or in connection with Seller's ownership or
operation of the Excluded Assets (other than to the extent such Third-Party
Claim constitutes an Assumed Liability); provided, however, that Seller shall be
liable pursuant to clause (i) and (ii) of this Section 9.1(c) only for
Indemnifiable Losses for which any Buyers' Indemnitee gives written notice to
<PAGE>
Seller (setting forth with reasonable specificity the nature and amount of the
Indemnifiable Loss) during the period for which such covenants or agreements
survive the Closing in accordance with Section 11.6.
(d) In furtherance, and not in limitation, of the provisions
set forth in Section 9.1(c), without any further action required by any Person,
from and after the Closing Date, each of PECO and PSEG shall be deemed to
release, hold harmless and forever discharge Seller from any and all
Indemnifiable Losses of any kind or character, whether known or unknown,
contingent or accrued, arising under or relating to Environmental Laws, or
relating to any claim in respect of any Environmental Condition or Hazardous
Substance, whether based on common law or Environmental Laws relating to the
Purchased Assets ("Environmental Claims") (other than those described in Section
2.4(g)). In furtherance of, and to the extent set forth in, the foregoing, each
of PECO and PSEG shall, at Closing, irrevocably waive any and all rights and
benefits with respect to such Environmental Claims that it now has or in the
future may have conferred upon it by virtue of any Law or common law principle,
which provides that a general release does not extend to claims which a party
does not know or suspect to exist in its favor at the time of executing the
release, if knowledge of such claims would have materially affected such party's
settlement with the obligor. In this connection, each of PECO and PSEG hereby
acknowledges that it is aware that factual matters now unknown to it may have
given, or hereafter may give, rise to Environmental Claims that are presently
unknown, unanticipated and unsuspected, and Buyers further agree that the
release from and after the Closing provided for in this Section 9.1(d) has been
negotiated and agreed upon in light of that awareness, and each of PECO and PSEG
nevertheless hereby intends, effective from and after the Closing, irrevocably
to release, hold harmless and forever discharge Seller from all such
Environmental Claims to the extent provided and in the manner contemplated by
this paragraph.
(e) Any Indemnifiable Loss shall be (i) net of the dollar
amount of any insurance or other proceeds actually receivable by the Indemnitee
or any of its Affiliates with respect to the Indemnifiable Loss, (ii) reduced to
take account of any Tax Benefit realized by the Indemnitee arising from the
incurrence or payment of such Indemnifiable Loss (a "Tax Benefit" meaning for
this purpose the positive excess of the Tax liability of Indemnitee without
regard to such Indemnifiable Loss over the Tax liability of such Indemnitee
taking into account such Indemnifiable Loss, with all other circumstances
remaining unchanged), and (iii) increased to take account of any Tax Cost
incurred by Indemnitee arising from the receipt of indemnity payments hereunder
<PAGE>
(grossed up for such increase) (a "Tax Cost" meaning for this purpose the
positive excess of the Tax liability of such Indemnitee taking such indemnity
payment into account over the Tax liability of such Indemnitee without regard to
such payment, with all other circumstances remaining unchanged).
(f) The rights and remedies of Seller, on the one hand, and
PECO and PSEG, on the other hand, under this Article IX are, solely as between
Seller and on the one hand, and PECO and PSEG, on the other hand, exclusive and
in lieu of any and all other rights and remedies which each of Seller and on the
one hand, and PECO and PSEG, on the other hand, may have under this Agreement,
under applicable Law, with respect to any Indemnifiable Loss, whether at common
law or in equity, including for declaratory, injunctive or monetary relief. The
indemnification obligations of the Parties set forth in this Article IX apply
only to matters arising out of this Agreement and the transactions contemplated
hereby, but do not extend to matters arising out of the Owners Agreement, the
Collateral Agreement or any of the Additional Agreements. Any Indemnifiable Loss
arising under or pursuant to the Owners Agreement, the Collateral Agreement or
any of the Additional Agreements shall be governed by the indemnification
obligations, if any, contained in such agreement under which the Indemnifiable
Loss arises.
(g) Notwithstanding anything to the contrary contained herein:
(i) No Party (including an Indemnitee) shall be
entitled to recover from any other Party (including any Party hereto required to
provide indemnification under this Agreement or any Additional Agreement (an
"Indemnifying Party")) for any liabilities, damages, obligations, payments,
losses, costs, or expenses under this Agreement any amount in excess of the
actual compensatory damages, court costs and reasonable attorney's and other
advisor fees suffered by such Party;
(ii) No Party shall have any liability or obligation
to indemnify under Section 9.1(a), 9.1(b) or 9.1(c), as the case may be, unless
and until the aggregate amount of Indemnifiable Losses for which such Party
would be liable thereunder, but for this provision, exceeds, together with all
such Indemnifiable Losses for which such Party is so liable under the Collateral
Agreement, $100,000, with respect to Seller, and $50,000, with respect to any
Buyer; provided that, thereafter, such Party shall be liable for all such
Indemnifiable Losses;
<PAGE>
(iii) To the fullest extent permitted by Law, each of
PECO, PSEG and Seller hereby waives any right to recover punitive, incidental,
special, exemplary and consequential damages arising in connection with or with
respect to this Agreement or any breach or violation hereof; provided that the
provisions of this clause (iii) shall not apply to indemnification for a
Third-Party Claim.
(h) An Indemnitee shall use Commercially Reasonable Efforts to
mitigate all losses, damages and the like relating to a claim under the
indemnification provisions in this Section 9.1, including availing itself of any
defenses, limitations, rights of contribution, claims against third Persons and
other rights at law or equity. For purposes of this Section 9.1(h), the
Indemnitee's Commercially Reasonable Efforts shall include the reasonable
expenditure of money to mitigate or otherwise reduce or eliminate any losses or
expenses for which indemnification would otherwise be due, and, in addition to
its other obligations hereunder, the Indemnifying Party shall reimburse the
Indemnitee for the Indemnitee's reasonable expenditures in undertaking the
mitigation.
(i) The expiration, termination or extinguishment of any
covenant or agreement shall not affect the Parties' obligations under Sections
9.1(a) through 9.1(c) hereof if the Indemnitee provided the Indemnifying Party
with proper notice of the claim or event for which indemnification is sought
prior to such expiration, termination or extinguishment.
9.2 Defense of Claims.
(a) If any Indemnitee receives notice of the assertion of any
claim or of the commencement of any suit, action or proceeding made or brought
by any Person who is not a Party to this Agreement or an Affiliate of a Party to
this Agreement (a "Third-Party Claim") with respect to which indemnification is
to be sought from an Indemnifying Party, the Indemnitee shall give such
Indemnifying Party reasonably prompt written notice thereof, but in no event
later than twenty (20) Business Days after the Indemnitee's receipt of notice of
such Third-Party Claim. Such notice shall describe the nature of the Third-Party
Claim in reasonable detail and shall indicate the estimated amount, if
practicable, of the Indemnifiable Loss that has been or may be incurred by the
Indemnitee. The Indemnifying Party shall have the right to participate in or, by
giving written notice to the Indemnitee, to elect to assume the defense of any
Third-Party Claim at such Indemnifying Party's expense and by such Indemnifying
Party's own counsel; provided that the counsel for the Indemnifying Party who
<PAGE>
shall conduct the defense of such Third-Party Claim shall be reasonably
satisfactory to the Indemnitee. The Indemnitee shall cooperate in good faith in
such defense at such Indemnitee's own expense. If an Indemnifying Party elects
to assume the defense of any Third-Party Claim, the Indemnitee shall (i)
cooperate in all reasonable respects with the Indemnifying Party in connection
with such defense, (ii) not admit any liability with respect to, or settle,
compromise or discharge, any Third-Party Claim without the Indemnifying Party's
prior written consent and (iii) agree to any settlement, compromise or discharge
of a Third-Party Claim which the Indemnifying Party may recommend and which by
its terms obligates the Indemnifying Party to pay the full amount of the
liability in connection with such Third-Party Claim and unconditionally releases
the Indemnitee completely in connection with such Third-Party Claim. In the
event that the Indemnifying Party shall assume the defense of any Third-Party
Claim, the Indemnitee shall be entitled to participate in (but not control) such
defense with its own counsel at its own expense. If the Indemnifying Party does
not assume the defense of any such Third-Party Claim, the Indemnitee may defend
the same in such manner as it may deem appropriate, including settling,
compromising or discharging such claim or litigation after giving notice to the
Indemnifying Party of the terms of the proposed settlement, compromise or
discharge and the Indemnifying Party will promptly reimburse the Indemnitee upon
written request. Anything contained in this Agreement to the contrary
notwithstanding, no Indemnifying Party shall be entitled to assume the defense
of any Third-Party Claim if such Third-Party Claim seeks an order, injunction or
other equitable relief or relief for other than monetary damages against the
Indemnitee which, if successful, would materially adversely affect the business
of the Indemnitee; provided that such Indemnifying Party shall continue to be
obligated to such Indemnitee pursuant to this Article IX for all Indemnifiable
Losses relating to, resulting from or arising out of such Third-Party Claim.
(b) If, within ten (10) Business Days after an Indemnitee
gives written notice to the Indemnifying Party of any Third-Party Claim, such
Indemnitee receives written notice from the Indemnifying Party that such
Indemnifying Party has elected to assume the defense of such Third-Party Claim
as provided in Section 9.2(a), the Indemnifying Party shall not be liable for
any costs, fees or expenses subsequently incurred by the Indemnitee in
connection with the defense, compromise or settlement thereof; provided,
however, that if the Indemnifying Party shall fail to take reasonable steps
necessary to defend diligently such Third-Party Claim within ten (10) Business
Days after receiving notice from the Indemnitee that the Indemnitee believes the
Indemnifying Party has failed to take such steps, the Indemnitee may assume its
own defense and the Indemnifying Party shall be liable for all reasonable costs,
fees and expenses thereof.
<PAGE>
(c) Without the prior written consent of the Indemnitee, the
Indemnifying Party shall not admit any liability with respect to, or enter into
any settlement, compromise or discharge of, or any voluntary consent decree,
order or injunction with respect to, any Third-Party Claim which would lead to
liability or create any financial or other obligation on the part of the
Indemnitee for which the Indemnitee is not entitled to indemnification
hereunder. If a firm offer is made to settle, compromise or discharge, or to
enter into any voluntary consent decree, order or injunction with respect to, a
Third-Party Claim, which offer would not lead to liability or the creation of
any financial or other obligation on the part of the Indemnitee for which the
Indemnitee is not entitled to indemnification hereunder, and the Indemnifying
Party desires to accept and agree to such offer, the Indemnifying Party shall
give written notice to the Indemnitee to that effect. If the Indemnitee fails to
consent to such firm offer within ten (10) Business Days after its receipt of
such notice, the Indemnifying Party shall be relieved of its obligations to
defend such Third-Party Claim and the Indemnitee may contest or defend such
Third-Party Claim. In such event, the maximum liability of the Indemnifying
Party as to such Third-Party Claim will be the amount of such settlement offer
plus reasonable costs and expenses paid or incurred by Indemnitee up to the date
of said notice.
(d) Subject to Section 9.3, any claim by an Indemnitee on
account of an Indemnifiable Loss which does not constitute a Third-Party Claim
(a "Direct Claim") shall be asserted by giving the Indemnifying Party reasonably
prompt written notice thereof, but in no event later than twenty (20) Business
Days after the Indemnitee becomes aware of such Direct Claim, stating the nature
of such claim in reasonable detail and indicating the estimated amount, if
practicable, of such Indemnifiable Loss; and the Indemnifying Party shall have a
period of twenty (20) Business Days within which to respond to such Direct
Claim. If the Indemnifying Party fails to respond during such twenty (20)
Business Day period, the Indemnifying Party shall be deemed to have accepted
such claim and, subject to this Article IX, shall promptly reimburse the
Indemnitee for the Indemnifiable Losses set forth in the Indemnitee's notice. If
the Indemnifying Party rejects such claim, subject to Section 9.3, the
Indemnitee shall be free to seek enforcement of its right to indemnification
under this Agreement.
(e) If the amount of any Indemnifiable Loss, at any time
subsequent to the making of an indemnity payment in respect thereof, is reduced
by recovery, settlement, compromise, discharge or otherwise under or pursuant to
<PAGE>
any insurance coverage, or pursuant to any claim, recovery, settlement,
compromise, discharge or payment by, from or against any other Person, the
amount of such reduction, less any costs, expenses or premiums incurred in
connection therewith (together with interest thereon from the date of payment
thereof at the Prime Rate) shall promptly be repaid by the Indemnitee to the
Indemnifying Party. Upon making any indemnity payment, the Indemnifying Party
shall, to the extent of such indemnity payment, be subrogated to all rights of
the Indemnitee against any third party in respect of the Indemnifiable Loss to
which the indemnity payment relates; provided, however, that (i) the
Indemnifying Party shall then be in compliance with its obligations under this
Agreement in respect of such Indemnifiable Loss and (ii) until the Indemnitee
recovers full payment of its Indemnifiable Loss, any and all claims of the
Indemnifying Party against any such third party on account of said indemnity
payment is hereby made expressly subordinated and subjected in right of payment
to the Indemnitee's rights against such third party. Without limiting the
generality or effect of any other provision hereof, each such Indemnitee and
Indemnifying Party shall duly execute upon request all instruments reasonably
necessary to evidence and perfect the above-described subrogation and
subordination rights, and otherwise cooperate in the prosecution of such claims
at the direction of the Indemnifying Party. Nothing in this Section 9.2(e) shall
be construed to require any Party hereto to obtain or maintain any insurance
coverage.
(f) A failure to give timely notice as provided in this
Section 9.2 shall not affect the rights or obligations of any Party hereunder
except to the extent that, as a result of such failure, the Party which was
entitled to receive such notice was actually prejudiced as a result of such
failure.
9.3 Arbitration.
(a) Notwithstanding any provision hereof to the contrary, in
the event of any dispute between Seller and, on the one hand and PECO or PSEG,
on the other hand, arising after the Closing (whether relating to facts, events
or circumstances occurring or existing prior to, on or after the Closing Date)
and relating to or arising out of any provision of this Agreement (other than
disputes arising under Section 2.3, 2.4, 3.2, 3.3, 3.4, 3.5, 3.6, 7.5,
9.1(a)(iii), 9.1(b)(iii) or 9.1(c)(iii)), the sole remedy available to any Party
is the dispute resolution procedure set forth in this Section 9.3; provided,
however, that any Party may seek a preliminary injunction or other provisional
judicial remedy if such action is necessary to prevent irreparable harm or
preserve the status quo, in which case all Parties involved in the dispute shall
<PAGE>
nonetheless continue to pursue resolution of the dispute by means of this
procedure. The Party asserting such dispute shall give written notice to the
other Parties involved in the dispute of the fact that a dispute has arisen
pursuant hereto. Such notice shall include (i) a statement setting forth in
reasonable detail the facts, events, circumstances, evidence and arguments
underlying such dispute and (ii) proposed arrangements for a meeting to attempt
to resolve the dispute to be held within sixty (60) days after such notice is
given. Within thirty (30) days after such notice is given, the other Party or
Parties hereto shall submit to the Party giving such notice a written summary
responding to such statement of facts, events, circumstances, evidence and
arguments contained in the notice and an acceptance of or proposed alternative
to the meeting arrangements set forth in the initial notice.
(b) The chief executive officers (or any other executive
officer or officers directly reporting to, and duly designated by, such chief
executive officers) of each Party involved in the dispute shall meet at a
mutually acceptable time and place to attempt to settle any dispute in good
faith; provided, however, that such meeting shall be held at the principal
offices of the Party receiving the notice of dispute unless otherwise agreed;
and provided further, that any such meeting shall be held no later than sixty
(60) days after the written notice of dispute is given pursuant to Section
9.3(a) hereof. Each Party shall bear its own costs and expenses with respect to
preparation for, attendance at and participation in such meeting.
(c) In the event that (i) a meeting has been held in
accordance with Section 9.3(b) and (ii) any such dispute of the kind referred to
in Section 9.3(a) shall have not been resolved at such meeting, then, upon the
written request of any Party involved in such dispute, the Parties shall submit
such dispute to binding arbitration pursuant to the Commercial Arbitration Rules
of the American Arbitration Association (the "Commercial Arbitration Rules"). In
the event that such dispute is submitted to arbitration pursuant to the
Commercial Arbitration Rules, then the arbitration tribunal shall be composed of
three arbitrators (one such arbitrator to be selected by each Seller, on the one
hand, and Buyers, on the other hand, within thirty (30) days after the meeting
held in accordance with Section 9.3(b) with the third such arbitrator, who shall
be a former U.S. District Court or U.S. Circuit Court of Appeals judge and shall
serve as chairperson of such tribunal, selected by the other two arbitrators or,
in the absence of agreement between such arbitrators (or between Buyers with
respect to the arbitrator to be selected by them), by the American Arbitration
Association). The venue of the arbitration shall be Wilmington, Delaware, the
language of the arbitration shall be English and the arbitration shall commence
no later than sixty (60) days after the meeting held in accordance with
<PAGE>
Section 9.3(b). The decision, judgment and order of the arbitration tribunal
shall be final, binding and conclusive as to the Parties involved in such
dispute, and their respective Representatives, and may be entered in court of
competent jurisdiction. Other than the fees and expenses of the arbitrators,
which shall be shared equally by the Parties to the dispute, each Party shall
bear its own costs and expenses (including attorneys' fees and expenses)
relating to the arbitration.
ARTICLE X
TERMINATION
10.1 Termination.
(a) This Agreement may be terminated at any time prior to the
Closing by mutual written consent of the Parties.
(b) This Agreement may be terminated by Seller, on the one
hand, or PECO and PSEG acting together, on the other hand, upon written notice
to the other Party, (i) at any time prior to the Closing if any court of
competent jurisdiction shall have issued an order, judgment or decree
permanently restraining, enjoining or otherwise prohibiting the Closing, and
such order, judgment or decree shall have become final and nonappealable; (ii)
at any time prior to the Closing if any Law shall have been enacted or issued by
any Governmental Authority which, directly or indirectly, prohibits the
consummation of the transactions contemplated by this Agreement, by any
Additional Agreement or the Collateral Agreement; or (iii) at any time after the
first anniversary of the date of this Agreement if the Closing shall not have
occurred on or before such date (the "Termination Date").
(c) This Agreement may be terminated by PECO, upon written
notice to Seller, if any of the PECO Required Regulatory Approvals, the receipt
of which is a condition to the obligation of PECO to consummate the Closing as
set forth in Section 8.2(a), shall have been denied (and a petition for
rehearing or refiling of an application initially denied without prejudice shall
also have been denied), and such denial was not caused by or the result of a
breach of this Agreement by PECO, or if the PECO Required Regulatory Approvals,
other than those set forth in Schedule 8.2(a), shall have been granted but are
not in form and substance reasonably satisfactory to PECO (including adverse
conditions relating to PECO or the Purchased Assets).
<PAGE>
(d) This Agreement may be terminated by PSEG, upon written
notice to Seller, if any of the PSEG Required Regulatory Approvals, the receipt
of which is a condition to the obligation of PSEG to consummate the Closing as
set forth in Section 8.3(a), shall have been denied (and a petition for
rehearing or refiling of an application initially denied without prejudice shall
also have been denied), and such denial was not caused by or the result of a
breach of this Agreement by PSEG, or if the PSEG Required Regulatory Approvals,
other than those set forth in Schedule 8.3(a)(i), shall have been granted but
are not in form and substance reasonably satisfactory to PSEG (including adverse
conditions relating to PSEG, the Affiliates of PSEG listed in Schedule
8.2(a)(ii) or the Purchased Assets).
(e) This Agreement may be terminated by Seller, upon written
notice to Buyers, if any of the Seller's Required Regulatory Approvals, the
receipt of which is a condition to the obligation of Seller to consummate the
Closing as set forth in Section 8.4(a), shall have been denied (and a petition
for rehearing or refiling of an application initially denied without prejudice
shall also have been denied), and such denial was not caused by or the result of
a breach of this Agreement by Seller, or shall have been granted but are not in
form and substance reasonably satisfactory to Seller (including adverse
conditions relating to Seller or the Purchased Assets).
(f) Except as otherwise provided in this Agreement, this
Agreement may be terminated by PECO and PSEG acting together, upon written
notice to Seller, if there has been a breach by Seller of any covenant,
agreement, representation or warranty contained in this Agreement, which has
resulted in a Material Adverse Effect and such violation or breach is not cured
by the earlier of the Closing Date or the date thirty (30) days after receipt by
Seller of notice specifying in reasonable detail the nature of such breach,
unless Buyers shall have previously waived such breach
(g) Except as otherwise provided in this Agreement, this
Agreement may be terminated by Seller, upon written notice to PECO and PSEG, if
there has been a breach by PECO or PSEG of any covenant, agreement,
representation or warranty contained in this Agreement, which has resulted in a
Material Adverse Effect and such violation or breach is not cured by the earlier
of the Closing Date or the date thirty (30) days after receipt by Buyers of
notice specifying in reasonable detail the nature of such breach, unless Seller
shall have previously waived such breach.
<PAGE>
(h) This Agreement may be terminated by Seller, on the one
hand, or PECO and PSEG acting together, on the other hand, upon written notice
to the other Party, in accordance with the provisions of Section 7.7, provided
that the Party seeking to so terminate shall have complied in all material
respects with its obligations under Section 7.7.
10.2 Effect of Termination. Upon termination of this Agreement prior to
the Closing pursuant to Section 10.1, this Agreement shall be null and void and
of no further force or effect (except that the provisions set forth in this
Section 10.2 and Article XI, and the Confidentiality Agreements, shall remain in
full force and effect in accordance with their respective terms); and no Party
shall have any further liability or obligation under this Agreement (other than
for any willful breach of its obligations hereunder). If this Agreement is
terminated as provided herein, all filings, applications and other submissions
made pursuant to this Agreement, to the extent practicable, shall be withdrawn
from the agency or other Person to which they were made.
10.3 Additional Effects of Termination. In the event that this
Agreement is terminated by Buyers pursuant to (i) Section 10.1(b)(iii) due to
the failure to satisfy the condition set forth in Section 8.2(a) or 8.3(a) or
(ii) Section 10.1(c) or (d), in each case due to the inclusion of an adverse
condition in any PECO Required Regulatory Approval or in any PSEG Required
Regulatory Approval (each, a "Regulatory Termination"), then, notwithstanding
any provision hereof or of the Owners Agreement, as may then be in effect, to
the contrary, upon any exercise by PECO, PSEG or PSE&G Utility of its rights
under Section 26.3 of the Owners Agreement, PECO, PSEG or PSE&G Utility shall
exercise such rights in such manner as to acquire the Peach Bottom Interest
pursuant to a transaction (the "Subsequent Transaction") on terms and conditions
that are no less favorable to Seller than those set forth in this Agreement;
provided that the Subsequent Transaction shall provide for the termination of
PECO's and PSEG's or PSE&G Utility's, as the case may be, rights under Section
26.3 of the Owners Agreement upon the occurrence of a Regulatory Termination
involving a PECO Required Regulatory Approval or a PSEG Required Regulatory
Approval, as the case may be, of such Subsequent Transaction prior to the
consummation thereof.
<PAGE>
ARTICLE XI
MISCELLANEOUS PROVISIONS
11.1 Amendment and Modification. Subject to applicable Law, this
Agreement may be amended, supplemented or otherwise modified only by written
agreement entered into by the Parties.
11.2 Expenses. Except to the extent provided herein, whether or not the
transactions contemplated hereby are consummated, all costs, fees and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be borne by the Party incurring such costs, fees and expenses,
including the fees and commissions referred to in Section 11.3. Notwithstanding
the foregoing, in no event shall Seller bear or be liable for the payment of any
costs, fees or expenses (other than attorneys' fees and expenses and the fees
and commissions referred to in Section 11.3) incurred by Seller to obtain any
approval of FERC or the NRC Approvals included among the PECO Required
Regulatory Approvals, PSEG Required Regulatory Approvals or Seller's Required
Regulatory Approvals, or to transfer the Decommissioning Funds to Buyer at the
Closing, to the extent that the aggregate amount of such costs, fees and
expenses exceeds, together with all such costs, fees and expenses which Seller
bears or is liable for under the Collateral Agreement, $200,000; and Buyers
shall equally bear and be liable to the extent of any such excess.
11.3 Fees and Commissions. Seller, on the one hand, and PECO and PSEG,
on the other hand, represent and warrant to the other that, except for Credit
Suisse First Boston, Inc. ("CSFB") and Reed/Navigant Consulting Group, which are
acting for and at the expense of Seller, no broker, finder or other Person is
entitled to any brokerage fees, commissions or finder's fees in connection with
the transactions contemplated hereby by reason of any action taken by such Party
or its Representatives. Seller shall pay or otherwise discharge all such
brokerage fees, commissions and finder's fees so incurred by Seller.
11.4 Bulk Sales Laws. Buyers hereby acknowledge that, notwithstanding
anything in this Agreement to the contrary, Seller will not comply with the
provisions of the bulk sales laws of any jurisdiction in connection with the
transactions contemplated by this Agreement and Buyers hereby irrevocably waive
compliance by Seller with the provisions of the bulk sales laws of all
jurisdictions.
<PAGE>
11.5 Waiver of Compliance. To the extent permitted by applicable Law,
any failure of any of the Parties to comply with any obligation, covenant,
agreement or condition set forth herein may be waived by the Party entitled to
the benefit thereof only by a written instrument signed by such Party, but any
such waiver shall not operate as a waiver of, or estoppel with respect to, any
prior or subsequent failure to comply therewith. The failure of a Party to this
Agreement to assert any of its rights under this Agreement or otherwise shall
not constitute a waiver of such rights.
11.6 Survival.
(a) The representations and warranties given or made by any
Party or in any certificate or other writing furnished in connection herewith
shall survive the Closing for a period of one (1) year after the Closing Date
and shall thereafter terminate and be of no further force or effect, except that
(i) all representations and warranties relating to Taxes and Tax Returns,
including those set forth in Sections 4.5 and 4.6, shall survive the Closing for
the period of the applicable statutes of limitation plus any extensions or
waivers thereof, and (ii) any representation or warranty as to which a claim
(including a contingent claim) shall have been asserted during the survival
period shall continue in effect with respect to such claim until such claim
shall have been finally resolved or settled. Each Party shall be entitled to
rely upon the representations and warranties of the other Party set forth
herein, notwithstanding any investigation or audit conducted before or after the
Closing Date or the decision of any Party to complete the Closing.
(b) The covenants and agreements of the Parties contained in
this Agreement, including those set forth in Article IX and Section 7.5, shall
survive the Closing in accordance with their respective terms.
11.7 Disclaimers. EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES SET
FORTH IN ARTICLE IV, THE PURCHASED ASSETS ARE SOLD "AS IS, WHERE IS", AND SELLER
EXPRESSLY DISCLAIMS ALL OTHER REPRESENTATIONS AND WARRANTIES OF ANY KIND OR
NATURE, EXPRESS OR IMPLIED, AS TO SELLER, THE PURCHASED ASSETS. WITHOUT LIMITING
THE GENERALITY OF THE FOREGOING, EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES
SET FORTH IN ARTICLE IV OR IN THE DEEDS, SELLER EXPRESSLY DISCLAIMS ALL OTHER
REPRESENTATIONS AND WARRANTIES REGARDING LIABILITIES, OWNERSHIP, LEASE,
MAINTENANCE AND OPERATION OF THE PURCHASED ASSETS, THE TITLE, CONDITION, VALUE
<PAGE>
OR QUALITY OF THE PURCHASED ASSETS OR THE PROSPECTS (FINANCIAL AND OTHERWISE),
RISKS AND OTHER INCIDENTS OF THE PURCHASED ASSETS; AND SELLER EXPRESSLY
DISCLAIMS ALL REPRESENTATIONS AND WARRANTIES OF MERCHANTABILITY, USAGE,
SUITABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE WITH RESPECT TO THE PURCHASED
ASSETS, OR ANY PART THEREOF, OR AS TO THE WORKMANSHIP THEREOF, OR THE ABSENCE OF
ANY DEFECTS THEREIN, WHETHER LATENT OR PATENT, OR COMPLIANCE WITH ENVIRONMENTAL
REQUIREMENTS, OR THE APPLICABILITY OF ANY REQUIREMENTS OF ANY GOVERNMENTAL
AUTHORITY, INCLUDING ANY NUCLEAR LAWS OR ENVIRONMENTAL LAWS. EXCEPT AS OTHERWISE
EXPRESSLY PROVIDED HEREIN, SELLER FURTHER EXPRESSLY DISCLAIMS ALL
REPRESENTATIONS AND WARRANTIES REGARDING THE ABSENCE OF HAZARDOUS SUBSTANCES OR
LIABILITY OR POTENTIAL LIABILITY ARISING UNDER NUCLEAR LAWS OR ENVIRONMENTAL
LAWS WITH RESPECT TO THE PURCHASED ASSETS. WITHOUT LIMITING THE GENERALITY OF
THE FOREGOING, EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN OR IN THE DEEDS,
SELLER EXPRESSLY DISCLAIMS ALL REPRESENTATIONS AND WARRANTIES OF ANY KIND
REGARDING THE CONDITION OF THE PURCHASED ASSETS AND NO SCHEDULE OR EXHIBIT TO
THIS AGREEMENT, NOR ANY OTHER MATERIAL OR INFORMATION PROVIDED, OR
COMMUNICATIONS MADE, BY SELLER OR ITS REPRESENTATIVES, INCLUDING ANY BROKER OR
INVESTMENT BANKER, WILL CAUSE OR CREATE ANY SUCH REPRESENTATION OR WARRANTY,
EXPRESS OR IMPLIED, AS TO THE TITLE, CONDITION, VALUE OR QUALITY OF THE
PURCHASED ASSETS.
11.8 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given on the day when delivered personally or by
facsimile transmission (with confirmation), on the next Business Day when
delivered to a nationally recognized overnight courier or five (5) Business Days
after deposited as registered or certified mail (return receipt requested), in
each case, postage prepaid, addressed to the recipient Party at its address set
forth below (or at such other address or facsimile number for a Party as shall
be specified by like notice; provided, however, that any notice of a change of
address or facsimile number shall be effective only upon receipt thereof):
<PAGE>
(a) If to Seller, to:
Delmarva Power & Light Company
In care of Conectiv
800 King Street
P.O. Box 231
Wilmington, Delaware 19899
Attention: Chairman
Facsimile: (302) 429-3367
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
One Rodney Square
Wilmington, Delaware 19801
Attention: Steven J. Rothschild, Esquire
Facsimile: (302) 651-3001
(b) If to PECO, to:
PECO Energy Company
965 Chesterbrook Blvd. 61A-3
Wayne, Pennsylvania 19087-5691
Attention: Charles P. Lewis, Vice President
Facsimile: (610) 640-6611
with a copy to:
Morgan, Lewis & Bockius, LLP
1701 Market Street
Philadelphia, Pennsylvania 19103-2921
Attention: Howard L. Meyers, Esq.
Facsimile: (215) 963-5299
<PAGE>
(c) If to PSEG, to:
PSEG Power LLC
80 Park Plaza
T-5A
P.O. Box 570
Newark, New Jersey 07101
Attention: Harold W. Borden
Vice President and General Counsel
Facsimile: (973) 639-0741
with a copy to:
Steptoe & Johnson LLP
1330 Connecticut Avenue, NW
Washington, DC 20036
Attention: Filiberto Agusti, Esquire
Facsimile: (202) 429-3902
11.9 Assignment, No Third-Party Beneficiaries. This Agreement shall be
binding upon and inure to the benefit of the Parties and their respective
successors and permitted assigns, and, except as set forth in this Section 11.9,
neither this Agreement nor any of the rights, interests, obligations or remedies
hereunder shall be assigned by any Party hereto without the prior written
consent of the other Parties, nor is this Agreement intended to confer upon any
other Person any rights, interests, obligations or remedies hereunder. This
Agreement shall create no third-party beneficiary rights of any kind in any
Representative or former employee of Seller or Buyers. Notwithstanding the
foregoing, (a) Seller may assign any or all of its rights, interests,
obligations and remedies hereunder to one or more Affiliates of Seller;
provided, however, that no such assignment shall relieve or discharge Seller
from any of its obligations hereunder; (b) PECO may (i) assign any or all of its
rights, interests, obligations and remedies hereunder to one or more Affiliates
of PECO, provided that each such Affiliate shall, at the time of such
assignment, be qualified under applicable Law to obtain all PECO Permits,
including PECO Nuclear Permits and Environmental Permits, necessary for such
Affiliate to own, lease, maintain and operate the Peach Bottom Station,
including, on the Closing Date, the Purchased Assets, or (ii) assign, transfer,
pledge or otherwise dispose of its rights and interest in this Agreement to a
<PAGE>
trustee, lending institution or other Person for financing purposes, including
upon or pursuant to the exercise of remedies under such financing or
refinancing, or by way of assignments, transfers, conveyances or dispositions in
lieu thereof; provided, however, that no such assignment, transfer, pledge,
conveyance or disposition pursuant to this Section 11.9(b) shall (A) impair or
materially delay the consummation of the transactions contemplated hereby or (B)
relieve or discharge PECO from any of its obligations hereunder, and (c) PSEG
may (i) assign any or all of its rights, interests, obligations and remedies
hereunder to one or more Affiliates of PSEG, provided that each such Affiliate
shall, at the time of such assignment, be qualified under applicable Law to
obtain all PSEG Permits, including PSEG Nuclear Permits and Environmental
Permits, necessary for such Affiliate to own, lease, maintain and operate the
Peach Bottom Station, including, on the Closing Date, the Purchased Assets, (ii)
assign, transfer, pledge or otherwise dispose of its rights and interest in this
Agreement to a trustee, lending institution or other Person for financing
purposes, including upon or pursuant to the exercise of remedies under such
financing or refinancing, or by way of assignments, transfers, conveyances or
dispositions in lieu thereof, or (iii) assign to any Affiliate of PSEG such
Purchased Assets as are not material in the aggregate and as may be necessary to
assure that the Purchased Assets may be operated as an exempt wholesale
generator under Section 32(g) of PUHCA; provided, however, that no such
assignment, transfer, pledge, conveyance or disposition pursuant to this Section
11.9(c) shall (A) impair or materially delay consummation of the transactions
contemplated hereby or (B) relieve or discharge PSEG from any of its obligations
hereunder.
11.10 Governing Law, Forum, Service of Process. This Agreement shall be
governed by and construed in accordance with the laws of the Commonwealth of
Pennsylvania (without giving effect to conflicts of law principles) as to all
matters, including validity, construction, effect, performance and remedies.
Venue in any and all suits, actions and proceedings related to the subject
matter of this Agreement shall be in the state and federal courts located in and
for the Commonwealth of Pennsylvania (the "Courts"), which shall have exclusive
jurisdiction for such purpose, and the Parties hereby irrevocably submit to the
exclusive jurisdiction of such Courts and irrevocably waive the defense of an
inconvenient forum to the maintenance of any such suit, action or proceeding.
Service of process may be made in any manner recognized by such Courts. Each of
the Parties hereby irrevocably waives its right to a jury trial in any suit,
action or proceeding arising out of any dispute in connection with this
Agreement or the transactions contemplated hereby. Nothing in this Section 11.10
<PAGE>
is intended to modify or expand the terms and provisions of Section 9.3 with
respect to the rights of the Parties to seek judicial remedy of any dispute
relating to or arising out of any provision of this Agreement.
11.11 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
11.12 Entire Agreement. This Agreement (including the Schedules and
Exhibits), together with the Confidentiality Agreements, embodies the entire
agreement and understanding of the Parties hereto in respect of the transactions
contemplated by this Agreement and the Additional Agreements and supersede all
prior agreements and understandings among the Parties with respect to such
transactions. There are no representations, warranties, covenants or agreements
between or among the Parties with respect to the subject matter set forth in
such agreements, other than those expressly set forth or referred to herein or
therein. Without limiting the generality of the foregoing, Buyers hereby
acknowledge and agree that there are no representations, warranties, covenants
or agreements among the Parties with respect to the subject matter set forth in
such agreements contained in any material made available to Buyer pursuant to
the terms of the Confidentiality Agreements (including the Offering Memorandum
dated July 2, 1999, previously provided to Buyers by or on behalf of Seller,
Reed/Navigant Consulting Group and CSFB).
[SIGNATURE PAGE FOLLOWS]
<PAGE>
IN WITNESS WHEREOF, Seller and Buyers have caused this Purchase
Agreement to be duly executed and delivered by their respective duly authorized
officers as of the date first written above.
DELMARVA POWER & LIGHT COMPANY
By: /s/ Thomas S. Shaw
-----------------------------------
Name: Thomas S. Shaw
---------------------------------
Title: Executive Vice President
--------------------------------
PECO ENERGY COMPANY
By: /s/ Paul E. Haviland
-----------------------------------
Name: Paul E. Haviland
----------------------------------
Title: Vice President, Corporate
Development
---------------------------------
PSEG POWER LLC
By: /s/ Robert W. Metcalfe
-----------------------------------
Name: Robert W. Metcalfe
---------------------------------
Title: Vice President - Development
---------------------------------
(DP&L/Peach Bottom)
STATE OF NEW JERSEY
BOARD OF PUBLIC UTILITIES
In the Matter of the Petition of : BPU Docket No. __________
Atlantic City Electric Company :
Regarding the Sale of Nuclear : PETITION
Assets :
Atlantic City Electric Company ("Petitioner," "Atlantic" or the
"Company") an electric public utility subject to the regulatory jurisdiction of
the Board of Public Utilities (the "Board" or "BPU"), in support of the within
petition respectfully shows:
Introduction
1. The Company is a corporation organized and existing under the
laws of the State of New Jersey and is engaged in the production, generation,
purchase, transmission, distribution and sale of electric energy for light, heat
and power to residential, commercial and industrial customers. The Company's
service territory comprises eight counties located in southern New Jersey and
includes approximately 450,000 customers. Atlantic is a wholly-owned subsidiary
of Conectiv, a Public Utility Holding Company under federal law. Conectiv is
also the parent company of Delmarva Power & Light Company ("Delmarva"), an
electric and gas utility serving portions of Delaware, Maryland, and Virginia.
2. As a result of the restructuring of the electric industry in New
Jersey, Atlantic has undertaken the sale of its interests in the Salem Nuclear
<PAGE>
Generating Station, Units 1 and 2 ("Salem"), Peach Bottom Atomic Power Station,
Units 2 and 3 ("Peach Bottom"), and the Hope Creek Nuclear Generating Station
("Hope Creek") (collectively referred to as the "Nuclear Assets"). Pursuant to
the Board's Orders in BPU Docket Nos. E097070455, E097070456 and E09707457 and
OAL Docket Nos. PUC07311-97 and PUC07312-97, and in accordance with the Electric
Discount and Energy Competition Act (the "Act"), N.J.S.A. 48:3-49 et seq.,
Atlantic hereby requests the Board's approval of the sale of its Nuclear Assets
and recovery of resultant stranded costs. In addition, both Atlantic and
Delmarva are requesting certain findings be made in order to meet federal law
requirements under the Public Utility Holding Company Act of 1935 ("PUHCA"), 15
U.S.C. section 79 et seq., in connection with transfer of both Atlantic and
Delmarva's interests in Salem, Peach Bottom and Hope Creek. Atlantic requests
that an order approving the sale of the Nuclear Assets, and containing the
findings requested herein, be issued by February 15, 2000 to enable a closing to
take place by March 31, 2000.
The Nuclear Assets
3. Atlantic's Nuclear Assets consist of minority ownership interests
in the three nuclear power stations described above. Specifically, Atlantic owns
5 percent of Hope Creek, 7.41 percent of Salem, and 7.51 percent of Peach
Bottom. Each of these Nuclear Stations is jointly owned by one or more public
utilities. Listed below are the ownership interests of the Nuclear Assets:
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<PAGE>
Peach Bottom Percent Ownership Interest
Atlantic City Electric Company 7.51%
Delmarva Power & Light Company 7.51%
PECO Energy Company 42.49%
Public Service Electric & Gas 42.49%
Salem Percent Ownership Interest
Atlantic City Electric Company 7.41%
Delmarva Power & Light Company 7.41%
PECO Energy Company 42.59%
Public Service Electric & Gas 42.59%
Hope Creek Percent Ownership Interest
Atlantic City Electric Company 5.00%
Public Service Electric & Gas 95.00%
It is important to note that Atlantic's minority interest in the Nuclear Assets
is subject to certain conditions contained in Owners' Agreements, previously
entered into by Atlantic, regarding each of the Nuclear Assets. Pursuant to
these Agreements, Atlantic has the right to transfer its interests in the
co-owned Nuclear Assets to non-co-owners, subject to a right of first refusal by
each of the co-owners. Specifically, any co-owner may transfer all or part of
its interest in one or more of the units to a third party, provided that the
same offer of transfer shall first have been made in writing to the other
co-owners and such offer shall have been rejected by them.
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<PAGE>
The Purchase Agreement
4. As required by N.J.S.A. 48:3-59(b), Atlantic filed a petition
seeking the Board's approval of proposed standards for the auction of its
Nuclear Assets. See I/M/O the Request of Atlantic City Electric Company for the
Establishment of Auction Standards for the Sale of Certain Generating Units, BPU
Docket Nos. EM99080605 (fossil assets), EM99080606 (nuclear assets), filed
August 11, 1999. The auction standards, as revised by Atlantic, were approved by
the Board at its meeting on September 17, 1999, with a final written order
pending at this time.
5. On August 30, 1999, Atlantic received from the co-owners of the
Nuclear Assets a comprehensive proposal for the purchase of the Nuclear Assets.
Specifically, PSEG Power LLC offered to acquire the combined Atlantic/Delmarva
interests in Salem and also offered to purchase Atlantic's interest in Hope
Creek. Finally, both PSEG Power LLC and PECO Energy Company ("PECO") offered to
purchase one-half of each of the Atlantic and Delmarva interests in Peach Bottom
(PSEG Power LLC 1/ and PECO are hereinafter collectively referred to as the
"Purchasers"). As a result of its analysis of the proposal, as well as an
evaluation of the prices, terms and conditions of recent comparable nuclear
asset sales, Atlantic determined to accept the Purchasers' offer. On September
27, 1999, Atlantic reached agreement with the Purchasers regarding the terms of
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1 It is Atlantic's understanding that at or before closing, PSEG Power LLC
will designate its subsidiary, PSEG Nuclear LLC, as the party which will
actually receive the ownership interests at closing.
-4-
<PAGE>
Purchase and Sale Agreements governing the sale of the Nuclear Assets (the
"Agreements").
6. Under the Agreements, the purchase price for Atlantic's interest
in the Nuclear Assets is approximately $11.3 million, allocated as follows: $4.1
million for Salem, $2.1 million for Hope Creek, and $5.1 million for Peach
Bottom. In addition, the Purchasers will compensate Atlantic for Atlantic's
share of the net book value of the nuclear fuel at each facility, as of the
closing date. In addition to these payments, the Agreements contain several
other elements which are advantageous for Atlantic, its employees and its
customers:
o The Purchasers will assume the nuclear decommissioning liability
associated with the Nuclear Assets, and receive the nuclear
decommissioning trust asset. In addition to lowering Atlantic's
exposure to the risk of future decommissioning costs, the Agreements
will enable Atlantic to avoid additional funding of the nuclear
decommissioning trust which would otherwise have been required in a
sale to a non-co-owner. This contract term significantly enhances the
value of the Agreements to Atlantic and its customers, and
differentiates these transactions from other potential sales of the
Nuclear Assets.
o The Purchasers will assume essentially all environmental liabilities
associated with the Nuclear Assets. Once again, this aspect of the
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<PAGE>
transactions serves to lower Atlantic's long-term exposure to the
risk of potentially costly environmental clean-up liability.
o Atlantic expects there will be no tax risk associated with the
transfer of the existing nuclear decommissioning trust. This enhances
the value of the Agreements to Atlantic and its customers.
o The Purchasers did not require Atlantic to agree to any above-market
purchased power contracts. This aspect of the Agreements is a direct
benefit to customers, since it is customers who would ultimately bear
the costs of any above-market contracts.
o The transfer of the Nuclear Assets is not anticipated to affect the
status of any employees at Salem, Peach Bottom, or Hope Creek. As set
forth in the Act, the Legislature was concerned that any asset
divestiture not come at the expense of workers at the generating
units. Customers benefit because there are no anticipated costs
associated with worker severance or relocation as a result of this
transaction.
7. Copies of the Agreements executed September 27, 1999 are attached
as Exhibit A (Hope Creek), Exhibit B (Salem), and Exhibit C (Peach Bottom).
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<PAGE>
Findings Requested Under New Jersey Law
8. Under the Electric Discount and Energy Competition Act, N.J.S.A.
48:3-49 et seq. ("Act") , Atlantic is requesting specific findings that the
proposed transfer of the Nuclear Assets is consistent with the provisions of the
Act. Furthermore, Atlantic is requesting specific findings in accordance with
the Act as to the quantification of the Company's stranded costs associated with
the Nuclear Assets.
9. Pursuant to N.J.S.A. 48:3-59(c), Atlantic asks that the Board
make the following findings of fact in accordance with the provisions of the
Act:
(a) the sale of the Nuclear Assets to the Purchasers represents the
full market value of the assets. N.J.S.A. 48:359(c)(1).
(b) the sale is in the best interest of Atlantic's customers.
N.J.S.A. 48:3-59(c)(2).
(c) the sale will not jeopardize the reliability of the electric
power system. N.J.S.A. 48:3-59(c)(3).
(d) the sale will not result in undue market control by the
Purchasers. N.J.S.A. 48:3-59(c)(4).
(e) the sale will not impact current employment at the facilities in
question. N.J.S.A. 48:3-59(c)(5).
(f) the sale process was consistent with standards established by the
Board pursuant to N.J.S.A. 48:3-59(b). N.J.S.A. 48:3-59(c)(6).
(g) the sale will not affect the existing employee bargaining unit,
existing collective bargaining agreements, or the requirement to bargain in good
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<PAGE>
faith when the current collective bargaining agreement has expired. N.J.S.A.
48:3-59(c)(7).
(h) the sale to the Purchasers will not impact the employees, or the
terms and conditions of employment, at the Nuclear Assets at the time of the
sale. N.J.S.A. 48:3-59(c)(8) and N.J.S.A. 48:3-59(c)(9).
10. Based upon Atlantic's compliance with the requirements of
N.J.S.A. 48:3-59, Atlantic asks that the Board find that such compliance
satisfies any obligation Atlantic may have under statutory provisions which
predate the Act, specifically N.J.S.A. 48:3-7.
11. Based upon the book value of the Nuclear Assets, the value of
construction work in progress, inventories, and accrued and unamortized costs,
the total current estimate of stranded costs associated with the Nuclear Assets
is $532,568,631 ("Eligible Stranded Costs"). A schedule setting for the
calculation of the Eligible Stranded Costs is attached hereto as Exhibit D.
Atlantic will update this information, and provide background information and
working papers, to the Board in the course of this proceeding in order to
establish the final quantification of the Eligible Stranded Costs.
12. Pursuant to N.J.S.A. 48:3-61, Atlantic seeks a finding by the
Board that it may recover the Eligible Stranded Costs associated with the
Nuclear Assets. Specifically, the Act provides that the Board may permit the
Company to recover stranded costs associated with its "utility generation
plant." N.J.S.A. 48:3-61(a)(1). The Act defines such stranded costs as the
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<PAGE>
"amount by which the net cost of an electric public utility's electric
generating assets ... exceeds the market value of those assets .... 11 N.J.S.A.
48:3-51. Therefore, Atlantic seeks a finding by the Board that the Company may
recover the Eligible Stranded Costs associated with the Nuclear Assets.
13. Pursuant to N.J.S.A. 48:3-62(c), Atlantic also seeks certain
findings from the Board so that Atlantic may recover the total amount of the
Eligible Stranded Costs associated with the Nuclear Assets through the issuance
of transition bonds. Atlantic submits that pursuant to N.J.S.A. 48:3-62(c)(1) it
is entitled to issue transition bonds for the full amount of the Eligible
Stranded Costs, because the Company has provided substantial rate reductions to
its customers and has agreed to divest these generation assets. Moreover,
issuance of the bonds for the full amount will result in substantial and
quantifiable savings for Atlantic's customers. Atlantic therefore requests that
the Board find that the full amount of the Eligible Stranded Costs either may
constitute, or be included as part of, the principal amount of transition bonds
for which Atlantic may seek approval to issue under the Act.
14. Under the terms of the Agreement, and subject to the necessary
approvals, Atlantic and Delmarva will be transferring their nuclear
decommissioning trust fund balances that are in various funds established by
each company for each generating unit. These balances will be transferred to the
Purchasers in the same proportion as the transfer of the Nuclear Assets
themselves (i.e., one-half of Atlantic's and Delmarva's balances for Peach
Bottom will be transferred to PECO and one-half to PSEG; while all of the
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<PAGE>
balances associated with Salem and Hope Creek will be transferred to PSEG). The
trust funds themselves are administered by third-party trustees. In order to
clarify that Atlantic and Delmarva have obtained any regulatory approvals that
may be necessary to direct the trustees to transfer these funds to the
Purchasers, Atlantic and Delmarva request a finding by the Board approving the
transfer by Atlantic and Delmarva of their nuclear trust fund decommissioning
balances to the Purchasers.
15. In support of the requested findings, Atlantic would note that
there have been a number of sales of nuclear assets in recent months. The value
that Atlantic will obtain for its Nuclear Assets, considering the totality of
the transaction terms, exceeds that of other comparable nuclear assets sales.
Moreover, Atlantic is selling only minority non-operating interests in the
Nuclear Stations, as opposed to total or majority interests as in other sales.
To date, minority interests have realized lower market prices. Thus, Atlantic
feels confident that it has negotiated a sales price for its Nuclear Assets that
is fully reflective of the current market price for the generating assets.
First, Atlantic relied on its knowledge of other nuclear asset sales as a gauge
of the current market price for nuclear assets. Second, by selling its interests
to the Purchasers, Atlantic has avoided the need for making additional payments
to the nuclear decommissioning trust fund, which otherwise would be required in
a sale to a third party. Third, the co-owners, right of first refusal creates
the potential of complications for any sale to a third party. This results
because a third party purchaser cannot be certain that the co-owners will not
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<PAGE>
exercise their rights after an agreement has been reached with the third party
purchaser.
16. The sale of Atlantic's Nuclear Assets will not result in undue
market control by the Purchasers. Since Atlantic's interests in the units are
small, minority interests, the transfer of these interests to the Purchasers
will not create a significant shift in the generation marketplace.
17. As a minority owner, Atlantic does not directly employ any
workers at Salem, Peach Bottom, or Hope Creek. Therefore, there are no Atlantic
employees who will be affected by the sale. The transaction is not anticipated
to affect the status of those employees currently employed at the facilities,
the terms and conditions of their employment, or existing collective bargaining
agreements.
18. The sale of the Nuclear Assets to the Purchasers is consistent
with the underlying goals set out in the Board's approval of the auction
standards. Atlantic understands the Board's interest in seeing that assets be
sold in a manner which yields the highest market value while also considering
vital issues such as: system reliability, on-going environmental and
decommissioning liabilities, operational safety, market power, and impact on the
workforce. Atlantic's decision to sell its Nuclear Assets to the Purchasers
results in a purchase price which is clearly representative of the current
market price for such assets. Moreover, the Purchasers, alone among other
prospective buyers, are uniquely positioned to mitigate the Board's concerns
with respect to the issues identified above. Based on its discussions with
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<PAGE>
prospective bidders, Atlantic is not aware of any other buyers who could bring
the same combination of market price, operational knowledge and experience,
system reliability and minimal impact on workers, as the Purchasers can bring to
the proposed transaction.
Findings Requested Under Federal Law
19. Atlantic also seeks, on behalf of itself and Delmarva, certain
findings by the Board pursuant to Section 32(c) of PUHCA. 15 U.S.C. section
79z-5a(c). This action is necessary because the Purchasers will either
immediately or in the near future seek to qualify the Nuclear Assets as
"eligible facilities" and obtain exempt wholesale generator ("EWG") status.
Section 32(c) of PUHCA requires that for any generation facility the costs of
whose construction or output was included in retail rates as of October 24,
1992, each State Commission with jurisdiction over such rates must make a
specific finding that qualifying the facility as an eligible facility (i) will
benefit consumers, (ii) is in the public interest, and (iii) does not violate
state law. 15 U.S.C. section 79z-a(c). For registered holding companies, such as
Conectiv, the parent of Atlantic and Delmarva, Section 32(c)(A) imposes an
additional requirement that such specific state commission findings be made by
every state commission having jurisdiction over the retail rates and charges of
the affiliates of such registered holding company. 15 U.S.C. section
79z-5a(c)(A). Therefore, both Atlantic and Delmarva are requesting specific
findings from each regulatory commission having jurisdiction over the rates and
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<PAGE>
charges of the companies 2/, that allowing the Nuclear Assets to become
"eligible facilities" (through the proposed sales transactions) (i) will benefit
consumers, (ii) is in the public interest, and (iii) does not violate state law.
15 U.S.C. section 79z-Sa(c).
20. In order to meet the PUHCA requirement, Atlantic and Delmarva
request that the Board make the following findings in its final order with
regard to Atlantic's sale of its Nuclear Assets, as well as Delmarva's sale of
its ownership interests in the Peach Bottom and Salem units:
The Board hereby finds, consistent with Section 32(c) of the Public
Utility Holding Company Act, that making the ownership interests of
Atlantic and Delmarva in Peach Bottom, Salem and Hope Creek "exempt
facilities": (1) will benefit consumers; (2) is in the public
interest; and (3) does not violate State law.
Atlantic and Delmarva would point out that the findings they seek pursuant to
PUHCA are entirely consistent with the findings the Company seeks pursuant to
the Act.
WHEREAS, Atlantic respectfully requests that the Board of Public
Utilities approve the sale of the Company's Nuclear Assets to the Purchasers and
find pursuant to the Act that: (1) the sale of the Nuclear Assets to the
Purchasers represents the full market value of the Nuclear Assets; (2) the sale
is in the best interest of Atlantic's customers; (3) the sale will not
jeopardize the reliability of the electric power system; (4) the sale will not
result in undue market control by the buyers; (5) the impacts of the sale on
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2 Atlantic and Delmarva are affiliates and members of a registered utility
holding company group because Conectiv owns the common stock of both companies.
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<PAGE>
Atlantic's workers have been reasonably mitigated; (6) the sale process was
consistent with standards established by the Board pursuant to N.J.S.A.
48:3-59(b); (7) the sale will maintain the existing employee bargaining unit,
honor existing collective bargaining agreements, and continue the requirement to
bargain in good faith when the current collective bargaining agreement has
expired; (8) the sale to the Purchasers will not impact the employees, or the
terms and conditions of employment, at the Nuclear Stations at the time of the
sale. Also pursuant to the Act, Atlantic requests that the Board find that
Atlantic may recover the full amount of the Eligible Stranded Costs, and that
the full amount of the Eligible Stranded Costs either may constitute, or be
included as part of, the principal amount of transition bonds for which Atlantic
may seek approval under the Act. Pursuant to the nuclear decommissioning fund
trust agreements, Atlantic and Delmarva request that the Board approve the
transfer by Atlantic and Delmarva of their nuclear decommissioning trust fund
balances to the Purchasers. Pursuant to PUHCA, Atlantic and Delmarva request
that the Board find the sales transactions: (i) will benefit consumers, (ii) are
in the public interest, and (iii) do not violate state law.
Respectfully submitted,
LEBOEUF, LAMB, GREENE & MACRAE, LLP
By: /s/ Stephen B. Genzer
-----------------------------------
Stephen B. Genzer
Date: November 23, 1999
-14-
<PAGE>
VERIFICATION
STATE OF DELAWARE )
) ss.
COUNTY OF NEW CASTLE )
I, Thomas S. Shaw, of full age, certify that:
1. I am Executive VP of Atlantic City Electric Company, Petitioner
in the foregoing Petition, and I am authorized to make this Verification on
behalf of the Company.
2. I have reviewed the attached Petition and Exhibits thereto, and
the same are true and correct to the best of my knowledge, information and
belief.
/s/ Thomas S. Shaw
----------------------------------------
Thomas S. Shaw
Sworn and subscribed to
before me this 23d day
of November, 1999.
/s/ Sharon M. Roach
- ---------------------
Sharon M. Roach
Notary Public Delaware
My Commission Expires Oct. 22, 2000
BEFORE THE
PENNSYLVANIA PUBLIC UTILITY COMMISSION
JOINT APPLICATION OF ATLANTIC CITY :
ELECTRIC COMPANY AND DELMARVA :
POWER & LIGHT COMPANY, AS :
TRANSFERORS, PECO ENERGY COMPANY, : DOCKET NOS. A-
AS TRANSFEREE, AND PUBLIC SERVICE : A-
ELECTRIC & GAS COMPANY, AS : A-
AFFILIATED INTEREST OF A TRANSFEREE, : A-
FOR CERTIFICATES OF PUBLIC :
CONVENIENCE EVIDENCING APPROVAL :
UNDER CHAPTER 11 OF THE PUBLIC :
UTILITY CODE FOR THE SALE AND :
TRANSFER OF THE TRANSFERORS' :
INTERESTS IN THE PEACH BOTTOM :
ATOMIC POWER STATION AND RELATED :
ASSETS :
TO THE PENNSYLVANIA PUBLIC UTILITY COMMISSION:
I. INTRODUCTION
1. Atlantic City Electric Company ("ACE"), Delmarva Power & Light
Company ("Delmarva"), PECO Energy Company ("PECO") and Public Service Electric &
Gas Company ("PSE&G") (collectively, the "Applicants") hereby request that the
Pennsylvania Public Utility Commission ("PUC" or the "Commission"): (1) issue
Certificates of Public Convenience evidencing approval under Chapter 11 of the
Public Utility Code (66 Pa.C.S. section 1101 et seq.) in connection with the
transfers by ACE and Delmarva of their respective interests in the Peach Bottom
Atomic Power Station ("Peach Bottom") to PECO and PSEG Nuclear LLC ("PSEG
<PAGE>
Nuclear"); and (2) make findings pursuant to Section 281l(e) of the Public
Utility Code (66 Pa. C.S. section 281l(e)) as a prerequisite for such approval.
2. The names and addresses of the Applicants are as follows:
Atlantic City Electric Company
c/o Conectiv, Inc.
800 King Street
P.O. Box 231
Wilmington, DE 19899
Delmarva Power & Light Company
c/o Conectiv, Inc.
800 King Street
P.O. Box 231
Wilmington, DE 19899
PECO Energy Company
2301 Market Street
P.O. Box 8699
Philadelphia, PA 19101-8699
Public Service Electric & Gas Company
80 Park Plaza
P.O. Box 570
Newark, NJ 07102-0570
3. The names and addresses of the attorneys for the Applicants are
as follows:
For ACE:
Karen Bab, Esquire
Atlantic City Electric Company
c/o Conectiv, Inc.
800 King Street
P.O. Box 231
Wilmington, DE 19899
2
<PAGE>
For Delmarva:
Karen Bab, Esquire
Delmarva Power & Light Company
c/o Conectiv, Inc.
800 King Street
P.O. Box 231
Wilmington, DE 19899
For PECO:
Paul R. Bonney, Esquire Thomas P. Gadsden, Esquire
Ward L. Smith, Esquire Anthony C. DeCusatis, Esquire
PECO Energy Company Morgan, Lewis & Bockius LLP
2301 Market Street 1701 Market Street
P.O. Box 8699 Philadelphia, PA 19103-2921
Philadelphia, PA 19101-8699 (215) 963-5234
(215) 841-4252 (215) 963-5299 (Fax)
(215) 841-3389 (Fax)
For PSE&G:
Richard P. Bonnifield, Esquire
Public Service Electric and Gas Company
80 Park Plaza -- T5G
P.O. Box 570
Newark, NJ 07101-0570
(973) 430-6441
(973) 430-5983 (Fax)
3
<PAGE>
II. DESCRIPTION OF THE COMPANIES INVOLVED
IN THE PROPOSED TRANSACTIONS
4. ACE is a corporation organized and existing under the laws of the
State of New Jersey and is a wholly owned subsidiary of Conectiv.1/ ACE
furnishes electric generation, transmission and distribution service in the
southern one-third of New Jersey under and subject to the jurisdiction of the
New Jersey Board of Public Utilities ("BPU"). ACE is qualified to do business in
the Commonwealth of Pennsylvania where it owns: (1) a 7.51% interest in Peach
Bottom, located in Drumore Township, York County, and Fulton Township, Lancaster
County; (2) a 2.47% interest in the Keystone Generating Station and related
facilities, located in Armstrong and Indiana Counties ("Keystone"); (3) a 3.83%
interest in the Conemaugh Generating Station and related facilities, located in
Indiana County ("Conemaugh"); and (4) an 8% interest in the Conemaugh-Conastone
EHV Transmission Line, located in Adams, Bedford, Blair, Cambria, Cumberland,
Franklin, Huntington, Indiana, Westmoreland and York Counties (the
"Conemaugh-Conastone Line"). ACE also has an ownership interest in buildings
located in Pennsylvania and used by the PJM Interconnection, L.L.C. ("PJM"),
which are not jurisdictional facilities. ACE holds Certificates of Public
Convenience issued by the Commission on November 25, 1964, July 25, 1966, April
24, 1968 and June 21, 1971 at Application Docket Nos. 91674, 93233, 94225 and
96379, respectively, for the purpose of exercising the rights of a foreign
- ---------------
1/ Conectiv is a corporation organized and existing under the laws of
Delaware. Pursuant to its Order and Certificate of Public Convenience
issued October 2, 1997 at Docket No. A00091675F.0002, the Commission
approved a series of transactions whereby ACE and Delmarva became wholly
owned subsidiaries of Conectiv. Conectiv is not an operating utility under
either federal or state law. Conectiv is a registered utility holding
company under the Public Utility Holding Company Act of 1935, as amended
(15 U.S.C. section 79).
4
<PAGE>
public utility in Pennsylvania. ACE has no retail utility customers in
Pennsylvania, receives no gross operating revenue for service rendered pursuant
to a tariff filed with the Commission for intrastate service within Pennsylvania
and operates no public utility facilities within the Commonwealth.
5. Delmarva is a corporation organized and existing under the laws
of the State of Delaware and is a wholly owned subsidiary of Conectiv. Delmarva
furnishes electric generation, transmission and distribution service in
Delaware, the Eastern Shore of Maryland and the Eastern Shore of Virginia and
also furnishes gas service in northern Delaware, under and subject to the
jurisdiction of the Delaware Public Service Commission, the Maryland Public
Service Commission and the Virginia State Corporation Commission. Delmarva is
qualified to do business in the Commonwealth of Pennsylvania where it owns: (1)
a 7.51% interest in Peach Bottom; (2) a 3.70% interest in Keystone; (3) a 3.72%
interest in Conemaugh; and (4) a 9% interest in the Conemaugh-Conastone Line.
Delmarva also has an ownership interest in buildings located in Pennsylvania and
used by PJM, which are not jurisdictional facilities. Delmarva holds
Certificates of Public Convenience issued by the Commission on November 25,
1964, July 25, 1966, April 24, 1968 and June 21, 1971 at Application Docket Nos.
91675, 93235, 94227 and 96380, respectively, for the purpose of exercising the
rights of a foreign public utility in Pennsylvania. Delmarva has no retail
utility customers in Pennsylvania, receives no gross operating revenue for
service rendered pursuant to a tariff filed with the Commission for intrastate
service within Pennsylvania and operates no public utility facilities within the
Commonwealth.
5
<PAGE>
6. PECO is a corporation organized and existing under the laws of the
Commonwealth of Pennsylvania. PECO furnishes electric generation, transmission
and distribution service and also furnishes retail natural gas service within
its authorized electric and gas service territories in Southeastern Pennsylvania
under and subject to the jurisdiction of the Commission.
7. PSE&G is a corporation organized and existing under the laws of the
State of New Jersey. PSE&G is a wholly owned subsidiary of Public Service
Enterprise Group Incorporated ("Public Service Enterprise Group"), an exempt
public utility holding company under the Public Utility Holding Company Act of
1935. PSE&G provides generation, distribution and transmission services
throughout most of the State of New Jersey under and subject to the jurisdiction
of the BPU.2/ It also provides transmission and bulk power sales service to
surrounding regions. PSE&G is qualified to do business in the Commonwealth of
Pennsylvania where it owns: (1) a 42.49% interest in Peach Bottom; (2) a 22.84%
interest in Keystone; (3) a 22.84% interest in Conemaugh; and (4) a 23% interest
in the Conemaugh-Conastone Line. PSE&G also has an ownership interest in
buildings located in Pennsylvania and used by PJM, which are not jurisdictional
- ---------------
2/ PSE&G is currently restructuring its businesses as a result of the
introduction of retail electric competition in New Jersey. Pursuant to the
New Jersey Electric Discount and Energy Competition Act of 1999 and an
implementing order issued by the BPU on August 24, 1999, the electric
generation industry in New Jersey is being deregulated by eliminating the
retail monopoly that electric utilities previously held in generation. In
accordance with the aforementioned Act and the BPU's implementing order,
PSE&G sought and received approval from the Federal Energy Regulatory
Commission ("FERC") to separate its generation and wholesale marketing
functions from its transmission and distribution functions and to transfer
its generating assets and wholesale merchant function to its affiliate,
PSEG Power, LLC. See Public Service Electric and Gas Co., et al., 88 FERC
para. 61,299 (September 29,1999).
6
<PAGE>
facilities. PSE&G holds Certificates of Public Convenience issued by the
Commission on November 25, 1964, July 25, 1966, April 24, 1968 and June 21, 1971
at Application Docket Nos. 91676, 93232, 94234 and 96378, respectively, for the
purpose of exercising the rights of a foreign public utility in Pennsylvania.
PSE&G has no retail utility customers in Pennsylvania, receives no gross
operating revenue for service rendered pursuant to a tariff filed with the
Commission for intrastate service within Pennsylvania and operates no public
utility facilities within the Commonwealth.
8. PSEG Nuclear is a subsidiary of PSEG Power LLC ("PSEG Power"). PSEG
Power is a wholly-owned subsidiary of Public Service Enterprise Group that will
own all of the shares of PSEG Nuclear, PSEG Fossil LLC and PSEG Energy Resources
& Trade LLC. PSEG Nuclear will own all of PSE&G's nuclear facilities and will
operate those nuclear facilities for which PSE&G is currently the operator. PSEG
Nuclear will engage only in wholesale sales of electric power and, therefore,
will not be a public utility within the meaning of the Public Utility Code.
9. All of the Applicants have turned over operational control of their
electric transmission systems to PJM, an independent system operator ("ISO"),
which performs that function for a control area comprising all or parts of the
states of Pennsylvania, New Jersey, Maryland, Delaware and Virginia and the
District of Columbia.
7
<PAGE>
III. THE FACILITIES INVOLVED IN THE
PROPOSED TRANSACTIONS
10. Peach Bottom has two operating nuclear power plants (referred to
as Units 2 and 3).3/ Each unit has a design electrical capacity of 1093 MW and
consists of a General Electric boiling water reactor, a General Electric steam
turbine and other associated equipment.
11. PECO and PSE&G each have a 42.49% ownership share in Peach Bottom
and, as previously indicated, ACE and Delmarva each have a 7.51% ownership share
in Peach Bottom. Pursuant to the Owners' Agreement among PECO, PSE&G, ACE and
Delmarva, PECO is the operator of Peach Bottom. PECO also holds the Facility
Operating Licenses issued by the Nuclear Regulatory Commission for Peach Bottom.
IV. SUMMARY OF THE TRANSACTIONS FOR WHICH APPROVALS ARE REQUESTED
A. Sale By ACE To PECO And PSEG Nuclear
12. On September 27,1999, a Purchase Agreement was executed among
ACE, PECO and PSEG Power 4/ (the "ACE Agreement") wherein ACE agreed to sell,
inter alia, all of its interest in and to the real and personal property
comprising Peach Bottom, the nuclear fuel supplies for Peach Bottom and ACE's
qualified and non-qualified decommissioning funds for Peach Bottom, as more
- ---------------
3/ Peach Bottom Unit 1 was a small gas-cooled reactor that has been retired.
4/ As permitted by the agreement, PSEG Power intends to assign to PSEG Nuclear
its rights to purchase and receive title to the ACE Assets.
8
<PAGE>
fully described in Sections 2.1 and 2.2 of the ACE Agreement (the "ACE Assets"),
and PECO and PSEG Power each agreed to purchase one-half of the ACE Assets, such
that, at closing on the purchase, each will acquire an additional 3.755%
undivided interest in Peach Bottom. Also, PECO and PSEG Power agreed to assume
certain liabilities and obligations of ACE with respect to Peach Bottom,
including, inter alia, all of ACE's liabilities and obligations for
decommissioning Peach Bottom, as more fully described in Sections 2.3 and 2.4 of
the ACE Agreement. A copy of the ACE Agreement is provided as Exhibit A to this
Application.
13. Upon the terms and conditions set forth in the ACE Agreement, PECO
and PSEG Power each agreed to pay to ACE: (1) the sums of $2,550,000, or a total
purchase price of $5,100,000, and (2) 3.755% of the net book value, as of the
date of closing, of the nuclear fuel supplies for Peach Bottom, as more fully
described in Sections 3.2-3.5 of the ACE Agreement.
14. Closing on the sale of the ACE Assets to PECO and PSEG Nuclear
will occur five business days after the satisfaction or waiver of all conditions
to closing set forth in Sections 8.1(a), 8.2(a), 8.3(a) and 8.4(a) of the ACE
Agreement. Among the conditions precedent to closing are the receipt by PECO and
PSEG Nuclear of required regulatory approvals, as explained in Sections 5.3(b)
and 6.3(b) of the ACE Agreement and as set forth in Schedules 5.3(b) and 6.3(b)
thereto.
9
<PAGE>
B. Sale By Delmarva To PECO And PSEG
15. On September 27, 1999, a Purchase Agreement was executed among
Delmarva, PECO and PSEG Power 5/ (the "Delmarva Agreement") wherein Delmarva
agreed to sell, inter alia, all of its interest in and to the real and personal
property comprising Peach Bottom, the nuclear fuel supplies for Peach Bottom and
Delmarva's qualified and non-qualified decommissioning funds for Peach Bottom,
as more fully described in Sections 2.1 and 2.2 of the Delmarva Agreement (the
"Delmarva Assets"), and PECO and PSEG Power each agreed to purchase one-half of
the Delmarva Assets, such that, at closing on the purchase, each will acquire an
additional 3.755% undivided interest in Peach Bottom. Also, PECO and PSEG Power
agreed to assume certain liabilities and obligations of Delmarva with respect to
Peach Bottom, including, inter alia, all of Delmarva's liabilities and
obligations for decommissioning Peach Bottom, as more fully described in
Sections 2.3 and 2.4 of the Delmarva Agreement. A copy of the Delmarva Agreement
is provided as Exhibit B to this Application.
16. Upon the terms and conditions set forth in the Delmarva
Agreement, PECO and PSEG Power each agreed to pay to Delmarva: (1) the sums of
$2,550,000, or a total purchase price of $5,100,000, and (2) 3.755% of the net
book value, as of the date of closing, of the nuclear fuel supplies for Peach
Bottom, as more fully described in Sections 3.2-3.5 of the Delmarva Agreement.
- ---------------
5/ As permitted by the agreement, PSEG Power intends to assign to PSEG Nuclear
its rights to purchase and receive title to the Delmarva Assets.
10
<PAGE>
17. Closing on the sale of the Delmarva Assets to PECO and PSEG
Nuclear will occur five business days after the satisfaction or waiver of all
conditions to closing set forth in Sections 8.1(a), 8.2(a), 8.3(a) and 8.4(a)
of the Delmarva Agreement. Among the conditions precedent to closing are the
receipt by PECO and PSEG Nuclear of required regulatory approvals, as explained
in Sections 5.3(b) and 6.3(b) of the Delmarva Agreement and as set forth in
Schedules 5.3(b) and 6.3(b) thereto.
C. REGULATORY APPROVALS, OTHER THAN THOSE REQUESTED HEREIN
18. In addition to the approvals requested herein, the following
principal regulatory approvals will be required in connection with the sale of
the ACE and Delmarva Assets:
a. Nuclear Regulatory Commission: Consent to a transfer of
control, in accordance with the Facility Operating Licenses for Peach Bottom,
and approval of amendments to the Facility Operating Licenses to reflect a
change in ownership.
b. Federal Energy Regulatory Commission: Approval under Section
203 of the Federal Power Act for approval of PECO's and PSEG Nuclear's
acquisition of FERC jurisdictional assets.
c. U.S. Department of Justice and Federal Trade Commission:
Filing under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the
termination or expiration of applicable waiting periods.
11
<PAGE>
d. Securities and Exchange Commission: Approval under Section
12 of the Public Utility Holding Company Act, which is required because of
Conectiv's status as a registered public utility holding company.
e. New Jersey BPU: Approval of the sale of assets under state
law and, because there is to be a transfer to a PSE&G affiliate that is an
Exempt Wholesale Generator, specified findings under Section 32(c) of the Public
Utility Holding Company Act of 1935, 15 U.S.C. sections 79z-5a(c).
f. Delaware Public Service Commission, Maryland Public Service
Commission and Virginia State Corporation Commission: Specified findings under
Section 32(c) of the Public Utility Holding Company Act of 1935, 15 U.S.C.
sections 79z-5a(c).
V. REQUEST FOR APPROVALS UNDER SECTION 1102
19. Section 1102(a)(3) requires Commission approval, evidenced by a
Certificate of Public Convenience:
For any public utility or an affiliated interest of a
public utility as defined in Section 2101 . . . to
acquire from, or transfer to,. . . any person or
corporation ... by any method or device whatsoever any
tangible or intangible property used or useful in the
public service.
20. Exhibit C, which accompanies this Application, sets forth, by
property account, a statement of the ACE Assets to be transferred by ACE to PECO
and PSEG Nuclear showing: (a) the book cost; (b) the original cost when first
12
<PAGE>
devoted to public service (if different from (a)); and (c) the associated
accrued depreciation with respect to depreciable assets, as of July 31, 1999.
21. Exhibit D, which accompanies this Application, sets forth, by
property account, a statement of the Delmarva Assets to be transferred by
Delmarva to PECO and PSEG Nuclear showing: (a) the book cost; (b) the original
cost when first devoted to public service (if different from (a)); and (c) the
associated accrued depreciation with respect to depreciable assets, as of July
31, 1999.
22. Exhibit E contains certified copies of Board of Directors'
resolutions authorizing the execution and delivery of the ACE Agreement.
23. Exhibit F contains certified copies of Board of Directors'
resolutions authorizing the execution and delivery of the Delmarva Agreement.
24. All annual reports, tariffs, certificates and applications filed
with the Commission by ACE, Delmarva, PECO and PSE&G are incorporated herein by
reference.
25. The transfer of the ACE Assets and Delmarva Assets to PECO and
PSEG Nuclear will have no effect on the rates or service of Pennsylvania retail
electric customers. As previously explained, ACE, Delmarva, PSE&G and PSEG
Nuclear do not furnish retail electric service in Pennsylvania. PECO provides
electric service in Pennsylvania. However, under the terms of the Electricity
Generation Customer Choice and Competition Act (66 Pa.C.S. sections 2801-2812)
(the "Electric Competition Act") and the Joint Petition For Full Settlement of
13
<PAGE>
PECO's Restructuring Proceeding, customers are given the opportunity to purchase
electric generation from suppliers other than PECO; PECO's rates for generation
are capped until December 31, 2010; and, after 2010, PECO will supply
generation to customers who do not or cannot choose an alternative supplier at
market-based prices rather than cost-based rates, pursuant to Section 2807(e)(3)
of the Electric Competition Act.
26. ACE, Delmarva, PECO and PSE&G request that the Commission issue
its approvals, under Section 1102(a)(3), as evidenced by Certificates of Public
Convenience, for the sale and transfer by ACE and Delmarva of the ACE Assets and
the Delmarva Assets, respectively, to PECO and PSEG Nuclear pursuant to the
terms of the ACE and Delmarva Agreements. In addition, because ACE and Delmarva
will own no interest in Peach Bottom after the transfers to PECO and PSEG
Nuclear are consummated, they request approval under Section 1102(a)(2) to
abandon the Certificates of Public Convenience issued at Application Docket Nos.
96379 and 96380, respectively, authorizing them to hold ownership interests in
Peach Bottom.
27. The proposed transfer is in the public interest for the following
principal reasons:
a. The transfer will assure continuity of ownership by the
existing majority owners of Peach Bottom or their affiliates under and pursuant
to the terms of the existing Owners' Agreement.
b. The transfer will assure the continued safe and reliable
operation of Peach Bottom by the existing NRC-licenced operator.
14
<PAGE>
c. The transfer will assure that the entire ownership interest
in Peach Bottom is retained by strong, financially sound and well-managed
entities that are fully capable of providing the funds necessary for the safe,
reliable, reasonable and efficient operation and eventual decommissioning of
Peach Bottom.
VI. THE PROPOSED TRANSACTONS WILL NOT RESULT IN
ANTICOMPETITIVE OR DISCRIMINATORY CONDUCT
28. Section 2811(e)(1) provides, in pertinent part, as follows:
In the exercise of authority the commission otherwise
may have to approve ... the acquisition or disposition
of assets of other public utilities or electricity
suppliers, the commission shall consider whether the
proposed ... acquisition or disposition is likely to
result in anticompetitive or discriminatory conduct,
including the unlawful exercise of market power, which
will prevent retail electricity customers in this
Commonwealth from obtaining the benefits of a properly
functioning and workable competitive retail electricity
market.
29. The proposed acquisition for which approval is sought
herein will have no adverse effect on competition or result in any unlawful
exercise of market power and, therefore, the Commission should make the findings
necessary under Section 2811(e)(2) for approval of the acquisition. Exhibit G
to this Application is the Affidavit and accompanying schedules of Ms. Bruce
Sloan, a principal in the firm of PHB Hagler Bailly, which explains that the
proposed transactions will have no adverse impact on competition. Ms. Sloan's
market power analysis demonstrates that the proposed transaction will not
significantly increase market concentration and will not create market power
concerns within the relevant geographic markets.
15
<PAGE>
30. Ms. Sloan's analysis is also being submitted to the FERC in
support of the Applications being filed under Section 203 of the Federal Power
Act for approval of the transfers of FERC jurisdictional facilities from ACE and
Delmarva to PECO and PSEG Nuclear as part of the proposed transactions.
VII. EXPRESS AFFIRMATION OF APPROVAL TO TRANSFER
DECOMMISSIONING TRUST FUND BALANCES
31. Under the ACE and Delmarva Agreements and subject to necessary
approvals, ACE and Delmarva will transfer to PECO and PSEG Nuclear the balances
in their respective decommissioning trust funds established for Peach Bottom 2
and 3. These balances will be transferred to PECO and PSEG Nuclear in the same
proportions as the transfer of ACE and Delmarva's interests in Peach Bottom
itself (i.e., the balances will be divided equally between PECO and PSEG
Nuclear). The decommissioning trusts are administered by third-party trustees,
and any transfers of fund balances must be made by the trustee. In order to
assure the trustees that ACE and Delmarva have any and all approvals that might
be necessary to direct the trustees to transfer the trust fund balances to PECO
and PSEG Nuclear, the Applicants request an explicit statement approving the
transfer by ACE and Delmarva of their respective nuclear decommissioning trust
fund balances as set forth herein and in the ACE and Delmarva Agreements.
16
<PAGE>
VII. NOTICE
32. Notice to be provided by the parties is governed by 52 Pa. Code
section 5.14(b)(7). In accordance with that regulation, the Applicants request
that, promptly upon its receipt of this Application, the Commission: (1) cause
notice hereof to be published in the Pennsylvania Bulletin; and (2) direct the
Applicants as to the additional forms of notice, if any, that are required.
33. Contemporaneously with the filing of this Application, copies
hereof will be served upon the Commission's Office of Trial Staff, the
Pennsylvania Office of Consumer Advocate and the Pennsylvania Office of Small
Business Advocate. In addition, copies hereof are being submitted to the
Securities and Exchange Commission, the New Jersey BPU, the Delaware Public
Service Commission, the Maryland Public Service Commission and the Virginia
State Corporation Commission.
VIII. CONCLUSION
WHEREFORE, for the reasons set forth above, Atlantic City Electric
Company, Delmarva Power & Light Company, PECO Energy Company and Public Service
17
<PAGE>
Electric & Gas Company request that the Commission approve this Application and
grant the relief requested herein.
/s/ Karen Bab /s/ Karen Bab
- ---------------------------------- ----------------------------------
Karen Bab, Esquire Karen Bab, Esquire
Atlantic City Electric Company Delmarva Power & Light Company
c/o Conectiv, Inc. c/o Conectiv, Inc.
800 King Street 800 King Street
P.O. Box 231 P.O. Box 231
Wilmington, DE 19899 Wilmington, DE 19899
(302) 429-3757 (302) 429-3757
(302) 429-3801 (Fax) (302) 429-3801 (Fax)
Counsel for Atlantic City Electric Counsel for Delmarva Power & Light
Company Company
/s/ Anthony C. DeCusatis /s/ Richard P. Bonnifield
- ---------------------------------- ----------------------------------
Paul R. Bonney, Esquire Richard P. Bonnifield, Esquire
Ward L. Smith, Esquire Public Service Electric and Gas Company
PECO Energy Company 80 Park Plaza -- T5G
2301 Market Street P.O. Box 570
P.O. Box 8699 Newark, NJ 07101-0570
Philadelphia, PA 19101-8699 (973) 430-6441
(215) 841-4252 (973) 430-5983 (Fax)
(215) 841-3389 (Fax) Counsel for PSE&G
Thomas P. Gadsden, Esquire
Anthony C. DeCusatis, Esquire
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA 19103-2921
(215) 963-5234
(215) 963-5299 (Fax)
Counsel for PECO Energy Company Dated: December 16, 1999
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<PAGE>
State of Delaware :s
:s
:s
County of New Castle :s
AFFIDAVIT
Thomas S. Shaw being duly affirmed according to law, deposes and says that he is
an Executive Vice President of Delmarva Power & Light Company and Atlantic City
Electric Company (the "Companies"); that he is authorized to and does make this
Affidavit for the Companies; and that the facts set forth in the foregoing
Application are true and correct to the best of his knowledge, information and
belief and he expects the Companies to be able to prove the same at any hearing
hereof.
/s/ Thomas S. Shaw
-----------------------
Sworn to and subscribed before me
this 10th day of December, 1999.
/s/ Julia P. Rully
- ---------------------------------
(My commission expires 4/30/2001)
<PAGE>
STATE OF NEW JERSEY :
:
COUNTY OF ESSEX :
AFFIDAVIT
R. EDWIN SELOVER being duly sworn according to law, deposes and says
that he is Senior Vice President and General Counsel of Public Service Electric
and Gas Company (the "Company"); that he is authorized to and does make this
Affidavit for the Company; and that the facts set forth in the foregoing
Application are true and correct to the best of his knowledge, information and
belief and he expects the Company to be able to prove the same at any hearing
hereof.
/s/ R. Edwin Selover
----------------------------------------
Sworn and subscribed to before me
this 9th day of December, 1999.
/s/ Jacquelyn G. Coyle
- ---------------------------------
(My commission expires July 22, 2002)
<PAGE>
TABLE OF EXIHBITS
Exhibit A ACE Agreement
Exhibit B Delmarva Agreement
Exhibit C Statement of ACE Assets by Property Accounts
Exhibit D Statement of Delmarva Assets by Property Accounts
Exhibit E Certified Board Resolutions Re: ACE Agreement
Exhibit F Certified Board Resolutions Re: Delmarva Agreement
Exhibit G Affidavit of Bruce M. Sloan
<PAGE>
Commonwealth of Pennsylvania :
:
County of Philadelphia :
AFFIDAVIT
Thomas P. Hill, Jr. being duly sworn (affirmed) according to law,
deposes and says that he is Vice President, Regulatory and External Affairs, of
PECO Energy Company (the "Company"); that he is authorized to and does make this
Affidavit for the Company; and that the facts set forth in the foregoing
Application are true and correct to the best of his knowledge, information and
belief and he expects the Company to be able to prove the same at any hearing
hereof.
/s/ Thomas P. Hill, Jr.
----------------------------------------
Sworn and subscribed to before me
this 13th day of December, 1999.
/s/ Rosemarie V. Sava
- ---------------------------------
(My commission expires April 17, 2001)
DELMARVA POWER & LIGHT COMPANY
APPLICATION FOR APPROVAL OF A PLAN
FOR FUNCTIONAL SEPARATION OF GENERATION
PURSUANT TO
VIRGINIA ELECTRIC UTILITY
RESTRUCTURING ACT
February 4, 2000
BEFORE THE
VIRGINIA STATE CORPORATION COMMISSION
<PAGE>
BEFORE THE COMMONWEALTH OF VIRGINIA
STATE CORPORATION COMMISSION
APPLICATION OF DELMARVA POWER & )
LIGHT COMPANY UNDER THE VIRGINIA )
ELECTRIC UTILITY RESTRUCTURING ACT ) CASE No. PUE __________
AND FOR OTHER FINDINGS )
APPLICATION OF
DELMARVA POWER & LIGHT COMPANY
Delmarva Power & Light Company ("Delmarva" or the "Company") hereby
respectfully seeks approval pursuant to section 56-590.B of the Code of
Virginia, of a plan for the functional separation of the Company's generation
activities from its transmission and distribution activities (the "Plan") and
necessary approvals for the implementation of the Plan in accordance with the
Virginia Electric Utility Restructuring Act ("Restructuring Act").
As explained in more detail below, the Plan involves complete
divestiture of Delmarva's generation facilities, some of which would be sold to
unaffiliated parties and the remainder of which are proposed to be transferred
to an affiliate. In order to effectuate the Plan, Delmarva also asks for certain
findings relating to Delmarva and its affiliate, Atlantic City Electric Company
("ACE"), that are necessary under the Public Utility Holding Company Act of
1935, as amended ("PUHCA") in order to sell or transfer these generation
facilities to an Exempt Wholesale Generator ("EWG").
Delmarva further requests findings that Delmarva's membership in the
PJM Interconnection, LLC, meets the requirements of Virginia Code sections
<PAGE>
56-577.A.1 and 56-579 relating to the transfer of management and control of
utility transmission facilities to regional transmission entities by January 1,
2001.
Delmarva further requests that the Virginia State Corporation
Commission ("Commission") exercise its discretion pursuant to Virginia Code
section 56-249.6 to waive the requirements of filing fuel rate adjustments for
the recovery of fuel costs, including purchase power costs, on the grounds that
Delmarva's fuel costs can be reasonably recovered through the rates and charges
established by the Commission in conjunction with the Plan.
The Plan provides for the divestiture of Delmarva's generation
facilities in three Phases. Therefore, Delmarva asks that the Commission enter
orders from time to time as necessary to authorize the conveyances described
herein. In particular, Delmarva asks that orders be entered on or before March
15, 2000, authorizing the sale to unaffiliated purchasers of its interests in
nuclear baseload generation facilities, with such orders containing the PUHCA
findings that are necessary in order to sell such generation facilities to an
EWG.
I. PARTIES AND OTHER RELATED COMPANIES.
1. Delmarva is a Delaware corporation and a Virginia public service
corporation that provides electric service to approximately 21,500 retail
customers and one wholesale customer in Virginia's two Eastern Shore counties.
Delmarva has approximately 445,000 additional electric service customers located
in Delaware and Maryland. Delmarva also provides natural gas service to
approximately 106,000 customers located in Delaware. Delmarva's Virginia
customers produce less than 3% of Delmarva's annual electric revenues. During
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<PAGE>
the period, October 1, 1998 - September 30, 1999, Delmarva's Virginia retail
load peaked on July 5, 1999, at approximately 84.8 MW, or about 2.6% of the
3,255 MW total system peak for Delmarva on that day. Annual energy usage by
Virginia retail customers was 367,154 MWH, or about 2.7% of Delmarva's system
annual energy usage of 13,657,098 MWH. Delmarva is a wholly owned subsidiary of
Conectiv. Delmarva is also a member of the PJM Interconnection, LLC, ("PJM")
which is an Independent System Operator as defined by the Federal Energy
Regulatory Commission ("FERC"). PJM administers a generation bidding,
dispatching and scheduling program and provides interstate transmission service
for power generated within and/or transmitted across all or portions of
Pennsylvania, New Jersey, Maryland and the Delmarva peninsula.
2. Conectiv is a Delaware corporation and a registered holding
company under PUHCA. Conectiv also owns ACE, Conectiv Resource Partners, Inc.
("CRP") and a number of other corporations with non-regulated businesses. CRP
employees provide various services for Conectiv-owned companies, including
financial, accounting, legal, human resources, and other administrative
services.
3. ACE is a New Jersey corporation whose retail utility activities
are regulated by the New Jersey Board of Public Utilities. ACE has approximately
488,800 electric customers located in the southern one-third of New Jersey. ACE
is also a member of PJM.
II. BACKGROUND.
A. THE LAW.
4. The Restructuring Act requires that, prior to January 1, 2001,
each Virginia electric utility file a plan for the functional separation of its
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<PAGE>
generation activities from its distribution and transmission activities. The
Commission is to review each plan. Section 56-590(B).
5. The Restructuring Act provides in sections 56-577.A.1 and 56-579
for the transfer of management and control of utility transmission facilities to
regional transmission entities by January 1, 2001.
6. Section 56-249.6 provides the Commission with discretion to waive
the requirements of filing fuel rate adjustments for the recovery of fuel costs,
including purchase power costs, if it makes findings that the utility's fuel
costs can be reasonably recovered through the rates and charges established by
the Commission.
7. Section 32 of PUHCA, 15 U.S.C. section 79z-5a, contains a variety
of provisions relating to EWGs, which are, by definition, exclusively in the
business of owning and/or operating "eligible facilities" and selling the
electric energy from such facilities at wholesale. Because they sell electricity
at retail, Delmarva and ACE cannot be EWGs, and their existing power plants are
not "eligible facilities" under PUHCA.
8. Under PUHCA, the power plants of Delmarva and ACE could become
"eligible facilities" upon the sale or transfer to an EWG if certain findings
are made; namely that:
allowing such facility to be an eligible facility a) will
benefit consumers; b) is in the public interest, and c) does
not violate state law. 15 U.S.C. section 79z-5a(c).
9. A special PUHCA rule within 15 U.S.C. section 79z-5a(c) applies
to utilities that are members of a registered utility holding company group,
such as Delmarva and ACE. That special rule requires that the EWG findings be
4
<PAGE>
obtained from each state commission with rate-making authority over any utility
within the holding company group for any facility held as of 1992 by any utility
in the group. This means that EWG findings must be sought from the Commission
even for facilities currently owned by ACE that are to be sold to an EWG. The
same EWG findings are being sought in Delaware, Maryland and New Jersey.
B. THE PERTINENT FACTS.
10. In anticipation of retail electric competition, Conectiv,
Delmarva, and ACE have developed a corporate strategy that focuses Delmarva and
ACE on the core utility business of transmitting and distributing energy to
retail and wholesale customers. Under this strategy, Delmarva and ACE would
retain their transmission and distribution facilities, continue to read meters
and bill customers, and, at least during the transition to full competition in
the retail electric generation business, be the provider of last resort to
customers who do not choose another electric supplier. Delmarva and ACE would
exit the business of owning and operating power plants.
11. The corporate strategy also classifies the existing power plants
as "strategic" and "non-strategic," depending on the perceived ability to
operate them profitably. "Non-strategic" facilities include the nuclear and
fossil units in which Delmarva and ACE have only small minority interests and
base-load coal or oil units whose economic value may be driven largely by
economies of scale. "Strategic facilities" are gas- or oil-fired units that are
"load-following" units, (i.e., units that can be fired-up and shutdown
relatively rapidly to match consumer demand for electricity). The corporate
strategy is to sell the non-strategic facilities to unaffiliated companies. The
strategic facilities would be transferred to an affiliate that would be part of
5
<PAGE>
a group operating in largely unregulated markets, including electric energy
trading, oil and gas trading, and competitive retail electric and gas sales
markets.
12. On September 27, 1999, Delmarva executed contracts with PECO
Energy Company and PSEG Power, LLC to sell its nuclear interests in the Peach
Bottom Nuclear Generating Station located in York County, Pennsylvania, and the
Salem Nuclear Power Station located in Salem County, New Jersey, subject to
obtaining necessary regulatory approvals. The sales include the nuclear
generation units themselves, nuclear decommissioning trust fund balances,
nuclear fuel, and the associated interests,in land and other equipment,
including the small turbine at Salem that is primarily used for startup and
on-site power needs. It is Delmarva's understanding that on or prior to closing,
PSEG Power, LLC will designate a subsidiary, PSEG Nuclear, LLC, to be the actual
purchaser of the interests.
13. Delmarva currently owns 7.51% of Peach Bottom and 7.41% of Salem,
(representing 173 MW and 172 MW of capacity, respectively). The sales agreements
also provide that Delmarva's affiliate, ACE, will sell its 7.51% share of
Peach Bottom and 7.41% share of Salem. One-half of each of those interests in
Peach Bottom would be sold to PECO Energy Company ("PECO"), and one-half to PSEG
Power, LLC. All of the Delmarva and ACE interests in Salem would be sold to PSEG
Power, LLC. In addition, ACE holds a 5% share in the Hope Creek Nuclear Station
located in Salem County, New Jersey. That 5% interest would also be sold to PSEG
Power, LLC.
14. Under the sales agreements, the purchase price for Delmarva's
interest in Salem and Peach Bottom is approximately $4.1 million and $5.1
million respectively. In addition, the purchasers will compensate Delmarva for
6
<PAGE>
Delmarva's share of the net book value of the nuclear fuel at each facility as
of the closing date. Under the sales agreements, PECO and PSEG Power, LLC, will
assume future decommissioning and environmental liabilities. The net loss
(pre-tax) expected from the sale of the Delmarva interests (including
transactional costs) in the Nuclear Facilities relative to book value is
approximately $252.3 million, but that number cannot be precisely quantified at
this time because transaction costs and adjustments to the purchase price and
book value will not be known until closing.
15. On January 18, 2000, Delmarva and ACE executed contracts with NRG
Energy, Inc., a non-utility affiliate of the Minnesota-based utility, Northern
States Power Company, which contracts, among other things, provide for the sale
of Delmarva's Indian River and Vienna powerplants located in Delaware and
Maryland, respectively; Delmarva's minority interests in the Keystone and
Conemaugh coal plants located in Pennsylvania; the unimproved land acquired by
Delmarva for the once-planned construction of a coal-fired powerplant in
Dorchester County, Maryland; and certain facilities and interests owned by ACE,
including ACE's interests in the Keystone and Conernaugh plants. The sales price
for the assets owned by Delmarva was $621.6 million, subject to adjustments for
certain projected capital costs incurred prior to closing and changes in
inventory levels. The net gain (net of transactional costs and pre-tax) expected
from the sale of the Delmarva interests in the Fossil Facilities relative to
book value is approximately $249.5 million, but that number cannot be precisely
quantified at this time because transaction costs and adjustments to the
purchase price and book value will not be known until closing. Associated with
the sales contracts are various related agreements involving, among other
7
<PAGE>
things, the interconnection of the powerplants to the Delmarva or ACE systems, a
six month transitional services agreement and a term sheet for a power purchase
agreement to be executed between Delmarva and NRG Energy, Inc. that will provide
Delmarva with 500 MW of firm energy (deliverable in every hour) from the date of
closing the Fossil Facilities transactions through the end of 2005. It is
Delmarva's understanding that on or prior to closing, NRG Energy, Inc. will
assign its interests to several subsidiaries or affiliates such that each plant
or share of a plant will be owned by a separate legal entity, who will be the
actual purchaser of the interests.
16. For many years Delmarva has been a member of the PJM power pool.
That power pool was reorganized in 1997 as the PJM Interconnection, LLC. PJM
operates as a single transmission control area with free-flowing
interconnections serving 23 million customers of eight mid-Atlantic utilities,
including Delmarva. By order dated November 25, 1997, the FERC approved PJM's
open access transmission tariff. In addition to its function as an independent
system operator (ISO), PJM operates a competitive energy market through the PJM
Interchange Energy Market, as described in the FERC order.
III. THE FUNCTIONAL SEPARATION PLAN.
A. PROPOSED DIVESTITURES.
17. Delmarva proposes to separate its generation function from its
transmission and distribution function through divestiture. If approved, it is
expected that the divestiture will be complete in the second quarter 2000 and
will occur in three phases: 1) sales to third parties (PECO and PSEG Nuclear) of
minority interests in Peach Bottom and Salem (the "Nuclear Facilities") on or
about March 31, 2000 ("Phase 1"); 2) sales to third parties (NRG Energy, Inc.)
8
<PAGE>
of its minority interests in the Keystone and Conemaugh coal-fired plants and
its 100% interests in the Vienna and Indian River base-load fossil units (the
"Fossil Units") ("Phase II"); and 3) transfer of intermediate and peak-load
facilities to an affiliate ("Phase III").
18. Delmarva currently owns 2,849 MW of capacity, of which 1,455 is
planned for sale to unrelated entities in Phases I and II. The remaining 1,394
MW of capacity would be transferred in Phase III of the Plan to an affiliate
after seeking approval of this Commission in a separate filing under the
Affiliate Act. That Affiliate Act filing will also identify and describe the
proposed transfer to an affiliate of certain intermediate-term and short-term
power purchase contracts that were entered into with unaffiliated parties as
part of Delmarva's wholesale trading activities.
19. The Plan results in a functional separation between employees who
work at the generation plants and employees performing transmission and
distribution functions. Employees at the generation plants will become employees
of the companies to which the plants are sold or transferred.
20. CRP employees will generally be retained by CRP and will continue
to provide services including legal, accounting, financial, fuel procurement and
energy trading services for the Conectiv holding company group, including
Delmarva and the affiliate(s) to which certain of the generation facilities will
be transferred. It is expected that, at some point within the period that rates
are capped, current CRP employees who perform functions primarily associated
with electric generation and supply (e.g., the trading desk employees, fuel
procurement employees) will be transferred out of CRP to an affiliated entity.
9
<PAGE>
B. RATE PROPOSALS.
(i) Introduction.
21. Delmarva's Plan reduces and stabilizes rates for Virginia retail
electric customers. For each of the first two Phases to close, Delmarva proposes
that there be a base rate decrease and that fuel rates be frozen. When the final
Phase closes, Delmarva proposes an additional rate decrease so there will be an
overall revenue decrease of 2.58%. The rates would stay in effect until at least
January 1, 2004, except for small, scheduled, annual increases in the fuel
rates. Each of the sales and transfers will require approvals from multiple
regulatory authorities. In the event that one or more such approvals is delayed
with respect to the sale of facilities to third parties, it is possible that the
Phase III transfer of generation facilities to an affiliate could occur prior to
implementation of one of the other phases. Delmarva's rate proposals as
described below do not require that the Phases close in I-II-III order. As each
Phase closes, there will be a rate decrease as described with respect to the
Phase that closes. Only two of these reductions would become effective, because,
at the closing of whichever Phase is last to close ("Total Divestiture"), the
Plan calls for a different set of base and fuel rates (which yield the same
overall result) than would result from implementing the base rate reductions in
all three Phases.
22. Because of the rate decreases in the Plan, no separate tracking
of "stranded costs" or net losses or net profits associated with the sale or
transfer of generation facilities will be necessary.
10
<PAGE>
23. The following illustrates the rate proposals described in more
detail below:
<TABLE>
<CAPTION>
Base Rates Fuel Rates Total Revenues
<S> <C> <C> <C>
Phase I Class decreases of Frozen Decrease from each
Closing of Sales of 0.88% - 1.03% Class of 0.70%.
Nuclear Facilities
Phase II Class decreases of Frozen Decrease from each
Closing of Sales of 1.07% - 1.33% Class of 0.90%
Fossil Facilities
Phase III Class decreases of Frozen Decrease from each
Affiliate Transfer of 1.19% - 1.49% Class of 1.00%
Remaining Facilities
Capped Rates Going Class decreases of Reset to Energy Decrease from each
Forward After Total 14.75% - 34.42% Price of PECO Class of 2.58%
Divestiture (All Power Purchase
Three Phases Agreement; 64.01%
Closed) above current fuel
rate but offset by
Base Rate
Reductions
</TABLE>
(ii) Base Rate Proposal With Respect
To Closing of Phases I, II, and III.
24. Delmarva proposes that, as of the first day of the month
beginning at least 15 days after closing (the "Effective Date") of any of the
three Phases, Virginia retail revenues be reduced as follows: for Phase I, the
overall revenue reduction for each class of customer would be 0.7%; for Phase
II, the overall revenue reduction for each class of customer would be an
additional 0.9%; and for Phase III, the overall revenue reduction for each class
of customer would be an additional 1.0%. In each instance, the reductions would
be with proration (based on consumption on and after the Effective Date) and,
across rate classes, would be pro rata based on revenues from each rate class.
See Appendix H, Att. 3, page 1, line 9.
11
<PAGE>
(iii) Fuel Rate Proposals Effective with
the First Closing of Any Phase.
25. Delmarva proposes that, as of the Effective Date after the
closing of the transactions involving any Phase of the Plan, Virginia retail
fuel rates be frozen at the level of actual fuel costs for the 12-month period
ending at least 30 days prior to the Effective Date. Any deferred fuel balance
as of the last day of the above-referenced 12-month period would continue to be
deferred until the date of Total Divestiture. Approximately 30 days after the
date of Total Divestiture, a final "true-up" of the deferred fuel balance would
be computed for recovery from or crediting to ratepayers over a period to be
determined by the Commission.
(iv) Base and Fuel Rate Proposals Effective upon
the Date of Total Divestiture.
26. In order to establish a reasonable degree of price stability for
Virginia ratepayers after Total Divestiture, Delmarva proposes as part of its
Plan to establish a Virginia fuel rate that is equal to the energy charge of a
recently executed, six and one-half year power purchase contract that is larger
than Delmarva's entire Virginia load, available every hour on an entirely firm
basis and backed by the 30,500 MW of capacity owned by PECO.
27. As of the first month starting at least 15 days after Total
Divestiture, the Virginia retail fuel rate would be set to equal the energy
charges set forth within that PECO power purchase agreement ("PECO PPA"). The
PECO PPA contains a fixed price per MWH with pre-determined increases scheduled
12
<PAGE>
under a fixed price escalator each year.1 Base rates will be simultaneously
reset such that the aggregate level of charges to customers yields a 2.58%
overall revenue decrease compared with the existing base rates and the fuel
rates that were frozen at the closing of the first set of assets to be sold or
transferred under the Plan. See Appendix H, Att. 3, page 2, line 16.
28. Under the Plan, the PECO PPA energy charge is used as a proxy
price for the Virginia fuel rate and to establish a schedule of future fuel rate
charges; but that PECO PPA energy charge should not be viewed as Delmarva's
actual cost for serving Virginia's retail load. Because the PECO PPA is a 100%
load factor contract, in order to calculate Delmarva's costs to serve Virginia's
retail load based on the PECO PPA, the energy charges would need to increased by
at least 50% under a formula that takes into account the actual Virginia retail
load factor, offset in part by sales back to PJM of offpeak energy not used by
Virginia customers, and grossed-up to reflect losses. Under the Plan, there
would be no need to establish such a formula or track PJM interchange purchases
and sales -- instead, the Virginia fuel rate would be set to equal the PECO PPA
energy charges and base rates decreased to offset the difference between those
energy charges and the frozen fuel rates and to provide a total bill reduction
of 2.58%.
29. Delmarva's Plan contemplates that the above-described base and
fuel rates would be frozen until January 1, 2004, except that the modest
escalation in PECO PPA energy charges would be reflected each year in fuel
rates.
- ---------------
1 The PECO PPA provides 243 megawatts ("MW") of capacity and 1,835,184
megawatthours ("MWH") of energy in 2000. There are scheduled increases in
the amount of capacity and energy purchased each year through the May 31,
2006 termination date. The price is initially set at $33.90 per MWH (with
no separately stated capacity charge) and slowly escalates to $37.07 per
MVM by 2006. The power purchase agreement with PECO has been filed with the
FERC and is to become effective on January 1, 2000. The agreement requires
PECO to provide and Delmarva to purchase firm energy "around-the-clock,"
(i.e., 24 hours a day at a 100% load factor). The electric energy provided
is not tied to any particular plant owned by PECO and, thus, is backed by
all of PECO's generation assets.
13
<PAGE>
30. During this period until January 1, 2004, consistent with the
Commission's discretionary power under section 56-249.6, Delmarva would not make
filings to recover fuel costs, because Delmarva's rates and charges would be
deemed to be sufficient to reasonably recover its fuel costs. Delmarva would
also request that it not be required to file fuel cost information during this
period beyond identification of annual quantities of Virginia retail sales and
the PECO PPA energy costs.
C. FUTURE FILINGS.
31. Phase III will also require entering into a number of contractual
relationships between Delmarva and one or more affiliates, including: the
transfer of the generation facilities; the assignment to an affiliate of certain
purchase and sales agreements currently between Delmarva and unaffiliated
third-parties; and interconnection and easement agreements between Delmarva and
the affiliate that would permit the affiliate's power to be transmitted across
Delmarva's system. There may also be power sales agreements between Delmarva and
an affiliate. These transactions will be the subject of a subsequent Affiliates
Act application.
32. Delmarva does request, however, that the Commission approve in
this proceeding certain principles associated with these future affiliate
transactions:
o Because of the rate reductions described above, the asset
transfers to a Delmarva affiliate will be at net book value and
no gain or loss will be recognized for ratemaking purposes.
o Because the Virginia retail fuel clause will be frozen or
established with reference to a contract with an unaffiliated
supplier, the appropriateness of the price of any other power
purchase agreement under which an affiliate sell power to
Delmarva will not be the subject of further regulatory review by
this Commission if such power purchase agreement does not affect
the fuel costs charged to Virginia customers.
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<PAGE>
33. Delmarva's Plan contemplates a filing in early 2001 to unbundle
rates and establish a Code of Conduct that would prohibit cross-subsidization
among other things, and make other tariff modifications necessary to comply with
the requirements of the Restructuring Act. Because Delmarva has only about
21,000 Virginia retail customers, the Plan would permit 100% of such customers
to choose an alternative electric supplier on or after January 1, 2002, rather
than proposing a phase-in of retail choice.
34. Delmarva believes that a competitive market will exist in
Delmarva's Virginia service area before January 1, 2004. Consequently, the Plan
contemplates a filing in mid-2003 seeking a termination of Capped Rates pursuant
to section 56-582.C. In the event the Commission does not terminate Delmarva's
Capped Rates as part of that proceeding, Delmarva would likely file a general
rate case application to reset base and fuel rates effective January 1, 2004.
IV. THE APPROVAL OF THE PLAN IS IN THE PUBLIC INTEREST
A. THE PLAN SATISFIES THE RESTRUCTURING ACT.
35. The Restructuring Act in section 56-590 requires functional
separation between a utility's generation activities and its transmission and
distribution activities. The Plan provides for such separation by complete
divestiture of all of Delmarva's generation facilities to either third parties
or affiliated entities. The Commission has authority under section 56-590.B.3 to
provide that a utility retain generating assets "or their equivalent" while the
utility serves as a default provider. The Plan fulfills this requirement by
Delmarva's commitment to obtain, through power purchase agreements and its
membership in PJM, sufficient capacity and energy to serve Delmarva's Virginia
retail load, with such capacity and energy priced with reference to the PECO
PPA.
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<PAGE>
B. THE PUBLIC INTEREST IS SERVED BY THE
PLAN'S SUBSTANTIAL PRICE PROTECTIONS
36. Historically, utility rates, particularly fuel rates, have varied
substantially over time and sometimes have fluctuated dramatically. Nuclear
Facilities, in particular, have had a history of millions of dollars being spent
on new capital investment to replace or repair equipment that has failed or is
needed to comply with changing Nuclear Regulatory Commission rules. The future
costs of decommissioning nuclear units are unpredictable, and a major benefit of
the sale of the Nuclear Facilities is the purchasers' agreement to assume future
liability for decommissioning and other environmental costs. Ratepayers are also
currently subject to the risk of sharply higher fuel prices due to demand during
abnormally hot or cold weather and as a result of general trends in fuel costs
that are outside of Delmarva's control.
37. The Plan provides substantial price reductions and price
stability, which, Delmarva respectfully submits, are in the public interest.
Between the date the first closing of any Phase occurs and Total Divestiture,
base and fuel rates will be set so that any rate changes are rate decreases.
38. When Total Divestiture occurs, customers similarly benefit. Base
and fuel rates are set so that the aggregate effect compared to base rates and
fuel costs prior to the sales, will be a revenue reduction of 2.58%.
39. After Total Divestiture, base rates will be fixed and fuel rates
will increase very slowly over time in accordance with the changes set forth in
the PECO PPA. Rate stability is guaranteed until January 1, 2004.
40. The Plan also provides savings relative to that which would occur
if Total Divestiture were to occur and "traditional" cost of service ratemaking
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<PAGE>
mechanisms were employed. See Appendix H, Att. 1, line 9. Under a traditional
approach: 1) base rates would be reduced by removing the remaining investment in
generation plant from rate base and removing from cost of service the operations
and maintenance and other costs associated with the generation facilities; 2)
base rates would be increased by the capacity charges incurred under new power
purchase contracts to procure sufficient capacity to meet the needs of Virginia
retail customers; and 3) fuel rates would rise or fall depending on the costs of
replacement energy in the market.
41. Under the "traditional" ratemaking approach, approximately $8.1
million of Delmarva's $21.3 million in Virginia retail base revenues would be
eliminated if the investment and cost of service costs from generation
facilities were removed from base rates. This reduction is almost exactly
offset, however, by approximately $8.1 million in added costs that would be
incurred to replace the capacity and energy provided by the generation
facilities. About 92.4 MW of capacity must be obtained in order to meet
Virginia-retail peak requirements including the reserve requirements established
by PJM. The estimated price for such replacement capacity is $21,900 per MW per
year as of May 2000, based on posted bids in futures markets. Replacement fuel
costs are calculated using the interchange price at which Delmarva can purchase
energy through PJM. The data in Appendix H applies the actual PJM locational
marginal prices for each hour multiplied by the energy used by Virginia retail
customers in such hours over the 12-month period ending September 30, 1999.
42. Under current market conditions, the sale and transfer of all of
Delmarva's generation facilities and replacing the capacity and energy in the
open market would be essentially "break-even," with a slight increase in
17
<PAGE>
customer bills of about $34,000 (about 0.1%). (Appendix H, Att. 1.) In contrast,
the Plan would reduce customer bills by about 2.58% or $727,543.
43. The workpapers in Appendix H do not reflect a change in the
capital structure of Delmarva caused by the sale of the generation facilities.
Delmarva's current expectations are that, while third quarter write-offs
primarily associated with the expected sale of the Nuclear Facilities have
temporarily increased Delmarva's debt/equity ratio, the proceeds from the sales
of fossil facilities and other sources will permit debt to be paid down to
levels that leave Delmarva's debt/equity ratio at a reasonable level.
C. RELIABILITY IS MAINTAINED UNDER THE PLAN.
44. After the divestiture, Delmarva will meet its retail load
obligations in Virginia through power purchase agreements and its continued
membership in and obligations with the PJM. Under Virginia law, until such time
as this Commission determines that some other entity should be the provider of
last resort, Delmarva has a continuing legal obligation to provide sales service
within its service territory.
45. Under its agreements with PJM, Delmarva is required to designate
resources (i.e., generation or firm power sales agreements) sufficient to meet
its customers' estimated peak demand. PJM is a so-called "tight power pool,"
with member companies that own in excess of 75,000 MW of capacity that is
dispatched by PJM on a daily, bid-in price basis. The physical electron flows
of such power is throughout the pool following the laws of physics (i.e., paths
of least resistance). PJM operates the higher-voltage transmission systems
within the region and the complex accounting systems that track and assign
revenues and costs in accordance with actual power generated and used. PJM is
18
<PAGE>
the 2nd largest non-government-owned power pool in the world. Delmarva submits
that its membership in PJM complies with the requirements of Virginia Code
section 56-577(A)(1).
46. On a purely physical basis, virtually nothing short of
mothballing or decommissioning a plant can impair the reliability of supply
within the PJM system. No matter who owns a power plant within PJM the output of
that plant will be delivered into the interconnected transmission grid and will
physically flow along the lines of least resistance to customers throughout the
PJM region. Thus, a change in ownership of the power plants, by itself, will
neither change the availability of power in the PJM region nor the amount of
power delivered into Delmarva's Virginia service area. All that would change is
the accounting by PJM so that the new power plant owner would receive the
revenues for the output of the plant.
47. With respect to physical reliability, Delmarva also notes the
planned construction near Oak Hall, Virginia, by Commonwealth Chesapeake
Company, LLC, ("CCC") of a power plant complex of approximately 135 MW (expected
operation in 2000) and an additional 312 MW in a subsequent period, CCC will be
executing sales contracts with various entities and it is expected that, for PJM
accounting and billing purposes, most or all of the power from this facility
will be treated as if delivered to purchasers outside the Delmarva peninsula. On
a purely physical basis, however, it is highly unlikely that the actual power
flow across Delmarva's system will result in deliveries outside the peninsula.
In fact, much of this power will likely flow along paths of least resistance to
Delmarva's retail customers in Virginia and southern Maryland.
48. In the short-run, Delmarva's ability to meet the needs of its
customers is actually enhanced by the onset of customer choice in Delmarva's
19
<PAGE>
service area. Retail customer choice began for larger industrial customers in
Delaware on October 1, 1999. As of January 26, 2000, Delmarva had already lost
336 MW of load (an amount that is four times the peak demand of Delmarva's
entire Virginia retail load) and is only a little less than the 345 MW of
nuclear capacity to be sold. Loss of load is expected to increase over time as
all Delaware customers become eligible to choose an alternative electric
supplier on October 1, 2000. On July 1, 2000, 100% of Delmarva's retail
customers in Maryland also become eligible for customer choice.
49. By the end of 2000, the lost load in Delaware and Maryland will
far exceed the size of the nuclear capacity sold. Delmarva recognizes, however,
that customer choice in Delaware and Maryland is not likely in the near-term to
result in lost load that would totally offset the amount of nuclear and fossil
capacity that is to be sold in Phases I and II. By obtaining power through power
purchase agreements and PJM, however, Delmarva will ensure that there is
sufficient capacity and energy to meet the needs of its Virginia customers.
V. REQUESTED FINDINGS UNDER PUHCA.
50. The requested PUHCA findings are that the treatment as "eligible
facilities" of Delmarva and ACE's generation facilities: 1) will benefit
consumers; 2) is in the public interest; and 3) is not contrary to state law.
51. The first two criteria set forth in PUHCA are effectively
indistinguishable from the standard set forth in the Restructuring Act with
respect to the review of a functional separation plan. The Commission is to
review such plans and may impose conditions, "as the public interest requires."
Virginia Code section 56-590(B)(3). Delmarva respectfully submits that these
20
<PAGE>
criteria of PUHCA are met because the Plan, which contemplates a sale or
transfer of generation facilities to entities with EWG status, offers
substantial benefits to consumers in the form of rate reductions and rate
stability, without impairing reliability.
52. Delmarva's sales of its nuclear interests are contingent on the
entire set of agreements involving Delmarva, ACE, PECO and PSEG Power, LLC,
being approved and the transactions closed. Thus, the benefits of the Phase I
rate reductions and fuel rate freeze that are triggered by Delmarva's sales of
its Nuclear Facilities cannot be obtained in the absence of the ACE sales.
Hence, the treatment of both Delmarva's and ACE's Nuclear Facilities as
"eligible facilities" is in the public interest and will result in benefits to
Virginia consumers.
53. Delmarva's sales of its fossil interests are contingent on the
entire set of agreements involving Delmarva, ACE, and NRG Energy, Inc. being
approved and the transactions closed. Thus, the benefits of the Phase II rate
reductions that are triggered by Delmarva's sales of its Fossil Facilities
cannot be obtained in the absence of the ACE sales. Hence, the treatment of both
Delmarva's and ACE's Fossil Facilities as "eligible facilities" is in the public
interest and will result in benefits to Virginia consumers.
54. The proposed sales of generation facilities in Phases I and II
are not contrary to state law. The Utilities Transfer Act, Chapter 4 of Title 56
of the Virginia Code, would not have even required Commission approval for
Delmarva's sale of these Phase I and II facilities, because none of them are
located in Virginia. Under the Restructuring Act, adding section 56-590, the law
contemplates the possibility that a utility would divest itself of generation
facilities. Thus, in the context of the requested PUHCA findings, the Commission
21
<PAGE>
can and should find that the sale of the Nuclear and Fossil Facilities by
Delmarva is not contrary to state law. Clearly, the sale of ACE's nuclear and
fossil facilities is not contrary to Virginia law.
55. Because Delmarva is part of a registered electric utility holding
company group, section 32(c) of PUHCA imposes a special rule that calls for the
PUHCA findings to be made with respect to any facilities of any member of the
group that will become "eligible facilities." Thus, the same PUHCA findings are
requested with respect to ACE's proposed sales of its nuclear and fossil
interests.
56. Delmarva and ACE plan to transfer the generation facilities that
are not sold to third parties to one or more affiliates. It is expected that, at
some point in the future, such affiliates may seek to qualify as EWGs. Thus,
Delmarva also requests in this Application that the Commission make the
requisite PUHCA findings for the generation facilities owned by Delmarva and ACE
that will be transferred to one or more affiliates.
VI. REQUESTED FINDINGS REGARDING TRANSMISSION
57. As a part of this Application, Delmarva seeks a determination
from the Commission that its participation in PJM satisfies the requirements of
those provisions of the Restructuring Act, sections 56-577 and 56-579.A and B.
58. Because of the geographic isolation of Delmarva's Virginia
service area on the Eastern Shore from the remainder of Virginia, Delmarva is
not connected to any other electric utility operating in Virginia. Therefore,
Delmarva is not involved in "the transfer of electric energy through the
Commonwealth's interconnected transmission grid" within the meaning of the
definition of "transmission" in section 56-576 of the Restructuring Act.
Accordingly, Delmarva would not be subject to the provisions of the
22
<PAGE>
Restructuring Act relating to the transfer of management and control of
transmission facilities.
59. The Commission noted these unique circumstances relative to
Delmarva's transmission facilities in its Modification of Filing Requirements
order dated June 11, 1998 in Case No. PUE980138 at page 3 which excused
Delmarva from certain reporting requirements relating to the development of
Independent System Operators and Regional Power Exchanges applicable to
utilities owning transmission facilities on "mainland" Virginia.
60. Though not required to do so, Delmarva satisfied the requirements
of Virginia Code sections 56-577 and 56-579 prior to their enactment by virtue
of its membership in PJM. Therefore, Delmarva asks that the Commission determine
either that (1) the requirements of sections 56-577 and 56-579.A and B for
transfer of management and control of transmission assets to a regional
transmission entity are not applicable to Delmarva or (2) participation by
Delmarva in the PJM power pool satisfies the sections 56-577 and 56579.A and B
requirements.
VII. DESCRIPTION OF APPENDICES.
61. The following items are appended:
o Appendix A lists Delmarva's generation facilities and
identifies fuel type, capacity, 1998 energy output,
location, and net book value on a Virginia retail basis.
o Appendix B lists ACE's generation facilities and their
location. None of ACE's generation facilities are located in
Virginia.
o Appendix C is a copy of Delmarva's recently executed power
purchase agreement with PECO (the "PECO PPA").
o Appendices D and E are, respectively, the Delmarva sales
agreements involving Peach Bottom and Salem.
23
<PAGE>
o Appendices F and G are, respectively, the Delmarva sales
agreement involving wholly-owned (Indian River and Vienna)
and minority interest owned (Keystone and Conemaugh) Fossil
Facilities.
o Appendix H is a set of workpapers and illustrative rates
demonstrating the revenue reductions proposed under the
Plan.
VIII. COMMISSION ACTION REQUESTED.
62. The Restructuring Act, adding section 56-590(D), provides for
Commission review of a functional separation plan within 60 days after filing,
with a discretionary authority to extend the period for a period not to exceed
120 days. Delmarva respectfully requests that the Commission issue an initial
order upon its review of Delmarva's Plan in order to facilitate the planned
sales to unaffiliated third parties of the Nuclear Facilities (scheduled for
closing on March 31, 2000). Therefore, Delmarva requests expedited consideration
and an order issued on or before March 15, 2000, that:
o Finds that this Application satisfies the requirement of section
56-590 to file a functional separation Plan prior to January 1,
2001.
o Approves, without further conditions, that portion of the Plan
with respect to the sale to third-parties of the Phase I
facilities and the associated base rate reduction and fuel rate
freeze.
o Makes explicit findings that, for the Phase I facilities to be
sold to third parties by Delmarva or by its affiliate, ACE, the
treatment of each such facility as an "exempt facility" as
defined by PUHCA: 1) will benefit customers; 2) is in the public
interest; and 3) is not contrary to state law.
o Finds that the rate reductions set forth in the Plan make
unnecessary any separate ratemaking treatment of net losses or
net gains from the sale to third parties of generation
facilities.
63. Delmarva respectfully requests that the Commission subsequently
enter an order that:
24
<PAGE>
o Approves, without further conditions, that portion of the Plan
with respect to the sale to third-parties of the Phase II
facilities and the associated base rate reduction and fuel rate
freeze.
o Approves the Plan with respect to the transfer at net book value
to one or more non-utility affiliates of the Phase III
facilities, with the conditions that the sales, interconnection,
easement, power purchase and related contracts between Delmarva
and its affliate(s) be filed and submitted for Commission review
under the Virginia Affiliates Act and that the rate adjustments
set forth herein be implemented.
o Approves, without further conditions, that portion of the Plan
relating to future filing dates for unbundling rates and
establishing other mechanisms for 100% of retail customers to
become eligible to choose an alternative electric supplier
January 2002.
o In conjunction with the above approvals and to facilitate the
sale of the Phase II facilities and the transfer of the Phase III
facilities, makes explicit findings that, for the treatment of
each such facility currently owned by Delmarva and ACE as an
"exempt facility" as defined by PUHCA: 1) will benefit
customers; 2) is in the public interest; and 3) is not contrary
to state law.
o Approves, without further conditions, that portion of the Plan
that, as of the date of complete divestiture, would establish the
Virginia fuel rates with reference to a power purchase agreement
between Delmarva and PECO Energy Company and permit recovery in
fuel rates of the per MWH charges associated with such agreement.
o Finds that either (1) the requirements of sections 56-577 and
56-579.A and B for transfer of management and control of
transmission assets to a regional transmission entity are not
applicable to Delmarva or (2) participation by Delmarva in the
PJM Interconnection, LLC satisfies the sections 56-577 and
56579.A and B requirements.
o Finds, pursuant to section 56-249.6, that Delmarva can reasonably
recover its fuel costs through the rates and charges otherwise
established and, therefore, that Delmarva need not file for rate
recovery or report of fuel costs during the period ending January
1, 2004.
25
<PAGE>
WHEREFORE, Delmarva Power & Light Company respectfully asks that the
Commission grant this Application and make the requested findings set forth
herein.
Respectfully submitted,
DELMARVA POWER & LIGHT COMPANY
By: /s/ Thomas S. Shaw
-----------------------------------
Thomas S. Shaw
Executive Vice President
Peter F. Clark
Randall V. Griffin
Legal Department
Delmarva Power & Light Company
800 King Street, P.0. Box 231
Wilmington, DE 19899
(302) 429-3069
Guy T. Tripp, III
Hunton & Williams
Riverfront Plaza-East Tower
951 East Byrd Street
Richmond, VA 23219-4074
(804) 788-8328
Dated: February 1, 2000
26
<PAGE>
STATE OF DELAWARE )
) ss.
COUNTY OF NEW CASTLE )
On this 31st day of January, 2000, personally came before me, the
subscriber, a Notary Public in and for the state and county aforesaid, Thomas S.
Shaw, Executive Vice President of Delmarva Power & Light Company, a corporation
existing under the laws of the State of Delaware and the Commonwealth of
Virginia, party to this Application, known to me personally to be such, and
acknowledged this Application to be his act and deed and the act and deed of
Delmarva Power & Light Company, that the signature of such Executive Vice
President is in his own proper handwriting, and that the facts set forth therein
are true and correct to the best of his knowledge, information, and belief.
/s/ Thomas S. Shaw
----------------------------------------
Thomas S. Shaw
SUBSCRIBED AND SWORN before me this 31st day of January, 2000.
----------------------------------------
Notary Public
My Commission Expires: 4/30/2001
-----------
27
<PAGE>
TABLE OF CONTENTS
APPENDIX A
Delmarva Power & Light Company Generating Facilities
APPENDIX B
Atlantic City Electric Company Generating Facilities
APPENDIX C
Power Purchase Agreement Between Delmarva Power & Light Company and Peco
Energy Company
APPENDIX D
Purchase Agreement Among Delmarva Power & Light Company, Peco Energy
Company and PSEG Power LLC (Peach Bottom Atomic Power Station)
APPENDIX E
Purchase Agreement Between Delmarva Power & Light Company and PSEG Power
LLC (Salem Nuclear Generating Station
APPENDIX F
Purchase and Sales Agreement Between Delmarva Power & Light Company and NRG
Energy, Inc. (Indian River and Vienna Power Plants, Dorchester Site)
APPENDIX G
Purchase and Sales Agreement Between Delmarva Power & Light Company and NRG
Energy, Inc. (Keystone and Conemaugh Interests)
APPENDIX H
Workpapers and Rates
<PAGE>
APPENDIX A
DELMARVA POWER & LIGHT COMPANY GENERATING FACILITIES
PHASE I FACILITIES
- --------------------------------------------------------------------------------
Plant Name Location Fuel Capacity 1998 Output Net Book
(MW) (MWH) Value (VA)
(7/31/99)
- --------------------------------------------------------------------------------
Peach Bottom PA Nuclear 173 1,230,366 $ 2,177,322
Salem NJ Nuclear 172 1,046,849 $ 4,374,436
- --------------------------------------------------------------------------------
PHASE II FACILITIES
- --------------------------------------------------------------------------------
Plant Name Location Fuel Capacity 1998 Output Net Book
(MW) (MWH) Value (VA)
(7/31/99)
- --------------------------------------------------------------------------------
Keystone PA Fuel 70 493,731 $ 307,272
Conemaugh PA Coal 70 488,898 $ 587,478
Indian River DE Coal/Oil 790 2,600,894 $ 7,302,330
Vienna MD Oil 180 218,207 $ 551,032
- --------------------------------------------------------------------------------
PHASE III FACILITIES
- --------------------------------------------------------------------------------
Plant Name Location Fuel Capacity 1998 Output Net Book
(MW) (MWH) Value (VA)
(7/31/99)
- --------------------------------------------------------------------------------
Edge Moor DE Coal/Gas/Oil 713 2,500,806 $ 3,471,362
Hay Road DE Gas/Kerosene 541 1,045,526 $ 5,742,693
Madison St DE Oil 14 178 $ 18,180
Christiana DE Gas 56 5,200 $ 44,338
Del. City DE Oil 21 79 $ (0)
West Sub DE Oil 20 1,013 $ (1,517)
Crisfield MD Oil 11 6,855 $ 7,525
Bayview VA Oil 12 8,816 $ 14,056
Tasley VA Oil 27 6,370 $ 41,839
- --------------------------------------------------------------------------------
Notes: VA portion of Net Book Value is 2.7963% (from 1998 VA AIF Filing).
Capacity, Output and Net Book Value figures for Salem, Keystone, Conemaugh,
Indian River and Vienna include the small peak units that are part of each of
the facilities.
<PAGE>
APPENDIX B
ATLANTIC CITY ELECTRIC COMPANY GENERATING FACILITIES
PHASE I FACILITIES
- --------------------------------------------------------------------------------
Plant Name Location Fuel
- --------------------------------------------------------------------------------
Peach Bottom PA Nuclear
Salem NJ Nuclear
Hope Creek NJ Nuclear
- --------------------------------------------------------------------------------
PHASE II FACILITIES
- --------------------------------------------------------------------------------
Plant Name Location Fuel
- --------------------------------------------------------------------------------
B.L. England NJ Coal/Oil/Tire Chips
Deepwater NJ Gas/Coal/Oil
Keystone PA Coal
Conemaugh PA Coal
- --------------------------------------------------------------------------------
PHASE III FACILITIES
- --------------------------------------------------------------------------------
Plant Name Location Fuel
- --------------------------------------------------------------------------------
Cumberland NJ Gas/Oil
Missouri NJ Oil
Middle Station NJ Oil
Cedar Station NJ Oil
Carlls Corner NJ Oil
Mickleton NJ Gas
Sherman Avenue NJ Gas/Oil
- --------------------------------------------------------------------------------
<PAGE>
APPENDIX C
POWER PURCHASE AGREEMENT BETWEEN
DELMARVA POWER & LIGHT COMPANY AND
PECO ENERGY COMPANY
<PAGE>
TRANSACTION AGREEMENT
BETWEEN
PECO ENERGY COMPANY - POWER TEAM
AND
DELMARVA POWER & LIGHT COMPANY
This Transaction Agreement is entered into as of the third day of
November, 1999, by and between PECO Energy Company - Power Team ("PECO") and
Delmarva Power & Light Company ("Delmarva") (with PECO or Delmarva referred to
hereinafter individually as a "Party" and collectively as the "Parties").
WHEREAS, the Parties had previously entered into that certain Purchase and Sale
of Capacity and Energy, dated May 24, 1994 (the "Original Agreement");
WHEREAS, the Parties desire to amend certain terms and conditions under the
Original Agreement to provide for the sale of Unforced Capacity, as defined
below, and Energy;
WHEREAS, the Parties have agreed that the most efficient way to modify such
terms and conditions is to terminate the Original Agreement on December 31,
1999, in consideration for each of the Party's executing this Transaction
Agreement; and
WHEREAS, the Parties also desire to release each other from all claims arising
from or related to the Original Agreement through the date hereof.
NOW, THEREFORE, in consideration of the mutual covenants set forth herein, PECO
and Delmarva, intending to be legally bound hereby, agree as follows:
1. Term. This Transaction Agreement will become effective upon
November 3, 1999, and will terminate on May 31, 2006 unless
sooner terminated in accordance with its terms. Applicable
provisions of this Transaction Agreement will continue in effect
after termination, to the extent necessary to provide for final
billings and adjustments, and to preserve or permit the
enforcement of or institution of action upon any right or
obligation hereunder. Notwithstanding the preceding, the
obligations of the Parties to deliver and accept the Product, as
defined below, in accordance with the terms and conditions of
this Transaction Agreement will commence on January 1, 2000, or
on the effective date provided for by the Federal Energy
Regulatory Commission (the "FERC").
<PAGE>
2. Sale of Energy and Unforced Capacity. PECO will deliver and sell
to Delmarva (i) Unforced Capacity (as that term is defined under
the PJM Reliability Assurances Agreement), and (ii) Energy (the
"Product" as set forth below. Delmarva will accept and pay for
such Unforced Capacity and Energy.
Interval Energy/mw Unforced Capacity/mw
-------- --------- --------------------
1/l/00-5/31/00 206 243
6/1/00-5/31/01 211 249
6/1/01-5/31/02 216 255
6/1/02-5/31/03 221 261
6/1/03-5/31/04 226 267
6/1/04-5/31/05 232 273
6/1/05-5/31/06 237 279
3. Payment. Delmarva will pay PECO a single fixed fee for the Energy
and Unforced Capacity equal to the product of: (i) dollar amount
for the calendar year in which the Energy and Unforced Capacity
were delivered, as set forth below and (ii) the Energy amount, as
set forth above (the "Fixed Fee"). The Fixed Fee represents the
total costs the Delmarva will owe to PECO for Energy scheduled
and delivered under this Transaction Agreement.
Calendar Year $/MWh
------------- -----
2000 33.90
2001 34.41
2002 34.92
2003 35.45
2004 35.98
2005 36.52
2006 37.07
4. Delivery Point. The Delivery Point will be the PECO zone as
defined by the PJM Interconnection, L.L.C.- Title TO THE PRODUCT
WILL PASS at the Delivery Point. PECO will be responsible for all
costs, including but not limited to transmission, ancillary
services and congestion, prior to delivery of the Product to the
Delivery Point. Delmarva will be responsible for all costs,
including but not limited to transmission, ancillary services and
congestion, after delivery of the Product to the Delivery Point.
5. Scheduling. The Product will be scheduled and delivered with a
100% load factor in each hour of the Term and is "must-take."
6. Default. (i) "Event of Default" shall mean, in relation to a
Party (the "Defaulting Party"):
(A) Either Party has a reasonable ground for insecurity of
payment by the other Party;
<PAGE>
(B) Either Party makes an assignment or any general arrangement
for the benefit of creditors;
(C) Either Party fails to make a payment and such failure
continues for 20 days after receipt of notice demanding such
payment;
(D) Either Party files a petition or otherwise commences,
authorizes, or acquiesces in the commencement of a
proceeding or cause under any bankruptcy or similar law for
the protection of creditors or have such petition filed or
proceeding commenced against it;
(E) Either Party becomes bankrupt or insolvent (however
evidenced);
(F) Either Party becomes unable to pay its debts as they fall
due; or
(G) Fails to perform any of its material obligations hereunder,
and such failure is not excused by Force Majeure.
(i) The Defaulting Party shall have a period of thirty (30)
days after receiving written notice (the "Cure Period") of
the Default from the Non Defaulting Party to attempt to cure
the Default. The Defaulting Party shall be able to extend
the Cure Period beyond 30 days for a Default that is not
curable within 30 days if the Defaulting Party initiates the
cure within 30 days and diligently pursues it thereafter
until fully unplemented. Provided, however, that no Cure
Period shall extend beyond 365 days from the initial written
notice of the Default
(ii) The opportunity to cure a Default provided for in
paragraph (ii) of this Section shall not be available to
cure a failure to make a payment under paragraph (i)(C) of
this Section or a failure to deliver the amounts specified
in Section 2.
(iii) In the event that (1) the Defaulting Party fails to
cure the Default within the Cure Period; or (2) the Default
is not subject to cure under paragraph (iii) of this
Section, then the Non-Defaulting Party may upon 10 days
written notice, in addition, to any other remedies available
at law, terminate this Transaction Agreement.
(iv) Determination of Liquidated Damages.
(A) In determining Liquidated Damages the following
terms will be used:
<PAGE>
(1) Replacement Price means the price at which
Delmarva, acting in a commercially reasonable
manner, effects a purchase of energy in place of
the Energy not delivered by PECO or, absent such a
purchase, the market price for such quantity of
electric energy at the Delivery Point, as
determined by Delmarva in a commercially
reasonable manner.
(2) Sales Price means the price at which PECO,
acting in a commercially reasonable manner,
effects a resale of the Energy not accepted by
Delmarva or, absent such a resale, the market
price for such quantity of Energy at the Delivery
Point, as determined by PECO in a commercially
reasonable manner.
(B) If PECO schedules or delivers an amount in any
hour that is less than the applicable hourly Energy
amount, then PECO shall be liable for (a) the product
of the amount by which the Replacement Price differed
from the Fixed Fee and the amount by which the quantity
delivered by PECO was less than the hourly Energy
amount, plus (b) the amount of transmission charges, if
any, for firm transmission service downstream of the
Delivery Point, which Delmarva incurred to achieve the
Replacement Price, less the reduction, if any, in
transmission charge(s) achieved as a result of the
reduction in PECO's schedule or delivery (based on
Delmarva's reasonable commercial effort to achieve such
reduction). If the total amounts for all hours
calculated under this paragraph (B) are negative, then
neither Delmarva nor PECO will pay any amount under
this liquidated damages provision.
(C) If Delmarva schedules and accepts an amount in any
hour that is less than the applicable hourly Energy
amount, then Delmarva will be liable for (a) the
product of the amount by which the Fixed Fee differed
from the Sales Price and the amount by which the
quantity accepted by Delmarva was less than the hourly
Energy amount, plus (b) the amount of transmission
charges, if any, for firm transmission service upstream
of the Delivery Point, which PECO incurred to achieve
the Sales Price, less the reduction, if any, in
transmission charge(s) achieved as a result of the
reduction in Delmarva's schedule or acceptance of
electric energy (based on PECO's reasonable commercial
efforts to achieve such reduction). If the total
amounts for all hours calculated under this paragraph
(C) are negative, then neither Delmarva nor PECO will
pay any amount under this Liquidated Damages provision.
<PAGE>
(D) The Parties agree that the amounts recoverable
under this section are a reasonable estimate of loss
and not a penalty, and represent the sole and exclusive
remedy for the Performing Party. Such amounts are
payable for the loss of bargain and the loss of
protection against future risks.
(E) Each Party agrees that it has a duty to mitigate
damages and covenants that it will use commercially
reasonable efforts to minimize any damages it may incur
as a result of the other Party's performance or
non-performance of this Agreement.
(F) Neither Party shall be liable to the other for any
indirect, consequential, incidental, punitive or
exemplary damages.
7. Notices. All notices under this Transaction Agreement shall be
sent to:
If to PECO:
Marjorie R. Philips
PECO Energy Company - Power Team
2004 Renaissance Boulevard
King of Prussia, PA 19406
Tel: 610-292-6610
Fax: 610-292-6644
If to Delmarva:
Nathan L. Wilson
Delmarva Power & Light Company
P.O. Box 6066
Newark, DE 19714-6066
Tel: 302-452-6360
Fax: 302-452-6364
8. Governing Documents. This Transaction Agreement is executed
pursuant to the Service Agreement under PECO's Electric Tariff
Volume 1, dated September 7, 1995. In the event of any conflict
between the terms of this Transaction Agreement and the terms of
the Tariff or Service Agreement, the terms of this Transaction
Agreement will prevail and be binding between the Parties without
modification thereby.
9. Agreement on Terms. The terms and conditions of this Transaction
Agreement will remain in effect for the term of this Transaction
Agreement and will not be subject to change by application or
complaint to the FERC or any successor agency pursuant to the
Federal power Act or any successor act, or by application or
complaint to any court or state regulatory agency, without the
prior written agreement of PECO and Delmarva. Neither Party will
seek relief from the provisions of this Transaction Agreement
from the FERC or any state regulatory authority without the prior
<PAGE>
written consent of the other Party. Both Parties represent that
no state commission acceptance or approval of this Transaction
Agreement is required.
10. Termination of the Original Agreement. The Parties hereby agree
that the Original Agreement will terminate at midnight, December
31, 1999, or at midnight of the day before the effective date of
service commencement if that date is later than January 1, 2000,
and upon such termination shall no longer be effective in any
way, and that they will file a Notice of Termination with the
FERC as soon as practicable thereafter. Upon the termination of
the Original Agreement: (i) this Transaction Agreement is
intended by the Parties as the final expression of their
agreement for the purchase and sale of energy and capacity as
provided for hereunder, and (ii) all prior written or oral
understandings, offers or other communications of every kind
pertaining to the sale of energy and capacity under this
Transaction Agreement and the Original Agreement will be
superseded by this Transaction Agreement.
11. Mutual Release. Each Party releases the other Party, fully and
forever, from all claims and demands whatsoever arising in any
manner, for any reason whatsoever, including, but not limited to
claims whether known or unknown, contingent or otherwise to the
date hereof relating to the Original Agreement.
12. Binding Arbitration.
(i) Any claim or dispute, which either Party may have against
the other, arising out of the Transaction Agreement will be
submitted in writing to the other Party not later than sixty
(60) days after the circumstances that gave rise to the
claim or dispute have taken place. The submission of any
claim or dispute will include a concise statement of the
question or issue in dispute, together with relevant facts
and documentation to fully support the claim.
(ii) If any such claim or dispute arises, the Parties will use
their reasonable best efforts to resolve the claim or
dispute, initially through good faith negotiations or upon
the failure of such negotiations, through mutually agreed to
alternative dispute resolution ("ADR") techniques, however,
either Party may terminate its participation in ADR during
any state of ADR and proceed under the following
subparagraph (iii).
(iii) If any claim or dispute arising hereunder is not resolved
within sixty (60) days after the notice thereof to the other
Party, either Party may demand in writing the submission of
the dispute to binding arbitration in Pennsylvania or some
other mutually agreed upon location and will be heard by one
neutral arbitrator under the American Arbitration
Association's Commercial Arbitration Rules.
<PAGE>
(iv) The arbitration process will be expeditiously concluded but
not later than six (6) months after the date that it is
initiated and the award of the arbitrator will be
accompanied by a reasoned opinion if requested by either
Party. The arbitrator will have no authority to award
punitive or treble damages or any damages inconsistent with
Section 6 hereof. The arbitration will be conducted as a
common law arbitration and the decision of the arbitrator
rendered in such proceeding will be final. Judgment may be
entered upon it in any court having jurisdiction.
(v) The procedures for the resolution of claims and disputes set
forth herein will be the sole and exclusive procedures for
the resolution of such. All applicable statutes of
limitations and defenses based upon the passage of time will
be tolled while the procedures specified herein are pending.
The Parties will take such action, if any, required to
effectuate such tolling. Each Party is required to continue
to perform its obligations under the Transaction Agreement
pending final resolution of such claim or dispute. All
negotiations pursuant to these procedures will be
confidential, and will be treated as compromise and
settlement negotiations for purposes of the Federal Rules of
Evidence and State Rules of Evidence.
13. Successors and Assigns. Section 8.6 of the Tariff is deemed to be
modified in accordance with this Section 13. Either Party may
assign its obligations under this Transaction Agreement in whole
without the prior written consent of the other Party: (i) to an
entity acquiring substantially all the electric assets of the
assigning Party, (ii) in connection with a merger, or (iii) to an
affiliate, provided however, that any such assignee agrees to
assume all of the obligations of the assigning Party under the
Transaction Agreement.
IN WITNESS WHEREOF, the Parties have caused this Transaction Agreement to be
executed as of the day and year first above written.
PECO ENERGY COMPANY DELMARVA POWER & LIGHT COMPANY
By: /s/ Ian P. McLean By: /s/ William H. Spence
----------------------------- -----------------------------------
Ian P. McLean William H. Spence
President, Power Team Vice President/General Manager
Energy Supply
<PAGE>
AGREEMENT TO AND
NOTICE OF TERMINATION
The undersigned parties to the Agreement between PECO Energy Company
and Delmarva Power & Light Company for Purchase and Sale of Capacity and Energy,
dated May 24, 1994, FERC Docket No. ER95-312-000, filed with the Federal Energy
Regulatory Commission as PECO's Rate Schedule FERC No. 96, hereby agree that
such Agreement shall terminate effective midnight, December 31, 1999.
DELMARVA POWER & LIGHT COMPANY PECO ENERGY COMPANY
/s/ Thomas S. Shaw /s/ Ian P. McLean
- ------------------------------ ----------------------------------------
Signature Signature
Thomas S. Shaw Ian P. McClean
- ------------------------------ ----------------------------------------
Name Name
Executive Vice President President, Power Team
- ------------------------------ ----------------------------------------
Title Title
11/15/19 11/19/99
- ------------------------------ ----------------------------------------
Date Date
<PAGE>
APPENDIX E
PURCHASE AGREEMENT
BETWEEN DELMARVA POWER & LIGHT COMPANY
AND PSEG POWER LLC
(SALEM NUCLEAR GENERATING STATION)
<PAGE>
(DP&L-SALEM)
CONFORMED
PURCHASE AGREEMENT
BY AND BETWEEN
DELMARVA POWER & LIGHT COMPANY
AND
PSEG POWER LLC
DATED AS OF SEPTEMBER 27, 1999
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS
1.1 Definitions...................................................... 1
1.2 Certain Interpretive Matters..................................... 18
1.3 U.S. Dollars..................................................... 18
1.4 Seller's Interest in Purchased Assets............................ 18
ARTICLE II
PURCHASE AND SALE
2.1 Transfer of Purchased Assets..................................... 18
2.2 Excluded Assets.................................................. 20
2.3 Assumed Liabilities.............................................. 23
2.4 Excluded Liabilities............................................. 26
2.5 Control of Litigation............................................ 27
2.6 Spent Nuclear Fuel Fees.......................................... 28
2.7 Department of Energy Decommissioning and
Decontamination Fees........................................ 28
ARTICLE III
THE CLOSING
3.1 Closing.......................................................... 29
3.2 Payment of Purchase Price........................................ 29
3.3 Adjustment to Nuclear Fuel Supply Payment........................ 30
3.4 Tax Reporting and Allocation of Purchase Price................... 31
3.5 Prorations....................................................... 32
3.6 Deliveries by Seller............................................. 34
3.7 Deliveries by Buyer.............................................. 35
3.8 Relationship of this Agreement and Collateral Agreement.......... 37
3.9 Owners Agreement to Govern....................................... 37
3.10 Additional Agreements............................................ 37
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
4.1 Organization, Qualification...................................... 37
4.2 Authority........................................................ 38
4.3 No Violations; Consents and Approvals............................ 38
4.4 Permits.......................................................... 39
4.5 Seller's Qualified Decommissioning Funds......................... 39
4.6 Seller's Nonqualified Decommissioning Funds...................... 42
4.7 Nuclear Law Matters.............................................. 43
4.8 Legal Proceedings................................................ 43
4.9 Personal Property................................................ 43
4.10 Real Property.................................................... 44
4.11 Contracts........................................................ 44
4.12 Certain Environmental Liabilities................................ 44
4.13 Undisclosed Liabilities.......................................... 44
4.14 Intellectual Property............................................ 44
4.15 Taxes............................................................ 45
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
5.1 Organization; Qualification...................................... 45
5.2 Authority........................................................ 45
5.3 No Violations; Consents and Approvals............................ 46
5.4 Buyer Permits.................................................... 47
5.5 Nuclear Law Matters.............................................. 47
5.6 Legal Proceedings................................................ 47
5.7 Qualified Buyer.................................................. 48
5.8 Inspections...................................................... 48
5.9 Certain Environmental Liabilities................................ 48
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<PAGE>
ARTICLE VI
COVENANTS OF THE PARTIES
6.1 Certain Buyer Covenants.......................................... 48
6.2 Public Statements................................................ 49
6.3 Further Assurances............................................... 49
6.4 Consents and Approvals........................................... 51
6.5 Certain Tax Matters.............................................. 52
6.6 Advice of Changes................................................ 55
6.7 ISRA Compliance.................................................. 55
6.8 Risk of Loss..................................................... 59
6.9 Cooperation after Closing........................................ 59
6.10 Decommissioning Funds............................................ 60
6.11 Amendment to Seller's Agreements................................. 62
6.12 Exclusivity...................................................... 62
6.13 Insurance........................................................ 62
ARTICLE VII
CONDITIONS
7.1 Conditions to Obligation of Each Party........................... 63
7.2 Conditions to Obligations of Buyer............................... 63
7.3 Conditions to Obligation of Seller............................... 66
ARTICLE VIII
INDEMNIFICATION AND ARBITRATION
8.1 Indemnification.................................................. 67
8.2 Defense of Claims................................................ 71
8.3 Arbitration...................................................... 74
ARTICLE IX
TERMINATION
9.1 Termination...................................................... 76
9.2 Effect of Termination............................................ 77
9.3 Additional Effects of Termination................................ 78
iii
<PAGE>
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 Amendment and Modification....................................... 78
10.2 Expenses......................................................... 78
10.3 Fees and Commissions............................................. 79
10.4 Bulk Sales Laws.................................................. 79
10.5 Waiver of Compliance............................................. 79
10.6 Survival......................................................... 79
10.7 Disclaimers...................................................... 80
10.8 Notices.......................................................... 81
10.9 Assignment, No Third-Party Beneficiaries......................... 82
10.10 Governing Law, Forum, Service of Process......................... 83
10.11 Counterparts..................................................... 83
10.12 Entire Agreement................................................. 83
iv
<PAGE>
LIST OF EXHIBITS AND SCHEDULES
EXHIBITS
Exhibit A Form of Assignment and Assumption Agreement
Exhibit B Form of Bill of Sale
Exhibit C Form of FIRPTA Affidavit
Exhibit D Form of Opinions of Counsel to Seller
Exhibit E Form of Opinions of Counsel to Buyer
SCHEDULES
1.1(105) Real Property
1.1(119) Seller's Agreements
2.1(e) Certain Assets
2.2(b) Certain Excluded Assets
4.3(a) Defaults and Violations
4.3(b) Seller's Required Regulatory Approvals
4.4(a) Seller Permits
4.4(b) Seller's Transferable Permits
4.5(d) Liabilities Relating to Seller's Qualified Decommissioning Funds
4.5(f) Tax Liability of Seller's Qualified Decommissioning Funds
4.6(d) Liabilities Relating to Seller's Nonqualified Decommissioning
Funds
4.7 Nuclear Law Matters
4.8 Seller Legal Proceedings
4.9 Encumbrances on Certain Personal Property
4.11 Certain Seller's Contracts
4.12 Certain Environmental Liabilities
4.15 Tax Matters
5.3(a) Defaults and Violations
5.3(b) Consents and Approvals
5.6(a) Buyer Legal Proceedings
5.9 Certain Environmental Liabilities
6.1(b) Salem Station Budget
6.10(c) Decommissioning Funds Investment Manager Agreements and
Policies
7.2(a)(i) Certain Buyer's Required Regulatory Approvals
7.2(a)(ii) Certain Affiliates
<PAGE>
PURCHASE AGREEMENT
------------------
(DP&L - Salem)
PURCHASE AGREEMENT, dated as of September 27, 1999, by and between
Delmarva Power & Light Company, a Delaware and Virginia corporation ("Seller"),
and PSEG Power LLC, a Delaware limited liability company ("Buyer"). Seller and
Buyer may be referred to herein individually as a "Party," and collectively as
the "Parties."
W I T N E S S E T H
WHEREAS, Seller owns an undivided 7.41% interest as tenant in common
without the right of partition in the Salem Station (as defined below) and
certain properties and assets associated therewith and ancillary thereto;
WHEREAS, Buyer desires to purchase and assume, and Seller desires to
sell and assign, or cause to be sold and assigned, all of Seller's rights, title
and interests in and to the Purchased Assets (as defined below) and certain
associated liabilities, upon the terms and conditions hereinafter set forth in
this Agreement; and
WHEREAS, Public Service Enterprise Group Incorporated, a New Jersey
corporation and sole member of Buyer, has contemporaneously delivered a Guaranty
dated the date hereof to Seller, upon which Seller has relied in entering into
this Agreement.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants, representations, warranties and agreements set forth herein, and
intending to be legally bound hereby, the Parties hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. As used in this Agreement, the following capitalized
terms have the meanings specified in this Section 1.1.
(1) "ACE" means Atlantic City Electric Company, a New Jersey
corporation.
2
<PAGE>
(2) "Additional Agreements" means the Deeds, the Assignment and
Assumption Agreement, the Bill of Sale and the Amendment to Owners Agreement.
(3) "Affiliate" has the meaning set forth in Rule 12b-2 of the General
Rules and Regulations promulgated under the Exchange Act.
(4) "Agreement" means this Purchase Agreement together with the
Schedules and Exhibits hereto.
(5) "Allocation" has the meaning set forth in Section 3.4.
(6) "Amendment to Owners Agreement" means the amendment to the Owners
Agreement among the signatories to the Owners Agreement, as executed and
delivered on the date hereof, effective from and after the Closing Date.
(7) "Antitrust Laws" means the Sherman Act, the Clayton Act, the HSR
Act, the Federal Trade Commission Act, and all other Laws that are designed or
intended to prohibit, restrict or regulate actions having the purpose or effect
of monopolization or restraint of trade, in each case, as amended from time to
time.
(8) "Applicable Tax Law" has the meaning set forth in Section 3.4.
(9) "Assignment and Assumption Agreement" means the assignment and
assumption agreement between Seller and Buyer, to be delivered at the Closing,
substantially in the form of Exhibit A hereto, pursuant to which Seller shall
assign to Buyer all of Seller's rights, title and interests in and to the
Seller's Agreements, certain intangible assets and certain other Purchased
Assets, and Buyer shall accept such assignments and assume the Assumed
Liabilities.
(10) "Assumed Decommissioning Liabilities" has the meaning set forth
in Section 2.3(d).
(11) "Assumed Liabilities" has the meaning set forth in Section 2.3.
(12) "Assumed Nuclear Liabilities" has the meaning set forth in
Section 2.3(e).
(13) "Assumed Spent Fuel Liabilities" has the meaning set forth in
Section 2.3(f).
3
<PAGE>
(14) "Atomic Energy Act" means the Atomic Energy Act of 1954, as
amended from time to time, 42 U.S.C. section 2011 et seq.
(15) "Bill of Sale" means the bill of sale of Seller, to be delivered
at the Closing, substantially in the form of Exhibit B hereto.
(16) [Intentionally Omitted]
(17) "Business Day" means any day other than Saturday, Sunday and any
day on which banking institutions in the State of New York are authorized or
required by Law or other governmental action to close.
(18) "Buyer" has the meaning set forth in the preamble to this
Agreement.
(19) "Buyer Nuclear Permits" has the meaning set forth in Section
5.5(b).
(20) "Buyer Permits" has the meaning set forth in Section 5.4.
(21) "Buyer's Indemnitee" has the meaning set forth in Section 8.1(b).
(22) "Buyer's Insurance Policies" means all insurance policies with
respect to the ownership, lease, maintenance or operation of the Salem Station,
including the Purchased Assets, including all liability, property damage and
business interruption policies in respect thereof, for which Buyer or its
Affiliates is liable for payment of the premium and related charges on behalf of
itself and the other parties to the Owners Agreement.
(23) "Buyer's Qualified Decommissioning Funds" means the trust funds
that are designated as "nuclear decommissioning reserve funds" under Code
Section 468A for the Salem Station held pursuant to the Amended Master
Decommissioning Trust Agreement between Public Service Electric & Gas Company
and Mellon Bank, N.A. dated as of January 1, 1996.
(24) "Buyer's Required Regulatory Approvals" has the meaning set forth
in Section 5.3(b).
(25) "Byproduct Material" means any radioactive material (except
Special Nuclear Material) yielded in, or made radioactive by, exposure to the
radiation incident to the process of producing or utilizing Special Nuclear
Material.
4
<PAGE>
(26) "CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended from time to time.
(27) "Closing" has the meaning set forth in Section 3.1.
(28) "Closing Date" has the meaning set forth in Section 3.1.
(29) "Closing Nuclear Fuel Supply Amount" has the meaning set forth in
Section 3.3(a).
(30) "Closing Payment" has the meaning set forth in Section 3.2(c).
(31) "Closing Statement" has the meaning set forth in Section 3.3(a).
(32) "Code" means the Internal Revenue Code of 1986, as amended from
time to time, and any regulations promulgated thereunder from time to time.
(33) "Collateral Agreement" means the purchase agreement dated as of
the date hereof between ACE and Buyer, relating to the sale by ACE to Buyer of
certain properties and assets at the Salem Station.
(34) "Commercial Arbitration Rules" has the meaning set forth in
Section 8.3(c).
(35) "Commercially Reasonable Efforts" means efforts by a Party which
are designed to enable a Party, directly or indirectly, to satisfy a condition
to, or otherwise assist in the consummation of, the transactions contemplated by
this Agreement and which do not require the performing Party to expend funds or
assume liabilities other than expenditures and liabilities which are customary
and reasonable in nature and amount in the context of the transactions
contemplated by this Agreement.
(36) "Confidentiality Agreement" means the Confidentiality Agreement,
dated August 6, 1999, as amended, between Conectiv and PSEG Energy Holdings, an
Affiliate of Buyer.
(37) "Courts" has the meaning set forth in Section 10.10.
(38) "CSFB" has the meaning set forth in Section 10.3.
5
<PAGE>
(39) "Decommissioning" means to remove the Salem Station from service
and restore the Sites, in accordance with applicable Law, including (a) the
dismantlement, decontamination, storage or entombment of the Salem Station, in
whole or in part, and any reduction or removal, whether before or after
termination of the NRC Licenses for the Salem Station, of radioactivity at the
Sites relating to the Salem Station and (b) all activities necessary for the
retirement, dismantlement and decontamination of the Salem Station to comply
with all Laws, including Nuclear Laws and Environmental Laws, including the
requirements of the Atomic Energy Act and the NRC's rules, regulations, orders
and pronouncements thereunder, the NRC Licenses for the Salem Station and
related decommissioning plans.
(40) "Decommissioning Costs" means the costs of Decommissioning the
Salem Station in accordance with all applicable Laws, including Nuclear Laws and
Environmental Laws.
(41) "Decommissioning Funds" means, collectively, the Seller's
Qualified Decommissioning Funds and the Seller's Nonqualified Decommissioning
Funds.
(42) "Deeds" means the special warranty deeds, as customarily used in
the State of New Jersey in form and substance reasonably satisfactory to the
Parties, pursuant to which Seller will convey all of its rights, title and
interests in the Real Property to Buyer.
(43) "Defined Expenses" has the meaning set forth in Section 6.1(b).
(44) "Department of Energy" means the United States Department of
Energy, and any successor agency thereto.
(45) "Department of Energy Decommissioning and Decontamination Fees"
means all fees related to the Department of Energy's special assessment of
utilities for the Uranium Enrichment Decontamination and Decommissioning Fund
pursuant to Sections 1801, 1802 and 1803 of the Atomic Energy Act (42 U.S.C.
2297g et seq.), and the Department of Energy's implementing regulations at 10
CFR Part 766, and any similar fees assessed under amended or superseding
statutes or regulations applicable to separative work units purchased from the
Department of Energy in order to decontaminate and decommission the Department
of Energy's gaseous diffusion enrichment facilities.
6
<PAGE>
(46) "Department of Energy Standard Contract" means the Contract for
Disposal of Spent Nuclear Fuel and/or High-Level Radioactive Waste, No. DE-
CR01-83NE44480 with respect to the Salem Station, dated as of June 13, 1983
between the United States of America, represented by the United States
Department of Energy, and PSE&G Utility.
(47) "Direct Claim" has the meaning set forth in Section 8.2(d).
(48) "Encumbrances" means any and all mortgages, pledges, liens,
claims, security interests, conditional and installment sale agreements,
easements, activity and use limitations, exceptions, rights-of-way, deed
restrictions, defects of title, encumbrances and charges of any kind.
(49) "Environmental Claims" has the meaning set forth in Section
8.1(c).
(50) "Environmental Condition" means the presence or Release to the
environment, whether at the Sites or otherwise, of Hazardous Substances,
including any migration of Hazardous Substances through air, soil or groundwater
at, to or from the Sites or at, to or from any Off-Site Location, regardless of
when such presence or Release occurred or is discovered.
(51) "Environmental Laws" means all (a) Laws, in each case, as amended
from time to time, relating to pollution or protection of the environment,
natural resources or human health and safety, including Laws relating to
Releases or threatened Releases of Hazardous Substances or otherwise relating to
the manufacture, formulation, generation, processing, distribution, use,
treatment, storage, Release, transport, Remediation, abatement, cleanup or
handling of Hazardous Substances, (b) Laws with regard to recordkeeping,
notification, disclosure and reporting requirements respecting Hazardous
Substances and (c) Laws relating to the management or use of natural resources;
but shall not include Nuclear Laws.
(52) "Environmental Permits" means all permits, registrations,
certifications, franchises, certificates, licenses and other authorizations,
consents and approvals of any Governmental Authorities with respect to or under
Environmental Laws.
(53) "Estimated Nuclear Fuel Supply Amount" has the meaning set forth
in Section 3.2(b).
7
<PAGE>
(54) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, and the rules and regulations promulgated thereunder
from time to time.
(55) "Excluded Assets" has the meaning set forth in Section 2.2.
(56) "Excluded Liabilities" has the meaning set forth in Section 2.4.
(57) "FERC" means the United States Federal Energy Regulatory
Commission, and any successor agency thereto.
(58) "Final Allocation" has the meaning set forth in Section 3.4.
(59) "FIRPTA Affidavit" means the Foreign Investment in Real Property
Tax Act Certification and Affidavit of Seller, to be delivered at the Closing,
substantially in the form of Exhibit C hereto.
(60) "Fuel Supplies" means, collectively, the Nuclear Fuel Supplies,
and fuel oil supplies, in each case, for use at the Salem Station.
(61) "Fund Tax Loss" has the meaning set forth in Section 6.5(g).
(62) "Governmental Authority" means any foreign, federal, state, local
or other governmental, executive, legislative, judicial, regulatory or
administrative agency, court, commission, department, board, or other
governmental subdivision, legislature, tribunal, government-owned corporation or
other governmental authority.
(63) "Hazardous Substances" means (a) any petrochemical or petroleum
products, oil or coal ash, radioactive materials, radon gas, asbestos in any
form that is or could become friable, urea formaldehyde foam insulation and
transformers or other equipment that contain dielectric fluid which may contain
polychlorinated biphenyls, (b) any chemicals, materials or substances defined as
or included in the definition of "hazardous substances," "hazardous wastes,"
"hazardous materials," "hazardous constituents," "restricted hazardous
materials," "extremely hazardous substances," "toxic substances,"
"contaminants," "pollutants," "toxic pollutants" or words of similar meaning and
regulatory effect under any Environmental Law and (c) any other chemical,
material or substance, exposure to which is prohibited, limited or regulated by
any Environmental Law; but shall not include Nuclear Material to the extent
regulated under Nuclear Laws.
8
<PAGE>
(64) "High-Level Waste" means (a) irradiated nuclear reactor fuel, (b)
liquid wastes resulting from the operation of the first cycle solvent extraction
system, or its equivalent, and the concentrated wastes from subsequent
extraction cycles, or their equivalent, in a facility for reprocessing
irradiated reactor fuel and (c) solids into which such liquid wastes have been
converted.
(65) "High-Level Waste Repository" means a facility subject to the
licensing and regulatory authority of the NRC, and which is designed,
constructed and operated by or on behalf of the Department of Energy for the
storage and disposal of Spent Nuclear Fuel and other High-Level Waste in
accordance with the requirements set forth in the Nuclear Waste Policy Act.
(66) "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended from time to time.
(67) "Income Tax" means any Tax imposed by any Governmental Authority
(a) based upon, measured by or calculated with respect to gross or net income,
profits or receipts (including municipal gross receipt Taxes, capital gains
Taxes and minimum Taxes) or (b) based upon, measured by or calculated with
respect to multiple bases (including corporate franchise taxes) if one or more
of such bases is described in clause (a), in each case together with any
interest, penalties or additions attributable to such Tax.
(68) "Indemnifiable Loss" has the meaning set forth in Section 8.1(a).
(69) "Indemnifying Party" has the meaning set forth in Section 8.1(f).
(70) "Indemnitee" has the meaning set forth in Section 8.1(b).
(71) "Independent Accounting Firm" means such nationally recognized,
independent accounting firm as is mutually appointed by Seller and Buyer for
purposes of this Agreement.
(72) "Inspection " means all tests, reviews, examinations,
inspections, investigations, verifications, samplings and similar activities
conducted by Buyer or its Representatives with respect to the Purchased Assets
prior to the Closing.
(73) "Inventories" means materials, spare parts, capital spare parts,
consumable supplies and chemical inventories relating to the operation of the
Salem Station; but shall not include Fuel Supplies.
9
<PAGE>
(74) "ISRA" has the meaning set forth in Section 6.7(a)(i).
(75) "Knowledge" means the actual knowledge of the directors and
executive officers of the specified Person, which directors and executive
officers are charged with responsibility for the particular function after
reasonable inquiry by them of selected employees of such Persons whom they
believe, in good faith, to be the persons responsible for the subject matter of
the inquiry, as of the date of this Agreement, or, with respect to any
certificate delivered pursuant to this Agreement, the date of delivery of such
certificate.
(76) "LDV Agreement" means the Integration of Lower Delaware Valley
Transmission System Agreement, Amendments and Supplements between Seller, ACE,
Jersey Central Power & Light Company, PECO and PSE&G Utility, as amended and
revised from time to time.
(77) "Laws" means all laws, statutes, rules, regulations and
ordinances of any Governmental Authority.
(78) "Low-Level Waste" means radioactive material that (a) is not
High-Level Waste, Spent Nuclear Fuel or Byproduct Material, and (b) the NRC
classifies as low-level radioactive waste.
(79) "Material Adverse Effect" means any change in or effect on the
Salem Station or any portion thereof (other than the Decommissioning Funds) that
is materially adverse to the operation or condition (financial or otherwise) of
the Salem Station, taken as a whole, including a shutdown thereof that is
materially adverse to the operation or condition (financial or otherwise) of the
Salem Station, but excluding (a) any change or effect generally affecting the
international, national, regional or local electric industry as a whole and not
specific to the Salem Station (other than any change or effect affecting the
nuclear electric industry generally), (b) any change or effect resulting from
changes in the international, national, regional or local wholesale or retail
markets for electricity, including any change in or effect on the structure,
operating agreements, operations or procedures of Pennsylvania-New
Jersey-Maryland Interconnection L.L.C. or its control area, (c) any change or
effect resulting from changes in the international, national, regional or local
markets for any fuel (whether nuclear or otherwise) used at the Salem Station,
(d) any change or effect resulting from changes in the North American, national,
regional or local electricity transmission systems or operations thereof, (e)
any change or effect to the extent constituting or involving an Excluded Asset
or an Excluded Liability and (f) any change or effect which is cured (including
10
<PAGE>
by payment of money) before the earlier of the Closing and the termination of
this Agreement pursuant to Section 9.1.
(80) "Mortgage" means the Mortgage and Deed of Trust, dated as of
October 1, 1934, between Seller and New York Trust Co., as amended.
(81) "NEIL" means Nuclear Electric Insurance Limited, and any
successor entity thereto.
(82) "Net Book Value" means, as of any date and with respect to any
asset or property, an amount equal to the original cost of such asset or
property less applicable depreciation and amortization, calculated and presented
in accordance with methods and procedures historically applied by Buyer in the
preparation of monthly statements delivered to Seller under the Owners Agreement
prior to the date hereof.
(83) "NJBPU" means the New Jersey Board of Public Utilities, and any
successor agency thereto.
(84) "NJDEP" means the New Jersey Department of Environmental
Protection, and any successor agency thereto.
(85) "NRC" means the Nuclear Regulatory Commission, as established by
section 201 of the Energy Reorganization Act of 1974, 42 U.S.C. section 5841, as
amended, and any successor agency thereto.
(86) "NRC Applications" means whatever actions may be necessary or
appropriate to request and obtain the NRC Approvals.
(87) "NRC Approvals" means the consent of the NRC pursuant to Section
184 of the Atomic Energy Act and 10 C.F.R. section 50.80 to the transfer of the
Purchased Assets to Buyer, NRC approval of all conforming administrative license
amendments associated with such transfers, NRC consent to the transfer of, and
approval of any related amendments to, any nuclear materials licenses associated
with such transfers and any other NRC consents and approvals required in
connection with the consummation of the transactions contemplated by this
Agreement.
(88) "NRC Licenses" means, together, (i) Facility Operating License
No. DPR-70 with respect to Unit 1 at the Salem Station and (ii) Facility
11
<PAGE>
Operating License No. DPR-75 with respect to Unit 2 at the Salem Station, in
each case, issued by the NRC to Seller, ACE, PSE&G Utility and PECO, as amended.
(89) "Nuclear Fuel Supplies" means the nuclear fuel assemblies in the
reactor core, natural uranium, converted uranium, enriched uranium and any other
form of any thereof, under contract or in inventory, and located at or in
transit to the Salem Station, as well as all nuclear fuel constituents in all
stages of the fuel cycle which are in the process of production, conversion,
enrichment or fabrication.
(90) "Nuclear Laws" means, collectively, in each case, as amended from
time to time, (a) all Laws relating to: the regulation of nuclear power plants,
Nuclear Materials and the transportation and storage of Nuclear Materials; the
regulation of nuclear fuel; the enrichment of uranium; the disposal and storage
of High-Level Waste, and Spent Nuclear Fuel, and contracts for and payments into
the Nuclear Waste Fund; (b) the Atomic Energy Act of 1954 (42 U.S.C. section
2011 et seq.); (c) the Energy Reorganization Act of 1974 (42 U.S.C. section 5801
et seq.); (d) the Convention on the Physical Protection of Nuclear Material
Implementation Act of 1982 (Public Law 97 - 351; 96 STAT. 1663); (e) the Foreign
Assistance Act of 1961 (22 U.S.C. section 2429 et seq.); (f) the Nuclear
Non-Proliferation Act of 1978 (22 U.S.C. section 3201); (g) the Low-Level
Radioactive Waste Policy Act (42 U.S.C. section 2021b et seq.); (h) the Nuclear
Waste Policy Act; (i) the Low-Level Radioactive Waste Policy Amendments Act of
1985 (42 U.S.C. section 2021d, 471); (j) the Energy Policy Act of 1992 (42
U.S.C. section 13201 et seq.); (k) New Jersey Radiation Protection Act, N.J.S.A.
26: 2D-1 et seq.; and (l) New Jersey Radiation Accident Response Act, N.J.S.A.
26: 2D-37 et.seq.; but shall not include Environmental Laws.
(91) "Nuclear Materials" means Source Material, Special Nuclear
Material, Low-Level Waste, High-Level Waste, Byproduct Material and Spent
Nuclear Fuel.
(92) "Nuclear Waste Fund" means the fund established by the Department
of Energy under the Nuclear Waste Policy Act in which the Spent Nuclear Fuel
Fees to be used for the design, construction and operation of a High-Level Waste
Repository and other activities related to the storage and disposal of Spent
Nuclear Fuel or High-Level Waste are deposited.
(93) "Nuclear Waste Policy Act" means the Nuclear Waste Policy Act of
1982, as amended from time to time (42 U.S.C. section 10101 et seq.).
(94) "Off-Site Location" means any real property other than the Sites.
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(95) "Owners Agreement" means the Owners Agreement for Salem Nuclear
Generating Station Units No. 1, 2 and 3, dated as of November 24, 1971, as
amended, by and between Seller, ACE, PECO and PSE&G Utility.
(96) "Party" and "Parties" have the respective meanings set forth in
the preamble to this Agreement.
(97) "PECO" means PECO Energy Company (formerly Philadelphia Electric
Company), a Pennsylvania corporation.
(98) "Permitted Encumbrances" means: (a) such Encumbrances as arise
under any Seller's Agreement or the LDV Agreement; (b) with respect to any
period before the Closing, Encumbrances created by the Mortgage; (c) statutory
liens for Taxes or other charges or assessments of Governmental Authorities not
yet due or delinquent or the validity of which is being challenged in good faith
by appropriate proceedings provided that the aggregate amount being so contested
does not exceed $100,000 or Seller has provided Buyer adequate security with
respect thereto, in form and substance satisfactory to Buyer; (d) mechanics',
carriers', workers', repairers' and other similar liens arising or incurred in
the ordinary course of business relating to obligations as to which there is no
default on the part of Buyer; (e) such zoning, entitlement, conservation
restriction and other land use and environmental regulations by Governmental
Authorities as (i) do not materially detract from the value of any Purchased
Asset as currently used, or materially interfere with the present use of any
Purchased Asset or (ii) would not, individually or in the aggregate, have a
Material Adverse Effect; and (f) such non-monetary easements, activity and use
limitations, exceptions, rights of way, deed restrictions, covenants and
conditions and defects of title as (i) do not materially detract from the value
of the Real Property as currently used or materially interfere with the present
use of the Real Property or (ii) would not, individually or in the aggregate,
have a Material Adverse Effect.
(99) "Person" means any individual, partnership, limited liability
company, joint venture, corporation, trust, unincorporated organization, other
business association or Governmental Authority.
(100) "Prime Rate" has the meaning set forth in Section 3.3(c).
(101) "PSE&G Utility" means Public Service Electric & Gas Company, a
New Jersey corporation.
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(102) "PUHCA" means the Public Utility Holding Company Act of 1935, as
amended from time to time, and the rules and regulations promulgated thereunder
from time to time.
(103) "Purchase Price" has the meaning set forth in Section 3.2(a).
(104) "Purchased Assets" has the meaning set forth in Section 2.1.
(105) "Real Property" means all real property interests in the
Counties of Salem, Cumberland and Cape May, New Jersey owned by the Seller
(including all land and the buildings and other improvements thereon and all
appurtenances thereto) on, underlying or used in connection with the Salem
Station and the properties acquired under the estuary enhancement program
related thereto, including the properties set forth on Schedule 1.1(105).
(106) "Regulatory Termination" has the meaning set forth in Section
9.3.
(107) "Release" means any release, spill, leak, discharge, disposal
of, pumping, pouring, emitting, emptying, injecting, leaching, dumping,
depositing, dispersing, allowing to escape or migrate into or through the
environment (including ambient air, surface water, groundwater, land surface and
subsurface strata) or within any building, structure, facility or fixture.
(108) "Remediation" or "Remediate" means action of any kind to address
an Environmental Condition or a Release or threatened Release of Hazardous
Substances or the presence of Hazardous Substances at the Sites or an Off-Site
Location, including the following activities to the extent they relate to,
result from or arise out of the presence of a Hazardous Substance at the Sites
or an Off-Site Location: (a) monitoring, investigation, assessment, treatment,
cleanup, containment, removal, mitigation, response or restoration work; (b)
obtaining any permits, consents, approvals or authorizations of any Governmental
Authority necessary to conduct any such activity; (c) preparing and implementing
any plans or studies for any such activity; (d) obtaining a written notice from
a Governmental Authority with jurisdiction over the Sites or an Off-Site
Location under Environmental Laws that no material additional work is required
by such Governmental Authority; (e) the use, implementation, application,
installation, operation or maintenance of removal actions on the Sites or an
Off-Site Location, remedial technologies applied to the surface or subsurface
soils, excavation and treatment or disposal of soils at an Off-Site Location,
systems for long-term treatment of surface water or groundwater, engineering
controls or institutional controls; and (f) any other activities reasonably
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determined by a Party to be necessary or appropriate or required under
Environmental Laws to address an Environmental Condition or a Release of
Hazardous Substances or the presence of Hazardous Substances at the Sites or an
Off-Site Location.
(109) "Representatives" of a Person means, collectively, such Person's
Affiliates and its and their respective directors, officers, partners, members,
employees, representatives, agents, advisors (including accountants, legal
counsel, environmental consultants and financial advisors), parent entities and
other controlling Persons.
(110) "Salem Interest" means Seller's undivided 7.41% interest as
tenant in common without the right of partition in the Salem Station.
(111) "Salem Station" means the generating station described in the
Owners Agreement described in Section 1.1(95).
(112) "Salem Station Budget" has the meaning set forth in Section
6.1(b).
(113) "SEC" means the United States Securities and Exchange
Commission, and any successor agency thereto.
(114) "Securities Act" means the Securities Act of 1933, as amended
from time to time, and the rules and regulations promulgated thereunder from
time to time.
(115) "Seller" has the meaning set forth in the preamble to this
Agreement.
(116) "Seller Nuclear Permits" has the meaning set forth in Section
4.7.
(117) "Seller Permits" has the meaning set forth in Section 4.4.
(118) "Seller Tax Loss" has the meaning set forth in Section 6.5(g).
(119) "Seller's Agreements" means, collectively, the contracts,
agreements, arrangements, licenses and leases of any nature, which shall be
assigned pursuant to Section 2.1(f), (i) to which Seller is a party, each of
which is set forth in Schedule 1.1(119), and (ii) entered into by Buyer, for and
on behalf of Seller, whether under the Owners Agreement or otherwise, and by or
to which Seller or the Purchased Assets is or are bound or subject, in each
case, relating to the ownership, lease, maintenance or operation of the
Purchased Assets.
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(120) "Seller's Indemnitee" has the meaning set forth in Section
8.1(a).
(121) "Seller's Insurance Policies" means all insurance policies with
respect to the ownership, lease, maintenance or operation of the Purchased
Assets, including all liability, property damage and business interruption
policies in respect thereof, for which solely Seller or its Affiliates (as
opposed to Buyer or its Affiliates) are liable for the payment of premiums and
related charges.
(122) "Seller's Nonqualified Decommissioning Funds" means the trust
funds that are designated as nonqualified decommissioning funds for the Salem
Station and held pursuant to the Trust Agreement.
(123) "Seller's Qualified Decommissioning Funds" means the trust funds
that are designated as "nuclear decommissioning reserve funds" under Code
Section 468A for the Salem Station and held pursuant to the Trust Agreement.
(124) "Seller's Required Regulatory Approvals" has the meaning set
forth in Section 4.3(b).
(125) "Sites" means the Real Property forming a part, or used or
usable in connection with the operation, of the Salem Station, including any
real property used for the disposal of solid or hazardous waste that is included
in the Real Property. Any reference to the Sites shall include the surface and
subsurface elements, to the extent owned by Seller, including the soil and
groundwater present at the Sites, and any reference to materials or conditions
"at the Sites", including Hazardous Substances and Environmental Conditions,
shall include all materials and conditions "at, on, in, upon, over, across,
under or within" the Sites.
(126) "Source Material" means: (a) uranium or thorium, or any
combination thereof, in any physical or chemical form or (b) ores which contain
by weight one-twentieth of one percent (0.05%) or more of (i) uranium, (ii)
thorium or (iii) any combination thereof; but shall not include Special Nuclear
Material.
(127) "Special Nuclear Material" means plutonium, uranium-233, uranium
enriched in the isotope-233 or in the isotope-235, and any other material that
the NRC determines to be "Special Nuclear Material", and any material
artificially enriched by any of the foregoing materials or isotopes; but shall
not include Source Material.
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(128) "Spent Nuclear Fuel" means nuclear fuel that has been withdrawn
from a nuclear reactor following irradiation and has not been chemically
separated into its constituent elements by reprocessing, including the Special
Nuclear Material, Byproduct Material, Source Material and other radioactive
materials associated with nuclear fuel assemblies.
(129) "Spent Nuclear Fuel Fees" means the fees assessed on electricity
generated and sold at the Salem Station pursuant to the Department of Energy
Standard Contract, as provided in Section 302 of the Nuclear Waste Policy Act
and 10 C.F.R. Part 961, as amended from time to time.
(130) "Subsequent Transaction" has the meaning set forth in Section
9.3.
(131) "Subsidiary", when used in reference to any Person, means any
entity of which outstanding securities or interests having ordinary voting power
to elect a majority of the board of directors or other governing body performing
similar functions of such entity are owned directly or indirectly by such
Person.
(132) "Tangible Personal Property" has the meaning set forth in
Section 2.1(e).
(133) "Tax" or "Taxes" means all taxes, surtaxes, charges, fees,
levies, penalties and other assessments imposed by any Governmental Authority,
including income, gross receipts, excise, property, sales, transfer, use,
franchise, special franchise, payroll, recording, withholding, social security,
gross receipts, license, stamp, occupation, employment or other taxes, including
any interest, penalties or additions attributable thereto or any liability for
taxes incurred by reason of joining in the filing of any consolidated, combined
or unitary Tax Returns, in each case including any interest, penalties or
additions attributable thereto; provided, however, that "Taxes" shall not
include sewer rents or charges for water.
(134) "Tax Benefit" has the meaning set forth in Section 8.1(d).
(135) "Tax Cost" has the meaning set forth in Section 8.1(d).
(136) "Tax Return" means any return, report, information return,
declaration, claim for refund, or other document, together with all amendments
and supplements thereto (including all related or supporting information),
required to be supplied to any Governmental Authority responsible for the
administration of Laws governing Taxes.
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(137) "Termination Date" has the meaning set forth in Section 9.1(b).
(138) "Third-Party Claim" has the meaning set forth in Section 8.2(a).
(139) "Transferable Permits" means all those Seller Permits, including
Seller's Nuclear Permits (and all applications pertaining thereto), which are
transferable under applicable Laws by Seller to Buyer with or without a filing
with, notice to, consent or approval of any Governmental Authority.
(140) "Transfer Taxes" means any property transfer or gains tax, sales
tax, conveyance fee, use tax, stamp tax, stock transfer tax or other similar
tax, including any related penalties, interest and additions to tax.
(141) "Transmission Assets" has the meaning set forth in Section
2.2(a).
(142) "Trust Agreement" means the Nuclear Decommissioning Master Trust
Agreement between Delmarva Power & Light Company and Mellon Bank, N.A., dated
December 1, 1995.
(143) "USEPA" means the United States Environmental Protection Agency,
and any successor agency thereto.
1.2 Certain Interpretive Matters. The Article, Section and Schedule
headings contained in this Agreement are solely for the purpose of reference,
are not part of the agreement of the Parties and shall not in any way affect the
meaning of this Agreement. The term "includes" or "including" shall mean
"including without limitation." The words "hereof", "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement.
Other capitalized terms used in this Agreement and not defined in Section 1.1
shall have the meanings assigned to them elsewhere in this Agreement. Unless the
context otherwise requires, the definitions contained in this Agreement are
applicable to the singular as well as the plural forms of such terms and to the
masculine as well as to the feminine and neuter genders of such term. Any
agreement, instrument, statute, regulation, rule or order defined or referred to
herein or in any agreement or instrument that is referred to herein means such
agreement, instrument, statute, regulation, rule or order as from time to time
amended, modified or supplemented, including (in the case of agreements or
instruments) by waiver or consent and (in the case of statutes, regulations,
rules or orders) by succession of comparable successor statutes, regulations,
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rules or orders and references to all attachments thereto and instruments
incorporated therein. References to a Section, Article, Exhibit or Schedule
shall mean a Section, Article, Exhibit or Schedule of this Agreement.
1.3 U.S. Dollars. When used herein, the term "dollars" and the symbol
"$" refer to the lawful currency of the United States of America.
1.4 Seller's Interest in Purchased Assets. The Parties acknowledge and
agree that Seller owns and holds an undivided seven and forty-one hundredths
percent (7.41%) interest as tenant in common without the right of partition in
the Salem Station. The Parties agree that all references in this Agreement to
Seller's rights, title and interests in, to and under the Purchased Assets, and
rights, liabilities and obligations in connection therewith, shall be construed
in this context.
ARTICLE II
PURCHASE AND SALE
2.1 Transfer of Purchased Assets. Upon the terms and subject to the
conditions set forth in this Agreement, at the Closing, Seller shall sell,
assign, convey, transfer and deliver to Buyer, and Buyer shall purchase, assume
and acquire from Seller, free and clear of all Encumbrances, except for the
Permitted Encumbrances, all of Seller's rights, title and interests, of whatever
kind and nature, whether tangible or intangible, in and to all assets (except
for the Excluded Assets) constituting or used and necessary for the operation of
the Salem Station or any portion thereof, together with all goodwill relating
thereto, including, without limitation, those assets listed below, each as in
existence on the Closing Date (collectively, the "Purchased Assets"):
(a) The Real Property;
(b) The Inventories;
(c) The Nuclear Materials held pursuant to the NRC Licenses;
(d) The Fuel Supplies;
(e) All machinery (mobile or otherwise), equipment (including
computer hardware and software and communications equipment), vehicles, tools,
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spare parts, fixtures, furniture, furnishings and other personal property
located at or in transit to the Salem Station or used and necessary for the
operation of the Salem Station, in each case, on the Closing Date (collectively,
the "Tangible Personal Property"), including the electrical transmission assets
(as opposed to generation assets) set forth in Schedule 2.1(e);
(f) Subject to the receipt of necessary consents and approvals,
the Seller's Agreements;
(g) Subject to the receipt of necessary consents and approvals,
the Transferable Permits and all of Seller's rights, title and interests in and
to any other permits, registrations, franchises, certificates, licenses and
other authorizations, consents and approvals of Governmental Authorities
relating to the ownership, lease, maintenance or operation of the Salem Station
or any portion thereof;
(h) Seller's Nonqualified Decommissioning Funds as of the Closing
Date, including all income, interest and other earnings accrued thereon,
together with all required accounting and other records;
(i) Seller's Qualified Decommissioning Funds as of the Closing
Date, including all income, interest and other earnings accrued thereon,
together with all required accounting and other records;
(j) All books, operating records, operating, safety and
maintenance manuals, engineering design plans, blueprints and as-built plans,
specifications, procedures and similar items of Seller relating specifically to
the Salem Station (subject to the right of Seller to retain copies of same for
its use) other than such items which are proprietary to third parties and
accounting records;
(k) All unexpired, transferable warranties and guarantees from
third parties arising out of, in respect of, or in connection with, (i) any item
of Real Property or personal property, or interest therein, included in the
Purchased Assets or (ii) the Assumed Liabilities;
(l) All claims of Seller relating to or pertaining to the
Department of Energy's defaults under the Department of Energy Standard Contract
(including all claims for failure by the Department of Energy to take Spent
Nuclear Fuel) accrued prior to, on or after the Closing Date, whether relating
to periods prior to, on or after the Closing Date, and all other claims of
Seller against the Department of Energy with respect to, arising out of or in
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connection with the Purchased Assets, other than the claims described in Section
2.2(l); and
(m) The rights of Seller in, to and under all causes of action
against third parties with respect to, arising out of or in connection with
Seller's rights, title and interests in and to the Purchased Assets or the
Assumed Liabilities, or any portion thereof, whether accruing prior to, on or
after the Closing Date, other than any such causes of action as constitute
Excluded Assets or Excluded Liabilities, whether received as payment or credit
against future liabilities, in each case, relating to any period prior to, on or
after the Closing Date, other than the claims described in Section 2.2(m).
2.2 Excluded Assets. Notwithstanding anything to the contrary in this
Agreement, nothing in this Agreement shall constitute or be construed as
requiring Seller to sell, assign, convey, transfer or deliver, and Buyer shall
not be entitled to purchase or acquire, any right, title or interest in, to or
under the following assets and properties which are associated with the
Purchased Assets, but which are hereby specifically excluded from the definition
of Purchased Assets (collectively, the "Excluded Assets"):
(a) The right, title and interest of Seller in, to and under all
electrical transmission or distribution assets (as opposed to generation assets)
located at or forming part of the Salem Station (whether or not regarded as a
"transmission" or "generation" asset for regulatory or accounting purposes),
including all switchyard facilities, substation facilities and support
equipment, as well as all permits, contracts (including the LDV Agreement) and
warranties, to the extent they relate to such transmission and distribution
assets (other than the electrical transmission assets identified in Schedule
2.1(e) included as Purchased Assets) (collectively, the "Transmission Assets");
(b) The right, title and interest of Seller in, to and under
certain switches and meters, gas facilities, revenue meters and remote testing
units, drainage pipes and systems, pumping equipment and associated piping, in
each case, located at or forming part of the Salem Station as identified in
Schedule 2.2(b) attached hereto;
(c) All certificates of deposit, shares of stock, securities,
bonds, debentures, evidences of indebtedness, and interests in joint ventures,
partnerships, limited liability companies and other entities, including account
balances under Seller's Insurance Policies and the right, title and interest of
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Seller in, to and under account balances held by NEIL under Buyer's Insurance
Policies, but excluding such assets comprising the Decommissioning Funds;
(d) All Seller's Insurance Policies and the right, title and
interest of Seller in, to and under account balances held by NEIL under Buyer's
Insurance Policies;
(e) All cash, cash equivalents, bank deposits, accounts and notes
receivable (trade or otherwise), and prepaid expenses, including premiums and
account balances under Seller's Insurance Policies and the right, title and
interest of Seller in, to and under account balances held by NEIL under Buyer's
Insurance Policies, and any income, sales, payroll or other Tax receivables (in
each case, whether held by Seller or any third party, including Buyer under the
Owners Agreement), but excluding such assets comprising the Decommissioning
Funds;
(f) The right, title and interest of Seller in, to and under all
intellectual property, including the names "Delmarva Power & Light Company",
"DP&L" or any derivation thereof, as well as any related or similar name, or any
other trade names, trademarks, service marks, corporate names and logos, or any
part, derivation, colorable imitation or combination thereof;
(g) All tariffs, agreements and arrangements with Persons other
than Buyer to which Seller is a party for the purchase or sale of electric
capacity or energy, or for the purchase of transmission, distribution or
ancillary services;
(h) Other than with respect to the Decommissioning Funds, all Tax
refunds or credits (including refunds or credits of real property Taxes paid or
due with respect to the Salem Station or any related Real Property), which
refunds or credits are owed to Seller with respect to periods prior to the
Closing Date, whether directly or indirectly, under the Owners Agreement or
otherwise regardless of when actually paid (which refunds or credits shall be
net to Seller of all reasonable out-of-pocket costs and expenses (including
legal fees) incurred by Buyer in connection with obtaining the portion of such
Tax refund or credit owed to Seller);
(i) The minute books, stock transfer books, corporate seal and
other corporate records of Seller;
(j) The right, title and interest of Seller in, to and under all
contracts, agreements, arrangements, licenses and leases of any nature, other
than the Seller's Agreements;
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(k) All other assets and properties owned or leased by Seller
which are not used and necessary for the operation of the Salem Station or any
portion thereof;
(l) All claims of Seller relating to or pertaining to any refund
or credit received on or after the Closing Date by Buyer or its successors or
permitted assigns of all or any part of Department of Energy Decommissioning and
Decontamination Fees for which Seller is or was liable; provided that Seller
shall not have any right to pursue such claims separately, but shall be entitled
to pursue such claims solely by joint action with Buyer and any other interested
parties approved by Buyer, such action to be controlled by Buyer in its sole
discretion; provided, also, that if Buyer shall receive any such refund or
credit on or after the Closing Date of all or any part of such Department of
Energy Decommissioning and Decontamination Fees, Seller's claim to a portion of
such refund shall be limited to the amount of such refund or credit multiplied
by a fraction, (i) the numerator of which is the amount of Decommissioning and
Decontamination Fees with respect to the Salem Station paid by Seller or on
Seller's behalf, and (ii) the denominator of which is the amount of
Decommissioning and Decontamination Fees with respect to the Salem Station paid
by all of the parties to the Owners Agreement or on their behalf; and provided,
further, that the aforesaid claims shall constitute Excluded Assets (rather than
Purchased Assets) after the Closing only if Seller shall continue to pay after
the Closing its proportionate share of the costs and expenses (including
reasonable legal fees) of pursuing any such claims (but not Department of Energy
Decommissioning and Decontamination Fees), such proportionate share to be
determined as if Seller had not transferred its rights, title and interests in
and to the Purchased Assets to Buyer;
(m) All rights of Seller in, to and under the action against
Westinghouse Electric Corporation or its Affiliates, or their respective
successors or assigns, captioned Public Service Electric & Gas Company, et al.
v. Westinghouse Electric Corporation, C.A. No. 96-925 (MTB) in the United States
District Court for the District of New Jersey, and all related actions currently
pending in state courts; provided that the aforesaid claims shall constitute
Excluded Assets (rather than Purchased Assets) after the Closing only if Seller
shall continue to pay after the Closing its proportionate share of the costs and
expenses (including reasonable legal fees) of pursuing any such claims, such
proportionate share to be determined as if Seller had not transferred its
rights, title and interests in and to the Purchased Assets to Buyer; and
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(n) The right, title and interest of Seller in, to and under this
Agreement, the Collateral Agreement and the Additional Agreements.
2.3 Assumed Liabilities. At the Closing, Buyer shall assume and agree
to pay, perform and otherwise discharge, without recourse to Seller (other than
as set forth herein or in the Owners Agreement, as amended by the Amendment to
Owners Agreement), in accordance with the terms and subject to the conditions
set forth herein, all of the liabilities and obligations of Seller, direct or
indirect, known or unknown, asserted or unasserted, absolute or contingent,
accrued or unaccrued, which relate to the Purchased Assets (other than Excluded
Liabilities) (the "Assumed Liabilities"), including those set forth below;
provided that nothing set forth in this Section 2.3 shall require Buyer to
assume any liabilities or obligations that are expressly excluded pursuant to
Section 2.4:
(a) All liabilities and obligations of Seller arising on or after
the Closing Date under the Seller's Agreements and the Transferable Permits in
accordance with the terms thereof, except, in each case, to the extent such
liabilities and obligations, but for a breach or default by Seller, would have
been paid, performed or otherwise discharged prior to the Closing Date;
(b) All liabilities and obligations of Seller in respect of Taxes
for which Buyer is liable pursuant to Section 6.5 hereof;
(c) Other than those set forth in Section 2.4(g), all liabilities
and obligations of Seller arising under or relating to Environmental Laws or
relating to any claim in respect of Environmental Conditions or Hazardous
Substances, whether based on common law or Environmental Laws, whether relating
to the Sites or any Off-Site Location, in either case, whether such liabilities
or obligations are known or unknown, contingent or accrued, including (i) any
violation or alleged violation of Environmental Laws with respect to the
ownership, lease, maintenance or operation of any of the Purchased Assets,
including any fines or penalties that arise in connection with the ownership,
lease, maintenance or operation of the Purchased Assets prior to, on or after
the Closing Date, and the costs associated with correcting any such violations;
(ii) loss of life, injury to Persons or property or damage to natural resources
(whether or not such loss, injury or damage arose or was made manifest before
the Closing Date or arises or becomes manifest prior to, on or after the Closing
Date), in each case, caused (or allegedly caused) by any Environmental Condition
or the presence or Release of Hazardous Substances at, on, in, under, or
migrating from the Purchased Assets prior to, on or after the Closing Date,
including any Environmental Condition or Hazardous Substances contained in
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building materials at or adjacent to the Purchased Assets or in the soil,
surface water, sediments, groundwater, landfill cells, or in other environmental
media at or near the Purchased Assets; (iii) the investigation or Remediation
(whether or not such investigation or Remediation commenced before the Closing
Date or commences on or after the Closing Date) of any Environmental Condition
or Hazardous Substances that are present or have been Released prior to, on or
after the Closing Date at, on, in, under or migrating from the Purchased Assets
or in the soil, surface water, sediments, groundwater, landfill cells or in
other environmental media at or adjacent to the Purchased Assets; (iv) loss of
life, injury to persons or property or damage to natural resources (whether or
not such loss, injury or damage arose or was made manifest before the Closing
Date or arises or becomes manifest on or after the Closing Date) caused or
allegedly caused by the disposal, storage, transportation, discharge, Release or
recycling of Hazardous Substances at an Off-Site Location, or the arrangement
for such activities, prior to, on or after the Closing Date, in connection with
the ownership, lease, maintenance or operation of the Purchased Assets; and (v)
the investigation or Remediation (whether or not such investigation or
Remediation commenced before the Closing Date or commences on or after the
Closing Date) of Hazardous Substances that are disposed, stored, transported,
discharged, Released, recycled at an Off-Site Location, or the arrangement for
such activities, prior to, on or after the Closing Date, in connection with the
ownership, lease, maintenance or operation of the Purchased Assets;
(d) All liabilities and obligations of Seller in respect of
Decommissioning the Salem Station, and the Decommissioning Costs relating
thereto, whether arising prior to, on or after the Closing Date (collectively,
"Assumed Decommissioning Liabilities");
(e) Other than as set forth in Section 2.4(h), all liabilities
and obligations of Seller arising under or relating to Nuclear Laws, and all
liabilities and obligations of Seller arising under or relating to Nuclear
Materials or to any claim in respect thereof, whether based on Nuclear Laws,
Environmental Laws, common law or otherwise (excluding liabilities and
obligations for Department of Energy Decommissioning and Decontamination Fees,
which are governed by Section 2.7), whether such liabilities or obligations are
known or unknown, contingent or accrued, in each case, arising or occurring
prior to, on or after the Closing Date, including all asserted or unasserted
liabilities or obligations to third parties (including employees) for personal
injury or tort, or any other theory of liability, arising out of the ownership,
lease, maintenance or operation of the Purchased Assets prior to, on or after
the Closing Date, including liabilities and obligations arising out of or
resulting from the transportation, treatment, storage or disposal of Nuclear
Materials, including liabilities and obligations arising out of or resulting
from a "nuclear incident" or "precautionary evacuation" (as such terms are
defined in the Atomic Energy Act) at the Salem Station, or any other licensed
nuclear reactor site in the United States, or in the course of the
transportation of Nuclear Materials to or from the Salem Station, or any other
such site prior to, on or after the Closing Date, including liability for all
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deferred premiums assessed in connection with such a nuclear incident or
precautionary evacuation under any applicable NRC or industry retrospective
rating plan or insurance policy, including any mutual insurance pools
established in compliance with the requirements imposed under Section 170 of the
Atomic Energy Act and 10 C.F.R. Part 140 or 10 C.F.R. section 50.54(w),
including all liabilities and obligations of Seller for retrospective premium
obligations under Seller's Insurance Policies or Buyer's Insurance Policies
(collectively, "Assumed Nuclear Liabilities");
(f) All liabilities and obligations of Seller in respect of Spent
Nuclear Fuel, including Spent Nuclear Fuel Fees, whether such liability or
obligation is known or unknown, contingent or accrued, and whether arising or
occurring prior to, on or after the Closing Date, except as specified in Section
2.6 (collectively, "Assumed Spent Fuel Liabilities"); and
(g) With respect to the Purchased Assets, any Tax that may be
imposed on Seller by any Governmental Authority on the ownership, lease,
maintenance, operation, or use of the Purchased Assets on or after the Closing
Date, except for any Income Tax attributable to income (including proceeds
representing the Purchase Price or proceeds of asset sales) received by Seller
and any Transfer Taxes for which Seller is liable pursuant to Section 6.5.
2.4 Excluded Liabilities. Notwithstanding anything to the contrary in
Section 2.3, Buyer shall not assume or be obligated to pay, perform or otherwise
discharge the following liabilities or obligations of Seller (the "Excluded
Liabilities"):
(a) Any liabilities or obligations of Seller arising out of, in
respect of, or in connection with, any Excluded Assets or other assets of Seller
which are not Purchased Assets;
(b) Any liabilities or obligations of Seller arising out of, in
respect of, or in connection with, Taxes attributable to the Purchased Assets
for taxable periods, or portions thereof, ending before the Closing Date, except
for Transfer Taxes and Taxes for which Buyer is liable pursuant to Section 6.5;
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(c) Any liabilities or obligations of Seller accruing under any
of the Seller's Agreements prior to the Closing Date;
(d) Any payment obligations of Seller under the Owners Agreement,
as amended by the Amendment to Owners Agreement, for goods delivered or services
rendered or liabilities incurred prior to the Closing Date, except for such
obligations for which Buyer or any other Person (other than Seller) is liable
under the Owners Agreement, as amended by the Amendment to Owners Agreement;
(e) Any and all asserted or unasserted liabilities or obligations
to third parties (including employees of Seller) for personal injury or tort, or
similar causes of action relating to Seller's acts or omissions in connection
with the ownership of the Purchased Assets arising during or attributable to the
period prior to the Closing Date, other than liabilities or obligations assumed
by Buyer under Sections 2.3(c) and (e);
(f) Any fines or similar penalties imposed by and payable to any
Governmental Authority under applicable Law (as in effect prior to the Closing
Date, notwithstanding any provision hereof to the contrary) with respect to the
Purchased Assets resulting from (i) an investigation, proceeding, request for
information or inspection before or by a Governmental Authority directly
relating to actions or omissions by Seller prior to the Closing Date or (ii)
violations of applicable Law (as in effect prior to the Closing Date,
notwithstanding any provision hereof to the contrary), wilful misconduct or
gross negligence directly relating to actions or omissions by Seller prior to
the Closing Date;
(g) Any liabilities or obligations of Seller arising under or
relating to any claim in respect of Environmental Conditions or Hazardous
Substances, in each case, relating to the Purchased Assets, but only to the
extent relating to any Off-Site Location and of which Seller has Knowledge prior
to the Closing Date; and
(h) Any liabilities or obligations of Seller arising under or
relating to Nuclear Laws, and any liabilities or obligations of Seller arising
under or relating to Nuclear Materials or to any claim in respect thereof,
whether based on Nuclear Laws, Environmental Laws, common law or otherwise, in
connection with the ownership, lease, maintenance or operation of the Purchased
Assets, but only to the extent relating to any written assessment by any
Governmental Authority prior to the Closing Date with respect to any Nuclear
Incident (as defined in the Atomic Energy Act) occurring prior to the Closing
Date, which assessment exceeds the aggregate amount of the policy limits under
all applicable Buyer's Insurance Policies.
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2.5 Control of Litigation.
(a) The Parties acknowledge and agree that, from and after the
Closing Date, Seller shall be entitled exclusively to control, defend and settle
any suit, action or proceeding, and any investigation arising out of or related
to any Excluded Assets or Excluded Liabilities, so long as such control, defense
or settlement does not unreasonably interfere with Buyer's operation of the
Salem Station; and Buyer agrees to cooperate fully in connection therewith,
provided, however, that Seller shall reimburse Buyer for all reasonable costs
and expenses incurred in providing such cooperation.
(b) The Parties acknowledge and agree that, from and after the
Closing Date, Buyer shall be entitled exclusively to control, defend and settle
any suit, action or proceeding, and any investigation arising out of or related
to any Purchased Assets or Assumed Liabilities, so long as such control, defense
or settlement does not unreasonably interfere with Seller's ownership of the
Excluded Assets or with the Excluded Liabilities; and Seller agrees to cooperate
fully in connection herewith provided, however, that Buyer shall reimburse
Seller for all reasonable costs and expenses incurred in providing such
cooperation.
2.6 Spent Nuclear Fuel Fees. Seller, to the extent of the Salem
Interest, shall be liable for and pay, pursuant to the Owners Agreement, all
Spent Nuclear Fuel Fees in effect prior to the Closing Date with respect to its
share of electricity generated at and sold from the Salem Station prior to the
Closing Date, and Buyer shall have no liability or obligation in respect
thereof. Buyer shall be liable for and pay all Spent Nuclear Fuel Fees with
respect to its share of electricity generated at and sold from the Salem
Station, including that relating to the Salem Interest, from and after the
Closing Date, together with all additional Spent Nuclear Fees that are assessed
or become effective on or after the Closing Date, whether assessed with respect
to electricity generated at and sold from the Salem Station prior to, on or
after the Closing Date, and Seller shall have no further liability or obligation
in respect thereof. Without limiting the liability of Buyer under Sections
2.3(e) and (f), from and after the Closing Date, Buyer shall assume title to,
and such liabilities and obligations as Seller may have for the storage and
disposal of, Spent Nuclear Fuel presently stored at the Salem Station (including
any such fuel which may have been used in connection with generating Seller's
share of electricity at the Salem Station). From and after the Closing Date,
Buyer shall have all rights of recovery from third parties and the Department of
Energy relating to, arising from or in connection with the Department of
Energy's failure to take Spent Nuclear Fuel.
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2.7 Department of Energy Decommissioning and Decontamination Fees.
Seller, to the extent of the Salem Interest, shall be liable for and pay,
pursuant to the Owners Agreement, its pro rata share of Department of Energy
Decommissioning and Decontamination Fees prior to the Closing Date, and,
thereafter, Buyer shall be liable for and pay, and Seller shall have no
liability for, such Department of Energy Decommissioning and Decontamination
Fees, together with all additional assessments for Department of Energy
Decommissioning and Decontamination Fees that become effective on or after the
Closing Date, whether assessed with respect to any period occurring prior to, on
or after the Closing Date.
ARTICLE III
THE CLOSING
3.1 Closing. Upon the terms and subject to the satisfaction of the
conditions contained in Article VII, the sale, assignment, conveyance, transfer
and delivery of Seller's rights, title and interests in and to the Purchased
Assets by Seller to Buyer, and the purchase, assumption and acquisition by Buyer
of the Purchased Assets and the Assumed Liabilities, and the consummation of the
other transactions contemplated hereby, shall take place at a closing (the
"Closing ") to be held at the offices of Skadden, Arps, Slate, Meagher & Flom
LLP, One Rodney Square, Wilmington, Delaware, at 10:00 a.m. local time, or at
such other time and location as may be agreed upon in writing between Buyer and
Seller, within five (5) Business Days following the date on which the last of
the conditions precedent to the Closing set forth in Sections 7.1(a), 7.2(a),
(h) and (i), and 7.3(a) and (f) of this Agreement, shall have been satisfied or,
to the extent permitted by applicable Law, waived by the Party for whose benefit
such conditions precedent exist. The date on which the Closing actually occurs
is hereinafter called the "Closing Date." The Closing shall be effective for all
purposes as of 12:01 a.m., New York City time, on the Closing Date.
3.2 Payment of Purchase Price.
(a) Upon the terms and subject to the satisfaction of the
conditions set forth in this Agreement, in consideration of the aforesaid sale,
assignment, conveyance, transfer and delivery of Seller's rights, title and
interests in and to the Purchased Assets, Buyer shall, at the Closing, (i) pay,
or cause to be paid, to Seller cash in an amount equal to the sum of (A)
$4,100,000 plus (B) 7.41% of the Net Book Value, as of the Closing Date, of the
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Nuclear Fuel Supplies (the "Purchase Price") and (ii) assume and agree to pay,
perform or otherwise discharge the Assumed Liabilities.
(b) At least five (5) Business Days prior to the Closing Date,
Buyer shall provide to Seller a written estimate of 7.41% of the Net Book Value,
as of the Closing Date, of the Nuclear Fuel Supplies (the "Estimated Nuclear
Fuel Supply Amount"), which shall be certified in writing by an appropriate
officer of Buyer.
(c) At the Closing, in furtherance but not in duplication of
Section 3.2(a), Buyer shall pay to Seller cash in an aggregate amount equal to
the sum of (i) $4,100,000 plus (ii) the Estimated Nuclear Fuel Supply Amount
(the "Closing Payment"). The Closing Payment shall be paid to Seller by Buyer at
the Closing by wire transfer of immediately available funds to the account of
Seller designated by Seller at least two (2) Business Days prior to the Closing
Date.
3.3 Adjustment to Nuclear Fuel Supply Payment.
(a) Within sixty (60) days after the Closing Date, Buyer shall
deliver to Seller, at Buyer's sole cost and expense, a statement ("Closing
Statement") setting forth 7.41% of the Net Book Value, as of the Closing Date,
of the Nuclear Fuel Supplies (the "Closing Nuclear Fuel Supply Amount"),
together with a calculation of the Purchase Price. Concurrently with the
delivery of the Closing Statement, Buyer shall furnish to Seller such documents
and other records as may be reasonably requested by Seller in order to confirm
the information and calculation set forth in the Closing Statement.
(b) In the event that Seller is in disagreement with the Closing
Nuclear Fuel Supply Amount, and in the event that the aggregate amount of such
disagreements exceeds $100,000, Seller shall, within ten (10) Business Days
after receipt of the Closing Statement, notify Buyer of such disagreements
setting forth with specificity the nature and amounts thereof. In the event that
Seller is in disagreement with only a portion of the Closing Nuclear Fuel Supply
Amount, Buyer or Seller, as the case may be, shall pay all undisputed amounts in
the manner set forth in Section 3.3(c); and all other amounts shall be paid at
such time as all disagreements are resolved in accordance with this Section
3.3(b). If (i) the aggregate amount of the disagreements referred to in this
Section 3.3(b) does not exceed $100,000 or (ii) Seller fails to notify Buyer of
all disagreements within the ten (10) Business Day period provided for herein,
then the Closing Nuclear Fuel Supply Amount, as delivered by Buyer pursuant to
Section 3.3(a), shall be final, binding and conclusive on the Parties. If Seller
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is in disagreement with the Closing Nuclear Fuel Supply Amount and notifies
Buyer within such ten (10) Business Day period, then the Parties shall promptly
attempt to resolve such disagreements by negotiation. If the Parties are unable
to resolve such disagreements within thirty (30) days following such notice of
disagreement by Seller, then the Parties shall appoint an Independent Accounting
Firm within forty-five (45) days following such notice, which shall review the
Closing Statement and determine the Closing Nuclear Fuel Supply Amount.
Resolution of any disagreements shall be made by the Independent Accounting Firm
in a writing addressed to all Parties within thirty (30) days following referral
to it by the Parties of such disagreements in accordance with this Agreement.
The findings of such Independent Accounting Firm shall be final, binding and
conclusive on the Parties. All costs and fees of the Independent Accounting Firm
shall be borne equally by Seller and Buyer.
(c) No later than the fifth (5th) Business Day following the
determination of the Closing Nuclear Fuel Supply Amount pursuant to Section
3.3(b), either (i) Buyer shall pay to Seller the amount, if any, by which the
Purchase Price exceeds the Closing Payment, or (ii) Seller shall pay to Buyer
the amount, if any, by which the Closing Payment exceeds the Purchase Price, in
either case, together with simple interest accruing on such payment at the Prime
Rate (as defined below) from the Closing Date through and including the date of
payment, by wire transfer of immediately available funds to an account
designated by the receiving Party. As used herein, "Prime Rate" means, as of any
date, the prime rate as published in The Wall Street Journal on such date or, if
not published on such date, on the most recent date of publication.
3.4 Tax Reporting and Allocation of Purchase Price. Buyer and Seller
shall treat the transactions contemplated by Article II as the acquisition by
Buyer of a trade or business for all United States federal income tax purposes
and agree that no portion of such transactions will be treated in whole or in
part as a payment for services (or future services) for United States federal
income tax purposes. Buyer shall deliver to Seller at the Closing a preliminary
allocation among the Purchased Assets of the Purchase Price and such other
consideration paid to Seller pursuant to this Agreement, and, as soon as
practicable following the Closing (but in any event within ten (10) Business
Days following the final determination of the Closing Nuclear Fuel Supply
Amount), Buyer shall prepare and deliver to Seller a final allocation of the
Purchase Price and additional consideration described in the preceding clause,
and the post-closing adjustments pursuant to Section 3.3(b), among the Purchased
Assets (the "Allocation"). The Allocation shall be consistent with Section 1060
of the Code and the regulations thereunder ("Applicable Tax Law"). Seller hereby
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agrees to accept Buyer's Allocation unless Seller determines that such
Allocation (including any valuations and the determination of the Purchase Price
or other consideration) was not prepared in accordance with Applicable Tax Law.
If Seller so determines, Seller shall within twenty (20) Business Days
thereafter propose any changes necessary to cause the Allocation to be prepared
in accordance with Applicable Tax Law. Within ten (10) 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 ten (10) Business Days thereafter, such
objections shall be referred to the Independent Accounting Firm, who shall
determine the Allocation (including any valuations and the determination of the
Purchase Price or other consideration). The Independent Accounting Firm shall be
instructed to deliver to Buyer and Seller a written determination of the proper
allocation of such disputed items within twenty (20) Business Days. Such
determination shall be final, conclusive and binding upon the Parties 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"). The fees and
disbursements of the Independent Accounting Firm attributable to the Allocation
shall be shared equally by Buyer and Seller. 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 purpose in a manner consistent with the Final Allocation. Each of
Buyer and Seller agrees to promptly provide the other Parties 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 Parties and each shall timely provide the other Parties with
reasonable assistance in the event of an examination, audit or other proceeding
regarding the Final Allocation.
3.5 Prorations.
(a) Buyer and Seller agree that, except as otherwise provided in
this Agreement, all of the items customarily prorated relating to the ownership,
lease, maintenance and operation of the Purchased Assets, including those listed
below (but not including Income Taxes), shall be prorated as of the Closing
Date, without any duplication of payment under the Owners Agreement, as amended
by the Amendment to Owners Agreement, with Seller liable to the extent such
items relate to any period prior to the Closing Date, and Buyer liable to the
extent such items relate to any period on or after the Closing Date (measured in
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the same units used to compute the item in question, or otherwise measured by
calendar days):
(i) Personal property, real estate and occupancy Taxes,
assessments and other charges, if any, on or arising out of, in respect of, or
in connection with, the ownership, lease, maintenance or operation of the
Purchased Assets;
(ii) Rent, Taxes and all other items (including prepaid
services and goods not included in Inventories), in each case, payable by or to
Seller under any of the Seller's Agreements assigned to and assumed by Buyer;
(iii) Any permit, license, registration, compliance
assurance fees or other fees arising out of, in respect of, or in connection
with, any Transferable Permit;
(iv) Sewer rents and charges for water, telephone,
electricity and other utilities arising out of, in respect of, or in connection
with, the Purchased Assets;
(v) Insurance premiums paid on or with respect to the
ownership, lease, maintenance or operation of the Purchased Assets, to the
extent payable under the Buyer's Insurance Policies;
(vi) Spent Nuclear Fuel Fees, in the manner contemplated by
Section 2.6;
(vii) Department of Energy Decommissioning and
Decontamination Fees, in the manner contemplated by Section 2.7; and
(viii) Prepaid operating and maintenance expenses, whether
arising under the Owners Agreement or otherwise.
(b) Seller or Buyer, as the case may be, shall promptly reimburse
the other Party that portion of any amount paid by such other Party to the
extent relating to the period for which Seller or Buyer, as the case may be, is
liable under Section 3.5(a), in each case, upon presentation of a statement
setting forth in reasonable detail the nature and amount of any such payment. In
connection with the prorations set forth in Section 3.5(a), if actual figures
are not available on the Closing Date, the proration shall be calculated based
upon the respective amounts accrued through the Closing Date or paid for the
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most recent year or other appropriate period for which such amounts paid are
available. All prorated amounts shall be recalculated and paid to the
appropriate Party within sixty (60) days after the date that the previously
unavailable actual figures become available. Seller and Buyer shall furnish each
other with such documents and other records as may be reasonably requested in
order to confirm all proration calculations made pursuant to this Section 3.5.
Notwithstanding anything to the contrary herein, no proration shall be made
under this Section 3.5 with respect to (i) real property Tax refunds that are
Excluded Assets under Section 2.2(h) or (ii) Taxes payable by Buyer pursuant to
Section 6.5(a).
3.6 Deliveries by Seller. At the Closing, Seller shall deliver, or
cause to be delivered, the following to Buyer:
(a) The Deeds, duly executed by Seller and in recordable form,
subject only to Permitted Encumbrances, and any owner's affidavits or similar
documents reasonably required by Buyer's title insurance company;
(b) The Bill of Sale, duly executed by Seller;
(c) The Assignment and Assumption Agreement, duly executed by
Seller;
(d) Evidence, in form and substance reasonably satisfactory to
Buyer and its counsel, of Seller's receipt of (i) the Seller's Required
Regulatory Approvals and (ii) the consents and approvals set forth on Schedule
4.3(a);
(e) The opinions of counsel to Seller to the effect set forth in
Exhibit D hereto, subject to customary limitations and qualifications;
(f) A Certificate of Good Standing with respect to Seller, as of
a recent date, issued by the Secretary of State of the State of Delaware and the
Commonwealth of Virginia;
(g) To the extent available, originals of all Seller's Agreements
to which Seller is a party and Transferable Permits issued to Seller and, if not
available, true and correct copies thereof;
(h) A certificate dated the Closing Date executed by the duly
authorized officers of Seller to the effect that, to such officers' Knowledge,
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the conditions set forth in Sections 7.2(b) and (c) have been satisfied by
Seller and that each of the representations and warranties of Seller made in
this Agreement are true and correct in all material respects as though made at
and as of the Closing Date;
(i) The Amendment to Owners Agreement, duly executed by Seller;
(j) A FIRPTA Affidavit, duly executed by Seller;
(k) Copies, certified by the Secretary or Assistant Secretary of
Seller, of corporate resolutions authorizing the execution and delivery of this
Agreement, each Additional Agreement to which Seller is a party and all of the
other agreements and instruments, in each case, to be executed and delivered by
Seller in connection herewith;
(l) A certificate of the Secretary or Assistant Secretary of
Seller identifying the name and title and bearing the signatures of the officers
of Seller authorized to execute and deliver this Agreement, each Additional
Agreement to which Seller is a party and the other agreements and instruments
contemplated hereby;
(m) All such other agreements, documents, instruments and
writings as shall, in the reasonable opinion of Buyer and its counsel, be
necessary to sell, assign, convey, transfer and deliver to Buyer, Seller's
rights, title and interests in and to the Purchased Assets, in accordance with
this Agreement and, where necessary or desirable, in recordable form, provided
that Seller shall not be required to prepare or obtain any survey, abstract,
title opinion or title insurance policy with respect to the Real Property; and
(n) All such other agreements, documents, instruments and
writings as are required to be delivered by Seller at or prior to the Closing
Date pursuant to this Agreement or otherwise reasonably required in connection
herewith.
3.7 Deliveries by Buyer. At the Closing, Buyer shall deliver, or cause
to be delivered, the following to Seller:
(a) The Closing Payment, by wire transfer of immediately
available funds to the account of Seller designated by Seller at least two (2)
Business Days prior to the Closing Date;
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(b) The Assignment and Assumption Agreement, duly executed by
Buyer;
(c) The Amendment to Owners Agreement, duly executed by PSE&G
Utility and Buyer;
(d) Copies, certified by the Secretary or Assistant Secretary of
Buyer, of resolutions authorizing the execution and delivery of this Agreement,
each Additional Agreement to which Buyer is a party and all of the agreements
and instruments, in each case, to be executed and delivered by Buyer in
connection herewith;
(e) A certificate of the Secretary or Assistant Secretary of
Buyer identifying the name and title and bearing the signatures of the officers
of Buyer authorized to execute and deliver this Agreement, each Additional
Agreement to which Buyer is a party and the other agreements contemplated
hereby;
(f) Certificates of insurance required pursuant to 10 C.F.R.
Parts 50 and 140;
(g) Evidence, in form and substance reasonably satisfactory to
Seller and its counsel, of Buyer's receipt of the Buyer's Required Regulatory
Approvals;
(h) The opinions of counsel to Buyer to the effect set forth in
Exhibit E hereto, subject to customary limitations and qualifications;
(i) A Certificate of Good Standing with respect to Buyer, as of a
recent date, issued by the Secretary of State of the state of organization of
Buyer;
(j) A certificate dated the Closing Date executed by the duly
authorized officers of Buyer to the effect that, to such officers' Knowledge,
the conditions set forth in Sections 7.3(b) and (c) have been satisfied by Buyer
and that each of the representations and warranties of Buyer made in this
Agreement are true and correct in all material respects as though made at and as
of the Closing Date;
(k) All such other agreements, documents, instruments and
writings as shall, in the reasonable opinion of Seller and its counsel, be
necessary for Buyer to purchase and acquire Seller's rights, title and interests
in and to the Purchased Assets, and to assume the Assumed Liabilities, in each
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case, in accordance with this Agreement and, where necessary or desirable, in
recordable form; and
(l) All such other agreements, documents, instruments and
writings as are required to be delivered by Buyer at or prior to the Closing
Date pursuant to this Agreement or otherwise reasonably required in connection
herewith.
3.8 Relationship of this Agreement and Collateral Agreement. The
transactions contemplated by this Agreement, together with the transactions
contemplated by the Collateral Agreement, are intended by the Parties to be
consummated substantially simultaneously; and if any of the transactions
contemplated hereby or by the Collateral Agreement are not consummated on the
Closing Date in accordance with the terms and subject to the conditions set
forth herein and therein, as applicable, then each Party shall take, or cause to
be taken, all actions, and do, or cause to be done, all things, in each case,
that are necessary to dissolve and invalidate all transactions contemplated
hereby; provided, however, that if the failure to consummate the transactions
contemplated hereby or by the Collateral Agreement results from a default or
breach of a party under this Agreement or the Collateral Agreement, then nothing
in the foregoing shall preclude or limit the rights or remedies of any Party in
connection with such default or breach.
3.9 Owners Agreement to Govern. The Parties agree that, except as
otherwise expressly provided in Section 6.1 of this Agreement, the Parties'
ownership, lease, maintenance and operation prior to the Closing Date of the
Salem Station shall be governed by the Owners Agreement.
3.10 Additional Agreements. The Parties acknowledge that the
Additional Agreements shall be executed and delivered on or before the Closing
Date, and each Party shall execute and deliver, in connection with the Closing,
each Additional Agreement to which it is to be a party, substantially in the
form of each Additional Agreement attached hereto.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer as follows:
4.1 Organization, Qualification. Seller is a corporation duly
incorporated, validly existing and in good standing under the Laws of the State
of Delaware and the Commonwealth of Virginia and has all requisite corporate
power and authority to own, lease and operate its assets and properties and to
carry on its business as it is now being conducted.
4.2 Authority. Seller has full corporate power and authority to
execute and deliver this Agreement and each Additional Agreement to which it is
a party and to consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement and each such Additional Agreement by
Seller and the consummation by Seller of the transactions contemplated hereby
and thereby have been duly and validly authorized by all necessary corporate
action required on the part of Seller, and no other corporate proceeding on the
part of Seller is necessary to authorize this Agreement and each of the
Additional Agreements to which Seller is a party or to consummate the
transactions contemplated hereby or thereby. This Agreement has been duly and
validly executed and delivered by Seller and constitutes, and upon the execution
and delivery by Seller of each Additional Agreement to which it is a party, each
such Additional Agreement will constitute, the legal, valid and binding
obligation of Seller, enforceable against Seller in accordance with its terms.
4.3 No Violations; Consents and Approvals
(a) Except as set forth in Schedule 4.3(a), and subject to
obtaining any Seller's Required Regulatory Approvals, none of the execution,
delivery and performance of this Agreement, the execution, delivery and
performance of the Additional Agreements, or the consummation by Seller of the
transactions contemplated hereby and thereby will (i) conflict with or result in
any breach of any provision of the Certificate or Articles of Incorporation or
Bylaws of Seller; (ii) result in a default (or give rise to any right of
termination, cancellation or acceleration) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, lease, agreement or
other instrument or obligation to which Seller is a party or by which it, or any
of the Purchased Assets, may be bound (other than the Seller's Agreements
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referred to in clause (ii) of the definition thereof), except for such defaults
(or rights of termination, cancellation or acceleration) as to which requisite
waivers or consents have been obtained or that would not, individually or in the
aggregate, have a Material Adverse Effect; or (iii) constitute violations of any
Law, order, judgment or decree applicable to Seller or any of its assets,
including the Purchased Assets, which violations, individually or in the
aggregate, would have a Material Adverse Effect.
(b) Except for consents, approvals, filings and notices (i)
required under the HSR Act, or (ii) set forth in Schedule 4.3(b) (the consents,
approvals, filings and notices referred to in clause (ii) of this sentence are
collectively referred to herein as the "Seller's Required Regulatory
Approvals"), no consent, authorization or approval of, declaration, filing or
registration with, or notice to, any Governmental Authority is necessary for the
execution and delivery by Seller of this Agreement and the Additional Agreements
or the consummation by Seller of the transactions contemplated hereby or
thereby, other than (i) such consents, authorizations, approvals, declarations,
filings, registrations with and notices which, if not obtained or made, would
not, individually or in the aggregate, have a Material Adverse Effect, or
prevent Seller from performing its material obligations under this Agreement or
the Additional Agreements; and (ii) such consents, authorizations, approvals,
declarations, filings, registrations with or notices which become applicable to
Seller or the Purchased Assets as a result of the status of Buyer (or any of its
Affiliates) or as a result of any other facts that specifically relate to the
business or activities in which Buyer (or any of its Affiliates) is or proposes
to be engaged.
4.4 Permits. Prior to the Closing Date, Seller will hold all permits,
registrations, franchises, certificates, licenses and other authorizations,
consents and approvals of all Governmental Authorities that Seller requires in
order to own any of the Purchased Assets (collectively, "Seller Permits"),
except for (a) Seller Nuclear Permits (which are governed by Section 4.7) and
(b) such failures to hold or comply with such Seller Permits as would not,
individually or in the aggregate, have a Material Adverse Effect or would not,
individually as in the aggregate, materially impair Seller's ability to
consummate the transactions contemplated hereby. Schedule 4.4(a) sets forth a
complete list, as of the date hereof, of all Seller Permits issued to Seller
through the date hereof. Schedule 4.4(b) sets forth a complete list, as of the
date hereof, of all Transferable Permits issued to Seller through the date
hereof.
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4.5 Seller's Qualified Decommissioning Funds.
(a) Each of Seller's Qualified Decommissioning Funds is a trust
validly existing and in good standing under the laws of the Commonwealth of
Pennsylvania with all requisite authority to conduct its affairs as it now does.
Seller has heretofore delivered to Buyer a copy of the Trust Agreement as in
effect on the date of this Agreement. Seller agrees to furnish Buyer with copies
of all amendments of the Trust Agreement adopted after the date of this
Agreement promptly after each such amendment has been adopted. Each of Seller's
Qualified Decommissioning Funds satisfies the requirements necessary to be
treated as a "Nuclear Decommissioning Reserve Fund" within the meaning of Code
Section 468A(a) and as a "nuclear decommissioning fund" and a "qualified nuclear
decommissioning fund" within the meaning of Treas. Reg. section 1.468A-1(b)(3).
Each of Seller's Qualified Decommissioning Funds is in compliance in all
material respects with all applicable rules and regulations of the NRC, the
Delaware Public Service Commission, the Maryland Public Service Commission, the
Virginia State Corporation Commission and the Internal Revenue Service. The
Seller's Qualified Decommissioning Funds have not engaged in any acts of
"self-dealing" as defined in Treas. Reg. section 1.468A-5(b)(2). No "excess
contribution" as defined in Treas. Reg. section 1.468A-5(c)(2)(ii) has been made
to Seller's Qualified Decommissioning Funds which has not been withdrawn within
the period provided under Treas. Reg. section 1.468A-5(c)(2)(i) for withdrawals
of excess contributions to be made without resulting in a disqualification of
such funds under Treas. Reg. section 1.468A-5(c)(1). Seller has made timely and
valid elections to make annual contributions to the Seller's Qualified
Decommissioning Funds since the formation of such trusts. Seller has delivered,
or will deliver prior to the Closing, copies of such elections to Buyer.
(b) Subject to the receipt of Seller's Required Regulatory
Approvals and amendment of the Trust Agreement, Seller has all requisite
authority to cause the assets of the Seller's Qualified Decommissioning Funds to
be transferred in accordance with the provisions of this Agreement.
(c) Seller or the trustees of each of the Seller's Qualified
Decommissioning Funds have filed or caused to be filed with the NRC, the
Internal Revenue Service and any state or local authority all material forms,
statements, reports, documents (including all exhibits, amendments and
supplements thereto) required to be filed by either of them. Seller has
delivered, or will deliver prior to the Closing, to Buyer a copy of the schedule
of ruling amounts most recently issued by the Internal Revenue Service for each
of the Seller's Qualified Decommissioning Funds, a copy of the request that was
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filed to obtain such schedule of ruling amounts and a copy of any pending
request for a revised ruling amounts, in each case together with all exhibits,
amendments and supplements thereto. As of the Closing, Seller will have timely
filed all requests for revised schedules of ruling amounts for Seller's
Qualified Decommissioning Funds to the extent required by and in accordance with
Treas. Reg. section 1.468A-3(i). Seller shall furnish Buyer with copies of such
request for revised schedules of ruling amounts, together with all exhibits,
amendments and supplementals thereto, promptly after they have been filed with
the Internal Revenue Service. Any amounts contributed to Seller's Qualified
Decommissioning Funds while such requests are pending before the Internal
Revenue Service and which turn out to be in excess of the applicable amounts
provided in the schedule of ruling amounts issued by the Internal Revenue
Service will be withdrawn from the Seller's Qualified Decommissioning Funds
within the period provided under Treas. Reg. section 1.468A-5(c)(2)(i) for
withdrawals of excess contributions to be made without resulting in a
disqualification of the Funds under Treas. Reg. section 1.468A-5(c)(1). There
are no interim rate orders that may be retroactively adjusted or retroactive
adjustments to interim rate orders that may affect amounts that may be
contributed to Seller's Qualified Decommissioning Funds or may require
distributions to be made from the Seller's Qualified Decommissioning Funds.
(d) Seller has made or prior to the Closing will make available
to Buyer the balance sheet for each of the Seller's Qualified Decommissioning
Funds as of March 31, 1999 and as of the fourth Business Day before Closing, as
prepared by the trustee of Seller's Qualified Decommissioning Fund in the
ordinary course and consistent with past practice. Seller has made, or prior to
the Closing will make, available to Buyer information from which Buyer can
determine the Tax Basis of all assets in Seller's Qualified Decommissioning
Funds as of the fourth Business Day before Closing. There are no liabilities
(whether absolute, accrued, contingent or otherwise and whether due or to become
due), including any acts of "self-dealing" as defined in Treas. Reg. section
1.468A-5(b)(2) or agency or other legal proceedings that may materially affect
the financial position of each of the Seller's Qualified Decommissioning Funds
other than those that are disclosed on Schedule 4.5(d).
(e) Seller has made or prior to the Closing will make available
to Buyer all contracts and agreements to which the trustee of each of the
Seller's Qualified Decommissioning Funds, in its capacity as such, is a party.
(f) Each of the Seller's Qualified Decommissioning Funds has
filed all Tax Returns required to be filed and all Taxes shown to be due on such
Tax Returns have been paid in full. Except as shown in Schedule 4.5(f), no
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notice of deficiency or assessment has been received from any taxing authority
with respect to liability for Taxes or the Seller's Qualified Decommissioning
Funds which have not been fully paid or finally settled, and any such deficiency
shown in such Schedule 4.5(f) is being contested in good faith through
appropriate proceedings. Except as set forth in Schedule 4.5(f), there are no
outstanding agreements or waivers extending the applicable statutory periods of
limitations for Taxes associated with each of the Seller's Qualified
Decommissioning Funds for any period.
(g) To the extent Seller has pooled the assets of the Seller's
Qualified Decommissioning Funds for investment purposes in periods prior to
Closing, such pooling arrangement is a partnership for federal income tax
purposes and Seller has filed all Tax Returns required to be filed with respect
to such pooling arrangement for such periods or the pooling arrangement has
elected out of partnership status, and the distributive or allocable share of
any income, gain or loss of such pooling arrangement is includable in the income
of Seller's Qualified Decommissioning Funds.
4.6 Seller's Nonqualified Decommissioning Funds.
(a) Each of Seller's Nonqualified Decommissioning Funds is a
trust validly existing and in good standing under the laws of the Commonwealth
of Pennsylvania with all requisite authority to conduct its affairs as it now
does. Each of Seller's Nonqualified Decommissioning Funds is in compliance in
all material respects with all applicable rules and regulations of the NRC and
the Delaware Public Service Commission, the Maryland Public Service Commission
and the Virginia State Corporation Commission.
(b) Subject only to receipt of the Seller's Required Regulatory
Approvals and amendment of the Trust Agreement, Seller has all requisite
authority to cause the assets of the Seller's Nonqualified Decommissioning Funds
to be transferred to Buyer's nonqualified decommissioning funds in accordance
with the provisions of this Agreement and amendment of the Trust Agreement.
(c) Seller or the trustee of the Seller's Nonqualified
Decommissioning Funds have filed or caused to be filed with the NRC and any
state or local authority all material forms, statements, reports, documents
(including all exhibits, amendments and supplements thereto) required to be
filed by either of them.
(d) Seller has made or prior to the Closing will make available
to Buyer the balance sheet for each of Seller's Nonqualified Decommissioning
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Funds as of March 31, 1999 and as of the fourth Business Day before Closing, as
prepared by the trustee of Seller's Nonqualified Decommissioning Fund in the
ordinary course and consistent with past practice. There are no liabilities
(whether absolute, accrued, contingent or otherwise and whether due or to become
due) including agency or other legal proceedings that may materially affect the
financial position of Seller's Nonqualified Decommissioning Funds other than
those, if any, that are disclosed on Schedule 4.6(d).
(e) Seller has made or prior to the Closing will make available
to Buyer all contracts and agreements to which the trustee of the Seller's
Nonqualified Decommissioning Funds, in its capacity as such, is a party.
(f) To the extent Seller has pooled the assets of Seller's
Nonqualified Decommissioning Funds for investment purposes in periods prior to
closing, such pooling arrangement is not an association taxable as a corporation
for federal income tax purposes.
4.7 Nuclear Law Matters. Seller is a licensed co-owner, but not an
operator, of the Salem Station. Subject to this fact, and except as set forth in
Schedule 4.7, prior to the Closing Date, Seller will hold all Seller Permits in
respect of Nuclear Laws that Seller requires in order to own its rights, title
and interests in and to the Purchased Assets (collectively, "Seller Nuclear
Permits").
4.8 Legal Proceedings. Except as set forth in Schedule 4.8, there is
no claim, action, proceeding or investigation pending, or to Seller's Knowledge,
threatened against or relating to Seller or its Affiliates before any court,
arbitrator or Governmental Authority, which could, individually or in the
aggregate, reasonably be expected to result, or has resulted, in (a) the
institution of legal proceedings to prohibit or restrain the performance of this
Agreement or any of the Additional Agreements, or the consummation of the
transactions contemplated hereby or thereby, (b) a claim against Buyer or its
Affiliates for damages as a result of Seller entering into this Agreement or any
of the Additional Agreements, or the consummation by Seller of the transactions
contemplated hereby or thereby, (c) a material impairment of Seller's ability to
perform its obligations under this Agreement or any of the Additional
Agreements, or (d) a Material Adverse Effect. Except as set forth in Schedule
4.8, Seller is not subject to any outstanding judgments, decrees or orders of
any court, arbitrator or Governmental Authority that would, individually or in
aggregate, have a Material Adverse Effect.
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4.9 Personal Property. Seller has such title to all personal property
included in the Purchased Assets as arises by reason of Seller's rights under
the Owners Agreement and owns such personal property free and clear of all
Encumbrances created by Seller, except for Permitted Encumbrances and the
Encumbrances set forth on Schedule 4.9.
4.10 Real Property. Seller owns good, valid and marketable fee simple
title to the Salem Interest in the Real Property described by metes and bounds
in the deeds listed as items 1.a., 1.b. and 2.a. through 2.h. in Schedule
1.1(105), subject only to Permitted Encumbrances.
4.11 Contracts. Except as disclosed in Schedule 4.11, (i) each
Seller's Agreement listed on Schedule 1.1(119) constitutes a legal, valid and
binding obligation of Seller and, to Seller's Knowledge, constitutes a valid and
binding obligation of the other parties thereto, (ii) to Seller's Knowledge is
in full force and effect, and (iii) may be transferred to Buyer as contemplated
by this Agreement without the consent of the other parties thereto and will
continue in full force and effect thereafter, in each case without breaching the
terms thereof or resulting in the forfeiture or impairment of any rights
thereunder, except for such breaches, forfeitures or impairments which would
not, individually or in the aggregate, have a Material Adverse Effect.
4.12 Certain Environmental Liabilities. Except as set forth on
Schedule 4.12, there are no liabilities or obligations arising under or relating
to Environmental Laws or relating to any claim with respect to Environmental
Conditions or Hazardous Substances with respect to the Purchased Assets, in any
case, which relate to any Off-Site Location and of which Seller has Knowledge.
4.13 Undisclosed Liabilities. Except for liabilities and obligations
specifically referred to in Section 2.3(a) through (g) or Section 2.4(a) through
(h), or on Schedule 4.3(a) or 4.9, the Purchased Assets are not, to the
Knowledge of Seller, subject to any material liability or obligation that has
arisen solely as a result of an act or omission by Seller (other than Permitted
Encumbrances).
4.14 Intellectual Property. Seller does not own or otherwise have any
right to use any patent, trade name, trademark, service mark or other
intellectual property that is used in and necessary for the operation of the
Salem Station, other than such as may be included in the Purchased Assets.
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4.15 Taxes. With respect to the Purchased Assets (i) all income Tax
Returns required to be filed have been filed, and (ii) all income Taxes shown to
be due on such income Tax Returns have been paid in full. Except as set forth in
Schedule 4.15, no notice of deficiency or assessment has been received from any
taxing authority with respect to liabilities for income Taxes of Seller in
respect of the Purchased Assets, which have not been fully paid or finally
settled, and any such deficiency shown in such Schedule 4.15 is being contested
in good faith through appropriate proceedings. Except as set forth in Schedule
4.15, there are no outstanding agreements or waivers extending the applicable
statutory periods of limitations for income Taxes associated with the Purchased
Assets for any period. Schedule 4.15 sets forth the taxing jurisdictions in
which Seller owns assets or conducts business that require a notification to a
taxing authority of the transactions contemplated by this Agreement, if the
failure to make such notification, or obtain Tax clearances in connection
therewith, would either require Buyer to withhold any portion of the Purchased
Price or would subject Buyer to any liability for any income Taxes of Seller.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as follows:
5.1 Organization; Qualification. Buyer is a limited liability company
duly formed, validly existing and in good standing under the Laws of the State
of Delaware and has all requisite limited liability company power and authority
to own, lease and operate its assets and properties and to carry on its business
as it is now being conducted. Buyer is, or by the Closing Date will be,
qualified to do business in the State of New Jersey.
5.2 Authority. Buyer has full power and authority to execute and
deliver this Agreement and each Additional Agreement to which it is a party and
to consummate the transactions contemplated hereby and thereby. The execution
and delivery of this Agreement by Buyer and each such Additional Agreement to
which Buyer is a party and the consummation of the transactions contemplated
hereby and thereby by Buyer have been duly and validly authorized by all
necessary action required on the part of Buyer and no other proceedings on the
part of Buyer are necessary to authorize this Agreement or each of the
Additional Agreements or to consummate the transactions contemplated hereby or
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thereby. This Agreement has been duly and validly executed and delivered by
Buyer and constitutes, and upon the execution and delivery by Buyer of each
Additional Agreement to which it is a party, each such Additional Agreement will
constitute, the legal, valid and binding obligation of Buyer, enforceable
against Buyer in accordance with its terms.
5.3 No Violations; Consents and Approvals
(a) Except as set forth in Schedule 5.3(a), and subject to
obtaining any Buyer's Required Regulatory Approvals, none of the execution,
delivery or performance of this Agreement, the execution, delivery and
performance of the Additional Agreements or the consummation by Buyer of the
transactions contemplated hereby and thereby will (i) conflict with or result in
any breach of any provision of the certificate of formation or operating
agreement (or similar governing 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, lease, agreement or other instrument or obligation to which
Buyer is a party, except for such defaults (or rights of termination,
cancellation or acceleration) as to which requisite waivers or consents have
been obtained or that would not, individually or in the aggregate, have a
Material Adverse Effect; or (iii) constitute violations of any Law, order,
judgment or decree applicable to Buyer, which violations, individually or in the
aggregate, would have a Material Adverse Effect.
(b) Except for consents, approvals, filings and notices (i)
required under the HSR Act, or (ii) set forth in Schedule 5.3(b) (the consents,
approvals, filings and notices referred to in clause (ii) of this sentence are
collectively referred to herein as the "Buyer's Required Regulatory Approvals"),
no consent, authorization or approval of, declaration, filing or registration
with, or notice to, any Governmental Authority is necessary for the execution
and delivery by Buyer of this Agreement and the Additional Agreements or the
consummation by Buyer of the transactions contemplated hereby and thereby, other
than (i) such consents, authorizations, approvals, declarations, filings,
registrations with, or notices, which, if not obtained or made, would not,
individually or in the aggregate, have a Material Adverse Effect or prevent
Buyer from performing its material obligations under this Agreement or the
Additional Agreements and (ii) such consents, authorizations, approvals,
declarations, filings, registrations with, or notices which become applicable to
Buyer as a result of the specific regulatory status of Seller (or any of its
Affiliates) or as a result of any other facts that specifically relate to the
business or activities in which Seller (or any of its Affiliates) is or proposes
to be engaged.
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5.4 Buyer Permits. Prior to and on the Closing Date, subject to the
receipt of Buyer's Required Regulatory Approvals, Buyer will hold all permits,
certificates, licenses and other authorizations of all Governmental Authorities
that Buyer requires in order to own, lease, maintain and operate the Salem
Station, including the Purchased Assets (collectively, "Buyer Permits"), except,
in each case, for (a) Buyer Nuclear Permits (which are governed by Section 5.5)
and (b) such failures to hold or comply with such Buyer Permits as would not
result in a Material Adverse Effect or would not, individually or in the
aggregate, materially impair Buyer's ability to consummate the transactions
contemplated hereby.
5.5 Nuclear Law Matters.
(a) PSE&G Utility is a licensed co-owner, and the licensed
operator, of the Salem Station.
(b) Prior to and on the Closing Date, subject to the receipt of
Buyer's Required Regulatory Approvals, Buyer will hold all Buyer Permits in
respect of Nuclear Laws that Buyer requires in order to own, lease, maintain and
operate the Salem Station, including, on the Closing Date, the Purchased Assets
(collectively, "Buyer Nuclear Permits").
5.6 Legal Proceedings.
(a) Except as set forth in Schedule 5.6(a), there is no action,
proceeding or investigation pending or, to Buyer's Knowledge, threatened against
or relating to Buyer or its Affiliates before any court, arbitrator or
Governmental Authority, which could, individually or in the aggregate,
reasonably be expected to result, or has resulted, in (i) the institution of
legal proceedings to prohibit or restrain the performance of this Agreement or
any of the Additional Agreements, or the consummation of the transactions
contemplated hereby or thereby, (ii) a claim against Seller or its Affiliates
for damages as a result of Buyer entering into this Agreement or any of the
Additional Agreements, or the consummation by Buyer of the transactions
contemplated hereby or thereby, (iii) a material impairment of Buyer's ability
to perform its obligations under this Agreement or any of the Additional
Agreements, or (iv) a Material Adverse Effect. Except as set forth in Schedule
5.6(a), Buyer is not subject to any outstanding judgments, decrees or orders of
any court, arbitrator or Governmental Authority that would, individually or in
the aggregate, have a Material Adverse Effect.
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(b) As of the date of this Agreement, to the Knowledge of Buyer,
there is no action, proceeding or investigation involving an amount in dispute
in excess of $1 million pending or threatened against any third party (other
than those referred to in Section 2.1(l), 2.2(l) or (m)) with respect to the
ownership, lease, operation or maintenance of the Salem Station.
5.7 Qualified Buyer. As of the date of this Agreement, to Buyer's
Knowledge, there is no fact, circumstance, event or condition reasonably
expected to impair Buyer's ability, on or prior to the Closing Date, to obtain
all Buyer Permits, including Buyer Nuclear Permits and Environmental Permits,
necessary for Buyer to own, lease, maintain and operate the Salem Station,
including on the Closing Date, the Purchased Assets.
5.8 Inspections. Buyer has, prior to its execution and delivery of
this Agreement, had full opportunity to conduct to its satisfaction Inspections
of the Purchased Assets. Buyer acknowledges, after such review and Inspections,
that no further investigation is necessary for purposes of acquiring Seller's
rights, title and interests in and to the Purchased Assets for Buyer's intended
use.
5.9 Certain Environmental Liabilities. Except as set forth on Schedule
5.9, there are no liabilities or obligations arising under or relating to
Environmental Laws or relating to any claim in respect to Environmental
Conditions or Hazardous Substances with respect to the Purchased Assets, in any
case, which relate to any Off-Site Location and of which Buyer has Knowledge.
ARTICLE VI
COVENANTS OF THE PARTIES
6.1 Certain Buyer Covenants.
(a) Notwithstanding any provision of the Owners Agreement to the
contrary, Buyer shall reimburse Seller for all costs and expenses relating to
Inventories at the Salem Station for which Seller is liable, whether under the
Owners Agreement or otherwise, between September 1, 1999 and the Closing Date to
the extent that the amount of such costs and expenses exceeds the product
obtained by multiplying (i) the average monthly costs and expenses for
Inventories at the Salem Station for which Seller was liable during the
twelve-month period ended August 31, 1999, by (ii) the number of months
(including partial months, prorated on a daily basis) between September 1, 1999
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and the Closing Date. Any such reimbursement payable by Buyer to Seller pursuant
to this Section 6.1(a) shall be paid in the manner contemplated by Section 3 of
the Amendment to Owners Agreement.
(b) Schedule 6.1(b) sets forth the aggregate forecasted budget
prepared by Buyer (the "Salem Station Budget") for capital expenditures (other
than Nuclear Fuel Supplies), and operations and maintenance expenses (whether
ordinary course or otherwise) for the Salem Station (together, "Defined
Expenses"), for the months from and after September 1, 1999. Notwithstanding any
provision of the Owners Agreement to the contrary, the amount of Defined
Expenses allocable to the Salem Interest from and after September 1, 1999 shall
be reduced to the extent that the amount of such Defined Expenses exceeds, in
the aggregate, the product obtained by multiplying (i) the sum of all Defined
Expenses allocated in the Salem Station Budget to each month (including partial
months, prorated on a daily basis) which has elapsed prior to the Closing Date,
times (ii) 1.05, times (iii) 0.0741. The amount of such reduction is referred to
as the "Defined Expenses Excess." The Defined Expenses Excess shall be taken
into account for purposes of and as set forth in Section 3 of the Amendment to
Owners Agreement.
6.2 Public Statements. Except as required by applicable Law, any
Governmental Authority or applicable rules of any national securities exchange,
in which event the Parties shall consult with each other in advance, prior to
the Closing Date, no press release or other public announcement, statement or
comment relating to this Agreement, the Additional Agreements or the
transactions contemplated by this Agreement shall be issued, made or permitted
to be issued or made by any Party or its Representatives without the prior
written consent of the other Party (which approval shall not be unreasonably
withheld or delayed).
6.3 Further Assurances.
(a) Subject to the terms and conditions of this Agreement, each
Party shall use its Commercially Reasonable Efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, all things necessary, proper
or advisable under Law to consummate and make effective the purchase, sale,
assignment, conveyance, transfer and delivery of the Purchased Assets and the
assumption of the Assumed Liabilities pursuant to this Agreement as soon as
practicable. Such actions shall include, without limitation, each Party using
its Commercially Reasonable Efforts to ensure satisfaction of the conditions
precedent to its obligations hereunder, including obtaining all necessary
consents, approvals, and authorizations of third parties and Governmental
Authorities required to be obtained in order to consummate the transactions
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hereunder, and to effectuate a transfer of the Transferable Permits to Buyer,
and providing access to such books and records of the other Party as may
reasonably be requested for such purpose. No Party shall, without the prior
written consent of the other Party, take or fail to take any action, which would
reasonably be expected to prevent or materially impede, interfere with or delay
the transactions contemplated by this Agreement; provided that the good faith
exercise of any approval rights or discretion provided for in this Agreement
shall not be deemed in violation of the requirements of this Section 6.3(a).
(b) Without limiting the generality of Section 6.3(a):
(i) In the event that any part of Seller's rights, title and
interests in and to Purchased Assets shall not have been assigned, conveyed,
transferred or delivered to Buyer at the Closing, Seller shall, subject to
Section 6.3(b)(ii), use Commercially Reasonable Efforts after the Closing to
assign, convey, transfer or deliver such rights, title and interests to Buyer as
promptly as practicable.
(ii) To the extent that Seller's rights under any Seller's
Agreement may not be assigned without the consent, approval or authorization of
any third party which consent, approval or authorization has not been obtained
by the Closing Date, this Agreement shall not constitute an agreement to assign
such right if an attempted assignment would constitute a breach of such Seller's
Agreement or violate any applicable Law and Seller, at its sole cost and
expense, shall use Commercially Reasonable Efforts to obtain any such required
consents, approvals or authorizations as promptly as practicable. If any
consent, approval or authorization to an assignment of any Seller's Agreement
shall not be obtained, or if any attempted assignment would be ineffective or
would impair Buyer's rights and obligations under such Seller's Agreement, such
that Buyer would not, subject to the terms and conditions hereof, acquire and
assume the benefit and detriment of all such rights and obligations, Seller, at
Buyer's option and to the fullest extent permitted by Law and such Seller's
Agreement, shall, after the Closing Date, appoint Buyer to be Seller's agent
with respect to such Seller's Agreement, and, to the maximum extent permitted by
Law and such Seller's Agreement enter into such reasonable arrangements with
Buyer or take such other actions as are necessary to provide Buyer with the same
or substantially similar rights and obligations of such Seller's Agreement as
Buyer may reasonably request.
6.4 Consents and Approvals. Without limiting the generality of Section
6.3(a):
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(a) As promptly as practicable after the date of this Agreement,
Seller and Buyer shall each file or cause to be filed with the Federal Trade
Commission and the United States Department of Justice all notifications
required to be filed under the HSR Act and the rules and regulations promulgated
thereunder, as amended from time to time, with respect to the transactions
contemplated hereby and by the Additional Agreements. The Parties shall use
their Commercially Reasonable Efforts to respond promptly to any requests for
additional information made by, either of such agencies, and to cause the
applicable waiting period under the HSR Act relating to the Purchased Assets to
terminate or expire at the earliest possible date after the date of filing of
such notification. Buyer shall pay all filing fees payable under the HSR Act but
each Party shall bear its own costs and expenses of the preparation of any
filing.
(b) As promptly as practicable after the date of this Agreement,
Seller and Buyer shall take, or cause to be taken, all actions, and do, or cause
to be done, all things necessary, proper or advisable under applicable Laws to
obtain all required consents and approvals of the NJBPU, the SEC and all other
Governmental Authorities, and make all other filings and give all other notices
required to be made prior to the Closing with respect to the transactions
contemplated hereby and by the Additional Agreements. The Parties shall respond
promptly to any requests for additional information made by such Persons, and
use their respective Commercially Reasonable Efforts to cause all such consents
and approvals to be obtained or waived at the earliest possible date after the
date of filing. Each Party will bear its own costs of the preparation of any
such filing or notice.
(c) Seller and Buyer shall cooperate with each other and promptly
prepare and file notifications with, and request Tax clearances from, state and
local taxing authorities in jurisdictions in which a portion of the Purchase
Price may be required to be withheld or in which Buyer would otherwise be liable
for any Tax liabilities of Seller pursuant to state or local Tax Law.
(d) Without limiting the generality of Section 6.4(b), as
promptly as practicable after the date of this Agreement, Buyer shall make all
filings required by the Federal Power Act, individually or jointly with Seller,
as reasonably determined by the Parties. Prior to filing any application with
the FERC, Buyer shall submit such application to Seller for review and comment
and shall incorporate into such application all revisions reasonably requested.
If any filing is rejected by the FERC, Buyer shall petition the FERC for
rehearing or permission to re-submit an application with the FERC, provided
that, in either case, such action has been approved by Seller.
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(e) Without limiting the generality of Section 6.4(b), as
promptly as practicable after the date hereof, Seller and Buyer shall jointly
submit NRC Applications requesting the NRC Approvals. The Parties shall respond
promptly to any requests for additional information made by the NRC, cooperate
in connection with any presentation or proceeding associated with such NRC
Applications and use their respective Commercially Reasonable Efforts to cause
such NRC Approvals to be obtained at the earliest practicable date after the
date of filing. Seller and Buyer each shall bear its own costs relating to the
NRC Applications and shall pay one-half of all NRC fees payable in connection
with the NRC Applications and the NRC Approvals, provided that, notwithstanding
the foregoing, Buyer shall, at its sole expense, comply with all conditions and
requirements imposed by the NRC relating to the amount, including the
sufficiency and adequacy, of the Decommissioning Funds and similar such external
trust funds of Buyer.
6.5 Certain Tax Matters.
(a) All Transfer Taxes incurred in connection with this Agreement
and the Additional Agreements, and the transactions contemplated hereby and
thereby (including (i) sales Tax on the sale or purchase of the Purchased Assets
imposed by the State of New Jersey, and (ii) Transfer Taxes or conveyance fees
on conveyances of interests in real and/or personal property imposed by the
State of New Jersey or any county or municipality therein) shall be borne
equally by Seller and Buyer. Seller, at its expense, shall prepare and file, to
the extent required by, or permissible under, applicable Law, all necessary Tax
Returns and other documentation with respect to all such, Transfer Taxes, and,
if required by Law, Buyer shall join in the execution of all such Tax Returns
and other documentation. Prior to the Closing Date, to the extent applicable,
Buyer shall provide to Seller appropriate certificates of Tax exemption from
each applicable Governmental Authority.
(b) With respect to Taxes to be prorated in accordance with
Section 3.5, Buyer shall prepare and timely file all Tax Returns required to be
filed after the Closing Date with respect to the Purchased Assets, if any, and
shall duly and timely pay all such Taxes shown to be due on such Tax Returns.
Buyer's preparation of such Tax Returns shall be subject to Seller's approval,
which approval shall not be unreasonably withheld or delayed. Buyer shall make
each such Tax Return available for Seller's review and approval (which approval
shall not be unreasonably withheld or delayed) no later than fifteen (15)
Business Days prior to the due date for filing such Tax Return, it being
understood that Seller's failure to approve any such Tax Return shall not limit
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Buyer's obligation to timely file such Tax Return and duly and timely pay all
Taxes shown to be due thereon. Seller shall, to the extent required by Law, join
in the execution of any such Tax Returns.
(c) Buyer and Seller shall provide the other with such assistance
as may reasonably be requested by the other Party in connection with the
preparation of any Tax Return, audit or other examination, or any proceeding, by
or before any Governmental Authority relating to liability for Taxes, and each
Party shall retain and provide the requesting Party with all books and records
or other information which may be relevant to such Tax Return, audit,
examination or proceeding. All books, records and information obtained pursuant
to this Section 6.5(c) or pursuant to any other Section hereof that provides for
the sharing of books, records and information or review of any Tax Return or
other instrument relating to Taxes shall be kept confidential by the parties
hereto in accordance with the terms and conditions set forth in the
Confidentiality Agreement.
(d) Buyer and Seller shall cooperate and provide each other with
such assistance as may be reasonably requested by the other Party in connection
with obtaining private letter rulings from the Internal Revenue Service
pertaining to the transfers of the Decommissioning Funds contemplated by this
Agreement. Without limiting the generality of the foregoing, Seller and Buyer
shall use its best efforts to obtain a private letter ruling from the Internal
Revenue Service determining that the transfer of assets from Seller's Qualified
Decommissioning Funds to Buyer's Qualified Decommissioning Funds is a
disposition that satisfies the requirements of Treas. Reg. section 1.468A-6(b)
or Treas. Reg. section 1.468A-(6)(g)(1). Neither Seller nor Buyer shall take any
action that would cause (i) such transfer to fail to satisfy the requirements of
Treas. Reg. section 1.468A-6(b) or Treas. Reg. section 1.468A-6(g)(1) or (ii)
Seller and Buyer to fail to obtain such private letter ruling.
(e) In the event that a dispute (other than with respect to the
Decommissioning Funds) arises between Seller and Buyer regarding Taxes or any
amount due under this Section 6.5, Seller and Buyer shall attempt in good faith
to resolve such dispute and any agreed upon amount shall be promptly paid to the
appropriate Party. If any such dispute is not resolved within thirty (30) days
after notice thereof is given to any Party, upon the written request of any
Party, the Parties shall submit the dispute to an Independent Accounting Firm
for resolution, which resolution shall be final, binding and conclusive on such
Parties. Notwithstanding anything in this Agreement to the contrary, the fees
and expenses of the Independent Accounting Firm in resolving the dispute shall
be borne equally by Seller and Buyer. Any payment required to be made as a
result of the resolution by the Independent Accounting Firm of any such dispute
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shall be made within five (5) Business Days after such resolution, together with
any interest determined by the Independent Accounting Firm to be appropriate.
(f) If Buyer or Seller receives a refund of Taxes in respect of
the Purchased Assets (other than with respect to the Decommissioning Funds) for
a taxable period including the Closing Date, Buyer shall pay to Seller the
portion of any such refund attributable to the portion of the taxable period
prior to the Closing Date, and Seller shall pay to Buyer the portion of any such
refund attributable to the portion of such taxable period on and after the
Closing Date.
(g) From and after the Closing Date, Buyer and, to the extent
permitted by applicable Law, the Buyer's Qualified Decommissioning Funds shall
indemnify, defend and hold harmless the Seller's Qualified Decommissioning Funds
from and against any and all Indemnifiable Losses asserted against or suffered
by the Seller's Qualified Decommissioning Funds relating to, resulting from or
arising out of the imposition of any federal, state or local Tax on any income
or gain recognized by the Seller's Qualified Decommissioning Funds as the result
of transfers contemplated by this Agreement of the assets in the Seller's
Qualified Decommissioning Funds to the Buyer's Qualified Decommissioning Funds
not qualifying under Treas. Reg. section 1.468A-6 (each, a "Fund Tax Loss")
(other than those Fund Tax Losses that occur directly as a result of Seller's
conduct or a breach of Seller's representations and warranties set forth in
Section 4.5). From and after the Closing Date, Buyer shall indemnify, defend and
hold harmless Seller's Indemnitees from and against any and all Indemnifiable
Losses asserted against or suffered by any Seller's Indemnitee relating to,
resulting from or arising out of the imposition on any of Seller's Indemnitees
of any federal, state or local Tax in connection with any income or gain
recognized by any of the Seller's Qualified Decommissioning Funds to the extent
such Tax was not paid by any of the Seller's Qualified Decommissioning Funds as
the result of transfers contemplated by this Agreement of the assets in the
Seller's Qualified Decommissioning Funds to the Buyer's Qualified
Decommissioning Funds not qualifying under Treas. Reg. section 1.468A-6 (each, a
"Seller Tax Loss") (other than those Seller Tax Losses that occur directly as a
result of Seller's conduct or a breach of Seller's representations and
warranties set forth in Section 4.5). Buyer shall pay the amount of any Fund Tax
Loss or Seller Tax Loss within ten (10) days of receipt of written notice
setting forth with reasonable specificity the nature and amount of such Fund Tax
Loss or Seller Tax Loss.
6.6 Advice of Changes. Prior to the Closing, each Party shall
advise the other Party in writing with respect to any matter arising after the
date of this Agreement of which that Party obtains Knowledge and which, if
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existing or occurring on or prior to the date of this Agreement, would have been
required to be set forth in this Agreement, including any of the Schedules
hereto. Seller may at any time notify Buyer, in writing, of any fact, event,
circumstance or condition that constitutes or results in a breach of any of its
representations and warranties in Article IV; provided, however, that no such
notice shall constitute a supplement or amendment of any Schedule hereto. No
supplement or amendment of any Schedule made pursuant to this Section shall be
deemed to cure any breach of any representation or warranty made in this
Agreement unless the Parties agree thereto in writing.
6.7 ISRA Compliance.
(a) Prior to the Closing.
(i) Prior to the Closing, Buyer shall be responsible for
taking all necessary actions to comply with the requirements of the New Jersey
Industrial Site Recovery Act, N.J.S.A. 13:1K-6, et seq. ("ISRA") applicable to
the transactions contemplated hereby and by the Additional Agreements, including
filing all necessary forms and conducting any Remediation as may be required by
NJDEP criteria, procedures and time schedules. Buyer shall fully cooperate with
Seller with respect to such compliance, including, providing Seller with advance
copies of all submittals to be filed in connection with ISRA and incorporating
comments provided by Seller into such filings as and where appropriate, in
Buyer's reasonable judgment, and providing to Seller copies of correspondence
and documents received from the New Jersey Department of Environmental
Protection ("NJDEP") on a timely basis; provided, that neither Buyer nor Seller
shall take any action that would result in a violation of ISRA by either person.
Without limiting the generality of the foregoing, Buyer shall, with cooperation
from Seller, prepare and file an application for a Letter of Non-Applicability
or another appropriate exemption or limitation on the scope of ISRA review if,
in the judgment of Buyer, such application is reasonably likely to be approved
by the NJDEP.
(ii) Seller shall fully cooperate with Buyer in connection
with Buyer's compliance with ISRA under subsection (a)(i), including providing
full cooperation and support to Buyer in connection with the preparation and
prosecution of an application for a Letter of Non-Applicability, providing
information as may be required to prepare and file any ISRA-related submission,
providing comments on any draft ISRA-related submittals forwarded by Buyer for
Seller review, executing any ISRA or ISRA-related forms reasonably requiring
Seller's signature that are necessary to allow the Parties to consummate the
transactions contemplated by this Agreement and the Additional Agreements in
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accordance with ISRA requirements, including a form of application for a Letter
of Non-Applicability, and providing to Buyer copies of correspondence and
documents received from the NJDEP, all on a timely basis.
(iii) Notwithstanding anything to the contrary herein,
Seller shall be responsible for filing a General Information Notice (as such
term is defined by ISRA) if, in the judgment of Seller, such action is necessary
to ensure compliance with ISRA, provided, however, that if on or by the date
required under ISRA for filing a General Information Notice related to the
transactions contemplated by this Agreement, Buyer has filed an application for
a Letter of Non-Applicability, Seller shall not make a General Information
Notice filing related to the transaction at such time without Buyer's written
approval and such filing otherwise shall not be made unless and until the NJDEP
makes a written determination that a Letter of Non-Applicability will not be
issued. Buyer shall defend, indemnify and hold harmless Seller from all
Indemnifiable Losses incurred by Seller that arise as a result of Seller's not
filing a General Information Notice on or by the date required by ISRA.
Furthermore, to the extent that the NJDEP alleges, because of Buyer's actions or
omissions prior to Closing, that a violation of ISRA is alleged to have occurred
for which NJDEP alleges Seller is liable, Seller shall provide written notice to
Buyer of such allegation and Buyer shall have five (5) days from receipt of such
written notice to Buyer to cure such alleged violation. If Buyer fails to cure
such alleged violation to the satisfaction of the NJDEP, Seller may assume
responsibility for complying with the requirements of ISRA until Closing. In
such event, Buyer shall promptly reimburse Seller for all reasonable costs and
expenses incurred by Seller in connection with actions taken by Seller to comply
with ISRA prior to the Closing, including all reasonable costs and expenses of
attorneys, environmental consultants and engineers retained by Seller to comply
with ISRA. Buyer shall fully cooperate with Seller in connection with Seller's
compliance with ISRA under this subsection, including executing any forms
necessary to allow the Parties to consummate the transactions contemplated by
this Agreement and the Additional Agreements in accordance with ISRA
requirements, providing reasonable access to the Salem Station, and assisting
Seller and its Representatives and consultants in conducting any required field
work. Buyer shall defend, indemnify and hold harmless Seller from all
Indemnifiable Losses incurred by Seller as a result of any violation of ISRA for
which NJDEP alleges Seller is liable because of Buyer's actions or omissions
prior to Closing that Buyer does not cure as provided in this subsection.
(iv) (A) If the NJDEP determines that ISRA is applicable to
the transactions contemplated by this Agreement and the Additional Agreements,
Buyer shall conduct a Preliminary Assessment and submit a Preliminary Assessment
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Report to the NJDEP that seeks the NJDEP's written concurrence that neither
Buyer nor Seller shall be required to Remediate potential contamination at the
Sites by radionuclides in connection with the actions that Seller or Buyer will
be required to take to comply with ISRA as a result of the transactions
contemplated by this Agreement and the Additional Agreements. Notwithstanding
anything to the contrary herein, Buyer shall not be obligated to commence work
on the Preliminary Assessment until such time as the NJDEP has ruled on the
application for a Letter of Non-Applicability.
(B) Except as provided in subsection (C) below, if the NJDEP
rules adversely on Buyer's and Seller's application for a Letter of Non-
Applicability and the request as set forth in subsection (A) above, then Buyer,
pursuant to Section 9.1(h) of this Agreement, may terminate the Agreement.
(C) Notwithstanding the foregoing, if the NJDEP determines
that ISRA is applicable to the transfer by PSE&G Utility of its interest in the
Real Property to any Affiliate of PSE&G Utility (the "PSE&G Reorganization"),
and PSE&G Utility and such Affiliate decide to proceed with the PSE&G
Reorganization whether or not PSE&G Utility or any Affiliate of PSE&G Utility
will or may be required to Remediate potential contamination of the Sites by
radionuclides pursuant to ISRA, then Buyer shall not have a right to terminate
the Agreement pursuant to Section 9.1(h) of this Agreement.
(v) Except as set forth in subsection (a)(iii) above, Buyer
and Seller shall each be responsible for the costs and expenses each incurs in
connection with the actions each is required to take to comply with ISRA prior
to Closing pursuant to Section 6.7(a), including all costs and expenses of
attorneys, environmental consultants and engineers each may retain to comply
with ISRA prior to Closing; provided, that if Buyer is required to conduct a
Preliminary Assessment and submit a Preliminary Assessment Report in accordance
with subsection (a)(iv) above, Buyer and Seller shall bear equally all costs and
expenses incurred by Buyer and Seller in connection with the performance of such
Preliminary Assessment and preparation of such Preliminary Assessment Report.
Such costs and expenses do not include any costs or expenses incurred by Buyer
or PSE&G Utility in connection with the PSE&G Reorganization.
(b) Closing Covenant. Seller and Buyer acknowledge and agree that
in order to consummate the transactions contemplated by this Agreement and the
Additional Agreements, it may be necessary to enter into one or more Remediation
Agreements, as such term is used in ISRA, or alternative agreements or orders
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whereby the party executing such agreements or orders commits to comply with all
requirements of ISRA after the Closing. Such Remediation Agreements or
alternative agreements or orders may require the party or parties executing such
agreements or orders to establish financial assurance in accordance with NJDEP
regulations. If the NJDEP does not issue a Letter of Non-Applicability with
respect to the transactions contemplated by this Agreement, Buyer shall execute
or cause to be executed by PSE&G Utility Remediation Agreements, as such term is
used under ISRA, and establish financial assurance as necessary, subject to
Buyer's right to terminate this Agreement under Section 9.1.
(c) Post-Closing. After the Closing, Buyer shall be liable for
compliance with ISRA in connection with all of the Purchased Assets that are
subject to ISRA, including with respect to the Remediation of all areas of
environmental concern to the extent required by the NJDEP or ISRA, whether or
not Buyer, PSE&G Utility or Seller have executed any Remediation Agreements or
alternative agreements or orders. Notwithstanding anything to the contrary
herein, Buyer shall indemnify, defend and hold harmless Seller for all
Indemnifiable Losses incurred by Seller after the Closing Date in connection
with ISRA compliance in connection with the Purchased Assets, including any
fines, penalties or costs related to a Remediation incurred because of Buyer's
failure to comply with ISRA or the terms of any Remediation Agreement or
alternative agreement or order.
6.8 Risk of Loss. From the date hereof through (but not including) the
Closing Date, all risk of loss or damage to the assets or properties included in
the Purchased Assets (other than the Decommissioning Funds) shall be borne by
Seller. Notwithstanding any provision hereof to the contrary, subject to Section
9.1(g), if, before the Closing Date, all or any portion of the Purchased Assets
is (i) condemned or taken by eminent domain or is the subject of a pending or
threatened condemnation or taking which has not been consummated or (ii) damaged
or destroyed by fire or other casualty, Seller shall notify Buyer promptly in
writing of such fact, and (x) in the case of a condemnation or taking, Seller
shall assign or pay, as the case may be, any proceeds thereof to Buyer at the
Closing and (y) in the case of a fire or other casualty, Seller shall either
restore such damage or assign the insurance proceeds therefor (and pay the
amount of any deductible and/or self-insured amount in respect of such
casualty) to Buyer at the Closing. Notwithstanding the foregoing, if such
condemnation, taking, damage, destruction or other casualty results in a
Material Adverse Effect, Buyer and Seller shall negotiate to settle the loss
resulting from such condemnation, taking, damage, destruction or other casualty
(and such negotiation shall include the negotiation of a fair and equitable
reduction of the Purchase Price). If no such settlement can be agreed upon
within sixty (60) days after Seller has notified Buyer of such casualty or loss,
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then Buyer or Seller may terminate this Agreement pursuant to Section 9.1(g).
6.9 Cooperation after Closing. From and after the Closing Date, Seller
shall have access to and rights to copy all books and records, and other
documents, relating to the Purchased Assets to the extent that such access may
reasonably be required by Seller in connection with matters relating to or
affected by the ownership, lease, maintenance or operation of the Purchased
Assets prior to the Closing Date. Such access shall be afforded by Buyer upon
receipt of reasonable advance notice and during normal business hours. Seller
shall be solely responsible for all costs or expenses incurred by Seller or
Buyer pursuant to this Section 6.9. Notwithstanding the foregoing, Buyer shall
not have any obligation to Seller under this Agreement to maintain any books,
records or other documents relating to the ownership, lease, maintenance or
operation of the Purchased Assets prior to the Closing Date beyond seven (7)
years from the Closing Date, except to the extent that such books and records,
or other documents, are required to be maintained under applicable Law. If Buyer
shall desire to dispose of any of such books and records, or other documents,
that may relate to ownership, lease, maintenance or operation of the Purchased
Assets prior to the Closing Date, Buyer shall, prior to such disposition, give
to Seller a reasonable opportunity, but in no event less than sixty (60) days,
at Seller's expense, to segregate and remove such books and records, or other
documents, as Seller may select.
6.10 Decommissioning Funds.
(a) At the Closing, Seller will direct the trustee and investment
managers of Seller's Qualified Decommissioning Funds for the Salem Station to
transfer all of the assets of such funds to the trustee of Buyer's Qualified
Decommissioning Funds for the Salem Station; provided, however, that, upon
written request of the trustee of Seller's Qualified Decommissioning Funds,
Buyer shall cause the trustee of the Buyer's Qualified Decommissioning Funds to
reimburse promptly, but in no event later than thirty (30) days after such
notice (with respect to expenses) and the due date (with respect to income
taxes), the trustee of Seller's Qualified Decommissioning Funds for expenses
associated with the transfer of the assets and the termination of such funds and
any related income taxes due with respect to such funds for the period prior to
Closing. If Buyer does not obtain a private letter ruling from the Internal
Revenue Service determining that the transfer of Seller's Qualified
Decommissioning Funds to Buyer's Qualified Decommissioning Funds satisfies the
requirements of Treas. Reg. section 1.468A-6(b) or Treas. Reg. sectin
1.468A-6(g)(1), then Seller shall transfer the assets in Seller's Qualified
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Decommissioning Funds to such trust(s) as directed by Buyer at least two (2)
Business Days prior to the Closing Date.
(b) At the Closing, Seller will direct the trustee and investment
managers of Seller's Nonqualified Decommissioning Funds for the Salem Station to
transfer all of the assets of such funds to the trustee of Buyer's nonqualified
decommissioning funds for the Salem Station; provided, however, that, upon
written request of the trustee of Seller's Nonqualified Decommissioning Funds,
Buyer shall cause the trustee of the Buyer's nonqualified decommissioning funds
to reimburse promptly, but in no event later than thirty (30) days after such
notice, the trustee of Seller's Nonqualified Decommissioning Funds for expenses
associated with the transfer of the assets and the termination of such funds.
(c) Schedule 6.10(c) sets forth a true and correct list of all
investment manager agreements and investment management policies relating to the
Trust Agreement and the Decommissioning Funds. Prior to the earlier of the
Closing Date and any date on which this Agreement is terminated pursuant to
Section 9.1, except as required by applicable Law, Seller shall not amend,
modify or change any investment manager agreement or investment management
policy relating to the Trust Agreement or the Decommissioning Funds, whether
orally or in writing, nor appoint a successor investment manager without the
prior written consent of Buyer (which consent shall not be unreasonably withheld
or delayed).
(d) To the extent not prohibited by the terms of the Trust
Agreement, Seller shall (i) instruct the trustee and investment managers of the
Decommissioning Funds to manage, invest and maintain the assets and properties
held by the Decommissioning Funds in a manner consistent with suggestions
provided in writing by Buyer to Seller from time to time and (ii) afford Buyer
the opportunity, as reasonably requested, to review information regarding the
management, investment and maintenance of the Decommissioning Funds; provided
that neither Seller, the trustee nor any investment manager of the
Decommissioning Funds shall be required to take, or fail to take, any action
pursuant to this Section 6.10(d) if either Seller, such trustee or any such
investment manager, in the exercise of its reasonable judgment, shall determine
in good faith that effecting any such suggestion would reasonably be expected to
(x) constitute a breach or violation of any other provision of this Agreement,
or impair the ability of any Party to perform its obligations hereunder or
consummate the transactions contemplated hereby, (y) constitute a breach or
violation of its certificate of incorporation or bylaws, or similar governing
documents, of any applicable Law, or applicable order, decree or judgment, or of
any other contract, agreement or other arrangement to which it is a party or by
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or to which it or its assets or properties are bound or subject, including any
agreement between Seller and such trustee or any investment manager, and any
investment policy that is effective on the date hereof with respect to the
Decommissioning Funds, or (z) result in an adverse effect on Seller, its
businesses, assets or properties, including the Decommissioning Funds, or their
respective conditions (financial or otherwise); and provided further, that Buyer
shall maintain the confidentiality of any information reviewed pursuant to
clause (ii) above in accordance with the terms and conditions set forth in the
Confidentiality Agreement.
(e) Subject to applicable Law and to the extent not prohibited by
the Trust Agreement, immediately prior to the Closing, Seller shall withdraw
from the Seller's Nonqualified Decommissioning Funds an amount equal to all
amounts in respect of contributions made by Seller to the Decommissioning Funds
during the period commencing on April 1, 1999 and ending on the Closing Date,
provided that in the event that such withdrawal is not permitted by applicable
Law or the Trust Agreement, then promptly, but in no event later than thirty
(30) days, after the Closing Date, Buyer shall reimburse to Seller all such
amounts, by wire transfer of immediately available funds to an account
designated by Seller. The Decommissioning Funds shall retain all income,
interest and other earnings accrued on the Decommissioning Funds as of Closing.
Seller shall furnish to Buyer such documents and other records as may be
reasonably requested by Buyer in order to confirm the amount of the withdrawal
provided for in this Section 6.10(e), as well as all income, interest and other
earnings accrued on the Decommissioning Funds between the date hereof and the
Closing Date.
(f) To the extent permitted by applicable Law and the terms of
the Trust Agreement, Seller shall, after the date hereof, not contribute
additional amounts to the Decommissioning Funds.
6.11 Amendment to Seller's Agreements. From and after the date hereof
and prior to the Closing Date, Seller shall not enter into any Seller's
Agreement as a party, or modify, amend, extend or voluntarily terminate, prior
to its expiration date, any Seller's Agreement to which Seller is a party or any
of the Transferable Permits issued to Seller, in any material respect.
6.12 Exclusivity. Effective as of the date of this Agreement through
and until the earlier to occur of the termination of this Agreement and the
Closing, Seller shall not market its rights, title or interests in the Purchased
Assets to any other Person, or accept or pursue any other offers or bids for
Seller's rights, title or interests in and to the Purchased Assets, provided
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this provision is not applicable to assets of the Decommissioning Funds to the
extent sold in accordance with Section 6.10.
6.13 Insurance.
(a) Buyer shall obtain and maintain the insurance required
pursuant to 10 C.F.R. Parts 50 and 140, and in accordance with all Nuclear Laws
for so long as Buyer shall be the licensed operator of the Salem Station;
provided that this provision is not intended to grant to Seller rights or
interests in any such insurance.
(b) Seller shall use its Commercially Reasonable Efforts to
assist Buyer in making any claims relating to pre-Closing periods against
Seller's Insurance Policies that may provide coverage related to the Assumed
Liabilities. Buyer shall use its Commercially Reasonable Efforts to assist
Seller in making any claims relating to pre-Closing periods against Buyer's
Insurance Policies that may provide coverage related to the Excluded
Liabilities.
ARTICLE VII
CONDITIONS
7.1 Conditions to Obligation of Each Party. The respective obligations
of each Party hereto to effect the transactions contemplated by this Agreement
shall be subject to the satisfaction at or prior to the Closing of the following
conditions:
(a) The waiting period under the HSR Act applicable to the
consummation of the transactions contemplated hereby shall have expired or been
terminated; and
(b) No preliminary or permanent injunction or other order or
decree by any Governmental Authority which prevents the consummation of the
transactions contemplated hereby or by the Additional Agreements shall have been
issued and remain in effect (each Party agreeing to use its Commercially
Reasonable Efforts to have any such injunction, order or decree lifted), and no
Law shall be in effect which prohibits the consummation of the transactions
contemplated hereby or thereby.
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7.2 Conditions to Obligations of Buyer. The obligations of Buyer to
effect the transactions contemplated by this Agreement shall be subject to the
satisfaction (or the waiver in writing, to the extent permitted by applicable
Law, by Buyer) at or prior to the Closing of the following conditions:
(a) (i) Buyer shall have received all of the Buyer Required
Regulatory Approvals (other than with respect to ISRA which is governed by
Sections 7.2(h) and (i)) and, except as set forth in Schedule 7.2(a)(i), in form
and substance reasonably satisfactory to Buyer (including adverse conditions
relating to Buyer, the Affiliates of Buyer listed in Schedule 7.2(a)(ii) or the
Purchased Assets), and all conditions to effectiveness prescribed therein or
otherwise by Law shall have been satisfied; provided, however, that if at the
time any Buyer's Required Regulatory Approval is obtained, Buyer reasonably
expects a request for rehearing or a challenge thereto to be filed or if a
request for rehearing or a challenge thereto has been filed, in each case,
which, if successful, would cause such Buyer's Required Regulatory Approval to
be reversed, stayed, enjoined, set aside, annulled, suspended or, except as set
forth in Schedule 7.2(a)(i), modified in such manner as to result in such
Buyer's Required Regulatory Approval not being reasonably satisfactory as set
forth above, then Buyer may by notice to Seller within five (5) Business Days
after receipt of such Buyer's Required Regulatory Approval, delay the Closing
Date until the time for requesting rehearing has expired or until such challenge
is decided, in each case, whether or not any appeal thereof is pending; and (ii)
Seller shall have received all of Seller's Required Regulatory Approvals and
Buyer shall have received evidence thereof, in form and substance reasonably
satisfactory to Buyer.
(b) Seller shall have in all material respects performed and
complied with the covenants and agreements contained in this Agreement which are
required to be performed and complied with by Seller on or prior to the Closing
Date;
(c) The representations and warranties of Seller set forth in
this Agreement shall be true and correct as of the date of this Agreement and as
of the Closing Date as though made at and as of such time (other than
representations and warranties that are made as of a specific date which shall
have been true and correct as of such date), except where the failure 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, have a Material Adverse Effect;
(d) Buyer shall have received a certificate from an authorized
officer of Seller, dated the Closing Date, to the effect that, to such officer's
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Knowledge, the conditions set forth in Sections 7.2(b) and (c) have been
satisfied by Seller;
(e) Seller shall have delivered, or caused to be delivered, to
Buyer at the Closing, Seller's closing deliveries set forth in Section 3.6;
(f) The lien of the Mortgage on the Purchased Assets and any
other Encumbrance (other than Permitted Encumbrances) on the Purchased Assets,
including the Nuclear Fuel Supplies, arising under or through Seller shall have
been released and any documents necessary to evidence such release shall have
been delivered to Buyer;
(g) The Collateral Agreement shall be in full force and effect
and the valid and binding obligation of each party thereto (other than Buyer);
and all conditions to the obligations of all parties to the Collateral Agreement
to consummate the transactions contemplated thereby shall have been satisfied
or, to the extent permitted by applicable Law, waived;
(h) Buyer shall, with respect to the Salem Station, have (i)
obtained a Letter of Non-Applicability (as such term is used in ISRA); (ii)
obtained a No Further Action Letter (as such term is used in ISRA) from the
NJDEP; (iii) obtained the approval of a Remedial Action Workplan (as such term
is used in ISRA); or (iv) executed a Remediation Agreement (to be executed by
Buyer or PSE&G Utility to the extent allowed by ISRA) or an alternative
agreement or order that will allow Buyer and Seller to consummate the
transactions contemplated by this Agreement and the Additional Agreements in
compliance with ISRA;
(i) (A) The NJDEP shall have determined that ISRA is not
applicable to the transactions contemplated by this Agreement and the Additional
Agreements or (B) Seller and Buyer shall have received prior to the Closing the
NJDEP's written concurrence that neither Buyer nor Seller shall be required to
Remediate potential contamination of the Sites by radionuclides in connection
with the actions that Seller or Buyer will be required to take to comply with
ISRA as a result of the transactions contemplated by this Agreement and the
Additional Agreements; provided, that the condition set forth in this subsection
shall be deemed satisfied if the NJDEP determines that (i) a Letter of
Non-Applicability will not be issued for the Sites as requested by PSE&G Utility
in connection with the PSE&G Reorganization and (ii) PSE&G Utility and any
Affiliate of PSE&G Utility decide to proceed with the PSE&G Reorganization
whether or not PSE&G Utility or any Affiliate of PSE&G Utility will or may be
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required to Remediate potential contamination of the Sites by radionuclides
pursuant to ISRA.
(j) There shall not have occurred and be continuing a Material
Adverse Effect;
(k) Buyer shall have received a title report or commitment with
respect to the Real Property that does not include any exceptions other than
Permitted Encumbrances and such matters as a current survey of the Real Property
may show; and
(l) Buyer shall have received a private letter ruling issued by
the Internal Revenue Service to the effect that Buyer will not recognize gain or
otherwise take into account any income for federal income tax purposes by reason
of the transfer of the assets of the Seller's Nonqualified Decommissioning Funds
to the Buyer's nonqualified decommissioning funds.
7.3 Conditions to Obligation of Seller. The obligation of Seller to
effect the transactions contemplated by this Agreement shall be subject to the
satisfaction (or the waiver in writing, to the extent permitted by applicable
Law, by Seller) at or prior to the Closing of the following conditions:
(a) (i) Seller shall have received all of the Seller Required
Regulatory Approvals, in form and substance reasonably satisfactory to Seller
(including adverse conditions relating to Seller or the Purchased Assets), and
all conditions to effectiveness prescribed therein or otherwise by Law shall
have been satisfied; provided, however, that if at the time any Seller Required
Regulatory Approval is obtained, Seller reasonably expects a request for
rehearing or a challenge thereto to be filed or if a request for rehearing or a
challenge thereto has been filed, in each case, which, if successful, would
cause such Seller Required Regulatory Approval to be reversed, stayed, enjoined,
set aside, annulled, suspended or modified in such manner as to result in such
Seller Required Regulatory Approval not being reasonably satisfactory as set
forth above, then Seller may by notice to Buyer within five (5) Business Days
after receipt of such Seller Required Regulatory Approval, delay the Closing
Date until the time for requesting rehearing has expired or until such challenge
is decided, in each case, whether or not any appeal thereof is pending; and (ii)
Buyer shall have received all of Buyer's Required Regulatory Approvals and
Seller shall have received evidence thereof, in form and substance reasonably
satisfactory to Seller.
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(b) Buyer shall have in all material respects performed and
complied with the covenants and agreements contained in this Agreement which are
required to be performed and complied with by Buyer on or prior to the Closing
Date;
(c) The representations and warranties of Buyer set forth in this
Agreement shall be true and correct as of the date of this Agreement and as of
the Closing Date as though made at and as of such time (other than
representations and warranties that are made as of a specific date which shall
have been true and correct as of such date) except where the failure 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, have a Material Adverse Effect;
(d) Seller shall have received a certificate from an authorized
officer of Buyer, dated the Closing Date, to the effect that, to such officer's
Knowledge, the conditions set forth in Sections 7.3(b) and (c) have been
satisfied by Buyer;
(e) Buyer shall have delivered, or caused to be delivered, to
Seller at the Closing, Buyer's closing deliveries set forth in Section 3.7;
(f) Buyer shall, with respect to the Salem Station, have (i)
obtained a Letter of Non-Applicability (as such term is used in ISRA); (ii)
obtained a No Further Action Letter (as such term is used in ISRA) from the
NJDEP; (iii) obtained the approval of a Remedial Action Workplan (as such term
is used in ISRA); or (iv) executed a Remediation Agreement (to be executed by
Buyer or PSE&G Utility to the extent allowed by ISRA) or an alternative
agreement or order that will allow Buyer and Seller to consummate the
transactions contemplated by this Agreement and the Additional Agreements in
compliance with ISRA;
(g) The Collateral Agreement shall be in full force and effect
and the valid and binding obligation of each party thereto (other than Seller);
and all conditions to the obligations of all parties to the Collateral Agreement
to consummate the transactions contemplated thereby shall have been satisfied
or, to the extent permitted by applicable Law, waived; and
(h) Seller shall have received a private letter ruling issued by
the Internal Revenue Service to the effect that Seller will be allowed current
ordinary deductions for federal income tax purposes for any amounts treated as
realized by Seller, or otherwise recognized as income to Seller, as a result of
Buyer's assumption of the Assumed Decommissioning Liabilities.
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ARTICLE VIII
INDEMNIFICATION AND ARBITRATION
8.1 Indemnification.
(a) From and after the Closing, Buyer shall indemnify, defend and
hold harmless Seller and its Representatives (each, a "Seller's Indemnitee")
from and against any and all claims, demands, suits, losses, liabilities,
penalties, damages, obligations, payments, costs and expenses (including the
cost and expense of any action, suit, proceeding, assessment, judgment,
settlement or compromise relating thereto and reasonable attorneys' fees and
reasonable disbursements in connection therewith) and including costs and
expenses incurred in connection with investigations and settlement proceedings
(each, an "Indemnifiable Loss") asserted against or suffered by any Seller's
Indemnitee relating to, resulting from or arising out of or in connection with
(i) any breach by Buyer of any representation or warranty of Buyer contained in
this Agreement; (ii) any breach by Buyer of any covenant or agreement of Buyer
set forth in this Agreement, (iii) the Assumed Liabilities, (iv) the failure by
Buyer or its Representatives to comply with ISRA with respect to the Purchased
Assets that are subject thereto; or (v) any Third-Party Claim against any
Seller's Indemnitee to the extent arising out of or in connection with Buyer's
ownership, lease, maintenance or operation of any of the Purchased Assets on or
after the Closing Date (other than to the extent such Third-Party Claim
constitutes an Excluded Liability); provided, however, that Buyer shall be
liable pursuant to clauses (i) and (ii) of Section 8.1 (a) only for
Indemnifiable Losses for which any Seller's Indemnitee gives written notice to
Buyer (setting forth with reasonable specificity the nature and amount of the
Indemnifiable Loss) during the period for which such representations,
warranties, covenants or agreements survive the Closing in accordance with
Section 10.6.
(b) From and after the Closing, Seller shall indemnify, defend
and hold harmless Buyer and its Representatives (each, a "Buyer's Indemnitee"
and, together with Seller's Indemnitees, an "Indemnitee") from and against any
and all Indemnifiable Losses asserted against or suffered by any Buyer's
Indemnitee in any way relating to, resulting from or arising out of or in
connection with (i) any breach by Seller of any covenant or agreement of Seller
set forth in this Agreement; (ii) any breach by Seller of any representation or
warranty of Seller contained in this Agreement; (iii) the Excluded Liabilities;
(iv) any Third-Party Claim against any Buyer's Indemnitee to the extent arising
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out of or in connection with Seller's ownership or operation of the Excluded
Assets (other than to the extent such Third-Party Claim constitutes an Assumed
Liability); provided, however, that Seller shall be liable pursuant to clause
(i) and (ii) of this Section 8.1(b) only for Indemnifiable Losses for which any
Buyer's Indemnitee gives written notice to Seller (setting forth with reasonable
specificity the nature and amount of the Indemnifiable Loss) during the period
for which such covenants or agreements survive the Closing in accordance with
Section 10.6.
(c) In furtherance, and not in limitation, of the provisions set
forth in Section 8.1(b), without any further action required by any Person, from
and after the Closing Date, Buyer shall be deemed to release, hold harmless and
forever discharge Seller from any and all Indemnifiable Losses of any kind or
character, whether known or unknown, contingent or accrued, arising under or
relating to Environmental Laws, or relating to any claim in respect of any
Environmental Condition or Hazardous Substance, whether based on common law or
Environmental Laws relating to the Purchased Assets ("Environmental Claims")
(other than those described in Section 2.4(g)). In furtherance of, and to the
extent set forth in, the foregoing, Buyer shall, at Closing, irrevocably waive
any and all rights and benefits with respect to such Environmental Claims that
it now has or in the future may have conferred upon it by virtue of any Law or
common law principle, which provides that a general release does not extend to
claims which a party does not know or suspect to exist in its favor at the time
of executing the release, if knowledge of such claims would have materially
affected such party's settlement with the obligor. In this connection, Buyer
hereby acknowledges that it is aware that factual matters now unknown to it may
have given, or hereafter may give, rise to Environmental Claims that are
presently unknown, unanticipated and unsuspected, and Buyer further agrees that
the release from and after the Closing provided for in this Section 8.1(c) has
been negotiated and agreed upon in light of that awareness, and Buyer
nevertheless hereby intends, effective from and after the Closing, irrevocably
to release, hold harmless and forever discharge Seller from all such
Environmental Claims to the extent provided and in the manner contemplated by
this paragraph.
(d) Any Indemnifiable Loss shall be (i) net of the dollar amount
of any insurance or other proceeds actually receivable by the Indemnitee or any
of its Affiliates with respect to the Indemnifiable Loss, (ii) reduced to take
account of any Tax Benefit realized by the Indemnitee arising from the
incurrence or payment of such Indemnifiable Loss (a "Tax Benefit" meaning for
this purpose the positive excess of the Tax liability of Indemnitee without
regard to such Indemnifiable Loss over the Tax liability of such Indemnitee
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taking into account such Indemnifiable Loss, with all other circumstances
remaining unchanged), and (iii) increased to take account of any Tax Cost
incurred by Indemnitee arising from the receipt of indemnity payments hereunder
(grossed up for such increase) (a "Tax Cost" meaning for this purpose the
positive excess of the Tax liability of such Indemnitee taking such indemnity
payment into account over the Tax liability of such Indemnitee without regard to
such payment, with all other circumstances remaining unchanged).
(e) The rights and remedies of Seller, and Buyer under this
Article VIII are, solely as between Seller and Buyer, exclusive and in lieu of
any and all other rights and remedies which each of Seller and Buyer may have
under this Agreement, under applicable Law, with respect to any Indemnifiable
Loss, whether at common law or in equity, including for declaratory, injunctive
or monetary relief. The indemnification obligations of the Parties set forth in
this Article VIII apply only to matters arising out of this Agreement and the
transactions contemplated hereby, but do not extend to matters arising out of
the Owners Agreement, the Collateral Agreement or any of the Additional
Agreements. Any Indemnifiable Loss arising under or pursuant to the Owners
Agreement, the Collateral Agreement or any of the Additional Agreements shall be
governed by the indemnification obligations, if any, contained in such agreement
under which the Indemnifiable Loss arises.
(f) Notwithstanding anything to the contrary contained herein:
(i) No Party (including an Indemnitee) shall be entitled
to recover from any other Party (including any Party hereto required to provide
indemnification under this Agreement or any Additional Agreement (an
"Indemnifying Party")) for any liabilities, damages, obligations, payments,
losses, costs, or expenses under this Agreement any amount in excess of the
actual compensatory damages, court costs and reasonable attorney's and other
advisor fees suffered by such Party;
(ii) No Party shall have any liability or obligation to
indemnify under Section 8.1(a) or 8.1(b), as the case may be, unless and until
the aggregate amount of Indemnifiable Losses for which such Party would be
liable thereunder, but for this provision, exceeds, together with all such
Indemnifiable Losses for which such Party is so liable under the Collateral
Agreement, $100,000; provided that, thereafter, such Party shall be liable for
all such Indemnifiable Losses;
(iii) To the fullest extent permitted by Law, each of Buyer
and Seller hereby waives any right to recover punitive, incidental, special,
exemplary and consequential damages arising in connection with or with respect
to this Agreement or any breach or violation hereof; provided that the
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provisions of this clause (iii) shall not apply to indemnification for a
Third-Party Claim.
(g) An Indemnitee shall use Commercially Reasonable Efforts to
mitigate all losses, damages and the like relating to a claim under the
indemnification provisions in this Section 8.1, including availing itself of any
defenses, limitations, rights of contribution, claims against third Persons and
other rights at law or equity. For purposes of this Section 8.1(g), the
Indemnitee's Commercially Reasonable Efforts shall include the reasonable
expenditure of money to mitigate or otherwise reduce or eliminate any losses or
expenses for which indemnification would otherwise be due, and, in addition to
its other obligations hereunder, the Indemnifying Party shall reimburse the
Indemnitee for the Indemnitee's reasonable expenditures in undertaking the
mitigation.
(h) The expiration, termination or extinguishment of any covenant
or agreement shall not affect the Parties' obligations under Sections 8.1(a)
through 8.1(b) hereof if the Indemnitee provided the Indemnifying Party with
proper notice of the claim or event for which indemnification is sought prior to
such expiration, termination or extinguishment.
8.2 Defense of Claims.
(a) If any Indemnitee receives notice of the assertion of any
claim or of the commencement of any suit, action or proceeding made or brought
by any Person who is not a Party to this Agreement or an Affiliate of a Party to
this Agreement (a "Third-Party Claim") with respect to which indemnification is
to be sought from an Indemnifying Party, the Indemnitee shall give such
Indemnifying Party reasonably prompt written notice thereof, but in no event
later than twenty (20) Business Days after the Indemnitee's receipt of notice of
such Third-Party Claim. Such notice shall describe the nature of the Third-Party
Claim in reasonable detail and shall indicate the estimated amount, if
practicable, of the Indemnifiable Loss that has been or may be incurred by the
Indemnitee. The Indemnifying Party shall have the right to participate in or, by
giving written notice to the Indemnitee, to elect to assume the defense of any
Third-Party Claim at such Indemnifying Party's expense and by such Indemnifying
Party's own counsel; provided that the counsel for the Indemnifying Party who
shall conduct the defense of such Third-Party Claim shall be reasonably
satisfactory to the Indemnitee. The Indemnitee shall cooperate in good faith in
such defense at such Indemnitee's own expense. If an Indemnifying Party elects
to assume the defense of any Third-Party Claim, the Indemnitee shall (i)
cooperate in all reasonable respects with the Indemnifying Party in connection
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with such defense, (ii) not admit any liability with respect to, or settle,
compromise or discharge, any Third-Party Claim without the Indemnifying Party's
prior written consent and (iii) agree to any settlement, compromise or discharge
of a Third-Party Claim which the Indemnifying Party may recommend and which by
its terms obligates the Indemnifying Party to pay the full amount of the
liability in connection with such Third-Party Claim and unconditionally releases
the Indemnitee completely in connection with such Third-Party Claim. In the
event that the Indemnifying Party shall assume the defense of any Third-Party
Claim, the Indemnitee shall be entitled to participate in (but not control) such
defense with its own counsel at its own expense. If the Indemnifying Party does
not assume the defense of any such Third-Party Claim, the Indemnitee may defend
the same in such manner as it may deem appropriate, including settling,
compromising or discharging such claim or litigation after giving notice to the
Indemnifying Party of the terms of the proposed settlement, compromise or
discharge and the Indemnifying Party will promptly reimburse the Indemnitee upon
written request. Anything contained in this Agreement to the contrary
notwithstanding, no Indemnifying Party shall be entitled to assume the defense
of any Third-Party Claim if such Third-Party Claim seeks an order, injunction or
other equitable relief or relief for other than monetary damages against the
Indemnitee which, if successful, would materially adversely affect the business
of the Indemnitee; provided that such Indemnifying Party shall continue to be
obligated to such Indemnitee pursuant to this Article VIII for all Indemnifiable
Losses relating to, resulting from or arising out of such Third-Party Claim.
(b) If, within ten (10) Business Days after an Indemnitee gives
written notice to the Indemnifying Party of any Third-Party Claim, such
Indemnitee receives written notice from the Indemnifying Party that such
Indemnifying Party has elected to assume the defense of such Third-Party Claim
as provided in Section 8.2(a), the Indemnifying Party shall not be liable for
any costs, fees or expenses subsequently incurred by the Indemnitee in
connection with the defense, compromise or settlement thereof; provided,
however, that if the Indemnifying Party shall fail to take reasonable steps
necessary to defend diligently such Third-Party Claim within ten (10) Business
Days after receiving notice from the Indemnitee that the Indemnitee believes the
Indemnifying Party has failed to take such steps, the Indemnitee may assume its
own defense and the Indemnifying Party shall be liable for all reasonable costs,
fees and expenses thereof.
(c) Without the prior written consent of the Indemnitee, the
Indemnifying Party shall not admit any liability with respect to, or enter into
any settlement, compromise or discharge of, or any voluntary consent decree,
order or injunction with respect to, any Third-Party Claim which would lead to
liability or create any financial or other obligation on the part of the
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Indemnitee for which the Indemnitee is not entitled to indemnification
hereunder. If a firm offer is made to settle, compromise or discharge, or to
enter into any voluntary consent decree, order or injunction with respect to, a
Third-Party Claim, which offer would not lead to liability or the creation of
any financial or other obligation on the part of the Indemnitee for which the
Indemnitee is not entitled to indemnification hereunder, and the Indemnifying
Party desires to accept and agree to such offer, the Indemnifying Party shall
give written notice to the Indemnitee to that effect. If the Indemnitee fails to
consent to such firm offer within ten (10) Business Days after its receipt of
such notice, the Indemnifying Party shall be relieved of its obligations to
defend such Third-Party Claim and the Indemnitee may contest or defend such
Third-Party Claim. In such event, the maximum liability of the Indemnifying
Party as to such Third-Party Claim will be the amount of such settlement offer
plus reasonable costs and expenses paid or incurred by Indemnitee up to the date
of said notice.
(d) Subject to Section 8.3, any claim by an Indemnitee on
account of an Indemnifiable Loss which does not constitute a Third-Party Claim
(a "Direct Claim") shall be asserted by giving the Indemnifying Party reasonably
prompt written notice thereof, but in no event later than twenty (20) Business
Days after the Indemnitee becomes aware of such Direct Claim, stating the nature
of such claim in reasonable detail and indicating the estimated amount, if
practicable, of such Indemnifiable Loss; and the Indemnifying Party shall have a
period of twenty (20) Business Days within which to respond to such Direct
Claim. If the Indemnifying Party fails to respond during such twenty (20)
Business Day period, the Indemnifying Party shall be deemed to have accepted
such claim and, subject to this Article VIII, shall promptly reimburse the
Indemnitee for the Indemnifiable Losses set forth in the Indemnitee's notice. If
the Indemnifying Party rejects such claim, subject to Section 8.3, the
Indemnitee shall be free to seek enforcement of its right to indemnification
under this Agreement.
(e) If the amount of any Indemnifiable Loss, at any time
subsequent to the making of an indemnity payment in respect thereof, is reduced
by recovery, settlement, compromise, discharge or otherwise under or pursuant to
any insurance coverage, or pursuant to any claim, recovery, settlement,
compromise, discharge or payment by, from or against any other Person, the
amount of such reduction, less any costs, expenses or premiums incurred in
connection therewith (together with interest thereon from the date of payment
thereof at the Prime Rate) shall promptly be repaid by the Indemnitee to the
Indemnifying Party. Upon making any indemnity payment, the Indemnifying Party
shall, to the extent of such indemnity payment, be subrogated to all rights of
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the Indemnitee against any third party in respect of the Indemnifiable Loss to
which the indemnity payment relates; provided, however, that (i) the
Indemnifying Party shall then be in compliance with its obligations under this
Agreement in respect of such Indemnifiable Loss and (ii) until the Indemnitee
recovers full payment of its Indemnifiable Loss, any and all claims of the
Indemnifying Party against any such third party on account of said indemnity
payment is hereby made expressly subordinated and subjected in right of payment
to the Indemnitee's rights against such third party. Without limiting the
generality or effect of any other provision hereof, each such Indemnitee and
Indemnifying Party shall duly execute upon request all instruments reasonably
necessary to evidence and perfect the above-described subrogation and
subordination rights, and otherwise cooperate in the prosecution of such claims
at the direction of the Indemnifying Party. Nothing in this Section 8.2(e) shall
be construed to require any Party hereto to obtain or maintain any insurance
coverage.
(f) A failure to give timely notice as provided in this Section
8.2 shall not affect the rights or obligations of any Party hereunder except to
the extent that, as a result of such failure, the Party which was entitled to
receive such notice was actually prejudiced as a result of such failure.
8.3 Arbitration.
(a) Notwithstanding any provision hereof to the contrary, in the
event of any dispute between Seller and Buyer arising after the Closing (whether
relating to facts, events or circumstances occurring or existing prior to, on or
after the Closing Date) and relating to or arising out of any provision of this
Agreement (other than disputes arising under Section 2.3, 2.4, 3.2, 3.3, 3.4,
6.5, 8.1(a)(iii) or 8.1(b)(iii)), the sole remedy available to either Party is
the dispute resolution procedure set forth in this Section 8.3; provided,
however, that either Party may seek a preliminary injunction or other
provisional judicial remedy if such action is necessary to prevent irreparable
harm or preserve the status quo, in which case both Parties shall nonetheless
continue to pursue resolution of the dispute by means of this procedure. The
Party asserting such dispute shall give written notice to the other of the fact
that a dispute has arisen pursuant hereto. Such notice shall include (i) a
statement setting forth in reasonable detail the facts, events, circumstances,
evidence and arguments underlying such dispute and (ii) proposed arrangements
for a meeting to attempt to resolve the dispute to be held within sixty (60)
days after such notice is given. Within thirty (30) days after such notice is
given, the other Party hereto shall submit to the Party giving such notice a
written summary responding to such statement of facts, events, circumstances,
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evidence and arguments contained in the notice and an acceptance of or proposed
alternative to the meeting arrangements set forth in the initial notice.
(b) The chief executive officers (or any other executive officer
or officers directly reporting to, and duly designated by, such chief executive
officers) of each of the Parties shall meet at a mutually acceptable time and
place to attempt to settle any dispute in good faith; provided, however, that
such meeting shall be held at the principal offices of the Party receiving the
notice of dispute unless otherwise agreed; and provided further, that any such
meeting shall be held no later than sixty (60) days after the written notice of
dispute is given pursuant to Section 8.3(a) hereof. Each Party shall bear its
own costs and expenses with respect to preparation for, attendance at and
participation in such meeting.
(c) In the event that (i) a meeting has been held in accordance
with Section 8.3(b) and (ii) any such dispute of the kind referred to in Section
8.3(a) shall have not been resolved at such meeting, then, upon the written
request of any Party, the Parties shall submit such dispute to binding
arbitration pursuant to the Commercial Arbitration Rules of the American
Arbitration Association (the "Commercial Arbitration Rules"). In the event that
such dispute is submitted to arbitration pursuant to the Commercial Arbitration
Rules, then the arbitration tribunal shall be composed of three arbitrators (one
such arbitrator to be selected by each Party within thirty (30) days after the
meeting held in accordance with Section 8.3(b) with the third such arbitrator,
who shall be a former U.S. District Court or U.S. Circuit Court of Appeals judge
and shall serve as chairperson of such tribunal, selected by the other two
arbitrators or, in the absence of agreement between such arbitrators, by the
American Arbitration Association). The venue of the arbitration shall be
Wilmington, Delaware, the language of the arbitration shall be English and the
arbitration shall commence no later than sixty (60) days after the meeting held
in accordance with Section 8.3(b). The decision, judgment and order of the
arbitration tribunal shall be final, binding and conclusive as to the Parties
involved in such dispute, and their respective Representatives, and may be
entered in court of competent jurisdiction. Other than the fees and expenses of
the arbitrators, which shall be shared equally by the Parties, each Party shall
bear its own costs and expenses (including attorneys' fees and expenses)
relating to the arbitration.
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ARTICLE IX
TERMINATION
9.1 Termination.
(a) This Agreement may be terminated at any time prior to the
Closing by mutual written consent of the Parties.
(b) This Agreement may be terminated by Seller, on the one hand,
or Buyer, on the other hand, upon written notice to the other Party, (i) at any
time prior to the Closing if any court of competent jurisdiction shall have
issued an order, judgment or decree permanently restraining, enjoining or
otherwise prohibiting the Closing, and such order, judgment or decree shall have
become final and nonappealable; (ii) at any time prior to the Closing if any Law
shall have been enacted or issued by any Governmental Authority which, directly
or indirectly, prohibits the consummation of the transactions contemplated by
this Agreement, by any Additional Agreement or the Collateral Agreement; or
(iii) at any time after the first anniversary of the date of this Agreement if
the Closing shall not have occurred on or before such date (the "Termination
Date").
(c) This Agreement may be terminated by Buyer, upon written
notice to Seller, if any of Buyer's Required Regulatory Approvals, the receipt
of which is a condition to the obligation of Buyer to consummate the Closing as
set forth in Section 7.2(a), shall have been denied (and a petition for
rehearing or refiling of an application initially denied without prejudice shall
also have been denied), and such denial was not caused by or the result of a
breach of this Agreement by Buyer, or if the Buyer's Required Regulatory
Approvals, other than those set forth in Schedule 7.2(a)(i), shall have been
granted but are not in form and substance reasonably satisfactory to Buyer
(including adverse conditions relating to Buyer, the Affiliates of Buyer listed
in Schedule 7.2(a)(ii) or the Purchased Assets).
(d) This Agreement may be terminated by Seller, upon written
notice to Buyer, if any of the Seller's Required Regulatory Approvals, the
receipt of which is a condition to the obligation of Seller to consummate the
Closing as set forth in Section 7.3(a), shall have been denied (and a petition
for rehearing or refiling of an application initially denied without prejudice
shall also have been denied), and such denial was not caused by or the result of
a breach of this Agreement by Seller, or shall have been granted but are not in
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form and substance reasonably satisfactory to Seller (including adverse
conditions relating to Seller or the Purchased Assets).
(e) Except as otherwise provided in this Agreement, this
Agreement may be terminated by Buyer, upon written notice to Seller, if there
has been a breach by Seller of any covenant, agreement, representation or
warranty contained in this Agreement, which has resulted in a Material Adverse
Effect and such violation or breach is not cured by the earlier of the Closing
Date or the date thirty (30) days after receipt by Seller of notice specifying
in reasonable detail the nature of such breach, unless Buyer shall have
previously waived such breach
(f) Except as otherwise provided in this Agreement, this
Agreement may be terminated by Seller, upon written notice to Buyer, if there
has been a breach by Buyer of any covenant, agreement, representation or
warranty contained in this Agreement, which has resulted in a Material Adverse
Effect and such violation or breach is not cured by the earlier of the Closing
Date or the date thirty (30) days after receipt by Buyer of notice specifying in
reasonable detail the nature of such breach, unless Seller shall have previously
waived such breach.
(g) This Agreement may be terminated by Seller, on the one hand,
or Buyer, on the other hand, upon written notice to the other Party, in
accordance with the provisions of Section 6.8, provided that the Party seeking
to so terminate shall have complied in all material respects with its
obligations under Section 6.8.
(h) This Agreement may be terminated by Buyer, upon written
notice to Seller, in accordance with the provisions of Section 6.7(a)(iv)(B),
provided that Buyer has complied in all respects with its obligations under
Section 6.7.
9.2 Effect of Termination. Upon termination of this Agreement prior to
the Closing pursuant to Section 9.1, this Agreement shall be null and void and
of no further force or effect (except that the provisions set forth in this
Section 9.2 and Article X, and the Confidentiality Agreement, shall remain in
full force and effect in accordance with their respective terms); and no Party
shall have any further liability or obligation under this Agreement (other than
for any willful breach of its obligations hereunder). If this Agreement is
terminated as provided herein, all filings, applications and other submissions
made pursuant to this Agreement, to the extent practicable, shall be withdrawn
from the agency or other Person to which they were made.
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9.3 Additional Effects of Termination. In the event that this
Agreement is terminated by Buyer pursuant to (a) Section 9.1(b)(iii) due to the
failure to satisfy the condition set forth in Section 7.2(a) or (b) Section
9.1(c), in each case due to the inclusion of an adverse condition in any Buyer's
Required Regulatory Approval (each, a "Regulatory Termination"), then,
notwithstanding any provision hereof or of the Owners Agreement, as may then be
in effect, to the contrary, upon any exercise by Buyer or PSE&G Utility of its
rights under Section 26.3 of the Owners Agreement, Buyer or PSE&G Utility shall
exercise such rights in such manner as to acquire the Salem Interest pursuant to
a transaction (the "Subsequent Transaction") on terms and conditions that are no
less favorable to Seller than those set forth in this Agreement; provided that
the Subsequent Transaction shall provide for the termination of Buyer's and
PSE&G Utility's rights under Section 26.3 of the Owners Agreement upon the
occurrence of a Regulatory Termination of such Subsequent Transaction prior to
the consummation thereof.
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 Amendment and Modification. Subject to applicable Law, this
Agreement may be amended, supplemented or otherwise modified only by written
agreement entered into by the Parties.
10.2 Expenses. Except to the extent provided herein, whether or not
the transactions contemplated hereby are consummated, all costs, fees and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be borne by the Party incurring such costs, fees and
expenses, including the fees and commissions referred to in Section 10.3.
Notwithstanding the foregoing, in no event shall Seller bear or be liable for
the payment of any costs, fees or expenses (other than attorneys' fees and
expenses and the fees and commissions referred to in Section 10.3) incurred by
Seller to obtain any approval of FERC or the NRC Approvals included among the
Buyer's Required Regulatory Approvals or the Seller's Required Regulatory
Approvals, or to transfer the Decommissioning Funds to Buyer at the Closing, to
the extent that the aggregate amount of such costs, fees and expenses exceeds,
together with all such costs, fees and expenses which Seller bears or is liable
for under the Collateral Agreement, $200,000; and Buyer shall bear and be liable
to the extent of any such excess.
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10.3 Fees and Commissions. Seller, on the one hand, and Buyer, on the
other hand, represent and warrant to the other that, except for Credit Suisse
First Boston, Inc. ("CSFB") and Reed/Navigant Consulting Group, which are acting
for and at the expense of Seller, no broker, finder or other Person is entitled
to any brokerage fees, commissions or finder's fees in connection with the
transactions contemplated hereby by reason of any action taken by such Party or
its Representatives. Seller shall pay or otherwise discharge all such brokerage
fees, commissions and finder's fees so incurred by Seller.
10.4 Bulk Sales Laws. Buyer hereby acknowledges that, notwithstanding
anything in this Agreement to the contrary, Seller will not comply with the
provisions of the bulk sales laws of any jurisdiction in connection with the
transactions contemplated by this Agreement and Buyer hereby irrevocably waives
compliance by Seller with the provisions of the bulk sales laws of all
jurisdictions.
10.5 Waiver of Compliance. To the extent permitted by applicable Law,
any failure of any of the Parties to comply with any obligation, covenant,
agreement or condition set forth herein may be waived by the Party entitled to
the benefit thereof only by a written instrument signed by such Party, but any
such waiver shall not operate as a waiver of, or estoppel with respect to, any
prior or subsequent failure to comply therewith. The failure of a Party to this
Agreement to assert any of its rights under this Agreement or otherwise shall
not constitute a waiver of such rights.
10.6 Survival.
(a) The representations and warranties given or made by any Party
or in any certificate or other writing furnished in connection herewith shall
survive the Closing for a period of one (1) year after the Closing Date and
shall thereafter terminate and be of no further force or effect, except that (i)
all representations and warranties relating to Taxes and Tax Returns, including
those set forth in Sections 4.5 and 4.6, shall survive the Closing for the
period of the applicable statutes of limitation plus any extensions or waivers
thereof, and (ii) any representation or warranty as to which a claim (including
a contingent claim) shall have been asserted during the survival period shall
continue in effect with respect to such claim until such claim shall have been
finally resolved or settled. Each Party shall be entitled to rely upon the
representations and warranties of the other Party set forth herein,
notwithstanding any investigation or audit conducted before or after the Closing
Date or the decision of any Party to complete the Closing.
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(b) The covenants and agreements of the Parties contained in this
Agreement, including those set forth in Article VIII and Section 6.5, shall
survive the Closing in accordance with their respective terms.
10.7 Disclaimers. EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES SET
FORTH IN ARTICLE IV, THE PURCHASED ASSETS ARE SOLD "AS IS, WHERE IS", AND SELLER
EXPRESSLY DISCLAIMS ALL OTHER REPRESENTATIONS AND WARRANTIES OF ANY KIND OR
NATURE, EXPRESS OR IMPLIED, AS TO SELLER, THE PURCHASED ASSETS. WITHOUT LIMITING
THE GENERALITY OF THE FOREGOING, EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES
SET FORTH IN ARTICLE IV OR IN THE DEEDS, SELLER EXPRESSLY DISCLAIMS ALL OTHER
REPRESENTATIONS AND WARRANTIES REGARDING LIABILITIES, OWNERSHIP, LEASE,
MAINTENANCE AND OPERATION OF THE PURCHASED ASSETS, THE TITLE, CONDITION, VALUE
OR QUALITY OF THE PURCHASED ASSETS OR THE PROSPECTS (FINANCIAL AND OTHERWISE),
RISKS AND OTHER INCIDENTS OF THE PURCHASED ASSETS; AND SELLER EXPRESSLY
DISCLAIMS ALL REPRESENTATIONS AND WARRANTIES OF MERCHANTABILITY, USAGE,
SUITABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE WITH RESPECT TO THE PURCHASED
ASSETS, OR ANY PART THEREOF, OR AS TO THE WORKMANSHIP THEREOF, OR THE ABSENCE OF
ANY DEFECTS THEREIN, WHETHER LATENT OR PATENT, OR COMPLIANCE WITH ENVIRONMENTAL
REQUIREMENTS, OR THE APPLICABILITY OF ANY REQUIREMENTS OF ANY GOVERNMENTAL
AUTHORITY, INCLUDING ANY NUCLEAR LAWS OR ENVIRONMENTAL LAWS. EXCEPT AS OTHERWISE
EXPRESSLY PROVIDED HEREIN, SELLER FURTHER EXPRESSLY DISCLAIMS ALL
REPRESENTATIONS AND WARRANTIES REGARDING THE ABSENCE OF HAZARDOUS SUBSTANCES OR
LIABILITY OR POTENTIAL LIABILITY ARISING UNDER NUCLEAR LAWS OR ENVIRONMENTAL
LAWS WITH RESPECT TO THE PURCHASED ASSETS. WITHOUT LIMITING THE GENERALITY OF
THE FOREGOING, EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN OR IN THE DEEDS,
SELLER EXPRESSLY DISCLAIMS ALL REPRESENTATIONS AND WARRANTIES OF ANY KIND
REGARDING THE CONDITION OF THE PURCHASED ASSETS AND NO SCHEDULE OR EXHIBIT TO
THIS AGREEMENT, NOR ANY OTHER MATERIAL OR INFORMATION PROVIDED, OR
COMMUNICATIONS MADE, BY SELLER OR ITS REPRESENTATIVES, INCLUDING ANY BROKER OR
INVESTMENT BANKER, WILL CAUSE OR CREATE ANY SUCH REPRESENTATION OR WARRANTY,
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EXPRESS OR IMPLIED, AS TO THE TITLE, CONDITION, VALUE OR QUALITY OF THE
PURCHASED ASSETS.
10.8 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given on the day when delivered personally or by
facsimile transmission (with confirmation), on the next Business Day when
delivered to a nationally recognized overnight courier or five (5) Business Days
after deposited as registered or certified mail (return receipt requested), in
each case, postage prepaid, addressed to the recipient Party at its address set
forth below (or at such other address or facsimile number for a Party as shall
be specified by like notice; provided, however, that any notice of a change of
address or facsimile number shall be effective only upon receipt thereof):
(a) If to Seller, to:
Delmarva Power & Light Company
In care of Conectiv
800 King Street
P.O. Box 231
Wilmington, Delaware 19899
Attention: Chairman
Facsimile: (302) 429-3367
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
One Rodney Square
Wilmington, Delaware 19801
Attention: Steven J. Rothschild, Esquire
Facsimile: (302) 651-3001
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(b) If to Buyer, to:
PSEG Power LLC
80 Park Plaza
T-5A
P.O. Box 570
Newark, New Jersey 07101
Attention: Harold W. Borden, Vice President
and General Counsel
Facsimile: (973) 639-0741
with a copy to:
Steptoe & Johnson LLP
1330 Connecticut Avenue, NW
Washington, DC 20036
Attention: Filiberto Agusti, Esquire
Facsimile: (202) 429-3902
10.9 Assignment, No Third-Party Beneficiaries. This Agreement shall be
binding upon and inure to the benefit of the Parties and their respective
successors and permitted assigns, and, except as set forth in this Section 10.9,
neither this Agreement nor any of the rights, interests, obligations or remedies
hereunder shall be assigned by any Party hereto without the prior written
consent of the other Party, nor is this Agreement intended to confer upon any
other Person any rights, interests, obligations or remedies hereunder. This
Agreement shall create no third-party beneficiary rights of any kind in any
Representative or former employee of Seller or Buyer. Notwithstanding the
foregoing, (a) Seller may assign any or all of its rights, interests,
obligations and remedies hereunder to one or more Affiliates of Seller;
provided, however, that no such assignment shall relieve or discharge Seller
from any of its obligations hereunder, and (b) Buyer may (i) assign any or all
of its rights, interests, obligations and remedies hereunder to one or more
Affiliates of Buyer, including Public Service Enterprise Group, provided that
each such Affiliate shall, at the time of such assignment be qualified under
applicable Law to obtain all Buyer Permits, including Buyer Nuclear Permits and
Environmental Permits, necessary for such Affiliate to own, lease, maintain and
operate the Salem Station including, on the Closing Date, the Purchased Assets,
(ii) assign, transfer, pledge or otherwise dispose of its rights and interest in
this Agreement to a trustee, lending institution or other Person for financing
purposes, including upon or pursuant to the exercise of remedies under such
financing or refinancing, or by way of assignments, transfers, conveyances or
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dispositions in lieu thereof, or (iii) assign to any Affiliate of PSEG such
Purchased Assets as are not material in the aggregate to the extent necessary to
assure that the Purchased Assets may be operated as an exempt wholesale
generator under Section 32(g) of PUHCA; provided, however, that no such
assignment, transfer, pledge, conveyance or disposition pursuant to this Section
10.9(b) shall (A) impair or materially delay the consummation of the
transactions contemplated hereby or (B) relieve or discharge Buyer from any of
its obligations hereunder.
10.10 Governing Law, Forum, Service of Process. This Agreement shall
be governed by and construed in accordance with the laws of the State of New
Jersey (without giving effect to conflicts of law principles) as to all matters,
including validity, construction, effect, performance and remedies. Venue in any
and all suits, actions and proceedings related to the subject matter of this
Agreement shall be in the state and federal courts located in and for the State
of New Jersey (the "Courts"), which shall have exclusive jurisdiction for such
purpose, and the Parties hereby irrevocably submit to the exclusive jurisdiction
of such Courts and irrevocably waive the defense of an inconvenient forum to the
maintenance of any such suit, action or proceeding. Service of process may be
made in any manner recognized by such Courts. Each of the Parties hereby
irrevocably waives its right to a jury trial in any suit, action or proceeding
arising out of any dispute in connection with this Agreement or the transactions
contemplated hereby. Nothing in this Section 10.10 is intended to modify or
expand the terms and provisions of Section 8.3 with respect to the rights of the
Parties to seek judicial remedy of any dispute relating to or arising out of any
provision of this Agreement.
10.11 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
10.12 Entire Agreement. This Agreement (including the Schedules and
Exhibits), together with the Confidentiality Agreement, embodies the entire
agreement and understanding of the Parties hereto in respect of the transactions
contemplated by this Agreement and the Additional Agreements and supersede all
prior agreements and understandings among the Parties with respect to such
transactions. There are no representations, warranties, covenants or agreements
between or among the Parties with respect to the subject matter set forth in
such agreements, other than those expressly set forth or referred to herein or
therein. Without limiting the generality of the foregoing, Buyer hereby
acknowledges and agrees that there are no representations, warranties, covenants
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or agreements among the Parties with respect to the subject matter set forth in
such agreements contained in any material made available to Buyer pursuant to
the terms of the Confidentiality Agreement (including the Offering Memorandum
dated July 2, 1999, previously provided to Buyer by or on behalf of Seller,
Reed/Navigant Consulting Group and CSFB).
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, Seller and Buyer have caused this Purchase
Agreement to be duly executed and delivered by their respective duly authorized
officers as of the date first written above.
DELMARVA POWER & LIGHT
COMPANY
By: /s/ Thomas S. Shaw
-----------------------------------
Name: Thomas S. Shaw
---------------------------------
Title: Executive Vice President
------------------------
PSEG POWER LLC
By: /s/ Robert W. Metcalfe
-----------------------------------
Name: Robert W. Metcalfe
---------------------------------
Title: Vice President - Development
--------------------------------
(DP&L/SALEM)
<PAGE>
APPENDIX F
PURCHASE AND SALE AGREEMENT
BETWEEN DELMARVA POWER & LIGHT COMPANY
AND NRG ENERGY, INC.
(INDIAN RIVER AND VIENNA POWER PLANTS,
DORCHESTER SITE)
<PAGE>
EXECUTION COPY
PURCHASE AND SALE AGREEMENT
BY AND BETWEEN
DELMARVA POWER & LIGHT COMPANY
AND
NRG ENERGY, INC.
DATED AS OF JANUARY 18, 2000
(DP&L - WHOLLY OWNED STATIONS)
<PAGE>
LIST OF EXHIBITS AND SCHEDULES
EXHIBITS
Exhibit A Form of Access Agreement
Exhibit B Form of Assignment and Assumption Agreement
Exhibit C Form of Bill of Sale
Exhibit D Form of FIRPTA Affidavit
Exhibit E Form of Interconnection Agreement
Exhibit F Form of Limited Warranty Deed
Exhibit G Term Sheet for Power Purchase Agreement
Exhibit H Form of Transition Services Agreement
Exhibit I Form of Seller's Legal Opinion
Exhibit J Form of Buyer's Legal Opinion
SCHEDULES
1.1(23) Capital Expenditures
1.1(42) Description of Dorchester Property
1.1(76) Description of the Indian River Station
1.1(96) Permitted Encumbrances
1.1(130) Target Adjustment Amount Methodology
1.1(137) Transferable Permits
1.1(147) Description of Vienna Station
2.1(c) Electrical Transmission Facilities/Information
Technology/Communications Assets
2.1(f) Emission Allowances to be Transferred to Buyer
2.1(g) Excess Emission Allowances
2.4(n) Certain Environmental Conditions
2.6 Inventories
4.3(a) Seller's Defaults and Violations
4.3(b) Seller's Consents and Approvals
4.4 Insurance Exceptions
4.6 Environmental Matters
4.7 Labor Matter Exceptions
4.8(a) Benefit Plans
4.8(b) Benefit Plans; ERISA Exceptions
4.9 Real Property
4.11(a) Seller's Agreements
4.12 Legal Proceedings
5.3(a) Buyer's Defaults and Violations
5.3(b) Buyer's Consents and Approvals
5.10 Environmental Site Assessments
6.1 Conduct of Business Exceptions
6.8(c) Collective Bargaining Agreements
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6.8(h) Transferred Non-Union Employee Severance Benefits
6.10 Certain Tax-Exempt Bonds
6.12(b)(i) Prorated SO2 Allowances
6.12(b)(ii) Prorated NOx Emission Allowances
7.1(c) Buyer's Required Regulatory Approvals
7.2(c) Seller's Required Regulatory Approvals
ii
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TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
1.1 Definitions..........................................................1
1.2 Certain Interpretive Matters........................................15
1.3 U.S. Dollars........................................................15
ARTICLE II
PURCHASE AND SALE
2.1 Transfer of Assets..................................................15
2.2 Excluded Assets.....................................................17
2.3 Assumed Liabilities.................................................19
2.4 Excluded Liabilities................................................20
2.5 Control of Litigation...............................................22
2.6 Inventories.........................................................22
ARTICLE III
THE CLOSING
3.1 Closing.............................................................23
3.2 Payment of Purchase Price...........................................23
3.3 Adjustment to Purchase Price........................................24
3.4 Tax Reporting and Allocation of Purchase Price......................25
3.5 Prorations..........................................................25
3.6 Deliveries by Seller................................................26
3.7 Deliveries by Buyer.................................................27
3.8 Post-Closing Excluded Asset Deliveries..............................28
3.9 Relationship of this Agreement and Related Purchase Agreements......28
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
4.1 Organization; Qualification.........................................29
4.2 Authority...........................................................29
4.3 Consents and Approvals; No Violation................................30
4.4 Insurance...........................................................30
4.5 Title and Related Matters...........................................31
4.6 Environmental Matters...............................................31
4.7 Labor Matters.......................................................31
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4.8 Benefit Plans; ERISA................................................32
4.9 Real Property.......................................................32
4.10 Condemnation........................................................32
4.11 Contracts and Leases................................................32
4.12 Legal Proceedings...................................................33
4.13 Permits.............................................................33
4.14 Year 2000...........................................................33
4.15 Assets Used in Operation of the Wholly Owned Stations...............33
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
5.1 Organization; Qualification.........................................34
5.2 Authority...........................................................34
5.3 Consents and Approvals; No Violation................................34
5.4 Buyer's Permits.....................................................35
5.5 Availability of Funds...............................................35
5.6 Financial Statements................................................35
5.7 Legal Proceedings...................................................36
5.8 Qualified Buyer.....................................................36
5.9 Inspections.........................................................36
5.10 WARN Act............................................................36
5.11 Regulation as a Utility.............................................36
ARTICLE VI
COVENANTS OF THE PARTIES
6.1 Conduct of Business Relating to the Purchased Assets................36
6.2 Access to Information...............................................37
6.3 Public Statements...................................................38
6.4 Further Assurances..................................................39
6.5 Consents and Approvals..............................................40
6.6 Certain Tax Matters.................................................41
6.7 Advice of Changes...................................................42
6.8 Employees...........................................................43
6.9 Risk of Loss........................................................47
6.10 Certain Tax-Exempt Bonds............................................48
6.11 PJM; MAAC...........................................................48
6.12 Emission Allowances.................................................48
6.13 Insurance Claims....................................................52
6.14 Reimbursement of Certain Metering Expenses..........................52
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ARTICLE VII
CONDITION
7.1 Conditions to Obligation of Buyer...................................52
7.2 Conditions to Obligation of Seller..................................54
ARTICLE VIII
INDEMNIFICATION AND ARBITRATION
8.1 Indemnification.....................................................55
8.2 Defense of Claims...................................................57
8.3 Arbitration.........................................................58
8.4 Remediation of Matters Covered in Sections 2.4(g) and 2.4(n)........59
ARTICLE IX
TERMINATION
9.1 Termination.........................................................60
9.2 Effect of Termination...............................................62
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 Amendment and Modification..........................................62
10.2 Expenses............................................................62
10.3 Fees and Commissions................................................62
10.4 Bulk Sales Laws.....................................................63
10.5 Waiver of Compliance; Consents....................................63
10.6 No Survival.........................................................63
10.7 Disclaimers.........................................................63
10.8 Notices.............................................................64
10.9 Assignment..........................................................65
10.10 Governing Law; Forum; Service of Process............................66
10.11 Counterparts........................................................66
10.12 Interpretation......................................................66
10.13 Schedules and Exhibits..............................................66
10.14 Entire Agreement....................................................66
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PURCHASE AND SALE AGREEMENT
PURCHASE AND SALE AGREEMENT, dated as of January 18, 2000 (this
"Agreement"), by and between Delmarva Power & Light Company, a Delaware and
Virginia corporation ("DP&L" or "Seller"), and NRG Energy, Inc., a Delaware
corporation ("Buyer"). Seller and Buyer may each be referred to herein
individually as a "Party," and collectively as the "Parties."
W I T N E S S E T H
WHEREAS, Seller owns two fossil fuel-fired electric generating
stations (the "Wholly Owned Stations"), and certain properties and assets
associated therewith and ancillary thereto; and
WHEREAS, Seller owns a developmental site consisting of approximately
247 acres of land located in Dorchester County, Maryland (referred to herein as
the "Dorchester Property"), and certain properties and assets associated
therewith and ancillary thereto; and
WHEREAS, Seller possesses certain Emission Allowances (as defined
below); and
WHEREAS, Buyer desires to purchase and assume, and Seller desires to
sell and assign, or cause to be sold and assigned, the Purchased Assets (as
defined below) and certain associated Liabilities (as defined below), upon the
terms and conditions hereinafter set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants, representations, warranties and agreements set forth herein, and
intending to be legally bound hereby, the Parties hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. As used in this Agreement, the following
capitalized terms have the meanings specified in this Section 1.1.
(1) "Access Agreement" means the easement and license agreement
between Buyer and Seller, or any Affiliate thereof, to be delivered at the
Closing, substantially in the form of Exhibit A hereto, pursuant to which Buyer
will provide Seller, or an Affiliate thereof, with access rights with respect to
certain of the Purchased Assets transferred to Buyer and to certain Excluded
Assets retained by Seller.
(2) "ACE" means Atlantic City Electric Company, a New Jersey
corporation.
<PAGE>
(3) "ACE Related Purchase Agreements" means (i) the separate Purchase
and Sale Agreement, dated as of the date hereof, entered into by ACE and Buyer,
relating to the purchase and sale of the B.L. England Station, the Deepwater
Station, certain interests in the Merrill Creek Reservoir, certain SO2
Allowances and NOx Emission Allowances, and certain related properties and
assets, and (ii) the separate Purchase and Sale Agreement, dated as of the date
hereof, entered into by Seller and Buyer, relating to the purchase and sale of
ACE's undivided 2.47% interest as tenant in common in the Keystone Station,
Seller's undivided 3.83% interest as tenant in common in the Conemaugh Station
and certain related properties and assets.
(4) "Additional Agreements" means the Interconnection Agreement, the
Power Purchase Agreement, the Transition Services Agreement, the Access
Agreement, the Limited Warranty Deeds, the Assignment and Assumption Agreements
and the Bill of Sale.
(5) "Affiliate" has the meaning set forth in Rule 12b-2 of the
General Rules and Regulations promulgated under the Exchange Act.
(6) "Agreement" means this Purchase Agreement together with the
Schedules and Exhibits hereto.
(7) "Assignment and Assumption Agreements" means the assignment and
assumption agreements between Seller and Buyer, to be delivered at the Closing,
substantially in the form of Exhibit B hereto, pursuant to which Seller shall
assign the Seller's Agreements, certain intangible assets and certain other
Purchased Assets to Buyer, and Buyer shall accept such assignment and assume the
Assumed Liabilities.
(8) "Assumed Liabilities" has the meaning set forth in Section 2.3.
(9) "B.L. England Station" means the generating station known as B.L.
England Station, located in the town of Beesley's Point, County of Cape May,
State of New Jersey, and related properties and assets.
(10) "Benefit Plans" has the meaning set forth in Section 4.8(a).
(11) "Bill of Sale" means the bill of sale of Seller, to be delivered
at the Closing, substantially in the form of Exhibit C hereto.
(12) "Business Day" means any day other than Saturday, Sunday and any
day on which banking institutions in the State of New York are authorized or
required by law or other governmental action to close.
(13) "Buyer" has the meaning set forth in the preamble to this
Agreement.
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(14) "Buyer Material Adverse Effect" has the meaning set forth in
Section 5.3(a).
(15) "Buyer's Benefit Plans" has the meaning set forth in Section
6.8(e)(iv).
(16) "Buyer's Financial Statements" has the meaning set forth in
Section 5.6.
(17) "Buyer's Indemnitee" has the meaning set forth in Section 8.1(b).
(18) "Buyer's Pension Plan" has the meaning set forth in Section
6.8(f).
(19) "Buyer's Permits" has the meaning set forth in Section 5.4.
(20) "Buyer's Required Regulatory Approvals" has the meaning set forth
in Section 5.3(b).
(21) "Buyer's Savings Plan" has the meaning set forth in Section
6.8(g).
(22) "Buyer's Welfare Plans" has the meaning set forth in Section
6.8(e)(iv).
(23) "Capital Expenditures" means the total amount of funds paid, or
Liabilities incurred, by Seller (other than such as constitute Assumed
Liabilities) for one or more of the projects listed on Schedule 1.1(23) during
the period commencing on September 1, 1999 and ending on the Closing Date.
(24) "CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended from time to time.
(25) "Closing" has the meaning set forth in Section 3.1.
(26) "Closing Adjustment Amount" means an amount, calculated in a
manner consistent with the calculation of the Target Adjustment Amount, equal to
the sum, as of the Closing Date, of (a) the Net Book Value of Seller's right,
title and interest in and to the Inventories plus (b) Capital Expenditures.
(27) "Closing Date" has the meaning set forth in Section 3.1.
(28) "Closing Date Benefits" has the meaning set forth in Section
6.8(f).
(29) "Closing Payment" has the meaning set forth in Section 3.2(c).
(30) "Closing Statement" has the meaning set forth in Section 3.3(a).
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(31) "COBRA" means Sections 601 through 608 of ERISA and Section 4980B
of the Code.
(32) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
(33) "Commercial Arbitration Rules" has the meaning set forth in
Section 8.3(c).
(34) "Commercially Reasonable Efforts" means efforts which are
reasonably within the contemplation of the Parties at the time of entering into
this Agreement and which do not require the performing Party to expend funds
other than expenditures which are customary and reasonable in transactions of
the kind and nature contemplated by this Agreement in order for the performing
Party to satisfy its obligations hereunder.
(35) "Computer Systems" has the meaning set forth in Section 4.14.
(36) "Conemaugh Station" means the generating station known as
Conemaugh Station, located in the County of Indiana, Commonwealth of
Pennsylvania, and related properties and assets.
(37) "Confidentiality Agreement" means the Confidentiality Agreement,
dated July 21, 1999, between Conectiv, a Delaware corporation, and Buyer.
(38) "Courts" has the meaning set forth in Section 10.10.
(39) "Deepwater Station" means the generating station known as
Deepwater Station, located in the Town of Pennsville, County of Salem, State of
New Jersey, and related properties and assets.
(40) "Direct Claim" has the meaning set forth in Section 8.2(c).
(41) "DNREC" means the Delaware Department of Natural Resources and
Environmental Control, and any successor agency thereto.
(42) "Dorchester Property" means the approximately 247-acre site
owned by DP&L located in the County of Dorchester, State of Maryland, and
related properties and assets, all as more fully identified on Schedule 1.1(42)
attached hereto.
(43) "DP&L" has the meaning set forth in the preamble to this
Agreement.
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(44) "DP&L Related Purchase Agreement" means the separate Purchase and
Sale Agreement, dated as of the date hereof, entered into by Seller and
Buyer, relating to the purchase and sale of Seller's undivided 3.70% interest as
tenant in common in the Keystone Station, Seller's undivided 3.72% interest as
tenant in common in the Conemaugh Station, and certain related properties and
assets.
(45) "DPSC" means the Delaware Public Service Commission, and any
successor agency thereto.
(46) "Easements" means, collectively, all easements, licenses, rights
of way and other access rights to be granted by Buyer to Seller, or any
Affiliate thereof, pursuant to the Access Agreement, and the easements,
licenses, rights of way and other access rights reserved by Seller, or any
Affiliate thereof, in the Limited Warranty Deeds, including such as authorize
access, use, maintenance, construction, repair, replacement and other activities
by Seller, or any Affiliate thereof, or otherwise necessary for Seller, or any
Affiliate thereof, to operate its electrical transmission and distribution
facilities, or information technology and telecommunications assets, or fulfill
legal requirements applicable thereto.
(47) "Emission Allowances" means Emission Reduction Credits, NOx
Emission Allowances and SO2 Allowances.
(48) "Emission Reduction Credits" means credits, in units that are
established by the Governmental Authority with jurisdiction over the relevant
Site that has obtained the credits, resulting from reductions in the emissions
of air pollutants from an emitting source or facility (including and to the
extent allowable under applicable Law, reductions resulting from shutdowns or
control of emissions beyond that required by applicable Law) that have been
certified by any applicable Governmental Authority as complying with the Law and
regulations governing the establishment of such credits (including certification
that such emissions reductions are enforceable, permanent, quantifiable and
surplus), including air emissions reductions as described above that have been
approved by the applicable Governmental Authority and are awaiting USEPA
approval. The term also includes certified air emissions reductions, as
described above, regardless as to whether the Governmental Authority certifying
such reductions designates such certified air emissions reductions by a name
other than "emission reduction credits."
(49) "Employees" has the meaning set forth in Section 6.8(e).
(50) "Encumbrances" means any and all mortgages, pledges, liens,
claims, security interests, agreements, easements, activity and use limitations,
restrictions, defects of title or encumbrances of any kind.
(51) "Environmental Claims" has the meaning set forth in Section
8.1(c).
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(52) "Environmental Condition" means the presence or Release to the
environment, whether at the Sites or otherwise, of Hazardous Substances,
including any migration of Hazardous Substances through air, soil or groundwater
at, to or from the Sites or at, to or from any Off-Site Location, regardless of
when such presence or Release occurred or is discovered.
(53) "Environmental Laws" means all (a) Laws, in each case, as amended
from time to time, relating to pollution or protection of the environment,
natural resources or human health and safety, including Laws relating to
Releases or threatened Releases of Hazardous Substances or otherwise relating to
the manufacture, formulation, generation, processing, distribution, use,
treatment, storage, Release, transport, Remediation, abatement, cleanup or
handling of Hazardous Substances, (b) Laws with regard to recordkeeping,
notification, disclosure and reporting requirements respecting Hazardous
Substances and (c) Laws relating to the management or use of natural resources.
(54) "Environmental Permits" means all permits, certificates, licenses
and authorizations of all Governmental Authorities under Environmental Laws.
(55) "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
(56) "ERISA Affiliate" has the meaning set forth in Section 2.4(k).
(57) "ERISA Affiliate Plans" has the meaning set forth in Section
2.4(k).
(58) "Estimated Adjustment Amount" has the meaning set forth in
Section 3.2(b).
(59) "Excess Emission Allowances" has the meaning set forth in Section
2.1(h).
(60) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, and the rules and regulations promulgated thereunder
from time to time.
(61) "Excluded Assets" has the meaning set forth in Section 2.2.
(62) "Excluded Liabilities" has the meaning set forth in Section 2.4.
(63) "FERC" means the United States Federal Energy Regulatory
Commission, and any successor agency thereto.
(64) "FIRPTA Affidavit" means the Foreign Investment in Real Property
Tax Act Certification and Affidavit of Seller, to be delivered at the Closing,
substantially in the form of Exhibit D hereto.
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(65) "Good Utility Practices" means any of the practices, methods and
acts engaged in or approved by a significant portion of the electric utility
industry during the relevant time period, or any of the practices, methods or
acts which, in the exercise of reasonable judgment in light of the facts known
at the time the decision was made, would have been expected to accomplish the
desired result at a reasonable cost consistent with good business practices,
reliability, safety and expedition.
(66) "Governmental Authority" means any executive, legislative,
judicial, regulatory or administrative agency, body, commission, department,
board, court, tribunal, arbitrating body or authority of the United States or
any foreign country, or any state, local or other governmental subdivision
thereof.
(67) "Hazardous Substances" means (a) any petrochemical or petroleum
products, oil or coal ash, radioactive materials, radon gas, asbestos in any
form that is or could become friable, urea formaldehyde foam insulation and
transformers or other equipment that contain dielectric fluid which may contain
polychlorinated biphenyls, (b) any chemicals, materials or substances defined as
or included in the definition of "hazardous substances," "hazardous wastes,"
"hazardous materials," "hazardous constituents," "restricted hazardous
materials," "extremely hazardous substances," "toxic substances,"
"contaminants," "pollutants," "toxic pollutants" or words of similar meaning and
regulatory effect under any applicable Environmental Law and (c) any other
chemical, material or substance, exposure to which is prohibited, limited or
regulated by any applicable Environmental Law.
(68) "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended from time to time.
(69) "IBEW" means Local 1307 of the International Brotherhood of
Electrical Workers.
(70) "IBEW Collective Bargaining Agreements" has the meaning set forth
in Section 6.8(c).
(71) "Income Tax" means any Tax imposed by any Governmental Authority
(a) based upon, measured by or calculated with respect to net income, profits or
receipts (including capital gains Taxes and minimum Taxes) or (b) based upon,
measured by or calculated with respect to multiple bases (including corporate
franchise taxes) if one or more of such bases is described in clause (a), in
each case, together with any interest, penalties or additions attributable
thereto.
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(72) "Indemnifiable Loss" has the meaning set forth in Section 8.1(a).
(73) "Indemnifying Party" has the meaning set forth in Section 8.1(e).
(74) "Indemnitee" has the meaning set forth in Section 8.1(b).
(75) "Independent Accounting Firm" means such nationally recognized,
independent accounting firm as is mutually appointed by Seller and Buyer for
purposes of this Agreement.
(76) "Indian River Station" means the generating station known as
Indian River Power Plant, located in the town of Millsboro, County of Sussex,
State of Delaware, and related properties and assets, all as more fully
identified on Schedule 1.1(76) attached hereto.
(77) "Inspection" means all tests, reviews, examinations, inspections,
investigations, verifications, samplings and similar activities conducted by
Buyer or its Representatives with respect to the Purchased Assets prior to the
Closing.
(78) "Interconnection Agreement" means the interconnection agreement,
between Seller, or an Affiliate thereof, and Buyer, to be delivered at the
Closing, substantially in the form of Exhibit E hereto.
(79) "Inventories" means coal, oil, tire-derived fuel and other fuel
inventories, limestone, materials, spare parts, capital spare parts, consumable
supplies and chemical and gas inventories (together with related freight,
commodity and handling (other than on-site handling)) which are located at or in
transit to the Wholly Owned Stations relating to the operation of the Wholly
Owned Stations.
(80) "Keystone Station" means the generating station known as Keystone
Station located in Plumcreek Township, County of Armstrong, Commonwealth of
Pennsylvania, and related properties and assets.
(81) "Knowledge" means the actual knowledge of the directors and
executive officers of the specified Person, which directors and executive
officers are charged with responsibility for the particular function as of the
date of this Agreement, or, with respect to any certificate delivered pursuant
to this Agreement, the date of delivery of such certificate.
(82) "Laws" means all laws, statutes, rules, regulations and
ordinances of any Governmental Authority.
(83) "Liability" or "Liabilities" means any liability or obligation
(whether known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated and
whether due or to become due), including any liability for Taxes.
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(84) "Like-Kind Exchange" has the meaning set forth in Section 6.6(e).
(85) "Limited Warranty Deeds" means the Limited Warranty Deeds, to be
delivered at the Closing, substantially in the form of Exhibit F hereto,
pursuant to which Seller will convey the Real Property to Buyer.
(86) "MAAC" means the Mid-Atlantic Area Council.
(87) "Material Adverse Effect" means any change in or effect on the
Purchased Assets or the operation of the Purchased Assets after the date hereof
that is materially adverse to the operation or condition (financial or
otherwise) of the Purchased Assets, taken as a whole, other than (i) any change
or effect affecting the international, national, regional or local electric
industry as a whole and not specific and exclusive to the Purchased Assets, (ii)
any change or effect resulting from changes in the international, national,
regional or local wholesale or retail markets for electricity, including any
change in or effect on the structure, operating agreements, operations or
procedures of Pennsylvania-New Jersey-Maryland Interconnection L.L.C. or its
control area, (iii) any change or effect resulting from changes in the
international, national, regional or local markets for any fuel used at each of
the Wholly Owned Stations, (iv) any change or effect resulting from changes in
the North American, national, regional or local electricity transmission systems
or operations thereof, (v) changes in Law, or any judgments, orders or decrees
that apply generally to similarly situated Persons, (vi) any change or effect to
the extent constituting or involving an Excluded Asset or an Excluded Liability
and (vii) any change in or effect on the Purchased Assets which is cured
(including by payment of money) before the earlier of the Closing and the
termination of this Agreement pursuant to Section 9.1.
(88) "MDE" means the Maryland Department of the Environment, and any
successor agency thereto.
(89) "Net Book Value" means, as of any date, original cost (including
related freight, commodity and handling (other than on-site handling)) less
applicable depreciation and amortization, as reflected on Seller's books and
records through such date in accordance with United States generally accepted
accounting principles as applied by Seller on August 31, 1999.
(90) "Non-Union Employees" has the meaning as set forth in Section
6.8(e).
(91) "NOx" means oxides of nitrogen.
(92) "NOx Budget Program" means Nitrogen Oxides Budget Program, which
is a statutory or regulatory program promulgated by the United States or a state
pursuant to which the United States or state provides for a limit on the oxides
of nitrogen that can be emitted by all sources covered by the program and
establishes allowances or authorizations, which in total are equal to the amount
of oxides of nitrogen allowed by the limit, where each allowance or
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authorization represents a "right" to emit a unit of oxides of nitrogen, as the
means for ensuring compliance with the limit.
(93) "NOx Emission Allowance" means (a) an authorization by the DNREC
under its NOx Budget Program authorizing the emission of one ton of NOx during
the ozone season, as such season is defined by the DNREC; (b) an authorization
by the MDE under any future NOx Budget Program authorizing the emission of one
ton of NOx during the ozone season, as such season is defined by the MDE; or (c)
an authorization by the USEPA under any future NOx Budget Program promulgated by
the USEPA, including any future program implemented in lieu of a state NOx
Budget Program, authorizing the emission of one ton of NOx during the ozone
season, as such season is defined by the USEPA.
(94) "Off-Site Location" means any real property other than the Sites.
(95) "Party" and "Parties" have the respective meanings set forth in
the preamble to this Agreement.
(96) "Permitted Encumbrances" means: (a) the Easements; (b) those
exceptions to title to the Purchased Assets listed on Schedule 1.1(96); (c)
statutory liens for Taxes or other charges or assessments of Governmental
Authorities not yet due or delinquent, or which are being contested in good
faith by appropriate proceedings; (d) mechanics', carriers', workers',
repairers' and other similar liens arising or incurred in the ordinary course of
business to the extent that they secure payment of obligations which are not in
arrears or otherwise due and which have been incurred under Good Utility
Practices; (e) zoning, entitlement, conservation restriction and other land use
and environmental regulations by Governmental Authorities; and (f) with respect
to any Station, such non-monetary Encumbrances as do not materially detract from
the value of the Purchased Assets located at such Station, taken as a whole, as
currently used, or materially interfere with the present use of the Purchased
Assets located at such Station, taken as a whole.
(97) "Person" means any individual, partnership, limited liability
company, joint venture, corporation, trust, unincorporated organization, other
business association or Governmental Authority.
(98) "PJM" means the Pennsylvania-New Jersey-Maryland Power Pool, as
established and administered by Pennsylvania-New Jersey-Maryland Interconnection
L.L.C.
(99) "PJM Agreement" means the Operating Agreement dated June 2, 1997
of Pennsylvania-New Jersey-Maryland Interconnection L.L.C., as amended from time
to time.
(100) "Power Purchase Agreement" means the power purchase agreement
between Buyer and Seller, to be delivered at the Closing, substantially to the
effect of the term sheet set forth as Exhibit G hereto.
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(101) "Prime Rate" has the meaning set forth in Section 3.3(c).
(102) "Proprietary Information" of a Party means all information about
any Party or its properties or operations furnished to the other Party or its
Representatives by such Party or its Representatives, after the date hereof,
regardless of the manner or medium in which it is furnished. Proprietary
Information does not include information that: (a) is or becomes generally
available to the public, other than as a result of a disclosure by the other
Party or its Representatives; (b) was available to the other Party on a
non-confidential basis prior to its disclosure by the Party or its
Representatives; (c) is or becomes available to the other Party on a
non-confidential basis from a source other than such Party, provided that the
source of such information was not known by such Party or its Representatives,
after reasonable investigation, to be bound by a confidentiality agreement with
or other contractual, legal or fiduciary obligation of confidentiality to such
Party or any of its Representatives with respect to such material; (d) is
independently developed by the other Party; or (e) was disclosed pursuant to the
Confidentiality Agreement and remains subject to the terms and conditions of the
Confidentiality Agreement.
(103) "PUHCA" means the Public Utility Holding Company Act of 1935, as
amended from time to time, and the rules and regulations promulgated thereunder
from time to time.
(104) "Purchase Price" has the meaning set forth in Section 3.2(a).
(105) "Purchased Assets" has the meaning set forth in Section 2.1.
(106) "Qualified Offer" has the meaning set forth in Section 6.8(e).
(107) "Qualifying Use" has the meaning set forth in Section 6.11.
(108) "Real Property" has the meaning set forth in Section 2.1(a).
(109) "Related Purchase Agreements" means, collectively, the ACE
Related Purchase Agreements and the DP&L Related Purchase Agreement.
(110) "Release" means any release, spill, leak, discharge, disposal
of, pumping, pouring, emitting, emptying, injecting, leaching, dumping or
allowing to escape into or through the environment.
(111) "Remediation" means an action of any kind to address an
Environmental Condition or a Release of Hazardous Substances or the presence of
Hazardous Substances at the Sites or an Off-Site Location, including the
following activities to the extent they relate to, result from or arise out of
the presence of a Hazardous Substance at the Sites or an Off-Site Location: (a)
monitoring, investigation, assessment, treatment, cleanup, containment, removal,
mitigation, response or restoration work; (b) obtaining any permits, consents,
approvals or authorizations of any Governmental Authority necessary to conduct
any such activity; (c) preparing and implementing any plans or studies for any
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such activity; (d) obtaining a written notice from a Governmental Authority with
jurisdiction over the Sites or an Off-Site Location under Environmental Laws
that no material additional work is required by such Governmental Authority; (e)
the use, implementation, application, installation, operation or maintenance of
removal actions on the Sites or an Off-Site Location, remedial technologies
applied to the surface or subsurface soils, excavation and treatment or disposal
of soils at an Off-Site Location, systems for long-term treatment of surface
water or groundwater, engineering controls or institutional controls; and (f)
any other activities reasonably determined by a Party to be necessary or
appropriate or required under Environmental Laws to address an Environmental
Condition or a Release of Hazardous Substances or the presence of Hazardous
Substances at the Sites or an Off-Site Location.
(112) "Remediation Standard" means a numerical standard (whether
resulting from an enacted statute, promulgated regulation, guidance or policy
document issued by a regulatory agency, or developed on a case-by-case basis
through a risk assessment or other methodology authorized pursuant to an
applicable Environmental Law) that defines the concentrations of Hazardous
Substances that may be permitted to remain in any environmental media after a
Remediation.
(113) "Representatives" of a Person means, collectively, such Person's
Affiliates and its and their respective directors, officers, partners, members,
employees, representatives, agents, advisors (including accountants, legal
counsel, environmental consultants, engineering consultants and financial
advisors), parent entities and other controlling Persons.
(114) "SEC" means the United States Securities and Exchange
Commission, and any successor agency thereto.
(115) "Securities Act" means the Securities Act of 1933, as amended
from time to time, and the rules and regulations promulgated thereunder from
time to time.
(116) "Seller" has the meaning set forth in the preamble to this
Agreement.
(117) "Seller's Agreements" means, collectively, (i) the contracts,
agreements, arrangements, licenses and leases of any nature to which, as of the
date hereof, Seller is a party, or by or to which Seller or the Purchased Assets
is bound or subject, and (ii) those contracts, agreements, arrangements,
licenses and leases of any nature entered into by Seller on or after the date of
this Agreement consistent with the terms of Section 6.1(iii), in each case,
relating to the ownership, lease, maintenance or operation of the Purchased
Assets, but excluding Benefit Plans.
(118) "Seller's Indemnitee" has the meaning set forth in Section
8.1(a).
(119) "Seller's Pension Plan" has the meaning set forth in Section
6.8(f).
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(120) "Seller's Permits" has the meaning set forth in Section 4.13.
(121) "Seller's Required Regulatory Approvals" has the meaning set
forth in Section 4.3(b).
(122) "Seller's Savings Plans" has the meaning set forth in Section
6.8(g).
(123) "Sites" means the Real Property, forming a part, or used or
usable in connection with the operation, of the Wholly Owned Stations and the
Dorchester Property, including any real property used for the disposal of solid
or hazardous waste that is included in the Real Property. Any reference to the
Sites shall include the surface and subsurface elements, to the extent owned by
or subject to any interest of Seller, including the soil and groundwater present
at the Sites, and any reference to materials or conditions "at the Sites",
including Hazardous Substances and Environmental Conditions, shall include all
materials and conditions "at, on, in, upon, over, across, under or within" the
Sites.
(124) "SO2" means sulfur dioxide.
(125) "SO2 Allowance" means an authorization by the Administrator of
the USEPA under the Clean Air Act, 42 U.S.C. section 7401, et seq., to emit one
ton of sulfur dioxide during or after a specified calendar year.
(126) "Statement" has the meaning set forth in Section 6.15(c).
(127) "Stations" means, together, the Indian River Station, the Vienna
Station and the Dorchester Property.
(128) "Subsidiary", when used in reference to any Person, means any
entity of which outstanding securities or interests having ordinary voting power
to elect a majority of the board of directors or other governing body performing
similar functions of such entity are owned directly or indirectly by such
Person.
(129) "Tangible Personal Property" has the meaning set forth in
Section 2.1(d).
(130) "Target Adjustment Amount" means $17,828,000, which represents
the Net Book Value, as of August 31, 1999, of Seller's right, title and interest
in and to the Inventories, as calculated in the manner set forth on Schedule
1.1(130).
(131) "Tax" or "Taxes" means all taxes, charges, fees, levies,
penalties and other assessments imposed by any Governmental Authority, including
income, gross receipts, excise, property, sales, transfer, use, franchise,
payroll, withholding, social security and other taxes, together with any
interest, penalties or additions attributable thereto.
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(132) "Tax Return" means any return, report, information return or
other document, together with all amendments and supplements thereto (including
any related or supporting information), required to be supplied to any
Governmental Authority responsible for the administration of Laws governing
Taxes.
(133) "Third-Party Claim" has the meaning set forth in Section 8.2(a).
(134) "Title Commitments" means (i) the Title Commitment provided by
Lawyers Title Insurance Corporation, dated October 5, 1999, relating to the
Indian River Station; (ii) the Title Commitment provided by Lawyers Title
Insurance Corporation, dated October 11, 1999, relating to the Vienna Station;
and (iii) the Title Commitment provided by Lawyers Title Insurance Corporation,
dated October 11, 1999, relating to the Dorchester Property.
(135) "Total Cash Compensation" has the meaning set forth in Section
6.8(e)(ii).
(136) "Transfer Taxes" has the meaning set forth in Section 6.6(a).
(137) "Transferable Permits" means those Permits and Environmental
Permits (and all applications pertaining thereto) which are transferable under
applicable Laws by Seller to Buyer (with or without a filing with, notice to,
consent or approval of any Governmental Authority), as set forth on Schedule
1.1(137).
(138) "Transferred Employee Records" means records of Seller that
relate to Transferred Employees, but only to the extent that such records
pertain to: (i) skill and development training, (ii) seniority histories, (iii)
salary and benefit information, (iv) Occupational, Safety and Health
Administration reports and (v) active medical restriction forms.
(139) "Transferred Employees" has the meaning set forth in Section
6.8(e).
(140) "Transferred Non-Union Employee" has the meaning set forth in
Section 6.8(e).
(141) "Transferred Savings Employees" has the meaning set forth in
Section 6.8(g).
(142) "Transferred Union Employee" has the meaning set forth in
Section 6.8(a).
(143) "Transition Services Agreement" means the Transition Services
Agreement between Seller and Buyer, to be delivered at the Closing,
substantially in the form of Exhibit H attached hereto.
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(144) "Transmission Assets" has the meaning set forth in Section
2.2(a).
(145) "Union Employees" has the meaning set forth in Section 6.8(a).
(146) "USEPA" means the United States Environmental Protection Agency,
and any successor agency thereto.
(147) "Vienna Station" means the generating station known as Vienna
Power Plant, located in the town of Vienna, County of Dorchester, State of
Maryland, and related properties and assets, all as more fully identified on
Schedule 1.1(147) attached hereto.
(148) "WARN Act" means the Worker Adjustment Retraining and
Notification Act of 1988, as amended.
(149) "Wholly Owned Stations" means, collectively, the Indian River
Station and the Vienna Station.
(150) "Year 2000 Compliance" has the meaning set forth in Section
4.14.
1.2 Certain Interpretive Matters. In this Agreement, unless the
context otherwise requires, the singular words include the plural, the masculine
includes the feminine and neuter, and vice versa. In this Agreement, the term
"includes" or "including" shall be deemed followed by the words "including
without limitation." References herein to a section, article, Exhibit or
Schedule mean a section, article, Exhibit or Schedule of this Agreement, and
reference to a given agreement or instrument constitutes a reference to that
agreement or instrument as modified, amended, supplemented and restated through
the date as of which such reference is made.
1.3 U.S. Dollars. When used herein, the term "dollars" and the symbol
"$" refer to the lawful currency of the United States of America.
ARTICLE II
PURCHASE AND SALE
2.1 Transfer of Assets. Upon the terms and subject to the conditions
set forth in this Agreement, at the Closing, Seller shall sell, assign, convey,
transfer and deliver to Buyer, and Buyer shall purchase, assume and acquire from
Seller, free and clear of all Encumbrances, except for the Permitted
Encumbrances, all of Seller's right, title and interest in, to and under the
following assets and properties, except as otherwise provided in Section 2.2,
each as of the Closing Date (collectively, the "Purchased Assets"):
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(a) The real property (including all buildings and other
improvements thereon and all appurtenances thereto) described on Schedule 4.9
(the "Real Property");
(b) The Inventories;
(c) Machinery, equipment, vehicles, furniture and other personal
property owned by Seller, located on the Real Property on the Closing Date
(collectively, "Tangible Personal Property"), including the electrical
transmission facilities (as opposed to generation facilities) and information
technology and telecommunications assets set forth on Schedule 2.1(c);
(d) The Seller's Agreements;
(e) Subject to the receipt of necessary consents and approvals,
the Transferable Permits;
(f) The Emission Allowances identified on Schedule 2.1(f);
(g) Such of the Emission Allowances of Seller as are identified
on Schedule 2.1(g) (the "Excess Emission Allowances");
(h) The names "Indian River Power Plant" and "Vienna Power
Plant"; provided, however, that Buyer expressly acknowledges and agrees that the
Purchased Assets do not include any right, title or interest in or to the names
"Delmarva Power & Light Company", "DP&L" or any derivation thereof, as well as
any related or similar name, or any other trade names, trademarks, service
marks, corporate names and logos or any part, derivation, colorable imitation or
combination thereof;
(i) To the extent permitted by applicable Law, the Transferred
Employee Records;
(j) All books, operating records, operating, safety and
maintenance manuals, engineering design plans, blueprints and as-built plans,
specifications, procedures, and similar items relating specifically to the
Wholly Owned Stations (subject to the right of Seller to retain copies of same
for its use), other than such items as are proprietary to third parties and
accounting records; and
(k) Other than those relating to the generator rotor failure at
the Indian River Station, the rights of Seller in, to and under all causes of
action against third parties with respect to, arising out of or in connection
with Seller's rights, title and interest in and to the Purchased Assets or the
Assumed Liabilities, or any portion thereof, whether accruing prior to, on or
after the Closing Date, other than any such causes of action as constitute
Excluded Assets or Excluded Liabilities, whether received as payment or credit
against future liabilities.
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2.2 Excluded Assets. Notwithstanding anything to the contrary in this
Agreement, nothing in this Agreement shall constitute or be construed as
requiring Seller to sell, assign, convey, transfer or deliver, and Buyer shall
not be entitled to purchase or acquire, any right, title or interest in, to or
under any properties, assets, business, operation or division of Seller, or any
Affiliate thereof, not expressly set forth in Section 2.1, including the
following assets and properties which are hereby specifically excluded from the
definition of Purchased Assets (collectively, the "Excluded Assets"):
(a) The right, title and interest of Seller and its successors,
assigns and Representatives in, to and under all electrical transmission or
distribution facilities (as opposed to generation facilities) or information
technology and communications assets of Seller or any of its Affiliates located
at or forming a part of either of the Wholly Owned Stations (whether or not
regarded as a "transmission" or "generation" asset for regulatory or accounting
purposes), including all switchyard facilities, substation facilities and
support equipment, as well as all permits, contracts and warranties, to the
extent they relate to such transmission and distribution assets or information
technology and communications assets (other than the electrical transmission
facilities and information technology and telecommunications assets identified
on Schedule 2.1(c), all of which are included as Purchased Assets)
(collectively, the "Transmission Assets");
(b) The right, title and interest of Seller and its successors,
assigns and Representatives in, to and under certain switches and meters, gas
facilities, revenue meters and remote testing units, drainage pipes and systems,
pumping equipment and associated piping, in each case, located at or forming a
part of the Wholly Owned Stations, as identified in the Access Agreement;
(c) All certificates of deposit, shares of stock, securities,
bonds, debentures, evidences of indebtedness, and interests in joint ventures,
partnerships, limited liability companies and other entities;
(d) All cash, cash equivalents, bank deposits, accounts and notes
receivable (trade or otherwise), prepaid expenses relating to the operation of
the Purchased Assets and any income, sales, payroll or other Tax receivables (in
each case, whether held by Seller or any third party);
(e) The right, title and interest of Seller and its successors,
assigns and Representatives in, to and under all intellectual property,
including the names "Delmarva Power & Light Company", "DP&L" or any derivation
thereof, as well as any related or similar name, or any other trade names,
trademarks, service marks, corporate names and logos, or any part, derivation,
colorable imitation or combination thereof;
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(f) All tariffs, agreements and arrangements to which Seller or
its Representatives is a party for the purchase or sale of electric capacity or
energy, or for the purchase of transmission, distribution or ancillary services;
(g) Subject to Section 6.13, the rights of Seller and its
successors, assigns and Representatives in, to and under all causes of action
against third parties relating to any Excluded Assets or Excluded Liabilities,
if any, whether accruing prior to, on or after the Closing Date, including all
claims for refunds, prepayments, offsets, recoupment, insurance proceeds,
insurance distributions, dividends or other proceeds, condemnation awards,
judgments and the like, whether received as payment or credit against future
Liabilities, in each case, relating to any period prior to the Closing Date;
(h) All Tax refunds or credits (including refunds or credits of
real property Taxes paid or due with respect to the Wholly Owned Stations, the
Dorchester Property or any related Real Property), which refunds or credits are
with respect to periods prior to the Closing Date, whether directly or
indirectly, regardless of when actually paid;
(i) All employment agreements and personnel records of Seller and
their respective successors, assigns and Representatives, other than, to the
extent permitted by applicable Law, Transferred Employee Records;
(j) The minute books, stock transfer books, corporate seal and
other corporate records of Seller and its successors, assigns and
Representatives;
(k) The right, title and interest of Seller and its successors,
assigns and Representatives in, to and under all contracts, agreements,
arrangements, licenses and leases of any nature, other than the Seller's
Agreements;
(l) Except as set forth in Section 6.8(g), all assets and
properties owned or held by any Benefit Plan;
(m) All insurance policies relating to the ownership, lease,
maintenance or operation of the Purchased Assets;
(n) All other assets and properties owned or leased by Seller or
its successors, assigns and Representatives which are not used in the operation
of the Wholly Owned Stations;
(o) The right, title and interest of Seller and its successors,
assigns and Representatives under this Agreement and the Additional Agreements;
and
(p) The right, title and interest of Seller and its successors,
assigns and Representatives in, to and under all Emission Allowances of Seller
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or any of its Affiliates (other than the Emission Allowances identified on
Schedule 2.1(f) and the Excess Emission Allowances identified on Schedule
2.1(g)).
2.3 Assumed Liabilities. On the Closing Date, Buyer shall assume and
agree to pay, perform and otherwise discharge, without recourse to Seller or its
Affiliates, all of the Liabilities of Seller and its Affiliates, successors,
assigns or Representatives which relate, directly or indirectly, to the
Purchased Assets, other than Excluded Liabilities (collectively, the "Assumed
Liabilities"), including the following such Liabilities:
(a) All Liabilities of Seller under the Seller's Agreements and
the Transferable Permits in accordance with the terms thereof, including the
contracts, agreements, arrangements, licenses and leases of whatever nature
entered into by Seller with respect to the Purchased Assets on or after the date
hereof consistent with the terms of Section 6.1(iii), except, in each case, to
the extent such Liabilities, but for a breach or default by Seller, would have
been paid, performed or otherwise discharged prior to the Closing Date;
(b) All Liabilities of Seller which relate to the Purchased
Assets in respect of Taxes for which Buyer is liable pursuant to Section 3.5 or
6.6;
(c) All Liabilities of Seller which relate to the Transferred
Employees for which Buyer is responsible on or after the Closing Date pursuant
to Section 6.8;
(d) All Liabilities of Seller arising under or relating to
Environmental Laws or relating to any claim in respect of Environmental
Conditions or Hazardous Substances, whether based on common law or Environmental
Laws, whether relating to the Sites or any Off-Site Location, including (i) any
violation or alleged violation of Environmental Laws, whether prior to, on or
after the Closing Date, with respect to the ownership, lease, maintenance or
operation of any of the Purchased Assets, including any fines or penalties that
arise in connection with the ownership, lease, maintenance or operation of the
Purchased Assets on or after the Closing Date (but excluding all fines and
penalties that arise in connection with the ownership, lease, maintenance or
operation of the Purchased Assets prior to the Closing Date), and the costs
associated with correcting any such violations; (ii) loss of life, injury to
persons or property or damage to natural resources (whether or not such loss,
injury or damage arose or was made manifest before the Closing Date or arises or
becomes manifest on or after the Closing Date) caused (or allegedly caused) by
any Environmental Condition or the presence or Release of Hazardous Substances
at, on, in, under, or migrating from the Purchased Assets prior to, on or after
the Closing Date, including any Environmental Condition or Hazardous Substances
contained in building materials at or migrating from the Purchased Assets or in
the soil, surface water, sediments, groundwater, landfill cells, or in other
environmental media at or near the Purchased Assets; (iii) any Remediation
(whether or not such Remediation commenced before the Closing Date or commences
on or after the Closing Date) of any Environmental Condition or Hazardous
Substances that are present or have been Released prior to, on or after the
Closing Date at, on, in, under, or migrating from, the Purchased Assets or in
the soil, surface water, sediments, groundwater, landfill cells or in other
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environmental media at or migrating from the Purchased Assets; (iv) any bodily
injury, loss of life, property damage, or natural resource damage arising from
the storage, transportation, treatment, disposal, discharge, recycling or
Release, at any Off-Site Location, or arising from the arrangement for such
activities, on or after the Closing Date, of Hazardous Substances generated in
connection with the ownership, lease, maintenance or operation of the Purchased
Assets; and (v) any Remediation of any Environmental Condition or Release of
Hazardous Substances arising from the storage, transportation, treatment,
disposal, discharge, recycling or Release, at any Off-Site Location, or arising
from the arrangement for such activities, on or after the Closing Date, of
Hazardous Substances generated in connection with the ownership, lease,
maintenance or operation of the Purchased Assets; provided that nothing set
forth in this Section 2.3(d) shall require Buyer to assume any Liabilities that
are Excluded Liabilities pursuant to Sections 2.4(e), 2.4(g), 2.4(h), 2.4(i),
2.4(j) or 2.4(n);
(e) With respect to the Purchased Assets, any Tax that may be
imposed by any federal, state or local government on the ownership, lease,
maintenance, use or sale of the Purchased Assets on or after the Closing Date,
except for any Income Taxes attributable to income received by Seller; and
(f) For purposes of clarification, Buyer acknowledges that it
shall assume and be fully responsible for holding in its accounts sufficient SO2
Allowances and NOx Allowances to cover emissions of SO2 and NOx from all of the
Sites for all of the calendar year in which the Closing occurs, including the
period of such year prior to the Closing Date.
2.4 Excluded Liabilities. Notwithstanding Section 2.3, Buyer shall not
assume or be obligated to pay, perform or otherwise discharge the following
Liabilities of Seller (the "Excluded Liabilities"):
(a) Any Liabilities of Seller in respect of any Excluded Assets
or other assets of Seller which are not Purchased Assets, except to the extent
caused by the acts or omissions of Buyer or its Representatives or Buyer's
ownership, lease, maintenance or operation of the Purchased Assets;
(b) Any Liabilities of Seller in respect of Taxes attributable to
the Purchased Assets for taxable periods ending before the Closing Date, except
for Taxes for which Buyer is liable pursuant to Section 3.5 or 6.6;
(c) Any Liabilities of Seller arising from the breach prior to
the Closing Date by Seller of any of the Seller's Agreements;
(d) Any and all Liabilities to third parties for personal injury
or tort, or similar causes of action to the extent arising out of the ownership,
lease, maintenance or operation of the Purchased Assets prior to the Closing
Date, other than the Liabilities assumed by Buyer under Section 2.3(d);
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(e) Any fines or penalties imposed by any Governmental Authority
resulting from any violation of law by Seller that occurred prior to the Closing
Date;
(f) Any payment obligations of Seller or its Affiliates for goods
delivered or services rendered prior to the Closing Date, other than the
Liabilities assumed by Buyer under Section 2.3(d);
(g) Liability for Remediation of Environmental Conditions at, on,
under or migrating from the Purchased Assets, but only to the extent that (i)
such Liability arises out of or derives from the same facts which form the basis
of a conviction, guilty plea or plea of nolo contendere by Seller for a
violation of Environmental Laws by Seller; (ii) Seller's conviction, guilty plea
or plea of nolo contendere was based on Seller's intentional and willful
wrongful actions; and (iii) Seller's conviction, guilty plea or plea of nolo
contendere arises from a matter as to which Seller has received written notice
from a Governmental Authority on or before the sixth anniversary of the Closing
Date.
(h) Any Liability under or related to Environmental Laws or the
common law arising as a result of or in connection with loss of life, injury to
persons or property or damage to natural resources (whether or not such loss,
injury or damage arose or was made manifest before the Closing Date or arises or
becomes manifest on or after the Closing Date) caused (or allegedly caused) by
the disposal, storage, transportation, discharge, migration of, Release or
recycling of Hazardous Substances at an Off-Site Location, or the arrangement
for such activities, prior to the Closing Date, in connection with the
ownership, lease, maintenance or operation of the Purchased Assets, provided
that, for purposes of this Section, "Off-Site Location" does not include any
location to which Hazardous Substances disposed of or Released at the Purchased
Assets have migrated;
(i) Any Liability under or related to Environmental Laws or the
common law arising as a result of or in connection with the Remediation (whether
or not such Remediation commenced before the Closing Date or commences on or
after the Closing Date) of Hazardous Substances that are disposed, stored,
transported, discharged, migrating from, Released, recycled, or the arrangement
of such activities, in connection with the ownership, lease, maintenance or
operation of the Purchased Assets, at any Off-Site Location, prior to the
Closing Date; provided that, for purposes of this Section, "Off-Site Location"
does not include any location to which Hazardous Substances disposed of or
Released at the Purchased Assets have migrated;
(j) Any Liability under or related to Environmental Laws or the
common law arising as a result of or in connection with the ownership, lease,
maintenance or operation by Seller or its Affiliates of the Transmission Assets
prior to, on or after the Closing Date, except to the extent caused by the acts
or omissions of Buyer or Buyer's ownership, lease, maintenance or operation of
the Purchased Assets;
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(k) Any Liabilities relating to any Benefit Plan maintained by
Seller or any trade or business (whether or not incorporated) which is or ever
has been under common control, or which is or ever has been treated as a single
employer, with Seller under Section 414(b), (c), (m) or (o) of the Code ("ERISA
Affiliate") or to which Seller and any ERISA Affiliate contributed thereunder
(the "ERISA Affiliate Plans"), maintained by, contributed to, or obligated to
contribute to, by Seller or any ERISA Affiliate, including any Liability (i) to
the Pension Benefit Guaranty Corporation under Title IV of ERISA; or (ii) with
respect to any noncompliance by Seller with ERISA or any other applicable Laws,
but not including any Liabilities assumed by Buyer pursuant to Section 6.8;
(l) Any Liabilities relating to the employment or termination of
employment, including discrimination, wrongful discharge, unfair labor
practices, or constructive termination by Seller of any individual, attributable
to any action or inaction by Seller prior to the Closing Date other than such
actions or inactions taken at the direction of Buyer;
(m) Any obligation to provide continuation coverage under COBRA
(and notice of the right to elect such coverage) to Transferred Employees,
employees associated with the Purchased Assets who do not become Transferred
Employees (and their dependents or former dependents), and former dependents of
Transferred Employees who became eligible for continuation coverage under COBRA
on account of a "qualifying event" (as defined under COBRA) occurring before the
Closing Date (but not including any Liabilities assumed by Buyer pursuant to
Section 6.8);
(n) Liability for Remediation of the Environmental Condition
described in Schedule 2.4(n); and
(o) Subject to Section 6.10, any Liabilities under the bonds
listed on Schedule 6.10.
2.5 Control of Litigation. The Parties agree and acknowledge that
Seller shall be entitled exclusively to control, defend and settle any suit,
action or proceeding, and any investigation arising out of or relating to any
Excluded Assets or Excluded Liabilities, and Buyer agrees to cooperate in
connection therewith to the extent Seller reasonably requests; provided,
however, that Buyer shall not be required to incur any out-of-pocket costs and
Seller shall reimburse Buyer for the costs incurred by Buyer in making its
employees available for such purpose, including the allocable amount of salaries
and wages of such employees.
2.6 Inventories. Schedule 2.6 lists the quantities of Inventories
relating to the Wholly Owned Stations that will be transferred at the Closing to
Buyer, to the extent located at or in transit to any Wholly Owned Station on the
Closing Date, together with the Net Book Value of Inventories, in each case, as
of August 31, 1999.
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ARTICLE III
THE CLOSING
3.1 Closing. The sale, assignment, conveyance, transfer and delivery
of the Purchased Assets by Seller to Buyer, and the purchase, assumption and
acquisition by Buyer of the Purchased Assets and the Assumed Liabilities, and
the consummation of the other transactions contemplated hereby, shall take place
at a closing (the "Closing") to be held at the offices of Skadden, Arps, Slate,
Meagher & Flom LLP, One Rodney Square, Wilmington, Delaware, at 10:00 a.m. local
time, on the first Business Day after August 31, 2000 that is ten (10) Business
Days after the date on which the last of the conditions precedent to the Closing
set forth in Sections 7.1(a) and (c), and Sections 7.2(a) and (c) of this
Agreement, shall have been satisfied or, to the extent permitted by applicable
Law, waived by the Party for whose benefit such conditions precedent exist, or
at such other date, time and location thereafter as may be agreed upon in
writing between Buyer and Seller. The date on which the Closing actually occurs
is hereinafter called the "Closing Date." The Closing shall be effective for all
purposes as of 12:01 a.m., New York City time, on the Closing Date.
3.2 Payment of Purchase Price.
(a) Upon the terms and subject to the conditions set forth in
this Agreement, in consideration of the aforesaid sale, assignment, conveyance,
transfer and delivery of the Purchased Assets, Buyer shall, at the Closing, (i)
pay to Seller cash in the aggregate amount of $508,463,000 plus the amount, if
any, by which the Closing Adjustment Amount exceeds the Target Adjustment
Amount, or minus the amount, if any, by which the Target Adjustment Amount
exceeds the Closing Adjustment Amount (the "Purchase Price"), and (ii) assume
and agree to pay, perform and otherwise discharge the Assumed Liabilities.
(b) At least five (5) Business Days prior to the Closing Date,
Seller shall provide to Buyer its good faith estimate of the Closing Adjustment
Amount, which estimate shall be certified in writing by an appropriate officer
of each Seller (the "Estimated Adjustment Amount").
(c) At the Closing, in furtherance but not in duplication of
Section 3.2(a) and without limiting the generality of Section 3.7, Buyer shall
pay to Seller cash in an aggregate amount equal to $508,463,000 plus the amount,
if any, by which the Estimated Adjustment Amount exceeds the Target Adjustment
Amount, or minus the amount, if any, by which the Target Adjustment Amount
exceeds the Estimated Adjustment Amount (the "Closing Payment"). The Closing
Payment shall be paid to Seller by Buyer at the Closing by wire transfer of
immediately available funds to the account of Seller designated by Seller at
least two (2) Business Days prior to the Closing Date.
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3.3 Adjustment to Purchase Price.
(a) Within sixty (60) days after the Closing Date, Seller shall
deliver to Buyer, at Seller's sole cost and expense, a statement setting forth
the Closing Adjustment Amount (the "Closing Statement"). Contemporaneously,
Seller shall deliver to Buyer a schedule setting forth a calculation of the
Purchase Price and the amount of any payment to be made, and by whom, pursuant
to Section 3.3(c).
(b) In the event that Buyer is in disagreement with the Closing
Statement, and in the event that the aggregate amount of such disagreements
exceeds $100,000, Buyer shall, within ten (10) Business Days after receipt of
the Closing Statement, notify Seller of such disagreements setting forth with
specificity the nature and amounts thereof. In the event that Buyer is in
disagreement with only a portion of the Closing Statement, Buyer or Seller, as
the case may be, shall pay all undisputed amounts in the manner set forth in
Section 3.3(c); and all other amounts shall be paid at such time as all
disagreements are resolved in accordance with this Section 3.3(b). If (i) the
aggregate amount of the disagreements referred to in this Section 3.3(b) does
not exceed $100,000 or (ii) Buyer fails to notify Seller of all disagreements
within the ten (10) Business Day period provided for herein, then the Closing
Statement, as delivered by Seller pursuant to Section 3.3(a), shall be final,
binding and conclusive on the Parties hereto. If Buyer is in disagreement with
the Closing Statement and notifies Seller within such ten (10) Business Day
period, then the Parties shall promptly attempt to resolve such disagreements by
negotiation. If the Parties are unable to resolve such disagreements within
thirty (30) days following such notice of disagreement by Buyer, the Parties
shall appoint an Independent Accounting Firm within forty-five (45) days
following such notice, which shall review the Closing Statement and determine
the Closing Adjustment Amount. Resolution of any disagreements shall be made by
the Independent Accounting Firm in a writing addressed to all Parties within
thirty (30) days following referral to it by the Parties of such disagreements
in accordance with this Agreement. The findings of such Independent Accounting
Firm shall be final, binding and conclusive on the Parties. All costs and fees
of the Independent Accounting Firm shall be borne equally by Buyer and Seller.
(c) No later than the fifth (5th) Business Day following the
determination of the Closing Adjustment Amount pursuant to Section 3.3(b),
either (i) Seller shall pay Buyer the amount, if any, by which the Closing
Payment exceeds the Purchase Price, or (ii) Buyer shall pay Seller the amount,
if any, by which the Purchase Price exceeds the Closing Payment, in either case,
together with simple interest accruing on such payment at the Prime Rate from
the Closing Date through and including the date of payment, by wire transfer of
immediately available funds to an account designated by the receiving Party. As
used herein, "Prime Rate" means, as of any date, the prime rate as published in
The Wall Street Journal on such date or, if not published on such date, on the
most recent date of publication.
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3.4 Tax Reporting and Allocation of Purchase Price. Buyer and Seller
shall use their respective reasonable best efforts to agree in good faith upon
an allocation among the Purchased Assets of the sum of the Purchase Price and
the Assumed Liabilities consistent with Section 1060 of the Code and the
Treasury Regulations thereunder within sixty (60) days after the Closing Date.
In the event that the Parties cannot agree on a mutually satisfactory allocation
within such sixty-day period, the Parties shall appoint an Independent
Accounting Firm that shall, at Seller's and Buyer's joint expense, determine the
appropriate allocation. The finding of such Independent Accounting Firm shall be
final, binding and conclusive on the Parties. After determination of the
allocation by agreement of the Parties or by binding determination of the
Independent Accounting Firm, Buyer and Seller shall file, for the tax year in
which the Closing occurs, Internal Revenue Service Form 8594, and all Tax
Returns, in accordance with such allocation. Buyer and Seller shall report the
transactions contemplated by this Agreement for United States federal Income Tax
and all other Tax purposes in a manner consistent with the allocation determined
pursuant to this Section 3.4. Buyer and Seller shall provide the other promptly
with any information required to complete Form 8594. Buyer and Seller shall
notify and provide the other with reasonable assistance in the event of an
examination, audit or other proceeding regarding the agreed-upon allocation of
the Purchase Price and the Assumed Liabilities.
3.5 Prorations.
(a) Buyer and Seller agree that, except as otherwise provided in
this Agreement, all of the items customarily prorated relating to the ownership,
lease, maintenance or operation of the Purchased Assets, including those listed
below (but not including Income Taxes), shall be prorated as of the Closing
Date, with Seller liable to the extent such items relate to any period prior to
the Closing Date, and Buyer liable to the extent such items relate to any period
on or after the Closing Date (measured in the same units used to compute the
item in question, otherwise measured by calendar days):
(i) Personal property, real estate and occupancy Taxes,
assessments and other charges, if any, on or with respect to the ownership,
lease, maintenance or operation of the Purchased Assets;
(ii) Rent, Taxes and all other items (including prepaid
services and goods not included in Inventory), in each case, payable by or to
Seller under any of the Seller's Agreements;
(iii) Any permit, license, registration, compliance
assurance fees or other fees with respect to any Transferable Permit;
(iv) Sewer rents and charges for water, telephone,
electricity and other utilities;
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(v) Insurance premiums paid on or with respect to the
ownership, lease, maintenance or operation of the Purchased Assets to the extent
payable under any policy or other arrangement included among the Seller's
Agreements; and
(vi) Prepaid operating and maintenance expenses.
(b) Seller or Buyer, as the case may be, shall promptly reimburse
the other Party that portion of any amount paid by such other Party to the
extent relating to the period for which Seller or Buyer, as the case may be, is
liable under Section 3.5(a), in each case, upon presentation of a statement
setting forth in reasonable detail the nature and amount of any such payment. In
connection with the prorations set forth in Section 3.5(a), if actual figures
are not available on the Closing Date, the proration shall be calculated based
upon the respective amounts accrued through the Closing Date or paid for the
most recent year or other appropriate period for which such amounts paid are
available. All prorated amounts shall be recalculated and paid to the
appropriate Party within sixty (60) days after the date that the previously
unavailable actual figures become available. Seller and Buyer shall furnish each
other with such documents and other records as may be reasonably requested in
order to confirm all proration calculations made pursuant to this Section 3.5.
Notwithstanding anything to the contrary herein, no proration shall be made
under this Section 3.5 with respect to (i) real property Tax refunds that are
Excluded Assets under Section 2.2(h) or (ii) Taxes payable by Buyer pursuant to
Section 6.6(a).
3.6 Deliveries by Seller. At the Closing, Seller shall deliver, or
cause to be delivered, the following to Buyer:
(a) One or more Limited Warranty Deeds, duly executed by Seller
and in recordable form;
(b) The Bills of Sale, duly executed by Seller;
(c) The Assignment and Assumption Agreements, duly executed by
Seller;
(d) The Interconnection Agreement, duly executed by Seller;
(e) The Power Purchase Agreement, duly executed by Seller;
(f) The Transition Services Agreement, duly executed by Seller;
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(g) The Access Agreement, duly executed by Seller and in
recordable form;
(h) Evidence, in form and substance reasonably satisfactory to
Buyer, demonstrating that Seller has obtained the Seller's Required Regulatory
Approvals set forth on Schedule 7.2(c);
(i) A FIRPTA Affidavit, duly executed by Seller;
(j) Copies, certified by the Secretary or Assistant Secretary of
Seller, of resolutions authorizing the execution and delivery of this Agreement,
each Additional Agreement to which Seller is a party and all of the other
agreements and instruments, in each case, to be executed and delivered by Seller
in connection herewith;
(k) A certificate of the Secretary or Assistant Secretary of
Seller identifying the name and title and bearing the signatures of the officers
of Seller authorized to execute and deliver this Agreement, each Additional
Agreement to which Seller is a party and the other agreements and instruments
contemplated hereby;
(l) All such other agreements, documents, instruments and
writings as shall, in the reasonable opinion of Buyer and its counsel, be
necessary to sell, assign, convey, transfer and deliver to Buyer the Purchased
Assets, in accordance with this Agreement and, where necessary or desirable, in
recordable form, provided that Seller shall not be required to prepare or obtain
any survey, abstract, title opinion or title insurance policy with respect to
the Real Property; and
(m) Such other agreements, documents, instruments and writings as
are required to be delivered by Seller at or prior to the Closing Date pursuant
to this Agreement or otherwise reasonably required in connection herewith.
3.7 Deliveries by Buyer. At the Closing, Buyer shall deliver, or cause
to be delivered, the following to Seller:
(a) The Closing Payment, by wire transfer of immediately
available funds in accordance with Seller's instructions to the account of
Seller designated by Seller at least two (2) Business Days prior to the Closing
Date;
(b) The Assignment and Assumption Agreements, including an
Assignment and Assumption Agreement with respect to all applicable obligations
under the IBEW Collective Bargaining Agreements as they relate to Transferred
Union Employees, duly executed by Buyer;
(c) The Interconnection Agreement, duly executed by Buyer;
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(d) The Power Purchase Agreement, duly executed by Buyer;
(e) The Transition Services Agreement, duly executed by Buyer;
(f) The Access Agreement, duly executed by Buyer;
(g) Evidence, in form and substance reasonably satisfactory to
Seller, demonstrating that Buyer has obtained the Buyer's Required Regulatory
Approvals set forth on Schedule 7.1(c);
(h) A copy, certified by the Secretary or Assistant Secretary of
Buyer, of resolutions authorizing the execution and delivery of this Agreement,
each Additional Agreement and all of the agreements and instruments, in each
case, to be executed and delivered by Buyer in connection herewith;
(i) A certificate of the Secretary or Assistant Secretary of
Buyer identifying the name and title and bearing the signatures of the officers
of Buyer authorized to execute and deliver this Agreement, each Additional
Agreement to which Buyer is a party and the other agreements contemplated
hereby;
(j) All such other permits, agreements, documents, instruments
and writings as shall, in the reasonable opinion of Seller and its counsel, be
necessary for Buyer to purchase and acquire the Purchased Assets, and to assume
the Assumed Liabilities, in each case, in accordance with this Agreement and,
where necessary or desirable, in recordable form; and
(k) Such other permits, agreements, documents, instruments and
writings as are required to be delivered by Buyer at or prior to the Closing
Date pursuant to this Agreement or otherwise reasonably required in connection
herewith.
3.8 Post-Closing Excluded Asset Deliveries. In the event that Seller
or Buyer, or any of their respective Representatives, shall determine after the
Closing that any Excluded Asset is in the possession of Buyer or any of its
Representatives, Buyer shall, or shall cause any such Representative to,
promptly, but in no event later than five (5) Business Days following such
determination, pay or deliver, or cause to be paid or delivered, to Seller such
Excluded Asset, at Buyer's sole cost and expense.
3.9 Relationship of this Agreement and Related Purchase Agreements.
The transactions contemplated by this Agreement, together with the transactions
contemplated by the Related Purchase Agreements, are intended by the Parties to
be consummated substantially simultaneously; and if any of the transactions
contemplated hereby or by any of the Related Purchase Agreements are not
consummated simultaneously on the Closing Date in accordance with the terms and
subject to the conditions set forth herein and therein, as applicable, then each
Party shall take, or cause to be taken, all actions, and do, or cause to be
done, all things, in each case, that are necessary to dissolve and invalidate
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all transactions contemplated hereby; provided, however, that if the failure to
consummate the transactions contemplated hereby or by the Related Purchase
Agreements results from a default or breach of a party under this Agreement or
any of the Related Purchase Agreements, then nothing in the foregoing shall
preclude or limit the rights or remedies of any Party in connection with such
default or breach. Notwithstanding any provision contained herein to the
contrary, if all conditions to the obligations of all parties to the ACE Related
Purchase Agreements to consummate the transactions contemplated thereby have
been satisfied or, to the extent permitted by applicable Law, waived, but, for
any reason, the transactions contemplated by this Agreement and the DP&L Related
Purchase Agreement cannot be consummated simultaneously therewith, then the
Parties shall, at Buyer's option and in its sole discretion, consummate the
transactions contemplated by the ACE Related Purchase Agreements; provided,
however, that nothing contained in this Section 3.9 shall be construed as
relieving Buyer of any of its obligations under this Agreement or the DP&L
Related Purchase Agreement, as set forth therein.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer as follows (all such
representations and warranties, except those set forth in Sections 4.1 and 4.2,
being made to the Knowledge of Seller):
4.1 Organization; Qualification. Seller is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware and the Commonwealth of Virginia and has all requisite corporate
power and authority to own, lease and operate its properties and to carry on its
business as it is now being conducted. Seller is duly qualified to do business
as a foreign corporation and is in good standing under the laws of each
jurisdiction in which its business as now being conducted requires it to be so
qualified, except to the extent that the failure to be so qualified would not,
individually or in the aggregate, have a Material Adverse Effect.
4.2 Authority. Seller has full corporate power and authority to
execute and deliver this Agreement and each Additional Agreement to which it is
a party and to consummate the transactions contemplated hereby and thereby. The
execution and delivery by Seller of this Agreement and each Additional Agreement
to which it is a party and the consummation by Seller of the transactions
contemplated hereby and thereby have been duly and validly authorized by all
necessary corporate action required on the part of Seller. This Agreement has
been duly and validly executed and delivered by Seller and, subject to the
receipt of Seller's Required Regulatory Approvals, this Agreement constitutes,
and upon the execution and delivery by Seller of each Additional Agreement to
which it is a party, each such Additional Agreement will constitute, the legal,
valid and binding obligation of Seller, enforceable against Seller in accordance
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with its terms, except that such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or
other similar Laws affecting or relating to enforcement of creditors' rights
generally and general principles of equity (regardless of whether enforcement is
considered in a proceeding at law or in equity).
4.3 Consents and Approvals; No Violation.
(a) Except as set forth on Schedule 4.3(a), subject to obtaining
or making all Seller's Required Regulatory Approvals, neither the execution and
delivery by Seller of this Agreement and the Additional Agreements to which it
is a party nor the consummation by Seller of the transactions contemplated
hereby or thereby will (i) conflict with or result in any breach of any
provision of the certificate or articles of incorporation or bylaws of Seller;
(ii) result in a default (or give rise to any right of termination, cancellation
or acceleration) under any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, material agreement or other instrument or obligation
to which Seller is a party or by which it, or any of the Purchased Assets, may
be bound, except for such defaults (or rights of termination, cancellation or
acceleration) as to which requisite consents, approvals or waivers have been, or
will be prior to the Closing obtained, or which would not, individually or in
the aggregate, have a Material Adverse Effect; or (iii) constitute violations of
any Law, order, judgment or decree applicable to Seller, which violations,
individually or in the aggregate, would have a Material Adverse Effect.
(b) Except for consents, approvals, filings and notices (i)
required under the HSR Act or (ii) set forth on Schedule 4.3(b) (the consents,
approvals, filings and notices referred to in clause (ii) of this sentence are
collectively referred to herein as the "Seller's Required Regulatory
Approvals"), no consent or approval of, filing with, or notice to, any
Governmental Authority is necessary for the execution and delivery by Seller of
this Agreement and the Additional Agreements to which it is a party or the
consummation by Seller of the transactions contemplated hereby or thereby, other
than (i) such consents, approvals, filings and notices which, if not obtained or
made, would not materially impair Seller's ability to perform its material
obligations under this Agreement or such Additional Agreements; (ii) such
consents, approvals, filings and notices which become applicable to Seller or
the Purchased Assets as a result of the status of Buyer (or any of its
Affiliates) or as a result of any other facts that specifically relate to the
business or activities in which Buyer (or any of its Affiliates) is or proposes
to be engaged; and (iii) such consents, approvals, filings and notices, the
failure of which to obtain or make would not, individually or in the aggregate,
have a Material Adverse Effect.
4.4 Insurance. Except as set forth on Schedule 4.4, all material
policies of fire, liability, workers' compensation and other forms of insurance
owned or held by, or on behalf of, Seller and insuring any Purchased Assets are
in full force and effect, all premiums with respect thereto covering all periods
up to and including the date hereof have been paid (other than retroactive
premiums which may be payable with respect to comprehensive general liability
and workers' compensation insurance policies), and no written notice of
cancellation or termination has been received by Seller with respect to any such
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policy which was not replaced on substantially similar terms prior to the date
of such cancellation or termination. Except as set forth on Schedule 4.4, as of
the date of this Agreement, Seller has not been refused any such insurance with
respect to any Purchased Assets.
4.5 Title and Related Matters. Except for Permitted Encumbrances,
Seller has good, valid and marketable title to the Real Property included in the
Purchased Assets and has good and valid title to all other Purchased Assets,
free and clear of all Encumbrances.
4.6 Environmental Matters. Except as set forth on Schedule 4.6:
(a) Seller holds, and is in compliance with, all Environmental
Permits that Seller requires in order to own, lease and operate the Purchased
Assets, and Seller is otherwise in compliance with applicable Environmental Laws
with respect to the ownership, lease, maintenance or operation of the Purchased
Assets, except for such failures to hold or comply with required Environmental
Permits, and such failures to be in compliance with applicable Environmental
Laws, as would not, individually or in the aggregate, materially impair the
ability of Buyer to operate the Purchased Assets after the Closing in the manner
operated by Seller on the date hereof;
(b) Seller has not received any written request for information,
or been notified in writing that it is a potentially responsible party under
CERCLA or any similar state law, with respect to any of the Sites, or any
written notice relating to any Governmental Authority's allegation or
investigation of any criminal violations by Seller of any Environmental Laws,
except for requests or notices with respect to Liabilities as would not,
individually or in the aggregate, materially impair the ability of Buyer to
operate the Purchased Assets after the Closing in the manner operated by Seller
on the date hereof; and
(c) Seller has not entered into or agreed to any consent decree
or order under any Environmental Law relating to the Purchased Assets, and
Seller is not subject to any outstanding judgment, decree or order relating to
compliance with any Environmental Law or to the investigation or cleanup of
Hazardous Substances under any Environmental Law relating to the Purchased
Assets, except for such decrees, orders and judgments as would not, individually
or in the aggregate, materially impair the ability of Buyer to operate the
Purchased Assets after the Closing in the manner operated by Seller on the date
hereof.
4.7 Labor Matters. Seller has previously delivered to Buyer true and
correct copies of all collective bargaining agreements to which Seller is a
party or is subject and which relate to its Employees. With respect to the
Employees, except as set forth on Schedule 4.7 and except for such matters as
would not, individually or in the aggregate, have a Material Adverse Effect, (a)
Seller is in compliance with all applicable Laws respecting employment and
employment practices, terms and conditions of employment and wages and hours;
(b) Seller has not received written notice of any unfair labor practice
complaint against it pending before the National Labor Relations Board; and (c)
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no material arbitration proceeding arising out of or under any collective
bargaining agreement is pending against Seller.
4.8 Benefit Plans; ERISA.
(a) Schedule 4.8(a) lists, as of the date of this Agreement, all
material deferred compensation, profit-sharing, retirement and pension plans,
and all material bonus, fringe benefit and other employee benefit plans,
maintained or with respect to which contributions are made by Seller for the
benefit of any Employee ("Benefit Plans"). True and complete copies of all such
Benefit Plans have been made available to Buyer.
(b) Except as set forth on Schedule 4.8(b) and except for such
matters as would not, individually or in the aggregate, have a Material Adverse
Effect: with respect to Employees, Seller has fulfilled its obligations under
the minimum funding requirements of Section 302 of ERISA, and Section 412 of the
Code, with respect to each of its "employee pension benefit plans" (as defined
in Section 3(2) of ERISA), and each such plan is in compliance with the
presently applicable provisions of ERISA and the Code; Seller has not incurred
any liability under Section 4062(b) of ERISA to the Pension Benefit Guaranty
Corporation in connection with any employee pension benefit plan relating to its
Employees which is subject to Title IV of ERISA; Seller shall as soon as
practicable after the date of this Agreement apply for a letter from the
Internal Revenue Service for each employee pension benefit plan determining that
such plan is exempt from United States federal income Tax under Sections 401(a)
and 501(a) of the Code; and no withdrawal liability has been incurred by or
asserted against Seller with respect to any employee pension benefit plan which
is a "multiemployer plan" (as defined in Section 3(37) of ERISA).
4.9 Real Property. Schedule 4.9 sets forth a description of the Real
Property. True and correct copies of all current surveys, abstracts, title
opinions and policies of title insurance currently in force, in each case, in
Seller's possession and relating to the Real Property, have been previously made
available to Buyer.
4.10 Condemnation. As of the date hereof, Seller has not received any
written notice of any pending or threatened proceedings or actions by any
Governmental Authority to condemn or take by power of eminent domain all or any
material part of the Purchased Assets.
4.11 Contracts and Leases.
(a) Schedule 4.11(a) sets forth a list of all written Seller's
Agreements, other than such contracts, licenses, agreements, arrangements and
personal property leases as (i) are set forth in any other Schedule, (ii)
constitute Excluded Assets or Excluded Liabilities, (iii) may be terminated
after the Closing by Buyer upon notice of no more than ninety (90) days, (iv)
involve future annual expenditures by Buyer after the Closing of $1,000,000 or
less, (v) are expected to expire or terminate prior to the Closing or (vi) are
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entered into by Seller after the date hereof consistent with the terms of
Section 6.1(iii).
(b) Except as set forth on Schedule 4.11(a), each Seller's
Agreement set forth on Schedule 4.11(a): (i) constitutes the valid and binding
obligation of Seller that is a party thereto and the other parties thereto and
(ii) will continue in full force and effect after the Closing in accordance with
its terms.
(c) Except as set forth on Schedule 4.11(a), there is not under
any Seller's Agreement set forth on Schedule 4.11(a) any default or event which,
with notice or lapse of time or both, would constitute a default, on the part of
Seller or any other party thereto, except such defaults as would not,
individually or in the aggregate, have a Material Adverse Effect.
4.12 Legal Proceedings. Except as set forth on Schedule 4.12, there
are no suits, actions or proceedings pending or, to the Knowledge of Seller,
threatened against Seller by or before any Governmental Authority, which would,
individually or in the aggregate, have a Material Adverse Effect or would
materially impair Seller's ability to consummate the transactions contemplated
hereby or by any Additional Agreement to which it is a party. Except as set
forth on Schedule 4.12, Seller is not subject to any judgment, order or decree
of any Governmental Authority which would, individually or in the aggregate,
have a Material Adverse Effect or would materially impair Seller's ability to
consummate the transactions contemplated hereby or by any Additional Agreement
to which it is a party.
4.13 Permits. Seller holds, and is in compliance with, all permits,
certificates, licenses and other authorizations of all Governmental Authorities
(collectively, "Seller's Permits") that Seller requires in order to own the
Purchased Assets, except for (a) Environmental Permits (which are governed by
Section 4.6) and (b) such failures to hold, or comply with, Seller's Permits as
would not, individually or in the aggregate, have a Material Adverse Effect.
4.14 Year 2000. Seller, with respect to all Computer Systems included
in the Purchased Assets, has plans to achieve Year 2000 Compliance with respect
to such Computer Systems and are using Commercially Reasonable Effects to
execute and carry out such plans. "Computer Systems" means data processing
hardware, software and firmware products (including embedded microcontrollers in
non-computer equipment). "Year 2000 Compliance" means that the Computer Systems
will correctly differentiate between years in different centuries that end in
the same two digits, and will accurately process date/time data (including
calculating, comparing and sequencing) from, into and between the twentieth and
twenty-first centuries.
4.15 Assets Used in Operation of the Wholly Owned Stations. Other than
Emission Allowances and the Excluded Assets, the Purchased Assets include all
material assets and properties that are used by Seller in the operation of the
Wholly Owned Stations as electrical generation stations as of the date hereof.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as follows (all such
representations and warranties, except those set forth in Sections 5.1 and 5.2,
being made to the Knowledge of Buyer):
5.1 Organization; Qualification. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as it is now being
conducted. Buyer is, or by the Closing will be, qualified to do business in the
State of New Jersey. Buyer has heretofore delivered to Seller true and correct
copies of its certificate or articles of incorporation and bylaws (or other
similar governing documents) as currently in effect.
5.2 Authority. Buyer has full corporate power and authority to execute
and deliver this Agreement and each Additional Agreement to which it is a party
and to consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement and each such Additional Agreement by
Buyer and the consummation by Buyer of the transactions contemplated hereby or
thereby have been duly and validly authorized by all necessary corporate action
required on the part of Buyer. This Agreement has been duly and validly executed
and delivered by Buyer and, subject to the receipt of Buyer's Required
Regulatory Approvals, this Agreement constitutes, and upon the execution and
delivery by Buyer of each Additional Agreement to which it is a party, each such
Additional Agreement will constitute, the legal, valid and binding obligation of
Buyer, enforceable against Buyer in accordance with its terms, except that such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other similar Laws
affecting or relating to enforcement of creditors' rights generally and general
principles of equity (regardless of whether enforcement is considered in a
proceeding at law or in equity).
5.3 Consents and Approvals; No Violation.
(a) Except as set forth on Schedule 5.3(a), and subject to
obtaining or making all Buyer's Required Regulatory Approvals, neither the
execution and delivery by Buyer of this Agreement or the Additional Agreements
to which it is a party nor the consummation by Buyer of the transactions
contemplated hereby or thereby will (i) conflict with or result in any breach of
any provision of the certificate or articles of incorporation or bylaws (or
other similar governing documents) of Buyer or any of its Subsidiaries; (ii)
result in a default (or give rise to any right of termination, cancellation or
acceleration) under any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, material agreement or other instrument or obligation
to which Buyer or any of its Subsidiaries is a party or by which Buyer, any such
Subsidiary or any of their respective properties and assets may be bound, except
for such defaults (or rights of termination, cancellation or acceleration) as to
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which requisite consents, approvals or waivers have been or will be prior to the
Closing obtained, or which would not, individually or in the aggregate,
materially impair Buyer's ability to consummate the transactions contemplated
hereby or by any Additional Agreement, or to perform its material obligations
hereunder or thereunder (a "Buyer Material Adverse Effect"); or (iii) constitute
violations of any Law, order, judgment or decree applicable to Buyer or any of
its Subsidiaries, which violations, individually or in the aggregate, would have
a Buyer Material Adverse Effect.
(b) Except for consents, approvals, filings and notices (i)
required under the HSR Act or (ii) set forth on Schedule 5.3(b) (the consents,
approvals, filings and notices referred to in clause (ii) of this sentence are
collectively referred to herein as the "Buyer's Required Regulatory Approvals"),
no consent or approval of, filing with, or notice to, any Governmental Authority
is necessary for the execution and delivery by Buyer of this Agreement and the
Additional Agreements to which it is a party or the consummation by Buyer of the
transactions contemplated hereby or thereby, other than such consents,
approvals, filings or notices, which, if not obtained or made, would not have a
Buyer Material Adverse Effect.
5.4 Buyer's Permits. Buyer holds, and is in compliance with, or on or
prior to the Closing Date will hold, and from and after the Closing Date will
comply with, all permits, certificates, licenses and other authorizations of all
Governmental Authorities that Buyer requires in order to own, lease, maintain
and operate the Wholly Owned Stations, including the Purchased Assets
(collectively, "Buyer's Permits").
5.5 Availability of Funds. Buyer has sufficient funds and lines of
credit available to it, or has received binding written commitments from
creditworthy financial institutions, true and correct copies of which have been
provided to Seller, to permit Buyer on the Closing Date to pay the Purchase
Price, all other amounts payable by Buyer hereunder or under any Additional
Agreement, and all fees and expenses incurred by Buyer in connection with the
transactions contemplated hereby and by the Additional Agreements, and to permit
Buyer to timely pay or perform all of its other obligations (including its
obligations pursuant to Article VIII) under this Agreement and the Additional
Agreements.
5.6 Financial Statements. Buyer has provided Seller with true and
correct copies of its balance sheet, income statement and statement of changes
in cash flows of Buyer for each of its last three completed fiscal years,
together with the related reports of its independent accountants,
PricewaterhouseCoopers LLP, and for its most recently completed fiscal quarter
("Buyer's Financial Statements"). Buyer's Financial Statements have been
prepared in accordance with United States generally accepted accounting
principles consistently applied and fairly reflect, in all material respects,
the financial position, results of operations and cash flow of Buyer at and for
the periods therein.
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5.7 Legal Proceedings. There are no suits, actions or proceedings
pending or threatened against Buyer by or before any Governmental Authority,
which would, individually or in the aggregate, have a Buyer Material Adverse
Effect or would materially impair such Buyer's ability to consummate the
transactions contemplated hereby or by any Additional Agreement to which it is a
party. Buyer is not subject to any judgments, orders or decrees of any
Governmental Authority which would, individually or in the aggregate, have a
Buyer Material Adverse Effect or would materially impair such Buyer's ability to
consummate the transactions contemplated hereby or by any Additional Agreement
to which it is a party.
5.8 Qualified Buyer. Buyer is qualified to obtain and, after the
Closing, retain all Buyer Permits, including Environmental Permits, necessary
for Buyer to own, lease, maintain and operate the Wholly Owned Stations,
including, from and after the Closing Date, the Purchased Assets.
5.9 Inspections. Buyer has, prior to the execution and delivery of
this Agreement, reviewed the environmental site assessments prepared for Seller
and set forth on Schedule 5.10.
5.10 WARN Act. Buyer does not intend to engage within sixty (60) days
of the Closing Date in a "plant closing" or "mass layoff" as such terms are
defined in the WARN Act.
5.11 Regulation as a Utility. Buyer is not subject to regulation as a
public utility or public service company (or similar designation) by any
Governmental Authority.
ARTICLE VI
COVENANTS OF THE PARTIES
6.1 Conduct of Business Relating to the Purchased Assets. Except as
set forth on Schedule 6.1, as contemplated by this Agreement or any Additional
Agreement or to the extent Buyer otherwise consents in writing, during the
period from the date of this Agreement to the Closing Date, Seller shall operate
the Purchased Assets in the ordinary course of business consistent with the past
practices of Seller and in accordance with Good Utility Practices, and shall use
all Commercially Reasonable Efforts to preserve intact the Purchased Assets, and
endeavor to preserve the goodwill and relationships with customers, vendors,
suppliers, employees and others having business dealings with it. Without
limiting the generality of the foregoing, and, except as contemplated in this
Agreement or as set forth on Schedule 6.1 or as required under applicable Law or
by any Governmental Authority, between the date hereof and the Closing Date,
without the prior written consent of Buyer, Seller shall not, with respect to
the Purchased Assets:
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(i) Sell, lease (as lessor), encumber, pledge, transfer or
otherwise dispose of, any Purchased Assets (except for Purchased Assets used,
consumed or replaced in the ordinary course of business consistent with past
practices of Seller or its Affiliates or with Good Utility Practices) other than
(a) to any Affiliate of Seller, in which event, Seller shall cause such
Affiliate to convey such Purchased Assets to Buyer at the Closing, or (b) to the
extent that any such action results in a Permitted Encumbrance of the type
described in clauses (c), (d) or (f) of Section 1.1(96);
(ii) Modify, amend or voluntarily terminate prior to the
expiration date any of the material Seller's Agreements, other than (a) in the
ordinary course of business, to the extent consistent with the past practices of
Seller or its Affiliates or with Good Utility Practices or (b) as may be
required in connection with transferring Seller's rights or obligations
thereunder to Buyer pursuant to this Agreement;
(iii) Enter into any contract, agreement, commitment or
arrangement relating to the Purchased Assets (other than Capital Expenditures)
that provides for future payments in any twelve-month period that individually
exceed $1,000,000 or in the aggregate exceed $5,000,000, unless it is terminable
by Seller without penalty or premium upon no more than ninety (90) days' notice;
(iv) Except as otherwise required by the terms of the IBEW
Collective Bargaining Agreements, Benefit Plans or applicable Law, (a)
materially increase the salaries or wages of Employees prior to the Closing, (b)
take any action prior to the Closing to effect a material change in the IBEW
Collective Bargaining Agreements or Benefit Plans or (c) take any action prior
to the Closing to materially increase the aggregate benefits payable to
Employees; or
(v) Except as otherwise provided herein, enter into any
written or oral contract, agreement, commitment or arrangement with respect to
any of the prohibited transactions set forth in the foregoing paragraphs (i)
through (iv).
6.2 Access to Information.
(a) Between the date of this Agreement and the Closing Date,
Seller shall: (i) give Buyer and its Representatives, during ordinary business
hours and upon reasonable notice, reasonable access to all books, records,
plans, offices and other facilities and properties in the possession of Seller
included in the Purchased Assets; (ii) furnish Buyer with such financial and
operating data and other information in the possession of Seller with respect to
the Purchased Assets as Buyer may from time to time reasonably request; and
(iii) furnish Buyer with all such other information in the possession of Seller
as shall be reasonably necessary to enable Buyer to verify the accuracy of the
representations and warranties of Seller contained in this Agreement; provided,
however, that (A) any such inspections and investigations shall be conducted in
such manner as not to interfere unreasonably with the operation of the Purchased
Assets, (B) Seller shall not be required to take any action which would
constitute a waiver of the attorney-client or other privilege, and (C) Seller
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need not supply Buyer with any information which Seller is under a legal or
contractual obligation not to supply. Notwithstanding anything herein to the
contrary, prior to the Closing Date, Buyer shall not have the right to perform
or conduct, or cause to be performed or conducted, any environmental sampling or
testing at, in, on or underneath any Wholly Owned Station, and Seller shall only
furnish or provide such access to Employee personnel records and files to the
extent permitted by applicable Law and to the extent that such records and files
pertain to the following: (i) skill and development training; (ii) seniority
histories; (iii) salary and benefit information; (iv) Occupational, Safety and
Health Administration reports; and (v) active medical restriction forms.
(b) All information furnished to or obtained by Buyer and Buyer's
Representatives pursuant to this Section 6.2 shall be Proprietary Information
and shall be kept confidential in accordance with the terms of the
Confidentiality Agreement. Nothing in this Section 6.2 is intended to or shall
be deemed to amend, supplement or otherwise modify the obligations of Buyer, its
Representatives or its Affiliates under the Confidentiality Agreement, all of
which remain in effect until termination of such agreement in accordance with
its terms.
(c) For a period of seven (7) years from and after the Closing
Date, each Party and its Representatives shall have reasonable access to all of
the books and records of the Purchased Assets, including all Transferred
Employee Records, in the possession of the other Party to the extent that such
access may reasonably be required by such Party in connection with the Assumed
Liabilities or the Excluded Liabilities, or other matters relating to or
affected by the operation of the Purchased Assets or the Excluded Assets. Such
access shall be afforded by the Party in possession of any such books and
records upon receipt of reasonable advance notice and during normal business
hours. The Party exercising this right of access shall be solely responsible for
any costs or expenses incurred by it or the other Party with respect to such
access pursuant to this Section 6.2(c). If the Party in possession of such books
and records shall desire to dispose of any books and records upon or prior to
the expiration of such seven-year period, such Party shall, prior to such
disposition, give the other Party a reasonable opportunity, at such other
Party's cost and expense, to segregate and remove such books and records as such
other Party may select.
(d) Buyer shall not, prior to the Closing Date, contact any
customer, vendor, supplier or employee of, or any other Person having business
dealings with, Seller or its Affiliates with respect to any aspect of the
Purchased Assets or the transactions contemplated hereby or by any Additional
Agreement, without the prior written consent of Seller, which consent shall not
be unreasonably withheld or delayed.
6.3 Public Statements. Except as required by applicable Law or by
applicable rules of any national securities exchange, in which event the Parties
shall consult with each other in advance, prior to the Closing Date, no press
release or other public announcement, statement or comment in response to any
inquiry relating to the transactions contemplated by this Agreement shall be
issued, made or permitted to be issued or made by any Party or its
Representatives without the prior written consent of the other Party.
6.4 Further Assurances.
(a) Subject to the terms and conditions of this Agreement, each
of the Parties hereto shall use its reasonable best efforts to take, or cause to
be taken, all actions, and to do, or cause to be done, all things necessary,
proper or advisable under applicable Laws to consummate and make effective the
purchase and sale of the Purchased Assets pursuant to this Agreement and the
assumption of the Assumed Liabilities, including using its reasonable best
efforts to ensure satisfaction of the conditions precedent to each Party's
obligations hereunder, including obtaining all necessary consents, approvals and
authorizations of, and making all required notices or filings with, third
parties required to be obtained or made in order to consummate the transactions
hereunder, including the transfer of the Transferable Permits to Buyer. Seller
shall cooperate with Buyer in its efforts to obtain all other Permits and
Environmental Permits necessary for Buyer to operate the Purchased Assets. Buyer
shall perform all conditions required of Buyer in connection with obtaining the
Seller's Required Regulatory Approvals. No Party shall, without prior written
consent of the other Party, take or fail to take any action which might
reasonably be expected to prevent or materially impede, interfere with or delay
the transactions contemplated by this Agreement.
(b) Without limiting the generality of Section 6.4(a):
(i) In the event that any Purchased Asset shall
not have been conveyed to Buyer at the Closing, Seller shall, subject to Section
6.4(b)(ii), use Commercially Reasonable Efforts after the Closing to convey such
asset to Buyer as promptly as practicable.
(ii) To the extent that Seller's rights under any
material Seller's Agreement may not be assigned without the consent, approval or
authorization of any third party which consent, approval or authorization has
not been obtained by the Closing Date, this Agreement shall not constitute an
agreement to assign such right if an attempted assignment would constitute a
breach of such Seller's Agreement or violate any applicable Law. If any consent,
approval or authorization to the assignment of any material Seller's Agreement
shall not be obtained, or if any attempted assignment would be ineffective or
would impair Buyer's rights and obligations under such Seller's Agreement, such
that Buyer would not acquire and assume the benefit and detriment of all such
rights and obligations, Seller, at its option and to the fullest extent
permitted by applicable Law and such Seller's Agreement, shall, after the
Closing Date, appoint Buyer to be Seller's agent with respect to such Seller's
Agreement, or, to the fullest extent permitted by applicable Law and such
Seller's Agreement, enter into such reasonable arrangements with Buyer or take
such other actions as are necessary to provide Buyer with the same or
substantially similar rights and obligations under such Seller's Agreement.
6.5 Consents and Approvals. Without limiting the generality of Section
6.4(a):
(a) As promptly as practicable after the date of this Agreement,
Seller and Buyer shall each file or cause to be filed with the Federal Trade
Commission and the United States Department of Justice all notifications
required to be filed under the HSR Act and the rules and regulations promulgated
thereunder, as amended from time to time, with respect to the transactions
contemplated hereby and by the Additional Agreements. The Parties shall use
their respective Commercially Reasonable Efforts to respond promptly to any
requests for additional information made by such agencies, and to cause the
applicable waiting period under the HSR Act to terminate or expire at the
earliest possible date after the date of filing. Buyer shall pay all filing fees
payable under the HSR Act but each Party shall bear its own costs and expenses
of the preparation of any filing.
(b) As promptly as practicable after the date of this Agreement,
Seller and Buyer shall take, or cause to be taken, all actions, and do, or cause
to be done, all things necessary, proper or advisable under applicable Laws to
obtain all required consents and approvals of the DPSC, the MPSC, the SEC and
all other Governmental Authorities, and make all other filings and give all
other notices required to be made prior to the Closing with respect to the
transactions contemplated hereby and by the Additional Agreements. In
furtherance of the foregoing, the Parties shall, prior to January 31, 2000,
agree upon a form of Power Purchase Agreement, substantially to the effect of
the term sheet set forth in Exhibit G hereto. The Parties shall respond promptly
to any requests for additional information made by such Persons, and use their
respective Commercially Reasonable Efforts to cause all such consents and
approvals to be obtained or waived at the earliest possible date after the date
of filing. Each Party will bear its own costs of the preparation of any such
filing or notice; provided, however, that Buyer shall bear all costs associated
with experts and consultants reasonably necessary for the preparation of any
such filing or notice or reasonably necessary to obtain such consents and
approvals as promptly as practicable.
(c) Seller and Buyer shall cooperate with each other and promptly
prepare and file notifications with, and request Tax clearances from, state and
local taxing authorities in jurisdictions in which a portion of the Purchase
Price may be required to be withheld or in which Buyer would otherwise be liable
for any Tax Liabilities of Seller pursuant to state or local Tax Law.
(d) Without limiting the generality of Section 6.5(b), as
promptly as practicable after the date hereof, Buyer shall make all filings
required by the Federal Power Act. Prior to filing any application with the
FERC, Buyer shall submit such application to Seller for review and comment and
shall incorporate into such application all revisions reasonably requested.
Buyer shall be solely responsible for the cost of preparing and filing such
application, as well as all petition(s) for rehearing and all reapplications. If
any filing is rejected by the FERC, Buyer shall petition the FERC for rehearing
or permission to re-submit an application with the FERC, provided that, in
either case, such action has been approved by Seller.
6.6 Certain Tax Matters.
(a) All transfer, sales and similar Taxes ("Transfer Taxes")
incurred in connection with this Agreement and the Additional Agreements, and
the transactions contemplated hereby and thereby (including (i) sales Tax on the
sale or purchase of the Purchased Assets imposed by Delaware and Maryland and
(ii) transfer Tax on conveyances of interests in real property imposed by
Delaware and Maryland) shall be borne by Buyer (and, to the extent paid by
Seller, Buyer shall reimburse Seller upon request); provided, however, that if,
pursuant to Section 6.6(e), the transactions contemplated by this Agreement are
effectuated as a Like-Kind Exchange, then Seller shall bear such Transfer Taxes
to the extent that they exceed the amount of Transfer Taxes that would have
otherwise been incurred had the transactions not been effectuated as a Like-Kind
Exchange (and all such amounts shall be computed on an after-Tax basis). Buyer,
at its expense, shall prepare and file, to the extent required by, or
permissible under, applicable Law, all necessary Tax Returns and other
documentation with respect to all such Transfer Taxes, and, if required by
applicable Law, Seller shall join in the execution of all such Tax Returns and
other documentation; provided, however, that prior to the Closing Date, to the
extent applicable, Buyer shall provide to Seller appropriate certificates of Tax
exemption from each applicable Governmental Authority.
(b) With respect to Taxes to be prorated in accordance with
Section 3.5, Buyer shall prepare and timely file all Tax Returns required to be
filed after the Closing Date with respect to the Purchased Assets, if any, and
shall duly and timely pay all such Taxes shown to be due on such Tax Returns.
Buyer's preparation of such Tax Returns shall be subject to Seller's approval,
which approval shall not be unreasonably withheld or delayed. Buyer shall make
each such Tax Return available for Seller's review and approval (which approval
shall not be unreasonably withheld or delayed) no later than fifteen (15)
Business Days prior to the due date for filing such Tax Return, it being
understood that Seller's failure to approve any such Tax Return shall not limit
Buyer's obligation to timely file such Tax Return and duly and timely pay all
Taxes shown to be due thereon.
(c) Buyer and Seller shall provide the other with such assistance
as may reasonably be requested by the other Party in connection with the
preparation of any Tax Return, audit or other examination, or any proceeding, by
or before any Governmental Authority relating to Liability for Taxes, and each
Party shall retain and provide the requesting Party with all books and records
or other information which may be relevant to such Tax Return, audit,
examination or proceeding. All books, records and information obtained pursuant
to this Section 6.6(c) or pursuant to any other Section that provides for the
sharing of books, records and information or review of any Tax Return or other
instrument relating to Taxes shall be kept confidential by the parties hereto in
accordance with the terms and conditions set forth in the Confidentiality
Agreement.
(d) In the event that a dispute arises between Seller and Buyer
regarding Taxes or any amount due under this Section 6.6, the affected Parties
shall attempt in good faith to resolve such dispute and any agreed-upon amount
shall be promptly paid to the appropriate Party. If any such dispute is not
resolved within thirty (30) days after notice thereof is given to any Party, the
affected Parties shall submit the dispute to an Independent Accounting Firm for
resolution, which resolution shall be final, binding and conclusive on such
Parties. Notwithstanding anything in this Agreement to the contrary, the fees
and expenses of the Independent Accounting Firm in resolving the dispute shall
be borne equally by Seller and Buyer. Any payment required to be made as a
result of the resolution by the Independent Accounting Firm of any such dispute
shall be made within five (5) Business Days after such resolution, together with
any interest determined by the Independent Accounting Firm to be appropriate.
(e) As reasonably requested by Seller, Buyer shall cooperate with
Seller in effectuating the transactions contemplated by this Agreement in such a
manner as to qualify for deferred like-kind exchange treatment under Section
1031 of the Code ("Like-Kind Exchange") (including the transfer of cash and
other property and the assignment of this Agreement to one or more qualified
intermediaries and the execution of appropriate documentation). In such event,
Seller shall be responsible, and shall indemnify Buyer for, any Transfer Taxes
incurred by Buyer as a result of effectuating such Like-Kind Exchange to the
extent that the amount of such Transfer Taxes exceeds the amount of Transfer
Taxes that the Buyer would have otherwise incurred had the transactions not been
effectuated as a Like-Kind Exchange (and all such amounts shall be computed on
an after-Tax basis). At Buyer's request, Seller shall promptly provide Buyer
copies of all documents prepared by Seller, including proposed agreements,
relating to the Like-Kind Exchange and shall give Buyer a reasonable opportunity
to promptly comment on such documents and agreements.
(f) To the extent that any Party receives a Tax refund or credit
with respect to a Tax that was paid or incurred by the other Party, such
receiving Party shall promptly pay the amount of such Tax refund or credit to
the other Party.
6.7 Advice of Changes. Prior to the Closing, each Party shall advise
the other in writing with respect to any matter arising after the date of this
Agreement of which that Party obtains Knowledge and which, if existing or
occurring on or prior to the date of this Agreement, would have been required to
be set forth in this Agreement, including any of the Schedules hereto. Seller
shall, from time to time prior to the Closing, promptly supplement or amend the
Schedules to this Agreement with respect to (a) any matter that existed as of
the date of this Agreement and should have been set forth or described in any of
the Schedules hereto and (b) any matter hereafter arising which, if existing as
of the date of this Agreement, would have been required to be set forth or
described in any of the Schedules hereto in order to make any representation or
warranty set forth in this Agreement true and correct as of such date; provided,
however, that, with respect to clause (a) above, any such supplemental or
amended disclosure shall not be deemed to have been disclosed as of the date of
this Agreement unless expressly consented to in writing by Buyer; and provided
further, that, with respect to clause (b) above, any such supplemental or
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amended disclosure shall, for purposes of this Agreement, including for purposes
of determining whether the conditions to Closing set forth in Article VII are
satisfied, be deemed to have been disclosed as of the date of this Agreement.
6.8 Employees.
(a) Buyer shall offer employment, effective as of the Closing
Date, to all employees of Seller employed at the Wholly Owned Stations as of the
Closing Date who are covered by any IBEW Collective Bargaining Agreement,
including those employees absent from active service due to illness or leave of
absence (the "Union Employees"), pursuant to and in accordance with the
applicable IBEW Collective Bargaining Agreement and applicable Law. Each Union
Employee who becomes employed by Buyer pursuant to this Section 6.8(a) is
referred to herein as a "Transferred Union Employee". Each Transferred Union
Employee shall receive on or before the date that is thirty (30) days after the
Closing Date a $4,500 lump sum signing bonus from Seller, less applicable
withholdings.
(b) Any Union Employee who refuses an offer of employment from
Buyer shall be treated by Seller as a terminated employee under the terms of the
IBEW Collective Bargaining Agreements.
(c) Schedule 6.8(c) sets forth the collective bargaining
agreements and amendments and supplements thereto to which Seller is a party
with the IBEW in connection with the Wholly Owned Stations (as so amended and
supplemented, "IBEW Collective Bargaining Agreements"). Transferred Union
Employees shall retain their seniority and receive full credit for service with
Seller and its Affiliates in connection with entitlement to vacation and all
other benefits and rights under the IBEW Collective Bargaining Agreements to
which seniority or years of service are applicable. On the Closing Date, Buyer
shall assume the IBEW Collective Bargaining Agreements for the duration of their
respective terms as they relate to Transferred Union Employees and other
employees to be employed by Buyer or its Affiliates at the Wholly Owned Stations
in positions covered by the IBEW Collective Bargaining Agreements, and Buyer
shall comply with all applicable obligations under the IBEW Collective
Bargaining Agreements. Buyer shall establish a pension plan and benefit programs
for the duration of the remaining term of the IBEW Collective Bargaining
Agreements which are substantially equivalent to Seller's plans and programs and
shall provide, with respect to each benefit and coverage thereunder, at least
the same level of benefits and coverage as Seller's plans and programs as of the
Closing Date, all in accordance with the IBEW Collective Bargaining Agreements.
Buyer shall recognize the IBEW as the collective bargaining agent for the
Transferred Employees in positions covered by the IBEW Collective Bargaining
Agreements.
(d) Buyer shall comply with the provisions of section 1016(b) of
the Delaware Electric Utility Restructuring Act of 1999, and similar Laws in
other jurisdictions, with respect to all Union Employees covered by the IBEW
Collective Bargaining Agreements.
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(e) Buyer may, but, except as set forth below, shall not be
required to, offer employment, effective as of the Closing Date, to certain
employees of Seller, to be agreed to by Buyer and Seller, who are (i) employed
at the Wholly Owned Stations (other than Union Employees) or (ii) corporate
support personnel identified by Seller within thirty (30) days after the date
hereof (collectively, the "Non-Union Employees" and, together with Union
Employees, "Employees"), provided that, Buyer shall hire its initial complement
of management personnel from among the Non-Union Employees. Within ninety (90)
days after the date hereof, Buyer shall notify Seller as to the identity of
those Non-Union Employees to whom it intends to offer employment, provided that,
during such period, Seller shall, upon reasonable notice and to the extent not
disruptive to the operation of the Purchased Assets, provide Buyer with
reasonable access to Non-Union Employees and, to the extent permitted by
applicable Law, their personnel records. Each Non-Union Employee who becomes
employed by Buyer pursuant to this Section 6.8(e) shall be referred to herein as
a "Transferred Non-Union Employee" and, together with Transferred Union
Employees, the "Transferred Employees." Each Transferred Non-Union Employee
shall receive on or before the date that is thirty (30) days after the Closing
Date a lump sum signing bonus from Seller equal to 10% of such Transferred
Non-Union Employee's base salary in the most recent calendar year ending prior
to the Closing, less applicable withholdings. Any offer of employment to a
Non-Union Employee that satisfies all of the following requirements is referred
to herein as a "Qualified Offer":
(i) Buyer shall offer such Non-Union Employee full-time
employment with Buyer; provided, however, that nothing herein shall prevent
Buyer from terminating any Transferred Non-Union Employee following the Closing
Date for cause within twelve (12) months after the Closing and for any reason
thereafter.
(ii) Buyer shall pay and provide such Transferred Non-Union
Employee annual compensation, bonus and other incentive opportunities (the
"Total Cash Compensation") at a rate equal to at least 85% of such Transferred
Non-Union Employee's Total Cash Compensation in the most recent calendar year
ending prior to the Closing.
(iii) The location of such Transferred Non-Union Employee's
workplace must be no more than 50 miles from the location of such Transferred
Non-Union Employee's workplace as of immediately prior to the Closing Date.
(iv) Such Transferred Non-Union Employee shall be eligible
to participate in such employee benefit plans, programs and arrangements of
Affiliates of Buyer as are offered to similarly situated non-union employees of
Buyer's operating Affiliates ("Buyer's Benefit Plans") and shall receive full
credit for service with Seller and their Affiliates for eligibility, vesting and
benefits entitlement purposes; provided, however, that such service shall not be
required to be recognized to the extent that such recognition would result in a
duplication of benefits. Buyer shall cause the Buyer's Benefit Plans to (x)
waive all limitations as to pre-existing condition exclusions and waiting
periods with respect to such Transferred Non-Union Employee under the employee
welfare benefit plans (as such term is defined in Section 3(1) of ERISA) of
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Buyer or its Affiliates ("Buyer's Welfare Plans") to the extent such limitations
or waiting periods that were in effect with respect to such Transferred
Non-Union Employees under Seller's employee welfare plans have been satisfied as
of the Closing Date, and (y) provide such Transferred Non-Union Employee with
credit for any co-payments and deductibles paid prior to the Closing Date in
satisfying any deductible or out-of-pocket requirements under the Buyer Welfare
Plans (on a pro rata basis in the event of a difference in plan years).
(f) With respect to each Transferred Employee's accrued benefit
(based on service and compensation as of the Closing Date) (the "Closing Date
Benefits"), Seller shall, effective as of the Closing Date, amend the Conectiv
Retirement Plan ("Seller's Pension Plan") to (i) recognize service with Buyer
for purposes of vesting the Closing Date Benefits in Seller's Pension Plan; (ii)
recognize service with Buyer toward eligibility for receipt of subsidized early
retirement and optional benefit forms with respect to the Closing Date Benefits
under Seller's Pension Plan; (iii) provide that retirement from Buyer's service
shall be deemed retirement from active employment with Seller for purposes of
eligibility for receipt of subsidized early retirement and optional benefit
forms with respect to the Closing Date Benefits under Seller's Pension Plan; and
(iv) provide that Closing Date Benefits cannot commence until the earlier of
such Transferred Employee's actual retirement from Buyer's employment or
attainment of age 65. The pension plan of Buyer ("Buyer's Pension Plan") shall
recognize all prior service with Seller for purposes of vesting and benefit
accrual for Transferred Union Employees (and, at Buyer's election, Transferred
Non-Union Employees), and may offset the Closing Date Benefits from benefit
accruals thereunder. Buyer and Seller shall provide each other with such records
and information as may be necessary or appropriate to carry out their respective
obligations under this Section 6.8(f) for the purposes of administration of
Buyer's Pension Plan and Seller's Pension Plan.
(g) As soon as practicable, and in any event within ninety (90)
days after the Closing Date, Buyer shall establish or make available to
Transferred Union Employees a defined contribution pension plan (or plans) and
trust (or trusts) intended to qualify under Sections 401(a) and 501(a) of the
Code (such plan or plans referred to as "Buyer's Savings Plan") in which all
Transferred Union Employees shall be eligible to participate as of the later of
the Closing Date or the Buyer's Savings Plan's Effective Date. Buyer's Savings
Plan shall provide for deferral options and employer matching contributions with
respect to the Transferred Union Employees who are participants in the Conectiv
Savings & Investment Plan and the Atlantic City Electric Co. Savings Plan B
(collectively, "Seller's Savings Plans") as of the Closing Date (such employees,
the "Transferred Savings Employees") that are no less favorable than those
provided as of immediately prior to the Closing Date to the Transferred Savings
Employees under the Seller's Savings Plans (including an opportunity to make up
for any lost deferrals and/or employer matching contributions that were
unavailable because of a delay between the Closing Date and the effective date
of Buyer's Savings Plan). Contributions to the Seller's Savings Plans with
respect to the Transferred Savings Employees shall cease effective as of the
Closing Date. Each Transferred Savings Employee shall be afforded the option of
transferring his or her account balance into the Buyer's Savings Plan; provided,
however, that if Seller is able to obtain a favorable ruling from the Internal
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Revenue Service to the effect that the consummation of the transactions
contemplated hereby shall constitute a sale of substantially all of the assets
used in a trade or business within the meaning of Section 401(k)(10) of the
Code, each Transferred Savings Employee shall be afforded the option of rolling
over his or her account balance into the Buyer's Savings Plan. Such transfers or
rollovers shall satisfy the requirements of Section 414(l) of the Code and
Section 208 of ERISA and shall be in the form of cash or other property, as
Seller and Buyer shall mutually agree prior to such transfer or rollover. Prior
to such transfer or rollover, Buyer will provide Seller with such documents and
other information as Seller shall reasonably request to assure itself that
Buyer's Savings Plan and the trust or trusts established pursuant thereto (i)
provide for voluntary participant after-tax contributions and (ii) contain
participant loan provisions and procedures necessary to effect the orderly
transfer of participant loan balances associated with the transfer or rollover.
In the event that a Transferred Savings Employee shall elect to leave his or her
loan balance in one of Seller's Savings Plans, Buyer shall cooperate with Seller
in providing that such outstanding loan balance shall be repaid through payroll
deductions from Buyer's payroll. Upon such transfer, Buyer's Savings Plan shall
assume all Liabilities whatsoever with respect to all amounts transferred from
Seller's Savings Plan to Buyer's Savings Plan in respect of the Transferred
Savings Employees and Seller, its Affiliates and Seller's Savings Plan shall be
relieved of all such Liabilities. Notwithstanding anything in this Section
6.8(g) to the contrary, no such transfer or rollover shall take place unless and
until Seller have received written evidence of the adoption of Buyer's Savings
Plan and the trust (or trusts) thereunder by Buyer and either (A) a copy of a
favorable determination letter issued by the Internal Revenue Service and
satisfactory to Seller's counsel with respect to Buyer's Savings Plan or (B) an
opinion, satisfactory to Seller's counsel, of Buyer's counsel to the effect that
the terms of Buyer's Savings Plan and its related trust or trusts qualify under
Sections 401(a) and 501(a) of the Code. Buyer and Seller shall provide each
other with such records and information as may be necessary or appropriate to
carry out their obligations under this Section 6.8(g) for the purposes of
administration of Buyer's Savings Plan, and they shall cooperate in the filing
of documents required by the transactions described herein.
(h) Buyer shall provide severance benefits as set forth on
Schedule 6.8(h) to any Transferred Non-Union Employee (i) who, within the
12-month period immediately following the Closing Date, is terminated by Buyer
or any of its Affiliates other than for cause (as defined on Schedule 6.8(h)) or
(ii) with respect to such Persons who have received and accepted Qualifying
Offers, whose terms and conditions of employment with Buyer or any of its
Affiliates are changed during the 12-month period immediately following the
Closing Date, such that such terms and conditions fail to satisfy all of the
requirements set forth in clauses (i) through (iv) of Section 6.8(e).
(i) Buyer shall provide notice of and the opportunity to purchase
continuation coverage as required by COBRA to any dependent or former dependent
of a Transferred Union Employee or Transferred Non-Union Employee who incurs a
"qualifying event" (as such term is defined in COBRA) on or after the Closing
Date, or who incurs a "qualifying event" prior to the Closing Date (other than a
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termination of employment or death of the employee) as to which notice is not
provided to Seller or Buyer until the Closing Date or thereafter.
(j) Seller shall be responsible, with respect to the Purchased
Assets, for performing and discharging all requirements under the WARN Act and
under applicable state and local Laws for the notification of Union Employees
and Non-Union Employees of any "employment loss" (within the meaning of the WARN
Act) which occurs prior to the Closing Date.
(k) Notwithstanding any contrary provision of this Section 6.8,
Buyer may, in its sole discretion and at its expense, choose to offer a
voluntary early retirement or employment termination benefit program to any
group of Union Employees or Non-Union Employees, and such program may be offered
either before or after the Closing. Seller shall (i) cooperate with Buyer in the
design, implementation and administration of such program; and (ii) provide
Buyer with such financial and demographic information as may be reasonably
necessary for such design, implementation or administration. Buyer acknowledges
and agrees that (x) any such program will require participating Employees to
sign a release or waiver as a condition of receipt of benefits thereunder; (y)
such release or waiver shall be designed and implemented in compliance with the
requirements for valid waivers contained in the Age Discrimination in Employment
Act, as amended, whether or not a participating Employee is protected by such
Act; and (z) such release or waiver shall release Seller, its directors,
officers and subsidiaries, to the same extent that Buyer is released thereby.
Buyer shall reimburse Seller for all reasonable out-of-pocket costs, fees and
expenses incurred at the direction of Buyer in the design, implementation or
administration of such program.
6.9 Risk of Loss.
(a) From the date hereof through the Closing Date, all risk of
loss or damage to the Tangible Personal Property included in the Purchased
Assets shall be borne by Seller, other than loss or damage caused by the
negligent acts or omissions of Buyer or any Buyer Representative, which loss or
damage shall be the responsibility of Buyer.
(b) Notwithstanding any provision hereof to the contrary, subject
to Section 9.1(g), if, before the Closing Date, all or any portion of the
Purchased Assets is (i) condemned or taken by eminent domain or is the subject
of a pending or threatened condemnation or taking which has not been
consummated, or (ii) materially damaged or destroyed by fire or other casualty,
Seller shall notify Buyer promptly in writing of such fact, and (x) in the case
of a condemnation or taking, Seller shall assign or pay, as the case may be, any
net proceeds thereof to Buyer at the Closing and (y) in the case of a fire or
other casualty, Seller shall either restore such damage or assign the insurance
proceeds therefor to Buyer at the Closing. Notwithstanding the foregoing, if
such condemnation, taking, damage or destruction results in a Material Adverse
Effect, Buyer and Seller shall negotiate to resolve the loss resulting from such
condemnation, taking, damage or destruction (and such negotiation shall include
the negotiation of a fair and equitable adjustment to the Purchase Price). If no
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such resolution can be agreed upon within ninety (90) days after Seller has
notified Buyer of such loss, then Buyer, on the one hand, or Seller, on the
other hand, may terminate this Agreement pursuant to Section 9.1(g).
6.10 Certain Tax-Exempt Bonds. Buyer acknowledges that Seller financed
the Purchased Assets set forth on Schedule 6.10 with the proceeds of tax-exempt
bonds and that the continuing tax-exempt status of such bonds depends on the
continuing qualifying use of such assets as property used to abate or control
water or atmospheric pollution or contamination by removing, altering, disposing
or storing pollutants, contaminants, water or heat within the meaning of Section
103(b)(4)(F) of the Code ("Qualifying Use"). In the event that the use of such
assets is changed to a non-Qualifying Use on or before the maturity date of such
bonds, as set forth on Schedule 6.10, Seller will be required to take certain
action to comply with their obligations to maintain the tax-exempt status of
those bonds. Accordingly, Buyer shall give Seller written notice of any change
in the use of such assets from their current Qualifying Use that occurs before
the maturity date of such bonds, as set forth on Schedule 6.10. Such notice
shall be given at least ten (10) Business Days prior to such change in use.
Notwithstanding the foregoing, Buyer shall not be deemed to have breached this
Section 6.10 if Buyer shall abandon the use of such assets. In the event that
Buyer sells or otherwise transfers such assets on or before the maturity date of
such bonds, as set forth on Schedule 6.10, Buyer shall give written notice to
Sellers at least ten (10) Business Days prior thereto and Buyer shall require
the subsequent owner of such assets to covenant and agree to comply with the
provisions of this Section 6.10. This covenant shall be included in any recorded
deed of transfer of such assets and, to the extent applicable, will be
considered a covenant that runs with the land.
6.11 PJM; MAAC. From and after the Closing Date, Buyer shall maintain
membership in good standing in PJM and MAAC, and shall submit to the governance
of the independent system operator established and administered under the PJM
Agreement.
6.12 Emission Allowances.
(a) Buyer and Seller shall take all necessary actions, including
executing any required forms or providing appropriate notices to Governmental
Authorities, in a timely fashion, to ensure that (i) Buyer will obtain all, or
the rights to all, (A) Emission Allowances that are to be transferred to it
pursuant to Section 2.1(f) and as set forth on Schedule 2.1(f), including the
right to receive such Emission Allowances that are to be allocated or issued by
a Governmental Authority in the future, and (B) Excess Emission Allowances that
are to be transferred to it pursuant to Section 2.1(g) and as set forth on
Schedule 2.1(g) and (ii) Seller will retain or obtain all, or the rights to all,
Emission Allowances that are defined as Excluded Assets pursuant to Section
2.2(p), including the right to receive such Emission Allowances that are to be
allocated or issued by a Governmental Authority in the future. Buyer and Seller
further acknowledge and agree that such actions may be required before, on or
after the Closing Date.
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(b) Notwithstanding anything in this Agreement to the contrary,
Seller shall provide additional Emissions Allowances to Buyer in connection with
Seller's operation of the Purchased Assets during the year of the Closing, or
Buyer shall transfer Emissions Allowances to Seller, as follows:
(i) SO2 Allowances.
(A) Seller shall provide SO2 Allowances to Buyer based
on the following formula: (1) Seller's emissions of SO2 (in tons) from the units
subject to Title IV of the Clean Air Act, 42 U.S.C. section 7401, et seq., for
the period of the year from and including January 1 of the year the transaction
closes up to, but not including, the Closing Date; minus (2) Seller's Prorated
SO2 Allowances. Seller's Prorated SO2 Allowances shall be determined by adding
all of the SO2 Allowances set forth on Schedule 6.12(b)(i) from and including
January 1 of the year in which the transaction closes up to, but not including,
the Closing Date. If the result of this calculation is less than zero, then
Buyer shall transfer to Seller SO2 Allowances equal to the absolute value of the
result of the calculation set forth in this subsection.
(B) If Schedule 6.12(b)(i) is not finalized as of the
date of the execution of this Agreement, Seller hereby covenants to act in good
faith to promptly prepare such schedule. Schedule 6.12(b)(i) shall be prepared
as follows. First, Seller shall develop a projection of its SO2 emissions for
each of the Purchased Assets for each calendar day for the year 2000. Second,
Seller shall take the SO2 Allowances set forth on Schedule 2.1(f) for each
Purchased Asset for the year 2000 and allocate the SO2 Allowances to each
calendar day for the year 2000 so that for each calendar day, the ratio of said
SO2 Allowances to the total number of SO2 Allowances for the Purchased Asset set
forth on Schedule 2.1(f) for the year 2000 shall equal the ratio of the
projected SO2 emissions for each calendar day to the total number of projected
SO2 emissions for the Purchased Asset for the year 2000. When completed,
Schedule 6.12(b)(i) shall be a day-by-day schedule of SO2 Allowances for each of
the Purchased Assets. The final form and substance of Schedule 6.12(b)(i) shall
be subject to the agreement of Seller and Buyer, acting in good faith,
consistent with the terms of this subsection.
(ii) NOx Emission Allowances.
(A) Seller shall provide NOx Emission Allowances to
Buyer based on the following formula: (1) Seller's emissions of NOx (in tons)
from the units subject to the NOx Budget Program of New Jersey for the period of
the year from and including May 1 of the year in which the transaction closes up
to, but not including, the Closing Date or September 30 of said year, whichever
comes first; minus (2) Seller's Prorated NOx Emission Allowances. Seller's
Prorated NOx Emission Allowances shall be determined by adding all of the NOx
Emission Allowances set forth on Schedule 6.12(b)(ii) from and including May 1
of the year the transaction closes up to, but not including, the Closing Date or
September 30 of the year the transaction closes, whichever comes first. If the
result of this calculation is less than zero, than Buyer shall transfer to
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Seller an amount of NOx Emission Allowances equal to the absolute value of the
result of the calculation set forth in this subsection.
(B) If Schedule 6.12(b)(ii) is not finalized as of the
date of the execution of this Agreement, Seller hereby covenants to act in good
faith to promptly prepare such schedule after the relevant Governmental
Authority finalizes the allocation of NOx Emission Allowances for the year 2000.
Schedule 6.12(b)(ii) shall be prepared as follows. First, Seller shall develop a
projection of its NOx emissions for each of the Purchased Assets for each
calendar day from May 1, 2000 to and including September 30, 2000. Second,
Seller shall take the NOx Emission Allowances set forth on Schedule 2.1(f) for
each Purchased Asset for the year 2000 and allocate the NOx Emission Allowances
to each calendar day for the period May 1, 2000 to and including September 30,
2000, so that for each such calendar day, the ratio of said NOx Emission
Allowances to the total number of NOx Emission Allowances for the Purchased
Asset set forth on Schedule 2.1(f) for the year 2000 shall equal the ratio of
the projected NOx emissions for each such calendar day to the total number of
projected NOx emissions for the Purchased Asset for the period May 1, 2000 to
and including September 30, 2000. When completed, Schedule 6.12(b)(ii) shall be
a day-by-day schedule of NOx Emission Allowances for each of the Purchased
Assets. The final form and substance of Schedule 6.12(b)(ii) shall be subject to
the agreement of Seller and Buyer, acting in good faith, consistent with the
terms of this subsection.
(iii) If it appears that the Closing of the transactions
contemplated by this Agreement will not occur until after December 31, 2000,
Seller shall prepare schedules that will accomplish the same purpose as
Schedules 6.12(b)(i) and 6.12(b)(ii) for calendar year 2001. Such schedules
shall be prepared consistent with the terms of Section 6.12(b).
(c) Buyer shall deliver to Seller, within thirty (30) days after
Closing, a statement indicating the amount of SO2 Allowances and NOx Emission
Allowances it is owed, or that it owes Seller, in accordance with the formulas
set forth in subsection (b) (the "Statement"). The Statement shall be based on
verified CEMs data for SO2 and NOx and shall include sufficient information to
be evaluated by Seller. In the event that Seller is in disagreement with the
Statement, Seller shall, within ten (10) calendar days after receipt of the
Statement, notify Buyer of such disagreement setting forth with specificity the
nature of such disagreement. If Seller fails to notify Buyer of all
disagreements within the ten (10) calendar days provided for herein, then the
Statement, as delivered by Buyer pursuant to Section 6.12(c), shall be final,
binding and conclusive on the Parties hereto and the Party owing SO2 Allowances
and/or NOx Emission Allowances to the other Party shall transfer such SO2
Allowances and/or NOx Emission Allowances (or make a payment in lieu of
transferring such Emissions Allowances in accordance with Section 6.12(d)). If
Seller is in disagreement with the Statement and notifies Buyer within such ten
(10) calendar day period, then the Parties shall promptly attempt to resolve
such disagreement by negotiation. If the Parties are unable to resolve such
disagreements within fifteen (15) calendar days following such notice of
disagreement, the Parties shall appoint an Independent Accounting Firm within
thirty (30) calendar days following such notice, which shall review the
Statement and any additional information related to the Statement submitted by
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either of the Parties and shall determine the amount of SO2 Allowances and/or
NOx Emission Allowances owed by either of the Parties. Resolution of any such
disagreements shall be made by the Independent Accounting Firm in a writing
addressed to all Parties within thirty (30) calendar days following referral to
it by the Parties of such disagreements in accordance with this Agreement. The
findings of such Independent Accounting Firm shall be final, binding and
conclusive on the Parties. All costs and fees of the Independent Accounting Firm
shall be borne by Buyer and Seller equally.
(d) The Party or Parties owing SO2 Allowances and/or NOx Emission
Allowances calculated pursuant to this Section shall transfer the number of SO2
Allowances and/or NOx Emission Allowances owed to the other Party by no later
than thirty (30) days prior to the dates by which Buyer must have sufficient SO2
Allowances and/or NOx Emission Allowances in its compliance accounts in order to
comply with Title IV of the federal Clean Air Act or the NOx Budget Programs of
Delaware and Maryland. The NOx Emission Allowances and SO2 Allowances
transferred hereunder shall have a vintage year that is the same as the year the
transaction closes or, solely in the case of SO2 Allowances, a prior vintage
year, unless the Party that is owed such Emission Allowances waives such
requirement in writing. If the Party owing SO2 Allowances and/or NOx Emission
Allowances does not or cannot meet this provision, the other Party shall be
entitled to (i) acquire SO2 Allowances and/or NOx Emission Allowances equal to
the number of additional SO2 Allowances and/or NOx Emission Allowances
calculated pursuant to this Section and (ii) seek compensation from the owing
Party for the cost of acquiring such additional SO2 Allowances and/or NOx
Emission Allowances, respectively ("Allowance Cost"), which shall be calculated
based on the market price for such allowances as of the date such allowances are
purchased; provided, that a Party that is owed SO2 Allowances and/or NOx
Emission Allowances and has the right to purchase such Emission Allowances
pursuant to this Section must purchase such Emission Allowances no later than
180 days after the date(s) by which the owing Party was to provide such Emission
Allowances to the owed Party, as set forth in the first sentence of this
subsection, in order to be entitled to receive compensation under this
subsection. The Party that has the right to purchase SO2 Allowances and/or NOx
Emission Allowances pursuant to this Section shall also be entitled to receive
simple interest at the Prime Rate on the Allowance Cost, which shall accrue from
the date(s) payment is due as provided in the following sentence through and
including the date of payment by the owing Party. Payment shall be made no later
than thirty (30) days after the owing Party receives an invoice from the owed
Party for compensation, which invoice shall specify the market price of the
Emissions Allowances acquired by the owed Party; provided, that the owing Party
shall not be obligated to make such payment if it disputes the amount of
compensation claimed by the owed Party within fifteen (15) days after receipt of
the invoice from the owed Party. Any disputes concerning the compensation owed
to Buyer under Section 6.12(d) shall be resolved through good faith negotiations
between the Parties. Buyer and Seller shall be obligated to act reasonably to
mitigate the Allowance Cost as set forth herein. Furthermore, notwithstanding
anything to the contrary herein, Seller shall have no obligation to indemnify
Buyer for any penalties or fines or other costs or expenses related to Buyer's
failure to comply with the legal requirements of Title IV of the Clean Air Act
or the NOx Budget Program of New Jersey.
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6.13 Insurance Claims. Seller shall use its Commercially Reasonable
Efforts to assist Buyer in making any claims relating to pre-Closing periods
against any insurance policies of Seller that may provide coverage related to
the Assumed Liabilities.
6.14 Reimbursement of Certain Metering Expenses. From and after the
Closing, Buyer shall (i) reimburse Seller for reasonable amounts expended by
Seller prior to the later to occur of December 31, 2000 and the date that is
ninety (90) days after the Closing Date in connection with the installation,
renovation or improvement of revenue quality meters and related equipment up to
an aggregate amount of $1,500,000; and (ii) cooperate with Seller as fully as
reasonably possible in order to facilitate Seller's installation, renovation or
improvement of revenue quality meters and related equipment to the extent that
such installation, renovation or improvement requires that Seller gain access to
the Real Property after the Closing Date.
ARTICLE VII
CONDITIONS
7.1 Conditions to Obligation of Buyer. The obligation of Buyer to
effect the transactions contemplated by this Agreement shall be subject to the
satisfaction (or the waiver, to the extent permitted by applicable Law, by
Buyer) at or prior to the Closing of the following conditions:
(a) The waiting period under the HSR Act applicable to the
consummation of the transactions contemplated hereby shall have expired or been
terminated;
(b) No preliminary or permanent injunction, order or decree by
any Governmental Authority which prevents the consummation of the transactions
contemplated hereby or by the Additional Agreements shall have been issued and
remain in effect (Buyer agreeing to use its reasonable best efforts to have any
such injunction, order or decree lifted), and no applicable Law shall be in
effect which prohibits the consummation of the transactions contemplated hereby
or thereby;
(c) Buyer shall have obtained the Buyer's Required Regulatory
Approvals set forth on Schedule 7.1(c), in form and substance reasonably
satisfactory to Buyer (including any adverse conditions therein); and such
Buyer's Required Regulatory Approvals shall be final and nonappealable;
(d) Seller shall have in all material respects performed and
complied with the covenants and agreements contained in this Agreement which are
required to be performed and complied with by Seller on or prior to the Closing
Date;
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(e) (i) The representations and warranties of Seller set forth in
this Agreement that are qualified by reference to Material Adverse Effect shall
be true and correct in all respects and (ii) the representations and warranties
of Seller set forth in this Agreement that are not so qualified shall be true
and correct in substantially all respects, in each case, as of the Closing Date
as though made at and as of the Closing Date (other than representations and
warranties that are made as of a specific date which shall have been true and
correct as of such date);
(f) Buyer shall have received a certificate from an authorized
officer of Seller, dated the Closing Date, to the effect that, to such officer's
Knowledge, the conditions set forth in Sections 7.1(d) and (e) have been
satisfied by Seller;
(g) Buyer shall have received an opinion from Seller's counsel,
which counsel shall be reasonably acceptable to Buyer, dated the Closing Date,
substantially in the form of Exhibit I hereto;
(h) There shall not have occurred any Material Adverse Effect
during the period commencing on the date hereof and ending at the Closing;
(i) Buyer shall be able to obtain at Closing an owner's policy or
policies of title insurance issued on the form customarily used in Delaware and
Maryland as applicable, insuring title to the Real Property in an amount equal
to the Purchase Price relating to such Real Property, or such lesser amount as
Buyer elects, with exceptions only for Permitted Encumbrances, but without the
so-called "standard" exceptions for (x) the rights of parties in possession, (y)
unfiled mechanics' and materialmens' liens and (z) matters arising after the
dates of the Title Commitments and with the creditors' rights exclusion to
coverage deleted, without Buyer being obligated to pay more than $50,000 in
aggregate additional premium in order for the issuer to delete or insure over
title exceptions which are not Permitted Encumbrances. For purposes hereof
"additional premium" means premium in excess of the amount that the title
insurer has otherwise agreed to accept for issuing the policies of title
insurance to Buyer in the requested amount;
(j) Buyer shall have obtained an easement or comparable access
rights allowing Buyer reasonable access to the rail line serving the Vienna
Station;
(k) Seller shall have (i) completed in all material respects the
overhaul of the high pressure section of the steam turbine of Unit 8 at the
Vienna Station and (ii) inspected and, to the extent consistent with Seller's
past practice, completed in all material respects the overhaul of the low
pressure section of the steam turbine of Unit 8 at the Vienna Station, in each
case, in a manner consistent with Seller's past practice; provided, however,
that, if prior to November 30, 2000 all conditions to the obligations of all
Parties to this Agreement to consummate the transactions contemplated hereby
have been satisfied or, to the extent permitted by applicable Law, waived, other
than the condition set forth in this Section 7.1(k), then the condition set
forth in this Section 7.1(k) shall be deemed satisfied if such overhaul can
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reasonably be completed after the Closing by Buyer, at Seller's expense, on or
before November 30, 2000; it being understood that after the Closing Buyer shall
complete such overhaul in a manner consistent with Seller's past practice;
(l) Seller shall have completed in all material respects the
testing, start-up and commissioning of the Unit 3 and Unit 4 SNCR at the Indian
River Station;
(m) Seller shall have completed in all material respects the
repair of the generator, transformer and related equipment forming a part of
Unit 3 at the Indian River Station such that: (i) such repair complies in all
material respects with Good Utility Practices; and (ii) upon completion of such
repair, Unit 3 at the Indian River Station shall be capable of meeting its net
capacity of 165 MW as demonstrated for PJM's summer and winter capacity tests
prior to the effective date of the Power Purchase Agreement;
(n) Seller shall have obtained an operating permit from DNREC for
Units 1 and 2 at the Indian River Station authorizing the use of low NOx burner
technology and over fire air; and
(o) Subject to the last sentence of Section 3.9, the Related
Purchase Agreements shall be in full force and effect and the valid and binding
obligation of each party thereto (other than Buyer); and all conditions to the
obligations of all parties to the Related Purchase Agreements to consummate the
transactions contemplated thereby shall have been satisfied or, to the extent
permitted by applicable Law, waived.
7.2 Conditions to Obligation of Seller. The obligation of Seller to
effect the transactions contemplated by this Agreement shall be subject to the
satisfaction (or the waiver, to the extent permitted by applicable Law, by
Seller) at or prior to the Closing of the following conditions:
(a) The waiting period under the HSR Act applicable to the
consummation of the transactions contemplated hereby shall have expired or been
terminated;
(b) No preliminary or permanent injunction or other order or
decree by any Governmental Authority which prevents the consummation of the
transactions contemplated hereby or by the Additional Agreements shall have been
issued and remain in effect (Seller agreeing to use its reasonable best efforts
to have any such injunction, order or decree lifted), and no applicable Law
shall be in effect which prohibits the consummation of the transactions
contemplated hereby or thereby;
(c) Seller shall have obtained the Seller's Required Regulatory
Approvals set forth on Schedule 7.2(c), in form and substance reasonably
satisfactory to Seller (including any adverse conditions therein) and all
conditions to effectiveness prescribed therein or otherwise by Law shall have
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been satisfied in all material respects; and such Seller's Required Regulatory
Approvals shall be final and nonappealable;
(d) Buyer shall have in all material respects performed and
complied with the covenants and agreements contained in this Agreement which are
required to be performed and complied with by Buyer on or prior to the Closing
Date;
(e) (i) The representations and warranties of Buyer set forth in
this Agreement that are qualified by reference to Buyer Material Adverse Effect
shall be true and correct in all respects and (ii) the representations and
warranties of Buyer that are not so qualified shall be true and correct in
substantially all respects, in each case, as of the Closing Date as though made
at and as of the Closing Date (other than representations and warranties that
are made as of a specific date which shall have been true and correct as of such
date);
(f) Seller shall have received a certificate from an authorized
officer of each Buyer, dated the Closing Date, to the effect that, to such
officer's Knowledge, the conditions set forth in Sections 7.2(d) and (e) have
been satisfied by Buyer;
(g) Seller shall have received an opinion from Buyer's counsel,
which counsel shall be reasonably acceptable to Seller, dated the Closing Date,
substantially in the form of Exhibit J hereto; and
(h) Subject to the last sentence of Section 3.9, the Related
Purchase Agreements shall be in full force and effect and the valid and binding
obligation of each party thereto (other than Seller); and all conditions to the
obligations of all parties to the Related Purchase Agreements to consummate the
transactions contemplated thereby shall have been satisfied or, to the extent
permitted by applicable Law, waived.
ARTICLE VIII
INDEMNIFICATION AND ARBITRATION
8.1 Indemnification.
(a) From and after the Closing Date, Buyer shall indemnify,
defend and hold harmless Seller and its Representatives (each, a "Seller's
Indemnitee"), from and against any and all claims, demands, suits, losses,
liabilities, penalties, damages, obligations, payments, costs and expenses
(including reasonable attorneys' fees and expenses in connection therewith)
(each, an "Indemnifiable Loss"), asserted against or suffered by any Seller's
Indemnitee relating to, resulting from or arising out of (i) any breach by Buyer
of any covenant or agreement of Buyer contained in this Agreement, (ii) the
Assumed Liabilities, (iii) any Inspection, or (iv) any Third-Party Claim
against any Seller's Indemnitee in connection with Buyer's ownership, lease,
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maintenance or operation of any of the Purchased Assets on or after the Closing
Date (other than to the extent such Third-Party Claim constitutes an Excluded
Liability); provided, however, that Buyer shall be liable to Seller pursuant to
clause (i) of Section 8.1(a) only for Indemnifiable Losses for which any
Seller's Indemnitee gives written notice to Buyer (setting forth with reasonable
specificity the nature and amount of the Indemnifiable Loss) during the period
for which such covenants or agreements survive the Closing in accordance with
Section 10.6.
(b) From and after the Closing, Seller shall indemnify, defend
and hold harmless Buyer and its Representatives (each, a "Buyer's Indemnitee"
and, together with Seller's Indemnitees, an "Indemnitee"), from and against any
and all Indemnifiable Losses asserted against or suffered by any Buyer's
Indemnitee relating to, resulting from or arising out of (i) any breach by
Seller of any covenant or agreement of Seller set forth in this Agreement or
(ii) the Excluded Liabilities; provided, however, that Seller shall be liable
pursuant to clause (i) of this Section 8.1(b) only for Indemnifiable Losses for
which any Buyer's Indemnitee gives written notice to Seller (setting forth with
reasonable specificity the nature and amount of the Indemnifiable Loss) during
the period for which such covenants or agreements survive the Closing in
accordance with Section 10.6.
(c) In furtherance, and not in limitation, of the provisions set
forth in Section 8.1(a), Buyer, for itself and on behalf of its Representatives,
hereby irrevocably releases, holds harmless and forever discharges Seller from
any and all Indemnifiable Losses of any kind or character, whether known or
unknown, contingent or accrued, arising under or relating to Environmental Laws,
or relating to any claim in respect of any Environmental Condition or Hazardous
Substance, whether based on common law or Environmental Laws relating to the
Purchased Assets, other than such Liabilities which have been retained by Seller
hereunder (collectively, "Environmental Claims"). In furtherance of the
foregoing, Buyer, for itself and on behalf of its Representatives, hereby
irrevocably waives any and all rights and benefits with respect to such
Environmental Claims that it now has, or in the future may have conferred upon
it by virtue of any Law or common law principle, which provides that a general
release does not extend to claims which a party does not know or suspect to
exist in its favor at the time of executing the release, if knowledge of such
claims would have materially affected such party's settlement with the obligor.
In this connection, Buyer hereby acknowledges that it is aware that factual
matters now unknown to it may have given, or hereafter may give, rise to
Environmental Claims that are presently unknown, unanticipated and unsuspected,
and Buyer further agrees that this release set forth in this Section 8.1(c) has
been negotiated and agreed upon in light of that awareness, and Buyer, for
itself and on behalf of its Representatives, nevertheless hereby intends
irrevocably to release, hold harmless and forever discharge Seller from all such
Environmental Claims.
(d) The rights and remedies of Seller and Buyer set forth in this
Article VIII are exclusive and in lieu of any and all other rights and remedies
which Seller and Buyer may have under this Agreement, under applicable Law,
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whether at common law or in equity, including for declaratory, injunctive or
monetary relief, in each case, with respect to any Indemnifiable Loss.
(e) Notwithstanding anything to the contrary herein, no Person
(including an Indemnitee) shall be entitled to recover from any other Person
(including any Party hereto required to provide indemnification under this
Agreement (an "Indemnifying Party")) any amount in excess of the actual
compensatory damages, court costs and reasonable attorneys' fees suffered by
such Party. Buyer and Seller hereby irrevocably waive any right to recover
punitive, special, exemplary and consequential damages arising in connection
with or with respect to this Agreement (other than with respect to
indemnification for a Third-Party Claim).
(f) Any Indemnitee shall use Commercially Reasonable Efforts to
mitigate all losses, damages and the like relating to a claim under the
indemnification provisions in this Section 8.1, including availing itself of any
defenses, limitations, rights of contribution, claims against third Persons and
other rights at law or equity. For purposes of this Section 8.1(f), the
Indemnitee's Commercially Reasonable Efforts shall include the reasonable
expenditure of money to mitigate or otherwise reduce or eliminate any loss or
expenses for which indemnification would otherwise be due, and, in addition to
its other obligations hereunder, the Indemnifying Party shall reimburse the
Indemnitee for the Indemnitee's reasonable expenditures in undertaking the
mitigation.
8.2 Defense of Claims.
(a) If any Indemnitee receives notice of the assertion of any
claim or of the commencement of any suit, action or proceeding made or brought
by any Person who is not an Indemnitee (a "Third-Party Claim") with respect to
which indemnification is to be sought from an Indemnifying Party, the Indemnitee
shall give such Indemnifying Party reasonably prompt written notice thereof, but
in no event later than ten (10) Business Days after the Indemnitee's receipt of
notice of such Third-Party Claim. Such notice shall describe the nature of the
Third-Party Claim in reasonable detail and shall indicate the estimated amount,
if practicable, of the Indemnifiable Loss that has been or may be incurred by
the Indemnitee. The Indemnifying Party shall have the right to participate in
or, by giving written notice to the Indemnitee, to elect to assume the defense
of any Third-Party Claim at such Indemnifying Party's expense and by such
Indemnifying Party's own counsel. If an Indemnifying Party elects not to assume
the defense of any Third-Party Claim, the Indemnitee may defend, compromise or
settle such Third-Party Claim with counsel selected by it, provided that,
without the prior written consent of the Indemnifying Party, the Indemnitee
shall not agree to the entry of any judgment with respect to, or any compromise
or settlement of, any Third-Party Claim, which judgment, compromise or
settlement does not include the unconditional release of the Indemnifying Party.
(b) If, within twenty (20) Business Days after an Indemnitee
gives written notice to the Indemnifying Party of any Third-Party Claim, such
Indemnitee receives written notice from the Indemnifying Party that such
Indemnifying Party has elected to assume the defense of such Third-Party Claim
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as provided in Section 8.2(a), then the Indemnifying Party shall not be liable
for any costs, fees or expenses subsequently incurred by the Indemnitee in
connection with the defense, compromise or settlement thereof.
(c) Subject to Section 8.3, any claim by an Indemnitee on account
of an Indemnifiable Loss which does not constitute a Third-Party Claim (a
"Direct Claim") shall be asserted by giving the Indemnifying Party reasonably
prompt written notice thereof, in no event later than twenty (20) Business Days
after the Indemnitee becomes aware of such Direct Claim, stating the nature of
such claim in reasonable detail and indicating the estimated amount, if
practicable, of such Indemnifiable Loss and the Indemnifying Party shall have a
period of twenty (20) Business Days within which to respond to such Direct
Claim. If the Indemnifying Party fails to respond during such twenty (20)
Business Day period, the Indemnifying Party shall be deemed to have accepted
such claim and, subject to this Article VIII, shall promptly reimburse the
Indemnitee for the Indemnifiable Losses set forth in the Indemnitee's notice.
(d) A failure to give timely notice as provided in this Section
8.2 shall not affect the rights or obligations of any Party hereunder except to
the extent that, as a result of such failure, the Party which was entitled to
receive such notice was actually prejudiced as a result of such failure.
8.3 Arbitration.
(a) Notwithstanding any provision hereof to the contrary, in the
event of any dispute between Seller and Buyer arising after the Closing (whether
relating to facts, events or circumstances occurring or existing prior to, on or
after the Closing Date) and relating to or arising out of any provision of this
Agreement (other than disputes arising under Section 2.3, 2.4, 3.2, 3.3, 3.4,
6.6 or 8.1(a)(ii)), the Party asserting such dispute shall give written notice
to the other of the fact that a dispute has arisen pursuant hereto. Such notice
shall include (i) a statement setting forth in reasonable detail the facts,
events, circumstances, evidence and arguments underlying such dispute and (ii)
proposed arrangements for a meeting to attempt to resolve the dispute to be held
within sixty (60) days after such notice is given. Within thirty (30) days after
such notice is given, the other Party hereto shall submit to the Party giving
such notice a written summary responding to such statement of facts, events,
circumstances, evidence and arguments contained in the notice and an acceptance
of or proposed alternative to the meeting arrangements set forth in the initial
notice.
(b) The chief executive officers (or any other executive officer
or officers directly reporting to, and duly designated by, such chief executive
officers) of each of the Parties shall meet at a mutually acceptable time and
place to attempt to settle any dispute in good faith; provided, however, that
such meeting shall be held at the principal offices of the Party receiving the
notice of dispute unless otherwise agreed; and provided further, that any such
meeting shall be held no later than sixty (60) days after the written notice of
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dispute is given pursuant to Section 8.3(a). Each Party shall bear its own costs
and expenses with respect to preparation for, attendance at and participation in
such meeting.
(c) In the event that (i) a meeting has been held in accordance
with Section 8.3(b), (ii) any such dispute of the kind referred to in Section
8.3(a) shall not have been resolved at such meeting and (iii) the aggregate
amount in dispute exceeds $100,000, then either Party may submit such dispute to
binding arbitration pursuant to the Commercial Arbitration Rules of the American
Arbitration Association (the "Commercial Arbitration Rules"). In the event that
such dispute is submitted to arbitration pursuant to the Commercial Arbitration
Rules, then the arbitration tribunal shall be composed of three arbitrators (one
arbitrator selected by each Party within thirty (30) days after the meeting held
in accordance with Section 8.3(b) with the third selected by the other two
arbitrators or, in the absence of agreement between them, the American
Arbitration Association), the venue of the arbitration shall be Wilmington,
Delaware, the language of the arbitration shall be English and the arbitration
shall commence no later than sixty (60) days after the meeting held in
accordance with Section 8.3(b). The decision, judgment and order of the
arbitration tribunal shall be final, binding and conclusive as to the Parties
and their respective Representatives, and may be entered in court of competent
jurisdiction. Other than the fees and expenses of the arbitrators, which shall
be shared equally by the Parties, each Party shall bear its own costs and
expenses (including attorneys' fees and expenses) relating to the arbitration.
8.4 Remediation of Matters Covered in Sections 2.4(g) and 2.4(n). With
respect to the Liabilities as to which Seller has retained responsibility for
Remediation pursuant to Section 2.4(g) or 2.4(n):
(a) Seller shall have the right, but not the obligation, to
control the management of any Remediation covered by this Section 8.4. With
respect to the Liabilities described in Schedule 2.4(n), Seller shall notify
Buyer at the Closing whether it intends to control the management of the
Remediation after the Closing. As for other Liabilities that are potentially
covered by this Section 8.4, Seller must notify Buyer within thirty (30) days of
receipt of notice of Buyer's claim for indemnification for such matter that it
intends to undertake responsibility for said Remediation. Prior to a
determination by Seller that it will undertake Remediation pursuant to this
Section 8.4, Buyer shall, at Seller's expense, take only those actions necessary
to comply with applicable Environmental Laws or as required by Governmental
Authorities or address conditions that pose an immediate and acute environmental
or health risk (unless additional actions are approved by Seller, such approval
not to be unreasonably withheld or delayed).
(b) Seller shall comply with all applicable Laws, including all
applicable Environmental Laws, with respect to its performance pursuant to this
Section 8.4. Seller shall promptly provide copies to Buyer of all notices,
correspondence, draft reports, submissions, work plans, and final reports and
shall give Buyer a reasonable opportunity (at Buyer's own expense) to promptly
comment on any submissions Seller intends to deliver or submit to the
appropriate regulatory body prior to said submission. Buyer may, at its own
expense, hire its own consultants, attorneys or other professionals to monitor
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the investigation or remediation, including any field work undertaken by Seller,
and Seller shall provide Buyer with the results of all such field work.
Notwithstanding the foregoing, Buyer shall not take any actions that shall
unreasonably interfere with Seller's performance of the Remediation. Seller
shall undertake any such work required herein in a manner designed to minimize
any disruption, to the greatest extent possible, with the conduct of operations
at the property. Buyer shall allow Seller reasonable access to conduct any of
the work contemplated herein and shall fully cooperate with Seller in the
performance of the Remediation, including providing Seller with reasonable
access to employees and documents as necessary.
(c) If Seller declines to undertake the performance of a
Remediation hereunder, Buyer shall be entitled to control the investigation and
remediation. Buyer shall promptly provide copies to Seller of all notices,
correspondence, draft reports, submissions, work plans, and final reports and
shall give Seller a reasonable opportunity (at Seller's own expense) to promptly
comment on any submissions Buyer intends to deliver or submit to the appropriate
regulatory body prior to said submission. Seller may, at its own expense, hire
its own consultants, attorneys or other professionals to monitor the
Remediation, including any field work undertaken by Buyer, and Buyer shall
provide Seller with the results of all such field work. Notwithstanding the
foregoing, Seller shall not take any actions that shall unreasonably interfere
with Buyer's performance of the Remediation. Seller's decision to allow Buyer to
undertake Remediation hereunder shall not limit or affect Seller's obligation to
indemnify Buyer for said investigation and remediation as otherwise provided in
this Agreement.
(d) Without regard to whether Buyer or Seller is conducting a
Remediation pursuant to this Section 8.4, the Parties agree that such
Remediation will be conducted in a reasonable manner and consistent with the use
of the Site in question as an electric generating station. Without limiting the
foregoing, the Parties agree that they will conduct any such Remediation so that
the Remediation Standard that is applicable to the Site is the least stringent
Remediation Standard that would apply to the Site based on the current use of
the Site, and Buyer furthermore covenants that it will accept a deed restriction
or other reasonable institutional or engineering controls, if such mechanisms
will (A) allow the Remediation of the Site to be completed in the least cost
manner in compliance with applicable Environmental Law and (B) not unreasonably
interfere with operations at the Site. Notwithstanding the foregoing, if Buyer
determines at or after the Closing that it desires a Remediation such that the
Site is remediated to a more stringent Remediation Standard, it may do so,
provided, that (x) if Seller is managing a Remediation pursuant to this Section
8.4, it has the right, to the extent permitted by Law, to cease conduct of the
Remediation and request Buyer to assume the conduct of the Remediation and (y)
notwithstanding which of the Parties conducts the Remediation, Buyer shall be
liable for the costs and expenses associated with the Remediation to the extent
those costs and expenses exceed those that would be associated with a
Remediation Standard as determined by the previous sentence.
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ARTICLE IX
TERMINATION
9.1 Termination.
(a) This Agreement may be terminated at any time prior to the
Closing by mutual written consent of the Parties.
(b) This Agreement may be terminated by Seller, on the one hand,
or Buyer, on the other hand, upon written notice to the other Party, (i) at any
time prior to the Closing if any court of competent jurisdiction shall have
issued an order, judgment or decree permanently restraining, enjoining or
otherwise prohibiting the Closing, and such order, judgment or decree shall have
become final and nonappealable; (ii) at any time prior to the Closing if any Law
shall have been enacted or issued by any Governmental Authority which, directly
or indirectly, prohibits the consummation of the transactions contemplated by
this Agreement or by any Additional Agreement; or (iii) at any time after the
first anniversary of the date of this Agreement if the Closing shall not have
occurred on or before such date; provided, however, that the right to terminate
this Agreement under this Section 9.1(b) (iii) shall not be available to any
Party whose breach of this Agreement has caused, or resulted in, the failure of
the Closing to occur on or before such date; and provided, further, that if on
such date, the conditions to the Closing set forth in Section 7.1(c) or 7.2(c)
shall not have been satisfied but all other conditions to the Closing shall be
satisfied or shall be capable of being satisfied, then no Party shall be
entitled to terminate this Agreement prior to the date which is 180 days after
the first anniversary of the date of this Agreement.
(c) This Agreement may be terminated by Buyer, upon written
notice to Seller, if any of Buyer's Required Regulatory Approvals, the receipt
of which is a condition to the obligation of Buyer to consummate the Closing as
set forth in Section 7.1(c), shall have been denied (and a petition for
rehearing or refiling of an application initially denied without prejudice shall
also have been denied), and such denial was not caused by or the result of a
breach of this Agreement by Buyer.
(d) This Agreement may be terminated by Seller, upon written
notice to Buyer, if any of the Seller's Required Regulatory Approvals, the
receipt of which is a condition to the obligation of Seller to consummate the
Closing as set forth in Section 7.2(c), shall have been denied (and a petition
for rehearing or refiling of an application initially denied without prejudice
shall also have been denied), and such denial was not caused by or the result of
a breach of this Agreement by Seller.
(e) Except as otherwise provided in this Agreement, this
Agreement may be terminated by Buyer, upon written notice to Seller, if there
has been a breach by Seller of any covenant, agreement, representation or
warranty contained in this Agreement which has had a Material Adverse Effect and
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such breach is not cured by the earlier of the Closing Date or the date thirty
(30) days after receipt by Seller of notice specifying in reasonable detail the
nature of such breach, unless Buyer shall have previously waived such breach.
(f) Except as otherwise provided in this Agreement, this
Agreement may be terminated by Seller, upon written notice to Buyer, if there
has been a material breach by Buyer of any covenant, agreement, representation
or warranty contained in this Agreement which has had a Material Adverse Effect
and such breach is not cured by the earlier of the Closing Date or the date
thirty (30) days after receipt by Buyer of notice specifying in reasonable
detail the nature of such breach, unless Seller shall have previously waived
such breach.
(g) This Agreement may be terminated by Seller, on the one hand,
or Buyer, on the other hand, upon written notice to the other Party, in
accordance with the provisions of Section 6.9(b), provided that the Party
seeking to so terminate shall have complied with its obligations under Section
6.9.
9.2 Effect of Termination. Upon termination of this Agreement prior to
the Closing pursuant to Section 9.1, this Agreement shall be null and void and
of no further force or effect (except that the provisions set forth in Section
6.3, this Section 9.2 and Article X, and the Confidentiality Agreement, shall
remain in full force and effect in accordance with their respective terms); and
no Party shall have any further Liability under this Agreement (other than for
any wilful breach of its obligations hereunder).
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 Amendment and Modification. Subject to applicable Law, this
Agreement may be amended, supplemented or otherwise modified only by written
agreement entered into by all Parties.
10.2 Expenses. Except to the extent provided herein, whether or not
the transactions contemplated hereby are consummated, all costs, fees and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be borne by the Party incurring such costs, fees and
expenses, including the fees and commissions referred to in Section 10.3.
Notwithstanding the foregoing, Buyer shall be responsible for the payment of, or
reimbursement of Seller for, (a) all actual out-of-pocket costs, fees and
expenses charged by Lawyers Title Insurance Corporation in connection with
obtaining any title insurance policy and all endorsements thereto, including
policy premiums, (b) all survey costs, fees and expenses, incurred by Buyer, (c)
all survey costs, fees and expenses incurred by Seller on or prior to the date
hereof, but, together with all such costs, fees and expenses incurred in
connection with the Related Purchase Agreements, not in excess of $600,000, (d)
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all filing fees under the HSR Act and (e) all costs for experts and consultants
in accordance with Section 6.5(b).
10.3 Fees and Commissions. Seller, on the one hand, and Buyer, on the
other hand, represent and warrant to the other that, except for Credit Suisse
First Boston, Inc. and Reed/Navigant Consulting Group, which are acting for and
at the expense of Seller, and CIBC World Markets Corp., which is acting for and
at the expense of Buyer, no broker, finder or other Person is entitled to any
brokerage fees, commissions or finder's fees in connection with the transactions
contemplated hereby by reason of any action taken by such Party or its
Representatives. Seller, on the one hand, and Buyer, on the other hand, shall
pay or otherwise discharge all such brokerage fees, commissions and finder's
fees so incurred by such Parties.
10.4 Bulk Sales Laws. Buyer hereby acknowledges that, notwithstanding
anything in this Agreement to the contrary, Seller will not comply with the
provisions of the bulk sales laws of any jurisdiction in connection with the
transactions contemplated by this Agreement; and Buyer hereby irrevocably waives
compliance by Seller with the provisions of the bulk sales laws of all
applicable jurisdictions.
10.5 Waiver of Compliance; Consents. To the extent permitted by
applicable Law, any failure of any of the Parties to comply with any covenant,
agreement or condition set forth herein may be waived by the Party entitled to
the benefit thereof only by a written instrument signed by such Party, but any
such waiver shall not operate as a waiver of, or estoppel with respect to, any
prior or subsequent failure to comply therewith.
10.6 No Survival. No representation or warranty contained in this
Agreement shall survive the delivery of the Limited Warranty Deeds and the
Closing. The covenants and agreements of the Parties contained in this Agreement
shall survive the Closing in accordance with their respective terms.
10.7 Disclaimers. EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES SET
FORTH IN ARTICLE IV, THE PURCHASED ASSETS ARE SOLD "AS IS, WHERE IS", AND SELLER
EXPRESSLY DISCLAIMS ALL OTHER REPRESENTATIONS AND WARRANTIES OF ANY KIND OR
NATURE, EXPRESS OR IMPLIED, AS TO SELLER AND THE PURCHASED ASSETS. WITHOUT
LIMITING THE GENERALITY OF THE FOREGOING, EXCEPT FOR THE REPRESENTATIONS AND
WARRANTIES SET FORTH IN ARTICLE IV: SELLER EXPRESSLY DISCLAIMS ALL OTHER
REPRESENTATIONS AND WARRANTIES REGARDING LIABILITIES, OWNERSHIP, LEASE,
MAINTENANCE OR OPERATION OF THE PURCHASED ASSETS, THE TITLE, CONDITION, VALUE OR
QUALITY OF THE PURCHASED ASSETS OR THE PROSPECTS (FINANCIAL AND OTHERWISE),
RISKS AND OTHER INCIDENTS OF THE PURCHASED ASSETS; AND SELLER EXPRESSLY
DISCLAIMS ALL REPRESENTATIONS AND WARRANTIES OF MERCHANTABILITY, USAGE,
SUITABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE WITH RESPECT TO THE PURCHASED
ASSETS, OR ANY PART THEREOF, OR AS TO THE WORKMANSHIP THEREOF, OR THE ABSENCE OF
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ANY DEFECTS THEREIN, WHETHER LATENT OR PATENT, OR COMPLIANCE WITH ENVIRONMENTAL
REQUIREMENTS, OR THE APPLICABILITY OF ANY GOVERNMENTAL AUTHORITY, INCLUDING ANY
ENVIRONMENTAL LAWS, OR WHETHER SELLER POSSESSES SUFFICIENT REAL PROPERTY OR
PERSONAL PROPERTY TO OPERATE THE PURCHASED ASSETS. EXCEPT AS OTHERWISE EXPRESSLY
PROVIDED HEREIN, SELLER FURTHER EXPRESSLY DISCLAIMS ALL REPRESENTATIONS OR
WARRANTIES REGARDING THE ABSENCE OF HAZARDOUS SUBSTANCES OR LIABILITY OR
POTENTIAL LIABILITY ARISING UNDER ENVIRONMENTAL LAWS WITH RESPECT TO THE
PURCHASED ASSETS. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, EXCEPT AS
OTHERWISE EXPRESSLY PROVIDED HEREIN, SELLER EXPRESSLY DISCLAIMS ALL
REPRESENTATIONS AND WARRANTIES OF ANY KIND REGARDING THE CONDITION OF THE
PURCHASED ASSETS OR THE SUITABILITY OF THE PURCHASED ASSETS FOR OPERATION AS A
POWER PLANT OR AS A FUEL PROCESSING FACILITY, AS APPLICABLE, AND NO SCHEDULE OR
EXHIBIT TO THIS AGREEMENT, NOR ANY OTHER MATERIAL OR INFORMATION PROVIDED, OR
COMMUNICATIONS MADE, BY SELLER OR ITS REPRESENTATIVES, INCLUDING ANY BROKER OR
INVESTMENT BANKER, WILL CAUSE OR CREATE ANY SUCH REPRESENTATION OR WARRANTY,
EXPRESS OR IMPLIED, AS TO THE TITLE, CONDITION, VALUE OR QUALITY OF THE
PURCHASED ASSETS.
SELLER EXPRESSLY DISCLAIMS ALL REPRESENTATIONS AND WARRANTIES WITH
RESPECT TO THE NAMES "INDIAN RIVER POWER PLANT" AND "VIENNA POWER PLANT,"
INCLUDING ALL REPRESENTATIONS AND WARRANTIES OF (1) TITLE; (2) LENGTH, NATURE,
EXCLUSIVITY AND CONTINUITY OF USE; (3) STRENGTH OR FAME; AND (4) NONINFRINGEMENT
AND NONDILUTION OF TRADEMARK, SERVICE MARK, TRADE NAME OR OTHER PROPRIETARY
RIGHTS OF ANY THIRD PARTY. BUYER HEREBY ACKNOWLEDGES THAT THE NAMES "INDIAN
RIVER POWER PLANT" AND "VIENNA POWER PLANT" EACH HAVE A GEOGRAPHIC CONNOTATION
ASSOCIATED WITH THE LOCATION OF CERTAIN OF THE PURCHASED ASSETS.
10.8 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given on the day when delivered personally or by
facsimile transmission (with confirmation), on the next Business Day when
delivered to a nationally recognized overnight courier or five (5) Business Days
after deposited as registered or certified mail (return receipt requested), in
each case, postage prepaid, addressed to the recipient Party at its address set
forth below (or at such other address or facsimile number for a Party as shall
be specified by like notice; provided, however, that any notice of a change of
address or facsimile number shall be effective only upon receipt thereof):
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(a) If to Seller, to:
Conectiv
800 King Street
P.O. Box 231
Wilmington, Delaware 19899
Attention: Chairman
Facsimile: (302) 429-3367
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
One Rodney Square
Wilmington, Delaware 19801
Attention: Steven J. Rothschild, Esquire
Facsimile: (302) 651-3001
(b) if to Buyer, to:
NRG Energy, Inc.
1221 Nicollet Mall, Suite 700
Minneapolis, Minnesota 55403
Attention: Vice President and General Counsel
Facsimile: (612) 373-5392
with a copy to:
Gray, Plant, Mooty, Mooty & Bennett, P.A.
3400 City Center
33 South Sixth Street
Minneapolis, Minnesota 55402
Attention: Joseph T. Kinning, Esquire
Facsimile: (612) 333-0066
10.9 Assignment. This Agreement shall be binding upon and inure to the
benefit of the Parties and their respective successors and permitted assigns,
but neither this Agreement nor any of the rights, interests, obligations or
remedies hereunder shall be assigned by any Party hereto, including by operation
of law, without the prior written consent of the other Parties, nor is this
Agreement intended to confer upon any other Person any rights, interests,
obligations or remedies hereunder. Without limiting the generality of the
foregoing, no provision of this Agreement shall create any third-party
beneficiary rights in any Employee or former employee of Seller (including any
beneficiary or dependent thereof) in respect of continued employment or resumed
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employment, and no provision of this Agreement shall create any rights in any
such Persons in respect of any benefits that may be provided, directly or
indirectly, under any employee benefit plan or arrangement except as expressly
provided for thereunder. Notwithstanding the foregoing, (i) Seller may assign
all or any portion of its rights, interests, obligations and remedies hereunder
to Conectiv, a Delaware corporation, or any of Conectiv's wholly owned
subsidiaries; provided, however, that no such assignment shall (A) materially
impair or delay the consummation of the transactions contemplated hereby or (B)
relieve or discharge Seller from any of its obligations hereunder; and (ii)
Buyer may assign all or any portion of its rights, interests, obligations and
remedies hereunder to (A) any of its wholly owned subsidiaries or (B) a trustee,
lending institution or other Person solely for purposes of financing the
transactions contemplated hereby; provided, however, that no such assignment
shall (A) materially impair or delay the consummation of the transactions
contemplated hereby or (B) relieve or discharge Buyer from any of its
obligations hereunder.
10.10 Governing Law; Forum; Service of Process. This Agreement shall
be governed by and construed in accordance with the laws of the State of
Delaware (without giving effect to conflicts of law principles) as to all
matters, including validity, construction, effect, performance and remedies.
Venue in any and all suits, actions and proceedings related to the subject
matter of this Agreement shall be in the state and federal courts located in and
for the State of Delaware (the "Courts"), which shall have exclusive
jurisdiction for such purpose, and the Parties hereby irrevocably submit to the
exclusive jurisdiction of such courts and irrevocably waive the defense of an
inconvenient forum to the maintenance of any such suit, action or proceeding.
Service of process may be made in any manner recognized by such Courts. Each of
the Parties hereby irrevocably waives its right to a jury trial arising out of
any dispute in connection with this Agreement or the transactions contemplated
hereby.
10.11 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
10.12 Interpretation. The article and section headings contained in
this Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
construction of this Agreement. Ambiguities and uncertainties in the wording of
this Agreement shall not be construed for or against any Party, but shall be
construed in the manner that most accurately reflects the Parties' intent as of
the date of this Agreement. Each Party acknowledges that it has been represented
by counsel in connection with the review and execution of this Agreement, and,
accordingly, there shall be no presumption that this Agreement or any provision
hereof be construed against the Party that drafted this Agreement.
10.13 Schedules and Exhibits. Except as otherwise provided in this
Agreement, all Exhibits and Schedules referred to herein are intended to be and
hereby are made a part of this Agreement.
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10.14 Entire Agreement. This Agreement (including the Schedules and
Exhibits), together with the Confidentiality Agreement, embodies the entire
agreement and understanding of the Parties hereto in respect of the transactions
contemplated by this Agreement and the Additional Agreements and supersedes all
prior agreements and understandings between or among the Parties with respect to
such transactions. There are no representations, warranties, covenants or
agreements between or among the Parties with respect to the subject matter set
forth in such agreements, other than those expressly set forth or referred to
herein or therein. Without limiting the generality of the foregoing, Buyer
hereby acknowledges and agrees that there are no representations, warranties,
covenants or agreements between or among the Parties with respect to the subject
matter set forth in such agreements contained in any material made available to
Buyer pursuant to the terms of the Confidentiality Agreement (including the
Offering Memorandum dated June 18, 1999, previously provided to Buyer by or on
behalf of Seller, Reed/Navigant Consulting Group and Credit Suisse First Boston,
Inc.).
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, Seller and Buyer have caused this Purchase and
Sale Agreement to be duly executed and delivered by their respective duly
authorized officers as of the date first above written.
DELMARVA POWER & LIGHT COMPANY
By: /s/ Thomas S. Shaw
-----------------------------------
Name: Thomas S. Shaw
Title: Executive Vice President
NRG ENERGY, INC.
By: /s/ Craig A. Mataczynski
-----------------------------------
Name: Craig A. Mataczynski
Title: Senior Vice President
<PAGE>
APPENDIX G
PURCHASE AND SALES AGREEMENT
BETWEEN DELMARVA POWER & LIGHT COMPANY
AND NRG ENERGY, INC.
(KEYSTONE AND CONEMAUGH INTERESTS)
<PAGE>
EXECUTION COPY
PURCHASE AND SALE AGREEMENT
BY AND BETWEEN
DELMARVA POWER & LIGHT COMPANY
AND
NRG ENERGY, INC.
DATED AS OF JANUARY 18, 2000
(DP&L - JOINTLY OWNED STATIONS)
<PAGE>
LIST OF EXHIBITS AND SCHEDULES
EXHIBITS
Exhibit A Form of Assignment and Assumption Agreement
Exhibit B Form of Bill of Sale
Exhibit C Form of FIRPTA Affidavit
Exhibit D Form of Limited Warranty Deed
Exhibit E Form of Seller's Legal Opinion
Exhibit F Form of Buyer's Legal Opinion
SCHEDULES
1.1(17) Capital Expenditures
1.1(28) Description of Conemaugh Station
1.1(66) Description of Keystone Station
1.1(84) Permitted Encumbrances
1.1(114) Target Adjustment Amount Methodology
1.1(120) Transferable Permits
2.1(c) Electrical Transmission Facilities
2.1(f) Emission Allowances to be Transferred to Buyer
2.1(g) Excess Emission Allowances
2.6 Inventories
4.3(a) Seller's Defaults and Violations
4.3(b) Seller's Consents and Approvals
4.4 Insurance Exceptions
4.6 Environmental Matters
4.7 Real Property
4.9(a) Seller's Agreements
4.10 Legal Proceedings
5.3(a) Buyer's Defaults and Violations
5.3(b) Buyer's Consents and Approvals
5.9 Environmental Site Assessments
7.1(c) Buyer's Required Regulatory Approvals
7.2(c) Seller's Required Regulatory Approvals
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TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
1.1 Definitions.......................................................... 1
1.2 Certain Interpretive Matters.........................................13
1.3 U.S. Dollars.........................................................13
1.4 Sellers' Interest in Jointly Owned Stations. .......................13
ARTICLE II
PURCHASE AND SALE
2.1 Transfer of Assets...................................................14
2.2 Excluded Assets......................................................15
2.3 Assumed Liabilities..................................................17
2.4 Excluded Liabilities.................................................18
2.5 Control of Litigation................................................20
2.6 Inventories..........................................................20
ARTICLE III
THE CLOSING
3.1 Closing..............................................................20
3.2 Payment of Purchase Price............................................21
3.3 Adjustment to Purchase Price.........................................21
3.4 Tax Reporting and Allocation of Purchase Price.......................22
3.5 Prorations...........................................................23
3.6 Deliveries by Seller.................................................24
3.7 Deliveries by Buyer..................................................25
3.8 Post-Closing Excluded Asset Deliveries...............................26
3.9 Relationship of this Agreement and Related Purchase Agreements.......26
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
4.1 Organization; Qualification..........................................27
4.2 Authority............................................................27
4.3 Consents and Approvals; No Violation.................................27
4.4 Insurance............................................................28
4.5 Title and Related Matters............................................28
4.6 Environmental Matters................................................28
4.7 Real Property........................................................29
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4.8 Condemnation.........................................................29
4.9 Contracts and Leases.................................................29
4.10 Legal Proceedings....................................................30
4.11 Permits..............................................................30
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
5.1 Organization; Qualification..........................................30
5.2 Authority............................................................31
5.3 Consents and Approvals; No Violation.................................31
5.4 Buyer's Permits......................................................32
5.5 Availability of Funds................................................32
5.6 Financial Statements.................................................32
5.7 Legal Proceedings....................................................32
5.8 Qualified Buyer......................................................32
5.9 Inspections..........................................................33
5.10 Regulation as a Utility..............................................33
ARTICLE VI
COVENANTS OF THE PARTIES
6.1 Access to Information................................................33
6.2 Public Statements....................................................34
6.3 Further Assurances...................................................34
6.4 Consents and Approvals...............................................35
6.5 Certain Tax Matters..................................................36
6.6 Advice of Changes....................................................38
6.7 Risk of Loss.........................................................38
6.8 PJM; MAAC............................................................39
6.9 Emission Allowances..................................................39
ARTICLE VII
CONDITIONS
7.1 Conditions to Obligation of Buyer....................................39
7.2 Conditions to Obligation of Seller...................................41
ARTICLE VIII
INDEMNIFICATION AND ARBITRATION
8.1 Indemnification......................................................42
8.2 Defense of Claims....................................................44
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8.3 Arbitration..........................................................45
8.4 Remediation of Matters Covered in Section 2.4(g).....................46
ARTICLE IX
TERMINATION
9.1 Termination..........................................................47
9.2 Effect of Termination................................................48
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 Amendment and Modification...........................................49
10.2 Expenses.............................................................49
10.3 Fees and Commissions.................................................49
10.4 Bulk Sales Laws......................................................49
10.5 Waiver of Compliance; Consents.....................................50
10.6 No Survival..........................................................50
10.7 Disclaimers..........................................................50
10.8 Notices..............................................................51
10.9 Assignment...........................................................52
10.10 Governing Law; Forum; Service of Process.............................52
10.11 Counterparts.........................................................53
10.12 Interpretation.......................................................53
10.13 Schedules and Exhibits...............................................53
10.14 Entire Agreement.....................................................53
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PURCHASE AND SALE AGREEMENT
PURCHASE AND SALE AGREEMENT, dated as of January 18, 2000 (this
"Agreement"), by and between Delmarva Power & Light Company, a Delaware and
Virginia corporation ("DP&L" or "Seller"), and NRG Energy, Inc., a Delaware
corporation ("Buyer"). Seller and Buyer may be referred to herein individually
as a "Party," and collectively as the "Parties."
W I T N E S S E T H
WHEREAS, Seller owns minority interests in two fossil fuel-fired
electric generating stations (referred to herein as the "Jointly Owned
Stations"), and certain properties and assets associated therewith and ancillary
thereto; and
WHEREAS, Seller possesses certain Emission Allowances (as defined
below) relating to the Jointly Owned Stations; and
WHEREAS, Buyer desires to purchase and assume, and Seller desires to
sell and assign, or cause to be sold and assigned, the Purchased Assets (as
defined below) and certain associated Liabilities (as defined below), upon the
terms and conditions hereinafter set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants, representations, warranties and agreements set forth herein, and
intending to be legally bound hereby, the Parties hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. As used in this Agreement, the following capitalized
terms have the meanings specified in this Section 1.1.
(1) "ACE" means Atlantic City Electric Company, a New Jersey
corporation.
(2) "ACE Related Purchase Agreements" means the separate Purchase and
Sale Agreement, dated as of the date hereof, entered into by ACE and Buyer,
relating to the purchase and sale of the B.L. England Station, the Deepwater
Station, certain Excess Merrill Creek Interests, certain SO2 Allowances and NOx
Emission Allowances and certain related properties and assets; and (ii) the
separate Purchase and Sale Agreement, dated as of the date hereof, entered into
by ACE and Buyer, relating to the purchase and sale of ACE's undivided 2.47%
interest as tenant in common in the Keystone Station, ACE's undivided 3.83%
interest as tenant in common in the Conemaugh Station, and certain related
properties and assets.
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(3) "Additional Agreements" means the Limited Warranty Deeds, the
Assignment and Assumption Agreement and the Bill of Sale.
(4) "Affiliate" has the meaning set forth in Rule 12b-2 of the
General Rules and Regulations promulgated under the Exchange Act.
(5) "Agreement" means this Purchase and Sale Agreement together with
the Schedules and Exhibits hereto.
(6) "Assignment and Assumption Agreements" means the assignment and
assumption agreements between Seller and Buyer, to be delivered at the Closing,
substantially in the form of Exhibit A hereto, pursuant to which Seller shall
assign to Buyer the Seller's Agreements, certain intangible assets and certain
other Purchased Assets, and Buyer shall accept such assignment and assume the
Assumed Liabilities.
(7) "Assumed Liabilities" has the meaning set forth in Section
2.3.
(8) "B.L. England Station" means the generating station known as B.L.
England Station, located in the Town of Beesley's Point, County of Cape May,
State of New Jersey, and certain related properties and assets.
(9) "Bill of Sale" means the bill of sale of Seller, to be delivered at
the Closing, substantially in the form of Exhibit B hereto.
(10) "Business Day" means any day other than Saturday, Sunday and any
day on which banking institutions in the State of New York are authorized or
required by law or other governmental action to close.
(11) "Buyer" has the meaning set forth in the preamble to this
Agreement.
(12) "Buyer Material Adverse Effect" has the meaning set forth in
Section 5.3(a).
(13) "Buyer's Financial Statements" has the meaning set forth in
Section 5.5.
(14) "Buyer's Indemnitee" has the meaning set forth in Section 8.1(b).
(15) "Buyer's Permits" has the meaning set forth in Section 5.4.
(16) "Buyer's Required Regulatory Approvals" has the meaning set forth
in Section 5.3(b).
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(17) "Capital Expenditures" means the total amount of funds paid, or
Liabilities incurred, by Seller (other than such as constitute Assumed
Liabilities) for one or more of the projects listed on Schedule 1.1(17) during
the period commencing on September 1, 1999 and ending on the Closing Date.
(18) "CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended from time to time.
(19) "Closing" has the meaning set forth in Section 3.1.
(20) "Closing Adjustment Amount" means an amount, calculated in a
manner consistent with the calculation of the Target Adjustment Amount, equal to
the sum, as of the Closing Date, of (a) the Net Book Value of Seller's right,
title and interest in and to the Inventories plus (b) Capital Expenditures.
(21) "Closing Date" has the meaning set forth in Section 3.1.
(22) "Closing Payment" has the meaning set forth in Section 3.2(c).
(23) "Closing Statement" has the meaning set forth in Section 3.3(a).
(24) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
(25) "Commercial Arbitration Rules" has the meaning set forth in
Section 8.3(c).
(26) "Commercially Reasonable Efforts" means efforts which are
reasonably within the contemplation of the Parties at the time of entering into
this Agreement and which do not require the performing Party to expend funds
other than expenditures which are customary and reasonable in transactions of
the kind and nature contemplated by this Agreement in order for the performing
Party to satisfy its obligations hereunder.
(27) "Conemaugh Interest" means Seller's 3.72% undivided interest as
tenant in common in Conemaugh Station.
(28) "Conemaugh Station" means the generating station known as
Conemaugh Station, located in the County of Indiana, Commonwealth of
Pennsylvania, and related properties and assets, all as more fully identified on
Schedule 1.1(28) attached hereto.
(29) "Confidentiality Agreement" means the Confidentiality Agreement,
dated July 21, 1999, between Conectiv, a Delaware corporation, and Buyer.
(30) "Courts" has the meaning set forth in Section 10.10.
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(31) "Deepwater Station" means the generating station known as
Deepwater Station, located in the Town of Pennsville, County of Salem, State of
New Jersey, and certain related properties and assets.
(32) "Direct Claim" has the meaning set forth in Section 8.2(c).
(33) "Dorchester Property" means the approximately 247-acre site owned
by DP&L located in the County of Dorchester, State of Maryland, and related
properties and assets.
(34) "DP&L" means Delmarva Power & Light Company, a Delaware and
Virginia corporation.
(35) "DP&L Related Purchase Agreement" means the separate Purchase and
Sale Agreement, dated as of the date hereof, entered into by Seller and Buyer,
relating to the purchase and sale of the Indian River Station, the Vienna
Station, the Dorchester Property, certain SO2 Allowances and NOx Emission
Allowances, and certain related properties and assets.
(36) "Easements" means, collectively, all easements, licenses, rights
of way and other access rights reserved by Seller, or any Affiliate thereof, in
the Limited Warranty Deeds, including such as authorize access, use,
maintenance, construction, repair, replacement and other activities by Seller,
or any Affiliate thereof, or otherwise necessary for Seller, or any Affiliate
thereof, to operate its electrical transmission and distribution facilities, or
information technology and telecommunications assets, or fulfill legal
requirements applicable thereto.
(37) "Emission Allowances" means Emission Reduction Credits, NOx
Emission Allowances and SO2 Allowances.
(38) "Emission Reduction Credits" means credits, in units that are
established by the Governmental Authority with jurisdiction over the relevant
Site that has obtained the credits, resulting from reductions in the emissions
of air pollutants from an emitting source or facility (including, and to the
extent allowable under applicable Law, reductions resulting from shutdowns or
control of emissions beyond that required by applicable Law) that have been
certified by any applicable Governmental Authority as complying with the Law and
regulations governing the establishment of such credits (including certification
that such emissions reductions are enforceable, permanent, quantifiable and
surplus), including air emissions reductions as described above that have been
approved by the applicable Governmental Authority and are awaiting USEPA
approval. The term also includes certified air emissions reductions, as
described above, regardless as to whether the Governmental Authority certifying
such reductions designates such certified air emissions reductions by a name
other than "emission reduction credits."
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(39) "Encumbrances" means any and all mortgages, pledges, liens,
claims, security interests, agreements, easements, activity and use limitations,
restrictions, defects of title or encumbrances of any kind.
(40) "Environmental Claims" has the meaning set forth in Section
8.1(c).
(41) "Environmental Condition" means the presence or Release to the
environment, whether at the Sites or otherwise, of Hazardous Substances,
including any migration of Hazardous Substances through air, soil or groundwater
at, to or from the Sites or at, to or from any Off-Site Location, regardless of
when such presence or Release occurred or is discovered.
(42) "Environmental Laws" means all (a) Laws, in each case, as amended
from time to time, relating to pollution or protection of the environment,
natural resources or human health and safety, including Laws relating to
Releases or threatened Releases of Hazardous Substances or otherwise relating to
the manufacture, formulation, generation, processing, distribution, use,
treatment, storage, Release, transport, Remediation, abatement, cleanup or
handling of Hazardous Substances, (b) Laws with regard to recordkeeping,
notification, disclosure and reporting requirements respecting Hazardous
Substances and (c) Laws relating to the management or use of natural resources.
(43) "Environmental Permits" means all permits, certificates, licenses
and authorizations of all Governmental Authorities under Environmental Laws.
(44) "Estimated Adjustment Amount" has the meaning set forth in
Section 3.2(b).
(45) "Excess Emission Allowances" has the meaning set forth in Section
2.1(g).
(46) "Excess Merrill Creek Interests" means the interests of ACE in
the Merrill Creek Reservoir located in Harmony Township, County of Warren, State
of New Jersey, which are to be sold to Buyer pursuant to the ACE Related
Purchase Agreements.
(47) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, and the rules and regulations promulgated thereunder
from time to time.
(48) "Excluded Assets" has the meaning set forth in Section 2.2.
(49) "Excluded Liabilities" has the meaning set forth in Section 2.4.
(50) "FERC" means the United States Federal Energy Regulatory
Commission, and any successor agency thereto.
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(51) "FIRPTA Affidavit" means the Foreign Investment in Real Property
Tax Act Certification and Affidavit of Seller, to be delivered at the Closing,
substantially in the form of Exhibit C hereto.
(52) "Governmental Authority" means any executive, legislative,
judicial, regulatory or administrative agency, body, commission, department,
board, court, tribunal, arbitrating body or authority of the United States or
any foreign country, or any state, local or other governmental subdivision
thereof.
(53) "Hazardous Substances" means (a) any petrochemical or petroleum
products, oil or coal ash, radioactive materials, radon gas, asbestos in any
form that is or could become friable, urea formaldehyde foam insulation and
transformers or other equipment that contain dielectric fluid which may contain
polychlorinated biphenyls, (b) any chemicals, materials or substances defined as
or included in the definition of "hazardous substances," "hazardous wastes,"
"hazardous materials," "hazardous constituents," "restricted hazardous
materials," "extremely hazardous substances," "toxic substances,"
"contaminants," "pollutants," "toxic pollutants" or words of similar meaning and
regulatory effect under any applicable Environmental Law and (c) any other
chemical, material or substance, exposure to which is prohibited, limited or
regulated by any applicable Environmental Law.
(54) "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended from time to time.
(55) "Income Tax" means any Tax imposed by any Governmental Authority
(a) based upon, measured by or calculated with respect to net income, profits or
receipts (including capital gains Taxes and minimum Taxes) or (b) based upon,
measured by or calculated with respect to multiple bases (including corporate
franchise taxes) if one or more of such bases is described in clause (a), in
each case, together with any interest, penalties or additions attributable
thereto.
(56) "Indemnifiable Loss" has the meaning set forth in Section 8.1(a).
(57) "Indemnifying Party" has the meaning set forth in Section 8.1(f).
(58) "Indemnitee" has the meaning set forth in Section 8.1(b).
(59) "Independent Accounting Firm" means such nationally recognized,
independent accounting firm as is mutually appointed by Seller and Buyer for
purposes of this Agreement.
(60) "Indian River Station" means the generating station known as
Indian River Power Plant, located in the Town of Millsboro, County of Sussex,
State of Delaware, and related properties and assets.
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(61) "Inspection" means all tests, reviews, examinations, inspections,
investigations, verifications, samplings and similar activities conducted by
Buyer or its Representatives with respect to the Purchased Assets prior to the
Closing.
(62) "Inventories" means coal, oil, tire-derived fuel and other fuel
inventories, limestone, materials, spare parts, capital spare parts, consumable
supplies and chemical and gas inventories (together with related freight,
commodity and handling (other than on-site handling)) which are located at or in
transit to the Jointly Owned Stations relating to the operation of the Jointly
Owned Stations.
(63) "Jointly Owned Stations" means, together, Conemaugh Station and
Keystone Station.
(64) "Jointly Owned Stations Operating Agreements" means, together,
(i) the Operating Agreement, dated December 1, 1967, as amended, among
Pennsylvania Electric Company, ACE, Baltimore Gas and Electric Company, DP&L,
Metropolitan Edison Company, Pennsylvania Power & Light Company, Philadelphia
Electric Company, Potomac Electric Power Company, Public Service Electric and
Gas Company and UGI Corporation, with respect to the ownership and operation of
Conemaugh Station and (ii) the Operating Agreement, dated December 1, 1965, as
amended, among Pennsylvania Electric Company, ACE, Baltimore Gas and Electric
Company, DP&L, Jersey Central Power & Light Company, Pennsylvania Power & Light
Company, Philadelphia Electric Company and Public Service Electric and Gas
Company, with respect to the ownership and operation of the Keystone Station.
(65) "Keystone Interest" means Seller's 3.70% undivided interest as
tenant in common in Keystone Station.
(66) "Keystone Station" means the generating station known as Keystone
Station located in Plumcreek Township, County of Armstrong, Commonwealth of
Pennsylvania, and related properties and assets, all as more fully identified on
Schedule 1.1(66) attached hereto.
(67) "Knowledge" means the actual knowledge of the directors and
executive officers of the specified Person, which directors and executive
officers are charged with responsibility for the particular function as of the
date of this Agreement, or, with respect to any certificate delivered pursuant
to this Agreement, the date of delivery of such certificate.
(68) "Laws" means all laws, statutes, rules, regulations and
ordinances of any Governmental Authority.
(69) "Liability" or "Liabilities" means any liability or obligation
(whether known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated and
whether due or to become due), including any liability for Taxes.
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(70) "Like-Kind Exchange" has the meaning set forth in Section 6.5(e).
(71) "Limited Warranty Deeds" means the Limited Warranty Deeds, to be
delivered at the Closing, substantially in the form of Exhibit D hereto,
pursuant to which Seller will convey the Real Property to Buyer.
(72) "MAAC" means the Mid-Atlantic Area Council.
(73) "Material Adverse Effect" means any change in or effect on the
Purchased Assets or the operation of the Purchased Assets after the date hereof
that is materially adverse to the operation or condition (financial or
otherwise) of the Purchased Assets, taken as a whole, other than (i) any change
or effect affecting the international, national, regional or local electric
industry as a whole and not specific and exclusive to the Purchased Assets, (ii)
any change or effect resulting from changes in the international, national,
regional or local wholesale or retail markets for electricity, including any
change in or effect on the structure, operating agreements, operations or
procedures of Pennsylvania-New Jersey-Maryland Interconnection L.L.C. or its
control area, (iii) any change or effect resulting from changes in the
international, national, regional or local markets for any fuel used at the
Jointly Owned Stations, (iv) any change or effect resulting from changes in the
North American, national, regional or local electricity transmission systems or
operations thereof, (v) changes in Law, or any judgments, orders or decrees that
apply generally to similarly situated Persons, (vi) any change or effect to the
extent constituting or involving an Excluded Asset or an Excluded Liability and
(vii) any change in or effect on the Purchased Assets which is cured (including
by payment of money) before the earlier of the Closing and the termination of
this Agreement pursuant to Section 9.1.
(74) "Net Book Value" means, as of any date, original cost (including
related freight, commodity and handling (other than on-site handling)) less
applicable depreciation and amortization, as reflected on Seller's books and
records through such date in accordance with United States generally accepted
accounting principles as applied by Seller on August 31, 1999.
(75) "Net PURTA Refund" has the meaning set forth in Section 3.5(c).
(76) "NOx" means oxides of nitrogen.
(77) "NOx Budget Program" means Nitrogen Oxides Budget Program, which
is a statutory or regulatory program promulgated by the United States or a state
pursuant to which the United States or state provides for a limit on the oxides
of nitrogen that can be emitted by all sources covered by the program and
establishes allowances or authorizations, which in total are equal to the amount
of oxides of nitrogen allowed by the limit, where each allowance or
authorization represents a "right" to emit a unit of oxides of nitrogen, as the
means for ensuring compliance with the limit.
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(78) "NOx Emission Allowance" means (a) an authorization by the PaDEP
under its NOx Budget Program authorizing the emission of one ton of NOx during
the ozone season, as such season is defined by the PaDEP; or (b) an
authorization by the USEPA under any future NOx Budget Program promulgated by
the USEPA, including any future program implemented in lieu of a state NOx
Budget Program, authorizing the emission of one ton of NOx during the ozone
season, as such season is defined by the USEPA.
(79) "Off-Site Location" means any real property other than the Sites.
(80) "PaDEP" means the Pennsylvania Department of Environmental
Protection, and any successor agency thereto.
(81) "PaPUC" means the Pennsylvania Public Utility Commission, and any
successor agency thereto.
(82) "Party" and "Parties" have the respective meanings set forth in
the preamble to this Agreement.
(83) "Pennsylvania Assets" has the meaning set forth in Section
3.5(c).
(84) "Permitted Encumbrances" means: (a) the Easements; (b) those
exceptions to title to the Purchased Assets listed in Schedule 1.1(84); (c)
statutory liens for Taxes or other charges or assessments of Governmental
Authorities not yet due or delinquent, or which are being contested in good
faith by appropriate proceedings; (d) mechanics', carriers', workers',
repairers' and other similar liens arising or incurred in the ordinary course of
business to the extent that they secure payment of obligations which are not in
arrears or otherwise due and which have been incurred under Good Utility
Practices; (e) zoning, entitlement, conservation restriction and other land use
and environmental regulations by Governmental Authorities; and (f) with respect
to any Jointly Owned Station, such non-monetary Encumbrances as do not
materially detract from the value of the Purchased Assets located at such
Jointly Owned Station, taken as a whole, as currently used, or materially
interfere with the present use of the Purchased Assets located at such Jointly
Owned Station, taken as a whole.
(85) "Person" means any individual, partnership, limited liability
company, joint venture, corporation, trust, unincorporated organization, other
business association or Governmental Authority.
(86) "PJM" means the Pennsylvania-New Jersey-Maryland Power Pool, as
established and administered by Pennsylvania - New Jersey - Maryland
Interconnection L.L.C.
(87) "PJM Agreement" means the Operating Agreement dated June 2, 1997
of Pennsylvania-New Jersey-Maryland Interconnection L.L.C., as amended from time
to time.
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(88) "Prime Rate" has the meaning set forth in Section 3.3(c).
(89) "Proprietary Information" of a Party means all information about
any Party or its properties or operations furnished to the other Party or its
Representatives by such Party or its Representatives, after the date hereof,
regardless of the manner or medium in which it is furnished. Proprietary
Information does not include information that: (a) is or becomes generally
available to the public, other than as a result of a disclosure by the other
Party or its Representatives; (b) was available to the other Party on a
non-confidential basis prior to its disclosure by the Party or its
Representatives; (c) is or becomes available to the other Party on a
non-confidential basis from a source other than such Party, provided that the
source of such information was not known by such Party or its Representatives,
after reasonable investigation, to be bound by a confidentiality agreement with
or other contractual, legal or fiduciary obligation of confidentiality to such
Party or any of its Representatives with respect to such material; (d) is
independently developed by the other Party; or (e) was disclosed pursuant to the
Confidentiality Agreement and remains subject to the terms and conditions of the
Confidentiality Agreement.
(90) "PUHCA" means the Public Utility Holding Company Act of 1935, as
amended from time to time, and the rules and regulations promulgated thereunder
from time to time.
(91) "Purchase Price" has the meaning set forth in Section 3.2(a).
(92) "Purchased Assets" has the meaning set forth in Section 2.1.
(93) "PURTA" has the meaning set forth in Section 3.5(a)(i).
(94) "PURTA Assessment" has the meaning set forth in Section 3.5(c).
(95) "Real Property" has the meaning set forth in Section 2.1(a).
(96) "Related Purchase Agreements" means, collectively, the ACE
Related Purchase Agreements and the DP&L Related Purchase Agreement.
(97) "Release" means any release, spill, leak, discharge, disposal of,
pumping, pouring, emitting, emptying, injecting, leaching, dumping or allowing
to escape into or through the environment.
(98) "Remediation" means an action of any kind to address an
Environmental Condition or a Release of Hazardous Substances or the presence of
Hazardous Substances at the Sites or an Off-Site Location, including the
following activities to the extent they relate to, result from or arise out of
the presence of a Hazardous Substance at the Sites or an Off-Site Location: (a)
monitoring, investigation, assessment, treatment, cleanup, containment, removal,
mitigation, response or restoration work; (b) obtaining any permits, consents,
approvals or authorizations of any Governmental Authority necessary to conduct
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any such activity; (c) preparing and implementing any plans or studies for any
such activity; (d) obtaining a written notice from a Governmental Authority with
jurisdiction over the Sites or an Off-Site Location under Environmental Laws
that no material additional work is required by such Governmental Authority; (e)
the use, implementation, application, installation, operation or maintenance of
removal actions on the Sites or an Off-Site Location, remedial technologies
applied to the surface or subsurface soils, excavation and treatment or disposal
of soils at an Off-Site Location, systems for long-term treatment of surface
water or groundwater, engineering controls or institutional controls; and (f)
any other activities reasonably determined by a Party to be necessary or
appropriate or required under Environmental Laws to address an Environmental
Condition or a Release of Hazardous Substances or the presence of Hazardous
Substances at the Sites or an Off-Site Location.
(99) "Remediation Standard" means a numerical standard (whether
resulting from an enacted statute, promulgated regulation, guidance or policy
document issued by a regulatory agency, or developed on a case-by-case basis
through a risk assessment or other methodology authorized pursuant to an
applicable Environmental Law) that defines the concentrations of Hazardous
Substances that may be permitted to remain in any environmental media after a
Remediation.
(100) "Representatives" of a Person means, collectively, such Person's
Affiliates and its and their respective directors, officers, partners, members,
employees, representatives, agents, advisors (including accountants, legal
counsel, environmental consultants, engineering consultants and financial
advisors), parent entities and other controlling Persons.
(101) "SEC" means the United States Securities and Exchange
Commission, and any successor agency thereto.
(102) "Securities Act" means the Securities Act of 1933, as amended
from time to time, and the rules and regulations promulgated thereunder from
time to time.
(103) "Seller" has the meaning set forth in the preamble to this
Agreement.
(104) "Seller's Agreements" means, collectively, (i) the contracts,
agreements, arrangements, licenses and leases of any nature to which, as of the
date hereof, Seller is a party, or by or to which Seller or the Purchased Assets
is bound or subject, (ii) those contracts, agreements, arrangements, licenses
and leases of any nature entered into by Seller on or after the date of this
Agreement consistent with the terms of this Agreement and (iii) those contracts,
agreements, arrangements, licenses and leases entered into by any party to the
Jointly Owned Stations Operating Agreements, for and on behalf of Seller, with
or without Seller's Knowledge, and by or to which Seller or the Purchased Assets
are bound or subject as of the date hereof, or by or to which Seller or the
Purchased Assets become bound or subject after the date hereof, in each case,
relating to the ownership, lease, maintenance or operation of the Purchased
Assets.
(105) "Seller's Indemnitee" has the meaning set forth in Section
8.1(a).
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(106) "Seller's Interests" means, together, the Conemaugh Interest and
the Keystone Interest.
(107) "Seller's Permits" has the meaning set forth in Section 4.11.
(108) "Seller's Required Regulatory Approvals" has the meaning set
forth in Section 4.3(b).
(109) "Sites" means the Real Property forming a part, or used or
usable in connection with the operation, of the Jointly Owned Stations,
including any real property used for the disposal of solid or hazardous waste
that is included in the Real Property. Any reference to the Sites shall include
the surface and subsurface elements, to the extent owned by or subject to any
interest of Seller, including the soil and groundwater present at the Sites, and
any reference to materials or conditions "at the Sites", including Hazardous
Substances and Environmental Conditions, shall include all materials and
conditions "at, on, in, upon, over, across, under or within" the Sites.
(110) "SO2" means sulfur dioxide.
(111) "SO2 Allowance" means an authorization by the Administrator of
the USEPA under the Clean Air Act, 42 U.S.C.ss. 7401, et seq., to emit one ton
of sulfur dioxide during or after a specified calendar year.
(112) "Subsidiary", when used in reference to any Person, means any
entity of which outstanding securities or interests having ordinary voting power
to elect a majority of the board of directors or other governing body performing
similar functions of such entity are owned directly or indirectly by such
Person.
(113) "Tangible Personal Property" has the meaning set forth in
Section 2.1(e).
(114) "Target Adjustment Amount" means $2,648,000, which represents
the Net Book Value, as of August 31, 1999, of Seller's right, title and interest
in and to the Inventories, as calculated in the manner set forth in Schedule
1.1(114).
(115) "Tax" or "Taxes" means all taxes, charges, fees, levies,
penalties and other assessments imposed by any Governmental Authority, including
income, gross receipts, excise, property, sales, transfer, use, franchise,
payroll, withholding, social security and other taxes, together with any
interest, penalties or additions attributable thereto.
(116) "Tax Return" means any return, report, information return or
other document, together with all amendments and supplements thereto (including
any related or supporting information), required to be supplied to any
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Governmental Authority responsible for the administration of Laws governing
Taxes.
(117) "Third-Party Claim" has the meaning set forth in Section 8.2(a).
(118) "Title Commitments" means (i) the Title Commitment provided by
Lawyers Title Insurance Corporation, dated December 20, 1999, relating to the
Conemaugh Station; (ii) the Title Commitment provided by Lawyers Title Insurance
Corporation, dated December 20, 1999, relating to the Keystone Station; and
(iii) the Title Commitment provided by Lawyers Title Insurance Corporation,
dated December 20, 1999, relating to Keystone Lake.
(119) "Transfer Taxes" has the meaning set forth in Section 6.6(a).
(120) "Transferable Permits" means those Permits and Environmental
Permits (and all applications pertaining thereto) which are transferable under
applicable Laws by Seller to Buyer (with or without a filing with, notice to,
consent or approval of any Governmental Authority), as set forth in Schedule
1.1(120).
(121) "Transmission Assets" has the meaning set forth in Section
2.2(a).
(122) "USEPA" means the United States Environmental Protection Agency,
and any successor agency thereto.
(123) "Vienna Station" means the generating station known as Vienna
Power Plant, located in the town of Vienna, County of Dorchester, State of
Maryland, and related properties and assets.
(124) "Year 2000 Compliance" has the meaning set forth in Section
4.14.
1.2 Certain Interpretive Matters. In this Agreement, unless the
context otherwise requires, the singular words include the plural, the masculine
includes the feminine and neuter, and vice versa. In this Agreement, the term
"includes" or "including" shall be deemed followed by the words "including
without limitation." References herein to a section, article, Exhibit or
Schedule mean a section, article, Exhibit or Schedule of this Agreement, and
reference to a given agreement or instrument constitutes a reference to that
agreement or instrument as modified, amended, supplemented and restated through
the date as of which such reference is made.
1.3 U.S. Dollars. When used herein, the term "dollars" and the symbol
"$" refer to the lawful currency of the United States of America.
1.4 Sellers' Interest in Jointly Owned Stations. The Parties
acknowledge and agree that Seller owns and holds (a) an undivided three and
seventy-two hundredths percent (3.72%) interest as tenant in common in the
Conemaugh Station and (b) an undivided three and seventy hundredths percent
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(3.70%) interest as tenant in common in the Keystone Station. All references in
this Agreement to Seller's right, title and interest in, to and under the
Purchased Assets, and, in each case, the rights, liabilities and obligations in
connection therewith, shall be construed in this context.
ARTICLE II
PURCHASE AND SALE
2.1 Transfer of Assets. Upon the terms and subject to the conditions
set forth in this Agreement, at the Closing, Seller shall sell, assign, convey,
transfer and deliver to Buyer, and Buyer shall purchase, assume and acquire from
Seller, free and clear of all Encumbrances, except for the Permitted
Encumbrances, all of Seller's right, title and interest in, to and under the
following assets and properties, except as otherwise provided in Section 2.2,
each as of the Closing Date, but only to the extent of the Seller's Interests
(collectively, the "Purchased Assets"):
(a) The real property (including all buildings and other
improvements thereon and all appurtenances thereto) described on Schedule 4.7
(the "Real Property");
(b) The Inventories;
(c) Machinery, equipment, vehicles, furniture and other
personal property owned by Seller, located on the Real Property on the Closing
Date (collectively, "Tangible Personal Property"), including the electrical
transmission facilities (as opposed to generation facilities) set forth on
Schedule 2.1(c);
(d) The Seller's Agreements;
(e) Subject to the receipt of necessary consents and approvals,
the Transferable Permits;
(f) The Emission Allowances identified on Schedule 2.1(f);
(g) Such of the Emission Allowances of Seller as are identified
on Schedule 2.1(g) (the "Excess Emission Allowances");
(h) The names "Conemaugh Station" and "Keystone Station";
provided, however, that Buyer expressly acknowledges and agrees that the
Purchased Assets do not include any right, title or interest in or to the names
"Delmarva Power & Light Company", "DP&L" or any derivation thereof, as well as
any related or similar name, or any other trade names, trademarks, service
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marks, corporate names and logos or any part, derivation, colorable imitation or
combination thereof; and
(i) All books, operating records, operating, safety and
maintenance manuals, engineering design plans, blueprints and as-built plans,
specifications, procedures and similar items relating specifically to the
Jointly Owned Stations that are in Seller's possession (subject to the right of
Seller to retain copies of same for its use), other than such items as are
proprietary to third parties and accounting records.
(j) The rights of Seller in, to and under all causes of action
against third parties with respect to, arising out of or in connection with
Seller's rights, title and interest in and to the Purchased Assets or the
Assumed Liabilities, or any portion thereof, whether accruing prior to, on or
after the Closing Date, other than any such causes of action as constitute
Excluded Assets or Excluded Liabilities, whether received as payment or credit
against future liabilities.
2.2 Excluded Assets. Notwithstanding anything to the contrary in this
Agreement, nothing in this Agreement shall constitute or be construed as
requiring Seller to sell, assign, convey, transfer or deliver, and Buyer shall
not be entitled to purchase or acquire, any right, title or interest in, to or
under any properties, assets, business, operation or division of Seller, or any
Affiliate thereof, not expressly set forth in Section 2.1, including the
following assets and properties which are hereby specifically excluded from the
definition of Purchased Assets (collectively, the "Excluded Assets"):
(a) The right, title and interest of Seller and its successors,
assigns and Representatives in, to and under all electrical transmission or
distribution facilities (as opposed to generation facilities) or information
technology and communications assets of Seller or any of its Affiliates located
at or forming a part of any of the Jointly Owned Stations (whether or not
regarded as a "transmission" or "generation" asset for regulatory or accounting
purposes), including all switchyard facilities, substation facilities and
support equipment, as well as all permits, contracts and warranties, to the
extent they relate to such transmission and distribution assets or information
technology and communications assets (other than the electrical transmission
facilities identified on Schedule 2.1(c), all of which are included as Purchased
Assets) (collectively, the "Transmission Assets");
(b) The right, title and interest of Seller and its successors,
assigns and Representatives in, to and under certain switches and meters, gas
facilities, revenue meters and remote testing units, drainage pipes and systems,
pumping equipment and associated piping, in each case, located at or forming a
part of the Jointly Owned Stations;
(c) All certificates of deposit, shares of stock, securities,
bonds, debentures, evidences of indebtedness, and interests in joint ventures,
partnerships, limited liability companies and other entities;
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(d) All cash, cash equivalents, bank deposits, accounts and
notes receivable (trade or otherwise), prepaid expenses relating to the
operation of the Purchased Assets and any income, sales, payroll or other Tax
receivables (in each case, whether held by Seller or any third party, including
under any Jointly Owned Stations Operating Agreements);
(e) The right, title and interest of Seller and its successors,
assigns and Representatives in, to and under all intellectual property,
including the names "Delmarva Power & Light Company", "DP&L" or any derivation
thereof, as well as any related or similar name, or any other trade names,
trademarks, service marks, corporate names and logos, or any part, derivation,
colorable imitation or combination thereof;
(f) All tariffs, agreements and arrangements to which Seller or
any of its Representatives is a party for the purchase or sale of electric
capacity or energy, or for the purchase of transmission, distribution or
ancillary services;
(g) The rights of Seller and its successors, assigns and
Representatives in, to and under all causes of action against third parties
relating to any Excluded Assets or Excluded Liabilities, if any, whether
accruing prior to, on or after the Closing Date, including all claims for
refunds, prepayments, offsets, recoupment, insurance proceeds, insurance
distributions, dividends or other proceeds, condemnation awards, judgments and
the like, whether received as payment or credit against future Liabilities, in
each case, relating to any period prior to the Closing Date;
(h) All Tax refunds or credits (including refunds or credits of
real property Taxes paid or due with respect to the Jointly Owned Stations),
which refunds or credits are with respect to periods prior to the Closing Date,
whether directly or indirectly, under the Jointly Owned Stations Operating
Agreements or otherwise, regardless of when actually paid;
(i) All employment agreements and personnel records of Seller
and its successors, assigns and Representatives;
(j) The minute books, stock transfer books, corporate seal and
other corporate records of Seller and its successors, assigns and
Representatives;
(k) The right, title and interest of Seller and its successors,
assigns and Representatives in, to and under all contracts, agreements,
arrangements, licenses and leases of any nature, other than the Seller's
Agreements;
(l) All insurance policies relating to the ownership, lease,
maintenance or operation of the Purchased Assets;
(m) All other assets and properties owned or leased by Seller or
its successors, assigns and Representatives which are not used in the operation
of the Jointly Owned Stations;
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(n) The right, title and interest of Seller and its successors,
assigns and Representatives under this Agreement and the Additional Agreements;
and
(o) The right, title and interest of Seller and its successors,
assigns and Representatives in, to and under all Emission Allowances of Seller
or any of its Affiliates (other than the Emission Allowances identified on
Schedule 2.1(f) and the Excess Emission Allowances identified on Schedule
2.1(g)).
2.3 Assumed Liabilities. On the Closing Date, Buyer shall assume and
agree to pay, perform and otherwise discharge, without recourse to Seller or its
Affiliates, all of the Liabilities of Seller and its Affiliates, successors,
assigns or Representatives which relate, directly or indirectly, to the
Purchased Assets, other than Excluded Liabilities, but only to the extent of the
Seller's Interests (collectively, the "Assumed Liabilities"), including the
following such Liabilities:
(a) All Liabilities of Seller under the Seller's Agreements,
including the Jointly Owned Stations Operating Agreements, and the Transferable
Permits in accordance with the terms thereof, including (i) the contracts,
agreements, arrangements, licenses and leases of whatever nature entered into by
Seller with respect to the Purchased Assets after the date hereof consistent
with the terms of this Agreement and (ii) those contracts, agreements,
arrangements, licenses and leases entered into by any party to the Jointly Owned
Stations Operating Agreements, for and on behalf of Seller, with or without
Seller's Knowledge, and by or to which Seller or the Purchased Assets are bound
or subject as of the date hereof, or by or to which Seller or the Purchased
Assets become bound or subject after the date hereof, in each case, relating to
the ownership, lease, maintenance or operation of the Purchased Assets, except,
in each case, to the extent such Liabilities, but for a breach or default by
Seller, would have been paid, performed or otherwise discharged prior to the
Closing Date;
(b) All Liabilities of Seller which relate to the Purchased
Assets in respect of Taxes for which Buyer is liable pursuant to Section 3.5 or
6.5;
(c) All Liabilities of Seller arising under or relating to
Environmental Laws or relating to any claim in respect of Environmental
Conditions or Hazardous Substances, whether based on common law or Environmental
Laws, whether relating to the Sites or any Off-Site Location, including (i) any
violation or alleged violation of Environmental Laws, whether prior to, on or
after the Closing Date, with respect to the ownership, lease, maintenance or
operation of any of the Purchased Assets, including any fines or penalties that
arise in connection with the ownership, lease, maintenance or operation of the
Purchased Assets on or after the Closing Date (but excluding all fines and
penalties that arise in connection with the ownership, lease, maintenance or
operation of the Purchased Assets prior to the Closing Date), and the costs
associated with correcting any such violations; (ii) loss of life, injury to
persons or property or damage to natural resources (whether or not such loss,
injury or damage arose or was made manifest before the Closing Date or arises or
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becomes manifest on or after the Closing Date) caused (or allegedly caused) by
any Environmental Condition or the presence or Release of Hazardous Substances
at, on, in, under or migrating from, the Purchased Assets prior to, on or after
the Closing Date, including any Environmental Condition or Hazardous Substances
contained in building materials at or migrating from the Purchased Assets or in
the soil, surface water, sediments, groundwater, landfill cells, or in other
environmental media at or near the Purchased Assets; (iii) any Remediation
(whether or not such Remediation commenced before the Closing Date or commences
on or after the Closing Date) of any Environmental Condition or Hazardous
Substances that are present or have been Released prior to, on or after the
Closing Date at, on, in, under or migrating from, the Purchased Assets or in the
soil, surface water, sediments, groundwater, landfill cells or in other
environmental media at or migrating from the Purchased Assets; (iv) any bodily
injury, loss of life, property damage, or natural resource damage arising from
the storage, transportation, treatment, disposal, discharge, recycling or
Release, at any Off-Site Location, or arising from the arrangement for such
activities, on or after the Closing Date, of Hazardous Substances generated in
connection with the ownership, lease, maintenance or operation of the Purchased
Assets; and (v) any Remediation of any Environmental Condition or Release of
Hazardous Substances arising from the storage, transportation, treatment,
disposal, discharge, recycling or Release, at any Off-Site Location, or arising
from the arrangement for such activities, on or after the Closing Date, of
Hazardous Substances generated in connection with the ownership, lease,
maintenance or operation of the Purchased Assets; provided that nothing set
forth in this Subsection 2.3(c) shall require Buyer to assume any liabilities or
obligations that are Excluded Liabilities pursuant to Section 2.4(e), 2.4(g),
2.4(h), 2.4(i) or 2.4(j);
(d) With respect to the Purchased Assets, any Tax that may be
imposed by any federal, state or local government on the ownership, lease,
maintenance, use or sale of the Purchased Assets on or after the Closing Date,
except for any Income Taxes attributable to income received by Seller; and
(e) For purposes of clarification, Buyer acknowledges that it
shall assume and be fully responsible for holding in its accounts sufficient SO2
Allowances and NOx Allowances to cover emissions of SO2 and NOx from all of the
Sites for all of the calendar year in which the Closing occurs, including the
period of such year prior to the Closing Date.
2.4 Excluded Liabilities. Notwithstanding Section 2.3, Buyer shall not
assume or be obligated to pay, perform or otherwise discharge the following
Liabilities of Seller (the "Excluded Liabilities"):
(a) Any Liabilities of Seller in respect of any Excluded Assets
or other assets of Seller which are not Purchased Assets, except to the extent
caused by the acts or omissions of Buyer or its Representatives or Buyer's
ownership, lease, maintenance or operation of the Purchased Assets;
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(b) Any Liabilities of Seller in respect of Taxes attributable
to the Purchased Assets for taxable periods ending before the Closing Date,
except for Taxes for which Buyer is liable pursuant to Section 3.5 or 6.5;
(c) Any Liabilities of Seller arising from the breach prior to
the Closing Date by Seller of any of the Seller's Agreements;
(d) Any and all Liabilities to third parties for personal injury
or tort, or similar causes of action to the extent arising out of the ownership,
lease, maintenance or operation of the Purchased Assets prior to the Closing
Date, other than the Liabilities assumed by Buyer under Section 2.3(c);
(e) Any fines or penalties imposed by any Governmental Authority
resulting from any violation of law by Seller that occurred prior to the Closing
Date;
(f) Any payment obligations of Seller or its Affiliates for
goods delivered or services rendered prior to the Closing Date, other than the
Liabilities assumed by Buyer under Section 2.3(c);
(g) Liability for Remediation of Environmental Conditions at,
on, under or migrating from, the Purchased Assets, but only to the extent that
(i) such Liability arises out of or derives from the same facts which form the
basis of a conviction, guilty plea or plea of nolo contendere by Seller for a
violation of Environmental Laws by Seller; (ii) Seller's conviction, guilty plea
or plea of nolo contendere was based on Seller's intentional and willful
wrongful actions; and (iii) Seller's conviction, guilty plea or plea of nolo
contendere arises from a matter as to which Seller has received written notice
from a Governmental Authority on or before the sixth anniversary of the Closing
Date.
(h) Any Liability under or related to Environmental Laws or the
common law arising as a result of or in connection with loss of life, injury to
persons or property or damage to natural resources (whether or not such loss,
injury or damage arose or was made manifest before the Closing Date or arises or
becomes manifest on or after the Closing Date) caused (or allegedly caused) by
the disposal, storage, transportation, discharge, migration of, Release or
recycling of Hazardous Substances at an Off-Site Location, or the arrangement
for such activities, prior to the Closing Date, in connection with the
ownership, lease, maintenance or operation of the Purchased Assets, provided
that, for purposes of this Section, "Off-Site Location" does not include any
location to which Hazardous Substances disposed of or Released at the Purchased
Assets have migrated;
(i) Any Liability under or related to Environmental Laws or the
common law arising as a result of or in connection with the Remediation (whether
or not such Remediation commenced before the Closing Date or commences on or
after the Closing Date) of Hazardous Substances that are disposed, stored,
transported, discharged, migrating from, Released, recycled, or the arrangement
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of such activities, in connection with the ownership, lease, maintenance or
operation of the Purchased Assets, at any Off-Site Location, prior to the
Closing Date; provided that, for purposes of this Section, "Off-Site Location"
does not include any location to which Hazardous Substances disposed of or
Released at the Purchased Assets have migrated; and
(j) Any Liability under or related to Environmental Laws or the
common law arising as a result of or in connection with the ownership, lease,
maintenance or operation by Seller or its Affiliates of the Transmission Assets
prior to, on or after the Closing Date, except to the extent caused by the acts
or omissions of Buyer or Buyer's ownership, lease, maintenance or operation of
the Purchased Assets.
2.5 Control of Litigation. The Parties agree and acknowledge that
Seller shall be entitled exclusively to control, defend and settle any suit,
action or proceeding, and any investigation arising out of or relating to any
Excluded Assets or Excluded Liabilities, and Buyer agrees to cooperate in
connection therewith to the extent Seller reasonably requests; provided,
however, that Buyer shall not be required to incur any out-of-pocket costs and
Seller shall reimburse Buyer for the costs incurred by Buyer in making its
employees available for such purpose, including the allocable amount of salaries
and wages of such employees.
2.6 Inventories. Schedule 2.6 lists the quantities of Inventories
relating to the Jointly Owned Stations that will be transferred to Buyer, but
only to the extent of the Seller's Interest, together with the Net Book Value of
such Inventories, in each case, as of August 31, 1999.
ARTICLE III
THE CLOSING
3.1 Closing. The sale, assignment, conveyance, transfer and delivery
of the Purchased Assets by Seller to Buyer, and the purchase, assumption and
acquisition by Buyer of the Purchased Assets and the Assumed Liabilities, and
the consummation of the other transactions contemplated hereby, shall take place
at a closing (the "Closing") to be held at the offices of Skadden, Arps, Slate,
Meagher & Flom LLP, One Rodney Square, Wilmington, Delaware, at 10:00 a.m. local
time on the first Business Day after August 31, 2000 that is ten (10) Business
Days after the date on which the last of the conditions precedent to the Closing
set forth in Sections 7.1(a) and (c), and Sections 7.2(a) and (c) of this
Agreement shall have been satisfied or, to the extent permitted by applicable
Law, waived by the Party for whose benefit such conditions precedent exist, or
at such other date, time and location thereafter as may be agreed upon in
writing between Buyer and Seller. The date on which the Closing actually occurs
is hereinafter called the "Closing Date." The Closing shall be effective for all
purposes as of 12:01 a.m., New York City time, on the Closing Date.
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3.2 Payment of Purchase Price.
(a) Upon the terms and subject to the conditions set forth in
this Agreement, in consideration of the aforesaid sale, assignment, conveyance,
transfer and delivery of the Purchased Assets, Buyer shall, at the Closing, (i)
pay to Seller cash in the aggregate amount of $113,136,000 plus the amount, if
any, by which the Closing Adjustment Amount exceeds the Target Adjustment
Amount, or minus the amount, if any, by which the Target Adjustment Amount
exceeds the Closing Adjustment Amount (the "Purchase Price"), and (ii) assume
and agree to pay, perform and otherwise discharge the Assumed Liabilities.
(b) At least five (5) Business Days prior to the Closing Date,
Seller shall provide to Buyer its good faith estimate of the Closing Adjustment
Amount, which estimate shall be certified in writing by an appropriate officer
of Seller (the "Estimated Adjustment Amount").
(c) At the Closing, in furtherance but not in duplication of
Section 3.2(a) and without limiting the generality of Section 3.7, Buyer shall
pay to Seller cash in an aggregate amount equal to $113,136,000 plus the amount,
if any, by which the Estimated Adjustment Amount exceeds the Target Adjustment
Amount, or minus the amount, if any, by which the Target Adjustment Amount
exceeds the Estimated Adjustment Amount (the "Closing Payment"). The Closing
Payment shall be paid to Seller by Buyer at the Closing by wire transfer of
immediately available funds to the account of Seller designated by Seller at
least two (2) Business Days prior to the Closing Date.
3.3 Adjustment to Purchase Price.
(a) Within sixty (60) days after the Closing Date, Seller shall
deliver to Buyer, at Seller's sole cost and expense, a statement setting forth
the Closing Adjustment Amount (the "Closing Statement"). Contemporaneously,
Seller shall deliver to Buyer a schedule setting forth a calculation of the
Purchase Price and the amount of any payment to be made, and by whom, pursuant
to Section 3.3(c).
(b) In the event that Buyer is in disagreement with the Closing
Statement, and in the event that the aggregate amount of such disagreements
exceeds $100,000, Buyer shall, within ten (10) Business Days after receipt of
the Closing Statement, notify Seller of such disagreements setting forth with
specificity the nature and amounts thereof. In the event that Buyer is in
disagreement with only a portion of the Closing Statement, Buyer or Seller, as
the case may be, shall pay all undisputed amounts in the manner set forth in
Section 3.3(c); and all other amounts shall be paid at such time as all
disagreements are resolved in accordance with this Section 3.3(b). If (i) the
aggregate amount of the disagreements referred to in this Section 3.3(b) does
not exceed $100,000 or (ii) Buyer fails to notify Seller of all disagreements
within the ten (10) Business Day period provided for herein, then the Closing
Statement, as delivered by Seller pursuant to Section 3.3(a), shall be final,
binding and conclusive on the Parties hereto. If Buyer is in disagreement with
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the Closing Statement and notifies Seller within such ten (10) Business Day
period, then the Parties shall promptly attempt to resolve such disagreements by
negotiation. If the Parties are unable to resolve such disagreements within
thirty (30) days following such notice of disagreement by Buyer, the Parties
shall appoint an Independent Accounting Firm within forty-five (45) days
following such notice, which shall review the Closing Statement and determine
the Closing Adjustment Amount. Resolution of any disagreements shall be made by
the Independent Accounting Firm in a writing addressed to all Parties within
thirty (30) days following referral to it by the Parties of such disagreements
in accordance with this Agreement. The findings of such Independent Accounting
Firm shall be final, binding and conclusive on the Parties. All costs and fees
of the Independent Accounting Firm shall be borne equally by Buyer and Seller.
(c) No later than the fifth (5th) Business Day following the
determination of the Closing Adjustment Amount pursuant to Section 3.3(b),
either (i) Seller shall pay Buyer the amount, if any, by which the Closing
Payment exceeds the Purchase Price, or (ii) Buyer shall pay Seller the amount,
if any, by which the Purchase Price exceeds the Closing Payment, in either case,
together with simple interest accruing on such payment at the Prime Rate from
the Closing Date through and including the date of payment, by wire transfer of
immediately available funds to an account designated by the receiving Party. As
used herein, "Prime Rate" means, as of any date, the prime rate as published in
The Wall Street Journal on such date or, if not published on such date, on the
most recent date of publication.
3.4 Tax Reporting and Allocation of Purchase Price. Buyer and Seller
shall use their respective reasonable best efforts to agree in good faith upon
an allocation among the Purchased Assets of the sum of the Purchase Price and
the Assumed Liabilities consistent with Section 1060 of the Code and the
Treasury Regulations thereunder within sixty (60) days after the Closing Date.
In the event that the Parties cannot agree on a mutually satisfactory allocation
within such sixty-day period, the Parties shall appoint an Independent
Accounting Firm that shall, at Seller's and Buyer's joint expense, determine the
appropriate allocation. The finding of such Independent Accounting Firm shall be
final, binding and conclusive on the Parties. After determination of the
allocation by agreement of the Parties or by binding determination of the
Independent Accounting Firm, Buyer and Seller shall file, for the tax year in
which the Closing occurs, Internal Revenue Service Form 8594, and all Tax
Returns, in accordance with such allocation. Buyer and Seller shall report the
transactions contemplated by this Agreement for United States federal Income Tax
and all other Tax purposes in a manner consistent with the allocation determined
pursuant to this Section 3.4. Buyer and Seller shall provide the other promptly
with any information required to complete Form 8594. Buyer and Seller shall
notify and provide the other with reasonable assistance in the event of an
examination, audit or other proceeding regarding the agreed-upon allocation of
the Purchase Price and the Assumed Liabilities.
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3.5 Prorations.
(a) Buyer and Seller agree that, except as otherwise provided in
this Agreement, all of the items customarily prorated relating to the ownership,
lease, maintenance or operation of the Purchased Assets, including those listed
below (but not including Income Taxes), shall be prorated as of the Closing
Date, with Seller liable to the extent such items relate to any period prior to
the Closing Date, and Buyer liable to the extent such items relate to any period
on or after the Closing Date (measured in the same units used to compute the
item in question, otherwise measured by calendar days):
(i) Personal property, real estate and occupancy Taxes
(other than any Pennsylvania public utility realty tax pursuant to 72 P.S. ss.
8102-A ("PURTA"), as well as additional assessments and surtaxes relating to
PURTA (collectively, the "PURTA Assessment") which are addressed in Section
3.5(c)), assessments and other charges, if any, on or with respect to the
ownership, lease, maintenance or operation of the Purchased Assets;
(ii) Rent, Taxes and all other items (including prepaid
services and goods not included in Inventory), in each case, payable by or to
Seller under any of the Seller's Agreements;
(iii) Any permit, license, registration, compliance
assurance fees or other fees with respect to any Transferable Permit;
(iv) Sewer rents and charges for water, telephone,
electricity and other utilities;
(v) Insurance premiums paid on or with respect to the
ownership, lease, maintenance or operation of the Purchased Assets to the extent
payable under any policy or other arrangement included among the Seller's
Agreements; and
(vi) Prepaid operating and maintenance expenses, whether
arising under the Jointly Owned Stations Operating Agreements or otherwise.
(b) Seller or Buyer, as the case may be, shall promptly
reimburse the other Party that portion of any amount paid by such other Party to
the extent relating to the period for which Seller or Buyer, as the case may be,
is liable under Section 3.5(a), in each case, upon presentation of a statement
setting forth in reasonable detail the nature and amount of any such payment. In
connection with the prorations set forth in Section 3.5(a), if actual figures
are not available on the Closing Date, the proration shall be calculated based
upon the respective amounts accrued through the Closing Date or paid for the
most recent year or other appropriate period for which such amounts paid are
available. All prorated amounts shall be recalculated and paid to the
appropriate Party within sixty (60) days after the date that the previously
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unavailable actual figures become available. Seller and Buyer shall furnish each
other with such documents and other records as may be reasonably requested in
order to confirm all proration calculations made pursuant to this Section 3.5.
Notwithstanding anything to the contrary herein, no proration shall be made
under this Section 3.5 with respect to (i) real property Tax refunds that are
Excluded Assets under Section 2.2(h) or (ii) Taxes payable by Buyer pursuant to
Section 6.5(a).
(c) (i) Seller shall be responsible for and pay the PURTA
Assessment imposed on any public utilities which are included in the Purchased
Assets located in the Commonwealth of Pennsylvania (the "Pennsylvania Assets")
with respect to the calendar year in which the Closing occurs. Buyer shall
reimburse Seller in accordance with this Section 3.5(c) for its proportionate
share of the PURTA Assessment for the calendar year in which the Closing occurs.
Buyer's proportionate share shall be based upon the number of days within the
Closing year that Buyer owned the Pennsylvania Assets. For example, if the
Closing were to occur on December 1, 2000, and $1,000,000 of PURTA Assessment
for calendar year 2000 had been paid, then Buyer's proportionate share of such
PURTA Assessment would be equal to the product obtained by multiplying
$1,000,000 by a fraction, the numerator of which would be the number of days in
calendar year 2000 during which Buyer owned the Pennsylvania Assets (31), and
the denominator of which would be the number of days in calendar year 2000
(366). Therefore, the aggregate amount of Buyer's proportionate share of the
PURTA Assessment would be $1,000,000 multiplied by 31/366, or $84,699.50. Seller
shall compute Buyer's obligation hereunder and notify Buyer of such obligation
at least five (5) Business Days before the Closing. The reimbursement payable by
Buyer to Seller hereunder shall be paid at Closing.
(ii) In the event Seller or Buyer obtains a refund of the
PURTA Assessment paid with respect to the year in which the Closing occurred,
any such refund, net of any costs incurred by the Party obtaining such refund (a
"Net PURTA Refund"), shall be prorated in accordance with this Section 3.5(c).
Any prorated Net PURTA Refund shall be paid to the Party entitled to such
prorated Net PURTA Refund promptly upon final adjudication or settlement of such
Net PURTA Refund. Buyer and Seller shall provide each other with such
cooperation and information as either of them reasonably may request of the
other in connection with the filing of any refund claim for a PURTA Assessment,
or the conduct of any audit, dispute, proceeding, suit or action concerning any
PURTA Assessment.
3.6 Deliveries by Seller. At the Closing, Seller shall deliver, or
cause to be delivered, the following to Buyer:
(a) One or more Limited Warranty Deeds, duly executed by Seller
and in recordable form;
(b) The Bills of Sale, duly executed by Seller;
(c) The Assignment and Assumption Agreements, duly executed by
Seller;
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(d) Evidence, in form and substance reasonably satisfactory to
Buyer, demonstrating that Seller has obtained the Seller's Required Regulatory
Approvals set forth on Schedule 7.2(c);
(e) A FIRPTA Affidavit, duly executed by Seller;
(f) Copies, certified by the Secretary or Assistant Secretary
of Seller, of resolutions authorizing the execution and delivery of this
Agreement, each Additional Agreement to which Seller is a party and all of the
other agreements and instruments, in each case, to be executed and delivered by
Seller in connection herewith;
(g) A certificate of the Secretary or Assistant Secretary of
Seller identifying the name and title and bearing the signatures of the officers
of Seller authorized to execute and deliver this Agreement, each Additional
Agreement to which Seller is a party and the other agreements and instruments
contemplated hereby;
(h) All such other agreements, documents, instruments and
writings as shall, in the reasonable opinion of Buyer and its counsel, be
necessary to sell, assign, convey, transfer and deliver to Buyer the Purchased
Assets, in accordance with this Agreement and, where necessary or desirable, in
recordable form, provided that Seller shall not be required to prepare or obtain
any survey, abstract, title opinion or title insurance policy with respect to
the Real Property; and
(i) Such other agreements, documents, instruments and writings
as are required to be delivered by Seller at or prior to the Closing Date
pursuant to this Agreement or otherwise reasonably required in connection
herewith.
3.7 Deliveries by Buyer. At the Closing, Buyer shall deliver, or
cause to be delivered, the following to Seller:
(a) The Closing Payment, by wire transfer of immediately
available funds in accordance with Seller's instructions to the account of
Seller designated by Seller at least two (2) Business Days prior to the Closing
Date;
(b) The Assignment and Assumption Agreements, duly executed by
Buyer;
(c) Evidence, in form and substance reasonably satisfactory to
Seller, demonstrating that Buyer has obtained the Buyer's Required Regulatory
Approvals set forth on Schedule 7.1(c);
(d) A copy, certified by the Secretary or Assistant Secretary
of Buyer, of resolutions authorizing the execution and delivery of this
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Agreement, each Additional Agreement and all of the agreements and instruments,
in each case, to be executed and delivered by Buyer in connection herewith;
(e) A certificate of the Secretary or Assistant Secretary of
Buyer identifying the name and title and bearing the signatures of the officers
of Buyer authorized to execute and deliver this Agreement, each Additional
Agreement to which Buyer is a party and the other agreements contemplated
hereby;
(f) All such other permits, agreements, documents, instruments
and writings as shall, in the reasonable opinion of Seller and its counsel, be
necessary for Buyer to purchase and acquire the Purchased Assets, and to assume
the Assumed Liabilities, in each case, in accordance with this Agreement and,
where necessary or desirable, in recordable form; and
(g) Such other permits, agreements, documents, instruments and
writings as are required to be delivered by Buyer at or prior to the Closing
Date pursuant to this Agreement or otherwise reasonably required in connection
herewith.
3.8 Post-Closing Excluded Asset Deliveries. In the event that Seller
or Buyer, or any of their respective Representatives, shall determine after the
Closing that any Excluded Asset is in the possession of Buyer or any of its
Representatives, Buyer shall, or shall cause any such Representative to,
promptly, but in no event later than five (5) Business Days following such
determination, pay or deliver, or cause to be paid or delivered, to Seller such
Excluded Asset, at Buyer's sole cost and expense.
3.9 Relationship of this Agreement and Related Purchase Agreements.
The transactions contemplated by this Agreement, together with the transactions
contemplated by the Related Purchase Agreements, are intended by the Parties to
be consummated substantially simultaneously; and if any of the transactions
contemplated hereby or by any of the Related Purchase Agreements are not
consummated simultaneously on the Closing Date in accordance with the terms and
subject to the conditions set forth herein and therein, as applicable, then each
Party shall take, or cause to be taken, all actions, and do, or cause to be
done, all things, in each case, that are necessary to dissolve and invalidate
all transactions contemplated hereby; provided, however, that if the failure to
consummate the transactions contemplated hereby or by the Related Purchase
Agreements results from a default or breach of a party under this Agreement or
any of the Related Purchase Agreements, then nothing in the foregoing shall
preclude or limit the rights or remedies of any Party in connection with such
default or breach. Notwithstanding any provision contained herein to the
contrary, if all conditions to the obligations of all parties to the ACE Related
Purchase Agreements to consummate the transactions contemplated thereby have
been satisfied or, to the extent permitted by applicable Law, waived, but, for
any reason, the transactions contemplated by this Agreement and the DP&L Related
Purchase Agreement cannot be consummated simultaneously therewith, then the
Parties shall, at Buyer's option and in its sole discretion, consummate the
transactions contemplated by the ACE Related Purchase Agreements; provided,
however, that nothing contained in this Section 3.9 shall be construed as
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relieving Buyer of any of its obligations under this Agreement or the DP&L
Related Purchase Agreement, as set forth therein.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer as follows (all such
representations and warranties, except those set forth in Sections 4.1 and 4.2,
being made to the Knowledge of Seller):
4.1 Organization; Qualification. Seller is a corporation duly
incorporated, validly existing and in good standing under the laws of the States
of Delaware and Virginia and has all requisite corporate power and authority to
own, lease and operate its properties and to carry on its business as it is now
being conducted. Seller is duly qualified to do business as a foreign
corporation and is in good standing under the laws of each jurisdiction in which
its business as now being conducted requires it to be so qualified, except to
the extent that the failure to be so qualified would not, individually or in the
aggregate, have a Material Adverse Effect.
4.2 Authority. Seller has full corporate power and authority to
execute and deliver this Agreement and each Additional Agreement to which it is
a party and to consummate the transactions contemplated hereby and thereby. The
execution and delivery by Seller of this Agreement and each Additional Agreement
to which it is a party and the consummation by Seller of the transactions
contemplated hereby and thereby have been duly and validly authorized by all
necessary corporate action required on the part of Seller. This Agreement has
been duly and validly executed and delivered by Seller and, subject to the
receipt of Seller's Required Regulatory Approvals, this Agreement constitutes,
and upon the execution and delivery by Seller of each Additional Agreement to
which it is a party, each such Additional Agreement will constitute, the legal,
valid and binding obligation of Seller, enforceable against Seller in accordance
with its terms, except that such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or
other similar Laws affecting or relating to enforcement of creditors' rights
generally and general principles of equity (regardless of whether enforcement is
considered in a proceeding at law or in equity).
4.3 Consents and Approvals; No Violation.
(a) Except as set forth on Schedule 4.3(a), subject to obtaining
or making all Seller's Required Regulatory Approvals, neither the execution and
delivery by Seller of this Agreement and the Additional Agreements to which it
is a party nor the consummation by Seller of the transactions contemplated
hereby or thereby will (i) conflict with or result in any breach of any
provision of the certificate or articles of incorporation or bylaws of Seller;
(ii) result in a default (or give rise to any right of termination, cancellation
or acceleration) under any of the terms, conditions or provisions of any note,
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bond, mortgage, indenture, material agreement or other instrument or obligation
to which Seller is a party or by which it, or any of the Purchased Assets, may
be bound, except for such defaults (or rights of termination, cancellation or
acceleration) as to which requisite consents, approvals or waivers have been, or
will be prior to the Closing obtained, or which would not, individually or in
the aggregate, have a Material Adverse Effect; or (iii) constitute violations of
any Law, order, judgment or decree applicable to Seller, which violations,
individually or in the aggregate, would have a Material Adverse Effect.
(b) Except for consents, approvals, filings and notices (i)
required under the HSR Act or (ii) set forth on Schedule 4.3(b) (the consents,
approvals, filings and notices referred to in clause (ii) of this sentence are
collectively referred to herein as the "Seller's Required Regulatory
Approvals"), no consent or approval of, filing with, or notice to, any
Governmental Authority is necessary for the execution and delivery by Seller of
this Agreement and the Additional Agreements to which it is a party or the
consummation by Seller of the transactions contemplated hereby or thereby, other
than (i) such consents, approvals, filings and notices which, if not obtained or
made, would not materially impair Seller's ability to perform its material
obligations under this Agreement or such Additional Agreements; (ii) such
consents, approvals, filings and notices which become applicable to Seller or
the Purchased Assets as a result of the status of Buyer (or any of its
Affiliates) or as a result of any other facts that specifically relate to the
business or activities in which Buyer (or any of its Affiliates) is or proposes
to be engaged; and (iii) such consents, approvals, filings and notices, the
failure of which to obtain or make would not, individually or in the aggregate,
have a Material Adverse Effect.
4.4 Insurance. Except as set forth on Schedule 4.4, all material
policies of fire, liability, workers' compensation and other forms of insurance
owned or held by, or on behalf of, Seller and insuring any Purchased Assets are
in full force and effect, all premiums with respect thereto covering all periods
up to and including the date hereof have been paid (other than retroactive
premiums which may be payable with respect to comprehensive general liability
and workers' compensation insurance policies), and no written notice of
cancellation or termination has been received by Seller with respect to any such
policy which was not replaced on substantially similar terms prior to the date
of such cancellation or termination. Except as set forth on Schedule 4.4, as of
the date of this Agreement, Seller has not been refused any such insurance with
respect to any Purchased Assets.
4.5 Title and Related Matters. Except for Permitted Encumbrances,
Seller has good, valid and marketable title to the Real Property included in the
Purchased Assets and has good and valid title to all other Purchased Assets,
free and clear of all Encumbrances.
4.6 Environmental Matters. Except as set forth on Schedule 4.6:
(a) Seller holds, and is in compliance with, all Environmental
Permits that Seller requires in order to own, lease and operate the Purchased
Assets, and Seller is otherwise in compliance with applicable Environmental Laws
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with respect to the ownership, lease, maintenance or operation of the Purchased
Assets, except for such failures to hold or comply with required Environmental
Permits, and such failures to be in compliance with applicable Environmental
Laws, as would not, individually or in the aggregate, materially impair the
ability of Buyer to operate the Purchased Assets after the Closing in the manner
operated by Seller on the date hereof.
(b) Seller has not received any written request for information,
or been notified in writing that it is a potentially responsible party under
CERCLA or any similar state law, with respect to any of the Sites, or any
written notice relating to any Governmental Authority's allegation or
investigation of any criminal violations by Seller of any Environmental Laws,
except for requests or notices with respect to Liabilities as would not,
individually or in the aggregate, materially impair the ability of Buyer to
operate the Purchased Assets after the Closing in the manner operated by Seller
on the date hereof; and
(c) Seller has not entered into or agreed to any consent decree
or order under any Environmental Law relating to the Purchased Assets, and
Seller is not subject to any outstanding judgment, decree or order relating to
compliance with any Environmental Law or to the investigation or cleanup of
Hazardous Substances under any Environmental Law relating to the Purchased
Assets, except for such decrees, orders and judgments as would not, individually
or in the aggregate, materially impair the ability of Buyer to operate the
Purchased Assets after the Closing in the manner operated by Seller on the date
hereof.
4.7 Real Property. Schedule 4.7 sets forth a description of the Real
Property. True and correct copies of all current surveys, abstracts, title
opinions and policies of title insurance currently in force, in each case, in
Seller's possession and relating to the Real Property, have been previously made
available to Buyer.
4.8 Condemnation. As of the date hereof, Seller has not received any
written notice of any pending or threatened proceedings or actions by any
Governmental Authority to condemn or take by power of eminent domain all or any
material part of the Purchased Assets.
4.9 Contracts and Leases.
(a) Schedule 4.9(a) sets forth a list of all written Seller's
Agreements, other than such contracts, licenses, agreements, arrangements and
personal property leases as (i) are set forth in any other Schedule, (ii)
constitute Excluded Assets or Excluded Liabilities, (iii) may be terminated
after the Closing by Buyer upon notice of no more than ninety (90) days, (iv)
involve future annual expenditures by Buyer after the Closing of $1,000,000 or
less, (v) are expected to expire or terminate prior to the Closing, (vi) are
entered into by Seller after the date hereof in accordance with the term of this
Agreement or (vii) are entered into by any party to the Jointly Owned Stations
Operating Agreements, for and on behalf of Seller, with or without Seller's
Knowledge, and by or to which Seller or the Purchased Assets are bound or
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subject as of the date hereof, or by or to which Seller or the Purchased Assets
become bound or subject after the date hereof.
(b) Except as set forth on Schedule 4.9(a), each Seller's
Agreement set forth on Schedule 4.9(a): (i) constitutes the valid and binding
obligation of Seller and the other parties thereto and (ii) will continue in
full force and effect after the Closing in accordance with its terms.
(c) Except as set forth on Schedule 4.9(a), there is not under
any Seller's Agreement set forth on Schedule 4.9(a) any default or event which,
with notice or lapse of time or both, would constitute a default, on the part of
Seller or any other party thereto, except such defaults as would not,
individually or in the aggregate, have a Material Adverse Effect.
4.10 Legal Proceedings. Except as set forth on Schedule 4.10, there
are no suits, actions or proceedings pending or, to the Knowledge of Seller,
threatened against Seller by or before any Governmental Authority, which would,
individually or in the aggregate, have a Material Adverse Effect or would
materially impair Seller's ability to consummate the transactions contemplated
hereby or by any Additional Agreement to which it is a party. Except as set
forth on Schedule 4.10, Seller is not subject to any judgment, order or decree
of any Governmental Authority which would, individually or in the aggregate,
have a Material Adverse Effect or would materially impair Seller's ability to
consummate the transactions contemplated hereby or by any Additional Agreement
to which it is a party.
4.11 Permits. Seller holds, and is in compliance with, all permits,
certificates, licenses and other authorizations of all Governmental Authorities
(collectively, "Seller's Permits") that Seller requires in order to own the
Purchased Assets, except for (a) Environmental Permits (which are governed by
Section 4.6) and (b) such failures to hold, or comply with, Seller's Permits as
would not, individually or in the aggregate, have a Material Adverse Effect.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as follows (all such
representations and warranties, except those set forth in Sections 5.1 and 5.2,
being made to the Knowledge of Buyer):
5.1 Organization; Qualification. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as it is now being
conducted. Buyer is, or by the Closing will be, qualified to do business in the
Commonwealth of Pennsylvania. Buyer has heretofore delivered to Seller true and
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correct copies of its certificate or articles of incorporation and bylaws (or
other similar governing documents) as currently in effect.
5.2 Authority. Buyer has full corporate power and authority to
execute and deliver this Agreement and each Additional Agreement to which it is
a party and to consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement and each such Additional Agreement by
Buyer and the consummation by Buyer of the transactions contemplated hereby or
thereby have been duly and validly authorized by all necessary corporate action
required on the part of Buyer. This Agreement has been duly and validly executed
and delivered by Buyer and, subject to the receipt of Buyer's Required
Regulatory Approvals, this Agreement constitutes, and upon the execution and
delivery by Buyer of each Additional Agreement to which it is a party, each such
Additional Agreement will constitute, the legal, valid and binding obligation of
Buyer, enforceable against Buyer in accordance with its terms, except that such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other similar Laws
affecting or relating to enforcement of creditors' rights generally and general
principles of equity (regardless of whether enforcement is considered in a
proceeding at law or in equity).
5.3 Consents and Approvals; No Violation.
(a) Except as set forth on Schedule 5.3(a), and subject to
obtaining or making all Buyer's Required Regulatory Approvals, neither the
execution and delivery by Buyer of this Agreement or the Additional Agreements
to which it is a party nor the consummation by Buyer of the transactions
contemplated hereby or thereby will (i) conflict with or result in any breach of
any provision of the certificate or articles of incorporation or bylaws (or
other similar governing documents) of Buyer or any of its Subsidiaries; (ii)
result in a default (or give rise to any right of termination, cancellation or
acceleration) under any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, material agreement or other instrument or obligation
to which Buyer or any of its Subsidiaries is a party or by which Buyer, any such
Subsidiary or any of their respective properties and assets may be bound, except
for such defaults (or rights of termination, cancellation or acceleration) as to
which requisite consents, approvals or waivers have been or will be prior to the
Closing obtained, or which would not, individually or in the aggregate,
materially impair Buyer's ability to consummate the transactions contemplated
hereby or by any Additional Agreement, or to perform its material obligations
hereunder or thereunder (a "Buyer Material Adverse Effect"); or (iii) constitute
violations of any Law, order, judgment or decree applicable to Buyer or any of
its Subsidiaries, which violations, individually or in the aggregate, would have
a Buyer Material Adverse Effect.
(b) Except for consents, approvals, filings and notices (i)
required under the HSR Act or (ii) set forth on Schedule 5.3(b) (the consents,
approvals, filings and notices referred to in clause (ii) of this sentence are
collectively referred to herein as the "Buyer's Required Regulatory Approvals"),
no consent or approval of, filing with, or notice to, any Governmental Authority
is necessary for the execution and delivery by Buyer of this Agreement and the
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Additional Agreements to which it is a party or the consummation by Buyer of the
transactions contemplated hereby or thereby, other than such consents,
approvals, filings or notices, which, if not obtained or made, would not have a
Buyer Material Adverse Effect.
5.4 Buyer's Permits. Buyer holds, and is in compliance with, or on or
prior to the Closing Date will hold, and from and after the Closing Date will
comply with, all permits, certificates, licenses and other authorizations of all
Governmental Authorities that Buyer requires in order to own, lease, maintain
and operate the Purchased Assets (collectively, "Buyer's Permits").
5.5 Availability of Funds. Buyer has sufficient funds and lines of
credit available to it, or has received binding written commitments from
creditworthy financial institutions, true and correct copies of which have been
provided to Seller, to permit Buyer on the Closing Date to pay the Purchase
Price, all other amounts payable by Buyer hereunder or under any Additional
Agreement, and all fees and expenses incurred by Buyer in connection with the
transactions contemplated hereby and by the Additional Agreements, and to permit
Buyer to timely pay or perform all of its other obligations (including its
obligations pursuant to Article VIII) under this Agreement and the Additional
Agreements.
5.6 Financial Statements. Buyer has provided Seller with true and
correct copies of its balance sheet, income statement and statement of changes
in cash flows of Buyer for each of its last three completed fiscal years,
together with the related reports of its independent accountants,
PricewaterhouseCoopers LLP, and for its most recently completed fiscal quarter
("Buyer's Financial Statements"). Such Buyer's Financial Statements have been
prepared in accordance with United States generally accepted accounting
principles consistently applied and fairly reflect, in all material respects,
the financial position, results of operations and cash flow of Buyer at and for
the periods therein.
5.7 Legal Proceedings. There are no suits, actions or proceedings
pending or threatened against Buyer by or before any Governmental Authority,
which would, individually or in the aggregate, have a Buyer Material Adverse
Effect or would materially impair such Buyer's ability to consummate the
transactions contemplated hereby or by any Additional Agreement to which it is a
party. Buyer is not subject to any judgments, orders or decrees of any
Governmental Authority which would, individually or in the aggregate, have a
Buyer Material Adverse Effect or would materially impair such Buyer's ability to
consummate the transactions contemplated hereby or by any Additional Agreement
to which it is a party.
5.8 Qualified Buyer. Buyer is qualified to obtain and, after the
Closing, retain all Buyer Permits, including Environmental Permits, necessary
for Buyer to own, lease, maintain and operate the Jointly Owned Stations,
including, from and after the Closing Date, the Purchased Assets.
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5.9 Inspections. Buyer has, prior to the execution and delivery of
this Agreement, reviewed the environmental site assessments prepared for Seller
and set forth on Schedule 5.9.
5.10 Regulation as a Utility. Buyer is not subject to regulation as a
public utility or public service company (or similar designation) by any
Governmental Authority.
ARTICLE VI
COVENANTS OF THE PARTIES
6.1 Access to Information.
(a) Between the date of this Agreement and the Closing Date,
Seller shall: (i) use its Commercially Reasonable Efforts to give Buyer and its
Representatives, during ordinary business hours and upon reasonable notice,
reasonable access to all books, records, plans, offices and other facilities and
properties included in the Purchased Assets; (ii) furnish Buyer with such
financial and operating data and other information in the possession of Seller
with respect to the Purchased Assets as Buyer may from time to time reasonably
request; and (iii) furnish Buyer with all such other information in the
possession of Seller as shall be reasonably necessary to enable Buyer to verify
the accuracy of the representations and warranties of Seller contained in this
Agreement; provided, however, that (A) any such inspections and investigations
shall be conducted in such manner as not to interfere unreasonably with the
operation of the Purchased Assets, (B) Seller shall not be required to take any
action which would constitute a waiver of the attorney-client or other
privilege, (C) Seller need not supply Buyer with any information which Seller is
under a legal or contractual obligation not to supply and (D) Seller shall not
be required to supply Buyer with any information with respect to the Jointly
Owned Stations to which Seller is not entitled pursuant to the terms of the
Jointly Owned Stations Operating Agreements. Notwithstanding anything herein to
the contrary, prior to the Closing Date, Buyer shall not have the right to
perform or conduct, or cause to be performed or conducted, any environmental
sampling or testing at, in, on or underneath any Jointly Owned Station.
(b) All information furnished to or obtained by Buyer and
Buyer's Representatives pursuant to this Section 6.1 shall be Proprietary
Information and shall be kept confidential in accordance with the terms of the
Confidentiality Agreement. Nothing in this Section 6.1 is intended to or shall
be deemed to amend, supplement or otherwise modify the obligations of Buyer, its
Representatives or its Affiliates under the Confidentiality Agreement, all of
which remain in effect until termination of such agreement in accordance with
its terms.
(c) For a period of seven (7) years from and after the Closing
Date, each Party and its Representatives shall have reasonable access to all of
the books and records of the Purchased Assets in the possession of the other
Party to the extent that such access may reasonably be required by such Party in
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connection with the Assumed Liabilities or the Excluded Liabilities, or other
matters relating to or affected by the operation of the Purchased Assets or the
Excluded Assets. Such access shall be afforded by the Party in possession of any
such books and records upon receipt of reasonable advance notice and during
normal business hours. The Party exercising this right of access shall be solely
responsible for any costs or expenses incurred by it or the other Party with
respect to such access pursuant to this Section 6.1(c). If the Party in
possession of such books and records shall desire to dispose of any books and
records upon or prior to the expiration of such seven-year period, such Party
shall, prior to such disposition, give the other Party a reasonable opportunity,
at such other Party's cost and expense, to segregate and remove such books and
records as such other Party may select.
(d) Buyer shall not, prior to the Closing Date, contact any
customer, vendor, supplier or employee of, or any other Person having business
dealings with, Seller or its Affiliates with respect to any aspect of the
Purchased Assets or the transactions contemplated hereby or by any Additional
Agreement, without the prior written consent of Seller, which consent shall not
be unreasonably withheld or delayed.
6.2 Public Statements. Except as required by applicable Law or by
applicable rules of any national securities exchange, in which event the Parties
shall consult with each other in advance, prior to the Closing Date, no press
release or other public announcement, statement or comment in response to any
inquiry relating to the transactions contemplated by this Agreement shall be
issued, made or permitted to be issued or made by any Party or its
Representatives without the prior written consent of the other Party.
6.3 Further Assurances.
(a) Subject to the terms and conditions of this Agreement, each
of the Parties hereto shall use its reasonable best efforts to take, or cause to
be taken, all actions, and to do, or cause to be done, all things necessary,
proper or advisable under applicable Laws to consummate and make effective the
purchase and sale of the Purchased Assets pursuant to this Agreement and the
assumption of the Assumed Liabilities, including using its reasonable best
efforts to ensure satisfaction of the conditions precedent to each Party's
obligations hereunder, including obtaining all necessary consents, approvals and
authorizations of, and making all required notices or filings with, third
parties required to be obtained or made in order to consummate the transactions
hereunder, including the transfer of the Transferable Permits to Buyer. Seller
shall cooperate with Buyer in its efforts to obtain all other Permits and
Environmental Permits necessary for Buyer to operate the Purchased Assets. Buyer
shall perform all conditions required of Buyer in connection with obtaining the
Seller's Required Regulatory Approvals. No Party shall, without prior written
consent of the other Party, take or fail to take any action which might
reasonably be expected to prevent or materially impede, interfere with or delay
the transactions contemplated by this Agreement.
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(b) Without limiting the generality of Section 6.3(a):
(i) In the event that any Purchased Asset shall not have
been conveyed to Buyer at the Closing, Seller shall, subject to Section
6.3(b)(ii), use Commercially Reasonable Efforts after the Closing to convey such
asset to Buyer as promptly as practicable.
(ii) To the extent that Seller's rights under any material
Seller's Agreement may not be assigned without the consent, approval or
authorization of any third party which consent, approval or authorization has
not been obtained by the Closing Date, this Agreement shall not constitute an
agreement to assign such right if an attempted assignment would constitute a
breach of such Seller's Agreement or violate any applicable Law. If any consent,
approval or authorization to the assignment of any material Seller's Agreement
shall not be obtained, or if any attempted assignment would be ineffective or
would impair Buyer's rights and obligations under such Seller's Agreement, such
that Buyer would not acquire and assume the benefit and detriment of all such
rights and obligations, Seller, at its option and to the fullest extent
permitted by applicable Law and such Seller's Agreement, shall, after the
Closing Date, appoint Buyer to be Seller's agent with respect to such Seller's
Agreement, or, to the fullest extent permitted by applicable Law and such
Seller's Agreement, enter into such reasonable arrangements with Buyer or take
such other actions as are necessary to provide Buyer with the same or
substantially similar rights and obligations under such Seller's Agreement.
6.4 Consents and Approvals. Without limiting the generality of
Section 6.3(a):
(a) As promptly as practicable after the date of this Agreement,
Seller and Buyer shall each file or cause to be filed with the Federal Trade
Commission and the United States Department of Justice all notifications
required to be filed under the HSR Act and the rules and regulations promulgated
thereunder, as amended from time to time, with respect to the transactions
contemplated hereby and by the Additional Agreements. The Parties shall use
their respective Commercially Reasonable Efforts to respond promptly to any
requests for additional information made by such agencies, and to cause the
applicable waiting period under the HSR Act to terminate or expire at the
earliest possible date after the date of filing. Buyer shall pay all filing fees
payable under the HSR Act but each Party shall bear its own costs and expenses
of the preparation of any filing.
(b) As promptly as practicable after the date of this Agreement,
Seller and Buyer shall take, or cause to be taken, all actions, and do, or cause
to be done, all things necessary, proper or advisable under applicable Laws to
obtain all required consents and approvals of the PaPUC, the SEC and all other
Governmental Authorities, and make all other filings and give all other notices
required to be made prior to the Closing with respect to the transactions
contemplated hereby and by the Additional Agreements. The Parties shall respond
promptly to any requests for additional information made by such Persons, and
use their respective Commercially Reasonable Efforts to cause all such consents
and approvals to be obtained or waived at the earliest possible date after the
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date of filing. Each Party will bear its own costs of the preparation of any
such filing or notice; provided, however, that Buyer shall bear all costs
associated with experts and consultants reasonably necessary for the preparation
of any such filing or notice or reasonably necessary to obtain such consents and
approvals as promptly as practicable.
(c) Seller and Buyer shall cooperate with each other and
promptly prepare and file notifications with, and request Tax clearances from,
state and local taxing authorities in jurisdictions in which a portion of the
Purchase Price may be required to be withheld or in which Buyer would otherwise
be liable for any Tax Liabilities of Seller pursuant to state or local Tax Law.
(d) Without limiting the generality of Section 6.4(b), as
promptly as practicable after the date hereof, Buyer shall make all filings
required by the Federal Power Act. Prior to filing any application with the
FERC, Buyer shall submit such application to Seller for review and comment and
shall incorporate into such application all revisions reasonably requested.
Buyer shall be solely responsible for the cost of preparing and filing such
application, as well as all petition(s) for rehearing and all reapplications. If
any filing is rejected by the FERC, Buyer shall petition the FERC for rehearing
or permission to re-submit an application with the FERC, provided that, in
either case, such action has been approved by Seller.
6.5 Certain Tax Matters.
(a) All transfer, sales and similar Taxes ("Transfer Taxes")
incurred in connection with this Agreement and the Additional Agreements, and
the transactions contemplated hereby and thereby (including (i) sales Tax on the
sale or purchase of the Purchased Assets imposed by Pennsylvania and (ii)
transfer Tax on conveyances of interests in real property imposed by
Pennsylvania) shall be borne by Buyer (and, to the extent paid by Seller, Buyer
shall reimburse Seller upon request); provided, however, that if, pursuant to
Section 6.6(e), the transactions contemplated by this Agreement are effectuated
as a Like-Kind Exchange, then Seller shall bear such Transfer Taxes to the
extent that they exceed the amount of Transfer Taxes that would have otherwise
been incurred had the transactions not been effectuated as a Like-Kind Exchange
(and all such amounts shall be computed on an after-Tax basis). Buyer, at its
expense, shall prepare and file, to the extent required by, or permissible
under, applicable Law, all necessary Tax Returns and other documentation with
respect to all such Transfer Taxes, and, if required by applicable Law, Seller
shall join in the execution of all such Tax Returns and other documentation;
provided, however, that prior to the Closing Date, to the extent applicable,
Buyer shall provide to Seller appropriate certificates of Tax exemption from
each applicable Governmental Authority.
(b) With respect to Taxes to be prorated in accordance with
Section 3.5, Buyer shall prepare and timely file all Tax Returns required to be
filed after the Closing Date with respect to the Purchased Assets, if any, and
shall duly and timely pay all such Taxes shown to be due on such Tax Returns.
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Buyer's preparation of such Tax Returns shall be subject to Seller's approval,
which approval shall not be unreasonably withheld or delayed. Buyer shall make
each such Tax Return available for Seller's review and approval (which approval
shall not be unreasonably withheld or delayed) no later than fifteen (15)
Business Days prior to the due date for filing such Tax Return, it being
understood that Seller's failure to approve any such Tax Return shall not limit
Buyer's obligation to timely file such Tax Return and duly and timely pay all
Taxes shown to be due thereon.
(c) Buyer and Seller shall provide the other with such
assistance as may reasonably be requested by the other Party in connection with
the preparation of any Tax Return, audit or other examination, or any
proceeding, by or before any Governmental Authority relating to Liability for
Taxes, and each Party shall retain and provide the requesting Party with all
books and records or other information which may be relevant to such Tax Return,
audit, examination or proceeding. All books, records and information obtained
pursuant to this Section 6.5(c) or pursuant to any other Section that provides
for the sharing of books, records and information or review of any Tax Return or
other instrument relating to Taxes shall be kept confidential by the parties
hereto in accordance with the terms and conditions set forth in the
Confidentiality Agreement.
(d) In the event that a dispute arises between Seller and Buyer
regarding Taxes or any amount due under this Section 6.5, the affected Parties
shall attempt in good faith to resolve such dispute and any agreed-upon amount
shall be promptly paid to the appropriate Party. If any such dispute is not
resolved within thirty (30) days after notice thereof is given to any Party, the
affected Parties shall submit the dispute to an Independent Accounting Firm for
resolution, which resolution shall be final, binding and conclusive on such
Parties. Notwithstanding anything in this Agreement to the contrary, the fees
and expenses of the Independent Accounting Firm in resolving the dispute shall
be borne equally by Seller and Buyer. Any payment required to be made as a
result of the resolution by the Independent Accounting Firm of any such dispute
shall be made within five (5) Business Days after such resolution, together with
any interest determined by the Independent Accounting Firm to be appropriate.
(e) As reasonably requested by Seller, Buyer shall cooperate
with Seller in effectuating the transactions contemplated by this Agreement in
such a manner as to qualify for deferred like-kind exchange treatment under
Section 1031 of the Code ("Like-Kind Exchange") (including the transfer of cash
and other property and the assignment of this Agreement to one or more qualified
intermediaries and the execution of appropriate documentation). In such event,
Seller shall be responsible, and shall indemnify Buyer, for any Transfer Taxes
incurred by Buyer as a result of effectuating such Like-Kind Exchange to the
extent that the amount of such Transfer Taxes exceeds the amount of Transfer
Taxes that the Buyer would have otherwise incurred had the transactions not been
effectuated as a Like-Kind Exchange (and all such amounts shall be computed on
an after-Tax basis). At Buyer's request, Seller shall promptly provide Buyer
copies of all documents prepared by Seller, including proposed agreements,
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relating to the Like-Kind Exchange and shall give Buyer a reasonable opportunity
to promptly comment on such documents and agreements.
(f) To the extent that any Party receives a Tax refund or credit
with respect to a Tax that was paid or incurred by the other Party, such
receiving Party shall promptly pay the amount of such Tax refund or credit to
the other Party.
6.6 Advice of Changes. Prior to the Closing, each Party shall advise
the other in writing with respect to any matter arising after the date of this
Agreement of which that Party obtains Knowledge and which, if existing or
occurring on or prior to the date of this Agreement, would have been required to
be set forth in this Agreement, including any of the Schedules hereto. Seller
shall, from time to time prior to the Closing, promptly supplement or amend the
Schedules to this Agreement with respect to (a) any matter that existed as of
the date of this Agreement and should have been set forth or described in any of
the Schedules hereto and (b) any matter hereafter arising which, if existing as
of the date of this Agreement, would have been required to be set forth or
described in any of the Schedules hereto in order to make any representation or
warranty set forth in this Agreement true and correct as of such date; provided,
however, that, with respect to clause (a) above, any such supplemental or
amended disclosure shall not be deemed to have been disclosed as of the date of
this Agreement unless expressly consented to in writing by Buyer; and provided
further, that, with respect to clause (b) above, any such supplemental or
amended disclosure shall, for purposes of this Agreement, including for purposes
of determining whether the conditions to Closing set forth in Article VII are
satisfied, be deemed to have been disclosed as of the date of this Agreement.
6.7 Risk of Loss.
(a) From the date hereof through the Closing Date, all risk of
loss or damage to the Tangible Personal Property included in the Purchased
Assets shall be borne by Seller, other than loss or damage caused by the
negligent acts or omissions of Buyer or any Buyer Representative, which loss or
damage shall be the responsibility of Buyer.
(b) Notwithstanding any provision hereof to the contrary,
subject to Section 9.1(g), if, before the Closing Date, all or any portion of
the Purchased Assets is (i) condemned or taken by eminent domain or is the
subject of a pending or threatened condemnation or taking which has not been
consummated, or (ii) materially damaged or destroyed by fire or other casualty,
Seller shall notify Buyer promptly in writing of such fact, and (x) in the case
of a condemnation or taking, Seller shall assign or pay, as the case may be, any
net proceeds thereof to Buyer at the Closing and (y) in the case of a fire or
other casualty, Seller shall either restore such damage or assign the insurance
proceeds therefor to Buyer at the Closing. Notwithstanding the foregoing, if
such condemnation, taking, damage or destruction results in a Material Adverse
Effect, Buyer and Seller shall negotiate to resolve the loss resulting from such
condemnation, taking, damage or destruction (and such negotiation shall include
the negotiation of a fair and equitable adjustment to the Purchase Price). If no
such resolution can be agreed upon within ninety (90) days after Seller has
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notified Buyer of such loss, then Buyer, on the one hand, or Seller, on the
other hand, may terminate this Agreement pursuant to Section 9.1(g).
6.8 PJM; MAAC. From and after the Closing Date, Buyer shall maintain
membership in good standing in PJM and MAAC, and shall submit to the governance
of the independent system operator established and administered under the PJM
Agreement.
6.9 Emission Allowances. Buyer and Seller shall take all necessary
actions, including executing any required forms or providing appropriate notices
to Governmental Authorities, in a timely fashion, to ensure that (i) Buyer will
obtain all, or the rights to all, (A) Emission Allowances that are to be
transferred to it pursuant to Section 2.1(f) and as set forth on Schedule
2.1(f), including the right to receive such Emission Allowances that are to be
allocated or issued by a Governmental Authority in the future, and (B) Excess
Emission Allowances that are to be transferred to it pursuant to Section 2.1(g)
and as set forth on Schedule 2.1(g) and (ii) Seller will retain or obtain all,
or the rights to all, Emission Allowances that are defined as Excluded Assets
pursuant to Section 2.2(o), including the right to receive such Emission
Allowances that are to be allocated or issued by a Governmental Authority in the
future. Buyer and Seller further acknowledge and agree that such actions may be
required before, on or after the Closing Date.
ARTICLE VII
CONDITIONS
7.1 Conditions to Obligation of Buyer. The obligation of Buyer to
effect the transactions contemplated by this Agreement shall be subject to the
satisfaction (or the waiver, to the extent permitted by applicable Law, by
Buyer) at or prior to the Closing of the following conditions:
(a) The waiting period under the HSR Act applicable to the
consummation of the transactions contemplated hereby shall have expired or been
terminated;
(b) No preliminary or permanent injunction, order or decree by
any Governmental Authority which prevents the consummation of the transactions
contemplated hereby or by the Additional Agreements shall have been issued and
remain in effect (Buyer agreeing to use its reasonable best efforts to have any
such injunction, order or decree lifted), and no applicable Law shall be in
effect which prohibits the consummation of the transactions contemplated hereby
or thereby;
(c) Buyer shall have obtained the Buyer's Required Regulatory
Approvals set forth on Schedule 7.1(c), in form and substance reasonably
satisfactory to Buyer (including any adverse conditions therein); and such
Buyer's Required Regulatory Approvals shall be final and nonappealable;
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(d) Seller shall have in all material respects performed and
complied with the covenants and agreements contained in this Agreement which are
required to be performed and complied with by Seller on or prior to the Closing
Date;
(e) (i) The representations and warranties of Seller set forth
in this Agreement that are qualified by reference to Material Adverse Effect
shall be true and correct in all respects and (ii) the representations and
warranties of Seller set forth in this Agreement that are not so qualified shall
be true and correct in substantially all respects, in each case, as of the
Closing Date as though made at and as of the Closing Date (other than
representations and warranties that are made as of a specific date which shall
have been true and correct as of such date);
(f) Buyer shall have received a certificate from an authorized
officer of Seller, dated the Closing Date, to the effect that, to such officer's
Knowledge, the conditions set forth in Sections 7.1(d) and (e) have been
satisfied by Seller;
(g) Buyer shall have received an opinion from Seller's counsel,
which counsel shall be reasonably acceptable to Buyer, dated the Closing Date,
substantially in the form of Exhibit E hereto;
(h) There shall not have occurred any Material Adverse Effect
during the period commencing on the date hereof and ending at the Closing;
(i) Buyer shall be able to obtain at Closing an owner's policy
or policies of title insurance issued on the form customarily used in
Pennsylvania insuring title to the Real Property in an amount equal to the
Purchase Price relating to such Real Property, or such lesser amount as Buyer
elects, with exceptions only for Permitted Encumbrances, but without the so-
called "standard" exceptions for (x) the rights of parties in possession, (y)
unfiled mechanics' and materialmens' liens and (z) matters arising after the
dates of the Title Commitments and with the creditors' rights exclusion to
coverage deleted, without Buyer being obligated to pay more than $50,000 in
aggregate additional premium in order for the issuer to delete or insure over
title exceptions which are not Permitted Encumbrances. For purposes hereof
"additional premium" means premium in excess of the amount that the title
insurer has otherwise agreed to accept for issuing the policies of title
insurance to Buyer in the requested amount; and
(j) Subject to the last sentence of Section 3.9, the Related
Purchase Agreements shall be in full force and effect and the valid and binding
obligation of each party thereto (other than Buyer); and all conditions to the
obligations of all parties to the Related Purchase Agreements to consummate the
transactions contemplated thereby shall have been satisfied or, to the extent
permitted by applicable Law, waived.
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7.2 Conditions to Obligation of Seller. The obligation of Seller to
effect the transactions contemplated by this Agreement shall be subject to the
satisfaction (or the waiver, to the extent permitted by applicable Law, by
Seller) at or prior to the Closing of the following conditions:
(a) The waiting period under the HSR Act applicable to the
consummation of the transactions contemplated hereby shall have expired or been
terminated;
(b) No preliminary or permanent injunction or other order or
decree by any Governmental Authority which prevents the consummation of the
transactions contemplated hereby or by the Additional Agreements shall have been
issued and remain in effect (Seller agreeing to use its reasonable best efforts
to have any such injunction, order or decree lifted), and no applicable Law
shall be in effect which prohibits the consummation of the transactions
contemplated hereby or thereby;
(c) Seller shall have obtained the Seller's Required Regulatory
Approvals set forth on Schedule 7.2(c), in form and substance reasonably
satisfactory to Seller (including any adverse conditions therein), and all
conditions to effectiveness prescribed therein or otherwise by Law shall have
been satisfied in all material respects; and such Seller's Required Regulatory
Approvals shall be final and nonappealable;
(d) Buyer shall have in all material respects performed and
complied with the covenants and agreements contained in this Agreement which are
required to be performed and complied with by Buyer on or prior to the Closing
Date;
(e) (i) The representations and warranties of Buyer set forth
in this Agreement that are qualified by reference to Buyer Material Adverse
Effect shall be true and correct in all respects and (ii) the representations
and warranties of Buyer that are not so qualified shall be true and correct in
substantially all respects, in each case, as of the Closing Date as though made
at and as of the Closing Date (other than representations and warranties that
are made as of a specific date which shall have been true and correct as of such
date);
(f) Seller shall have received a certificate from an authorized
officer of Buyer, dated the Closing Date, to the effect that, to such officer's
Knowledge, the conditions set forth in Sections 7.2(d) and (e) have been
satisfied by Buyer;
(g) The Jointly Owned Stations Operating Agreements shall have
been amended to (i) join Buyer as a party to each of the Jointly Owned Stations
Operating Agreements and (ii) irrevocably release Seller from any and all
liabilities and obligations under the Jointly Owned Stations Operating
Agreements, in each case, effective from and after the Closing Date; the Jointly
Owned Stations Operating Agreements, as amended, shall be in form and substance
satisfactory to Seller; and the Jointly Owned Stations Operating Agreements, as
amended, shall be in full force and effect and the valid and binding obligation
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of each signatory thereto, including Buyer, enforceable against each such
signatory in accordance with their respective terms;
(h) Seller shall have received an opinion from Buyer's counsel,
which counsel shall be reasonably acceptable to Seller, dated the Closing Date,
substantially in the form of Exhibit F hereto; and
(i) Subject to the last sentence of Section 3.9, the Related
Purchase Agreements shall be in full force and effect and the valid and binding
obligation of each party thereto (other than Seller); and all conditions to the
obligations of all parties to the Related Purchase Agreements to consummate the
transactions contemplated thereby shall have been satisfied or, to the extent
permitted by applicable Law, waived.
ARTICLE VIII
INDEMNIFICATION AND ARBITRATION
8.1 Indemnification.
(a) From and after the Closing Date, Buyer shall indemnify,
defend and hold harmless Seller and its Representatives (each, a "Seller's
Indemnitee"), from and against any and all claims, demands, suits, losses,
liabilities, penalties, damages, obligations, payments, costs and expenses
(including reasonable attorneys' fees and expenses in connection therewith)
(each, an "Indemnifiable Loss"), asserted against or suffered by any Seller's
Indemnitee relating to, resulting from or arising out of (i) any breach by Buyer
of any covenant or agreement of Buyer contained in this Agreement, (ii) the
Assumed Liabilities, (iii) any Inspection or (iv) any Third-Party Claim against
any Seller's Indemnitee in connection with Buyer's ownership, lease, maintenance
or operation of any of the Purchased Assets on or after the Closing Date (other
than to the extent such Third-Party Claim constitutes an Excluded Liability);
provided, however, that Buyer shall be liable to Seller pursuant to clause (i)
of this Section 8.1(a) only for Indemnifiable Losses for which any Seller's
Indemnitee gives written notice to Buyer (setting forth with reasonable
specificity the nature and amount of the Indemnifiable Loss) during the period
for which such covenants or agreements survive the Closing in accordance with
Section 10.6.
(b) From and after the Closing, Seller shall indemnify, defend
and hold harmless Buyer and its Representatives (each, a "Buyer's Indemnitee"
and, together with Seller's Indemnitees, an "Indemnitee"), from and against any
and all Indemnifiable Losses asserted against or suffered by any Buyer's
Indemnitee relating to, resulting from or arising out of (i) any breach by
Seller of any covenant or agreement of Seller set forth in this Agreement or
(ii) the Excluded Liabilities; provided, however, that Seller shall be liable
pursuant to clause (i) of this Section 8.1(b) only for Indemnifiable Losses for
which any Buyer's Indemnitee gives written notice to Seller (setting forth with
reasonable specificity the nature and amount of the Indemnifiable Loss) during
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the period for which such covenants or agreements survive the Closing in
accordance with Section 10.6.
(c) In furtherance, and not in limitation, of the provisions set
forth in Section 8.1(a), Buyer, for itself and on behalf of its Representatives,
hereby irrevocably releases, holds harmless and forever discharges Seller from
any and all Indemnifiable Losses of any kind or character, whether known or
unknown, contingent or accrued, arising under or relating to Environmental Laws,
or relating to any claim in respect of any Environmental Condition or Hazardous
Substance, whether based on common law or Environmental Laws relating to the
Purchased Assets, other than such Liabilities which have been retained by Seller
hereunder (collectively, "Environmental Claims"). In furtherance of the
foregoing, Buyer, for itself and on behalf of its Representatives, hereby
irrevocably waives any and all rights and benefits with respect to such
Environmental Claims that it now has, or in the future may have conferred upon
it by virtue of any Law or common law principle, which provides that a general
release does not extend to claims which a party does not know or suspect to
exist in its favor at the time of executing the release, if knowledge of such
claims would have materially affected such party's settlement with the obligor.
In this connection, Buyer hereby acknowledges that it is aware that factual
matters now unknown to it may have given, or hereafter may give, rise to
Environmental Claims that are presently unknown, unanticipated and unsuspected,
and Buyer further agrees that this release set forth in this Section 8.1(c) has
been negotiated and agreed upon in light of that awareness, and Buyer, for
itself and on behalf of its Representatives, nevertheless hereby intends
irrevocably to release, hold harmless and forever discharge Seller from all such
Environmental Claims.
(d) The rights and remedies of Seller and Buyer set forth in
this Article VIII are exclusive and in lieu of any and all other rights and
remedies which Seller and Buyer may have under this Agreement, under applicable
Law, whether at common law or in equity, including for declaratory, injunctive
or monetary relief, in each case, with respect to any Indemnifiable Loss.
(e) Notwithstanding anything to the contrary herein, no Person
(including an Indemnitee) shall be entitled to recover from any other Person
(including any Party hereto required to provide indemnification under this
Agreement (an "Indemnifying Party")) any amount in excess of the actual
compensatory damages, court costs and reasonable attorneys' fees suffered by
such Party. Buyer and Seller hereby irrevocably waive any right to recover
punitive, special, exemplary and consequential damages arising in connection
with or with respect to this Agreement (other than with respect to
indemnification for a Third-Party Claim).
(f) Any Indemnitee shall use Commercially Reasonable Efforts to
mitigate all losses, damages and the like relating to a claim under the
indemnification provisions in this Section 8.1, including availing itself of any
defenses, limitations, rights of contribution, claims against third Persons and
other rights at law or equity. For purposes of this Section 8.1(f), the
Indemnitee's Commercially Reasonable Efforts shall include the reasonable
expenditure of money to mitigate or otherwise reduce or eliminate any loss or
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expenses for which indemnification would otherwise be due, and, in addition to
its other obligations hereunder, the Indemnifying Party shall reimburse the
Indemnitee for the Indemnitee's reasonable expenditures in undertaking the
mitigation.
8.2 Defense of Claims.
(a) If any Indemnitee receives notice of the assertion of any
claim or of the commencement of any suit, action or proceeding made or brought
by any Person who is not an Indemnitee (a "Third-Party Claim") with respect to
which indemnification is to be sought from an Indemnifying Party, the Indemnitee
shall give such Indemnifying Party reasonably prompt written notice thereof, but
in no event later than ten (10) Business Days after the Indemnitee's receipt of
notice of such Third-Party Claim. Such notice shall describe the nature of the
Third-Party Claim in reasonable detail and shall indicate the estimated amount,
if practicable, of the Indemnifiable Loss that has been or may be incurred by
the Indemnitee. The Indemnifying Party shall have the right to participate in
or, by giving written notice to the Indemnitee, to elect to assume the defense
of any Third-Party Claim at such Indemnifying Party's expense and by such
Indemnifying Party's own counsel. If an Indemnifying Party elects not to assume
the defense of any Third-Party Claim, the Indemnitee may defend, compromise or
settle such Third-Party Claim with counsel selected by it, provided that,
without the prior written consent of the Indemnifying Party, the Indemnitee
shall not agree to the entry of any judgment with respect to, or any compromise
or settlement of, any Third-Party Claim, which judgment, compromise or
settlement does not include the unconditional release of the Indemnifying Party.
(b) If, within twenty (20) Business Days after an Indemnitee
gives written notice to the Indemnifying Party of any Third-Party Claim, such
Indemnitee receives written notice from the Indemnifying Party that such
Indemnifying Party has elected to assume the defense of such Third-Party Claim
as provided in Section 8.2(a), then the Indemnifying Party shall not be liable
for any costs, fees or expenses subsequently incurred by the Indemnitee in
connection with the defense, compromise or settlement thereof.
(c) Subject to Section 8.3, any claim by an Indemnitee on
account of an Indemnifiable Loss which does not constitute a Third-Party Claim
(a "Direct Claim") shall be asserted by giving the Indemnifying Party reasonably
prompt written notice thereof, in no event later than twenty (20) Business Days
after the Indemnitee becomes aware of such Direct Claim, stating the nature of
such claim in reasonable detail and indicating the estimated amount, if
practicable, of such Indemnifiable Loss and the Indemnifying Party shall have a
period of twenty (20) Business Days within which to respond to such Direct
Claim. If the Indemnifying Party fails to respond during such twenty (20)
Business Day period, the Indemnifying Party shall be deemed to have accepted
such claim and, subject to this Article VIII, shall promptly reimburse the
Indemnitee for the Indemnifiable Losses set forth in the Indemnitee's notice.
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(d) A failure to give timely notice as provided in this Section 8.2
shall not affect the rights or obligations of any Party hereunder except to the
extent that, as a result of such failure, the Party which was entitled to
receive such notice was actually prejudiced as a result of such failure.
8.3 Arbitration.
(a) Notwithstanding any provision hereof to the contrary, in the
event of any dispute between Seller and Buyer arising after the Closing (whether
relating to facts, events or circumstances occurring or existing prior to, on or
after the Closing Date) and relating to or arising out of any provision of this
Agreement (other than disputes arising under Section 2.3, 2.4, 3.2, 3.3, 3.4,
6.5 or 8.1(a)(ii)), the Party asserting such dispute shall give written notice
to the other of the fact that a dispute has arisen pursuant hereto. Such notice
shall include (i) a statement setting forth in reasonable detail the facts,
events, circumstances, evidence and arguments underlying such dispute and (ii)
proposed arrangements for a meeting to attempt to resolve the dispute to be held
within sixty (60) days after such notice is given. Within thirty (30) days after
such notice is given, the other Party hereto shall submit to the Party giving
such notice a written summary responding to such statement of facts, events,
circumstances, evidence and arguments contained in the notice and an acceptance
of or proposed alternative to the meeting arrangements set forth in the initial
notice.
(b) The chief executive officers (or any other executive officer
or officers directly reporting to, and duly designated by, such chief executive
officers) of each of the Parties shall meet at a mutually acceptable time and
place to attempt to settle any dispute in good faith; provided, however, that
such meeting shall be held at the principal offices of the Party receiving the
notice of dispute unless otherwise agreed; and provided further, that any such
meeting shall be held no later than sixty (60) days after the written notice of
dispute is given pursuant to Section 8.3(a). Each Party shall bear its own costs
and expenses with respect to preparation for, attendance at and participation in
such meeting.
(c) In the event that (i) a meeting has been held in accordance
with Section 8.3(b), (ii) any such dispute of the kind referred to in Section
8.3(a) shall not have been resolved at such meeting and (iii) the aggregate
amount in dispute exceeds $100,000, then either Party may submit such dispute to
binding arbitration pursuant to the Commercial Arbitration Rules of the American
Arbitration Association (the "Commercial Arbitration Rules"). In the event that
such dispute is submitted to arbitration pursuant to the Commercial Arbitration
Rules, then the arbitration tribunal shall be composed of three arbitrators (one
arbitrator selected by each Party within thirty (30) days after the meeting held
in accordance with Section 8.3(b) with the third selected by the other two
arbitrators or, in the absence of agreement between them, the American
Arbitration Association), the venue of the arbitration shall be Wilmington,
Delaware, the language of the arbitration shall be English and the arbitration
shall commence no later than sixty (60) days after the meeting held in
accordance with Section 8.3(b). The decision, judgment and order of the
arbitration tribunal shall be final, binding and conclusive as to the Parties
and their respective Representatives, and may be entered in court of competent
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jurisdiction. Other than the fees and expenses of the arbitrators, which shall
be shared equally by the Parties, each Party shall bear its own costs and
expenses (including attorneys' fees and expenses) relating to the arbitration.
8.4 Remediation of Matters Covered in Section 2.4(g). With respect to
the Liabilities as to which Seller has retained responsibility for Remediation
pursuant to Section 2.4(g):
(a) Seller shall have the right, but not the obligation, to
control the management of any Remediation covered by this Section 8.4. With
respect to Liabilities that are potentially covered by this Section 8.4, Seller
must notify Buyer within thirty (30) days of receipt of notice of Buyer's claim
for indemnification for such matter that it intends to undertake responsibility
for said Remediation. Prior to a determination by Seller that it will undertake
Remediation pursuant to this Section 8.4, Buyer shall, at Seller's expense, take
only those actions necessary to comply with applicable Environmental Laws or as
required by Governmental Authorities or address conditions that pose an
immediate and acute environmental or health risk (unless additional actions are
approved by Seller, such approval not to be unreasonably withheld or delayed).
(b) Seller shall comply with all applicable Laws, including all
applicable Environmental Laws, with respect to its performance pursuant to this
Section 8.4. Seller shall promptly provide copies to Buyer of all notices,
correspondence, draft reports, submissions, work plans, and final reports and
shall give Buyer a reasonable opportunity (at Buyer's own expense) to promptly
comment on any submissions Seller intends to deliver or submit to the
appropriate regulatory body prior to said submission. Buyer may, at its own
expense, hire its own consultants, attorneys or other professionals to monitor
the investigation or remediation, including any field work undertaken by Seller,
and Seller shall provide Buyer with the results of all such field work.
Notwithstanding the foregoing, Buyer shall not take any actions that shall
unreasonably interfere with Seller's performance of the Remediation. Seller
shall undertake any such work required herein in a manner designed to minimize
any disruption, to the greatest extent possible, with the conduct of operations
at the property. Buyer shall allow Seller reasonable access to conduct any of
the work contemplated herein and shall fully cooperate with Seller in the
performance of the Remediation, including providing Seller with reasonable
access to employees and documents as necessary.
(c) If Seller declines to undertake the performance of a
Remediation hereunder, Buyer shall be entitled to control the investigation and
remediation. Buyer shall promptly provide copies to Seller of all notices,
correspondence, draft reports, submissions, work plans, and final reports and
shall give Seller a reasonable opportunity (at Seller's own expense) to promptly
comment on any submissions Buyer intends to deliver or submit to the appropriate
regulatory body prior to said submission. Seller may, at its own expense, hire
its own consultants, attorneys or other professionals to monitor the
Remediation, including any field work undertaken by Buyer, and Buyer shall
provide Seller with the results of all such field work. Notwithstanding the
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<PAGE>
foregoing, Seller shall not take any actions that shall unreasonably interfere
with Buyer's performance of the Remediation. Seller's decision to allow Buyer to
undertake Remediation hereunder shall not limit or affect Seller's obligation to
indemnify Buyer for said investigation and remediation as otherwise provided in
this Agreement.
(d) Without regard to whether Buyer or Seller is conducting a
Remediation pursuant to this Section 8.4, the Parties agree that such
Remediation will be conducted in a reasonable manner and consistent with the use
of the Site in question as an electric generating station. Without limiting the
foregoing, the Parties agree that they will conduct any such Remediation so that
the Remediation Standard that is applicable to the Site is the least stringent
Remediation Standard that would apply to the Site based on the current use of
the Site, and Buyer furthermore covenants that it will accept a deed restriction
or other reasonable institutional or engineering controls, if such mechanisms
will (A) allow the Remediation of the Site to be completed in the least cost
manner in compliance with applicable Environmental Law and (B) not unreasonably
interfere with operations at the Site. Notwithstanding the foregoing, if Buyer
determines at or after the Closing that it desires a Remediation such that the
Site is remediated to a more stringent Remediation Standard, it may do so,
provided, that (x) if Seller is managing a Remediation pursuant to this Section
8.4, it has the right, to the extent permitted by Law, to cease conduct of the
Remediation and request Buyer to assume the conduct of the Remediation and (y)
notwithstanding which of the Parties conducts the Remediation, Buyer shall be
liable for the costs and expenses associated with the Remediation to the extent
those costs and expenses exceed those that would be associated with a
Remediation Standard as determined by the previous sentence.
ARTICLE IX
TERMINATION
9.1 Termination.
(a) This Agreement may be terminated at any time prior to the
Closing by mutual written consent of the Parties.
(b) This Agreement may be terminated by Seller, on the one hand,
or Buyer, on the other hand, upon written notice to the other Party, (i) at any
time prior to the Closing if any court of competent jurisdiction shall have
issued an order, judgment or decree permanently restraining, enjoining or
otherwise prohibiting the Closing, and such order, judgment or decree shall have
become final and nonappealable; (ii) at any time prior to the Closing if any Law
shall have been enacted or issued by any Governmental Authority which, directly
or indirectly, prohibits the consummation of the transactions contemplated by
this Agreement or by any Additional Agreement; or (iii) at any time after the
first anniversary of the date of this Agreement if the Closing shall not have
occurred on or before such date; provided, however, that the right to terminate
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<PAGE>
this Agreement under this Section 9.1(b)(iii) shall not be available to any
Party whose breach of this Agreement has caused, or resulted in, the failure of
the Closing to occur on or before such date; and provided, further, that if on
such date, the conditions to the Closing set forth in Section 7.1(c) or 7.2(c)
shall not have been satisfied but all other conditions to the Closing shall be
satisfied or shall be capable of being satisfied, then no Party shall be
entitled to terminate this Agreement prior to the date which is 180 days after
the first anniversary of the date of this Agreement.
(c) This Agreement may be terminated by Buyer, upon written
notice to Seller, if any of Buyer's Required Regulatory Approvals, the receipt
of which is a condition to the obligation of Buyer to consummate the Closing as
set forth in Section 7.1(c), shall have been denied (and a petition for
rehearing or refiling of an application initially denied without prejudice shall
also have been denied), and such denial was not caused by or the result of a
breach of this Agreement by Buyer.
(d) This Agreement may be terminated by Seller, upon written
notice to Buyer, if any of the Seller's Required Regulatory Approvals, the
receipt of which is a condition to the obligation of Seller to consummate the
Closing as set forth in Section 7.2(c), shall have been denied (and a petition
for rehearing or refiling of an application initially denied without prejudice
shall also have been denied), and such denial was not caused by or the result of
a breach of this Agreement by Seller.
(e) Except as otherwise provided in this Agreement, this
Agreement may be terminated by Buyer, upon written notice to Seller, if there
has been a breach by Seller of any covenant, agreement, representation or
warranty contained in this Agreement which has had a Material Adverse Effect and
such breach is not cured by the earlier of the Closing Date or the date thirty
(30) days after receipt by Seller of notice specifying in reasonable detail the
nature of such breach, unless Buyer shall have previously waived such breach.
(f) Except as otherwise provided in this Agreement, this
Agreement may be terminated by Seller, upon written notice to Buyer, if there
has been a material breach by Buyer of any covenant, agreement, representation
or warranty contained in this Agreement which has had a Material Adverse Effect
and such breach is not cured by the earlier of the Closing Date or the date
thirty (30) days after receipt by Buyer of notice specifying in reasonable
detail the nature of such breach, unless Seller shall have previously waived
such breach.
(g) This Agreement may be terminated by Seller, on the one hand,
or Buyer, on the other hand, upon written notice to the other Party, in
accordance with the provisions of Section 6.7(b), provided that the Party
seeking to so terminate shall have complied with its obligations under Section
6.7.
9.2 Effect of Termination. Upon termination of this Agreement prior
to the Closing pursuant to Section 9.1, this Agreement shall be null and void
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<PAGE>
and of no further force or effect (except that the provisions set forth in
Section 6.2, this Section 9.2 and Article X, and the Confidentiality Agreement,
shall remain in full force and effect in accordance with their respective
terms); and no Party shall have any further Liability under this Agreement
(other than for any wilful breach of its obligations hereunder).
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 Amendment and Modification. Subject to applicable Law, this
Agreement may be amended, supplemented or otherwise modified only by written
agreement entered into by all Parties.
10.2 Expenses. Except to the extent provided herein, whether or not
the transactions contemplated hereby are consummated, all costs, fees and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be borne by the Party incurring such costs, fees and
expenses, including the fees and commissions referred to in Section 10.3.
Notwithstanding the foregoing, Buyer shall be responsible for the payment of, or
reimbursement of Seller for: (a) all actual out-of-pocket costs, fees and
expenses charged by Lawyers Title Insurance Corporation in connection with
obtaining any title insurance policy and all endorsements thereto, including
policy premiums; (b) all survey costs, fees and expenses incurred by Buyer; (c)
all survey costs, fees and expenses incurred by Seller on or prior to the date
hereof, but, together with all such costs, fees and expenses incurred in
connection with the Related Purchase Agreements, not in excess of $600,000; (d)
all filing fees under the HSR Act; and (e) all costs for experts and consultants
in accordance with Section 6.4(b).
10.3 Fees and Commissions. Seller, on the one hand, and Buyer, on the
other hand, represent and warrant to the other that, except for Credit Suisse
First Boston, Inc. and Reed/Navigant Consulting Group, which are acting for and
at the expense of Seller, and CIBC World Markets Corp., which is acting for and
at the expense of Buyer, no broker, finder or other Person is entitled to any
brokerage fees, commissions or finder's fees in connection with the transactions
contemplated hereby by reason of any action taken by such Party or its
Representatives. Seller, on the one hand, and Buyer, on the other hand, shall
pay or otherwise discharge all such brokerage fees, commissions and finder's
fees so incurred by such Parties.
10.4 Bulk Sales Laws. Buyer hereby acknowledges that, notwithstanding
anything in this Agreement to the contrary, Seller will not comply with the
provisions of the bulk sales laws of any jurisdiction in connection with the
transactions contemplated by this Agreement; and Buyer hereby irrevocably waives
compliance by Seller with the provisions of the bulk sales laws of all
applicable jurisdictions.
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<PAGE>
10.5 Waiver of Compliance; Consents. To the extent permitted by
applicable Law, any failure of any of the Parties to comply with any covenant,
agreement or condition set forth herein may be waived by the Party entitled to
the benefit thereof only by a written instrument signed by such Party, but any
such waiver shall not operate as a waiver of, or estoppel with respect to, any
prior or subsequent failure to comply therewith.
10.6 No Survival. No representation or warranty contained in this
Agreement shall survive the delivery of the Limited Warranty Deeds and the
Closing. The covenants and agreements of the Parties contained in this Agreement
shall survive the Closing in accordance with their respective terms.
10.7 Disclaimers. EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES SET
FORTH IN ARTICLE IV, THE PURCHASED ASSETS ARE SOLD "AS IS, WHERE IS", AND SELLER
EXPRESSLY DISCLAIMS ALL OTHER REPRESENTATIONS AND WARRANTIES OF ANY KIND OR
NATURE, EXPRESS OR IMPLIED, AS TO SELLER AND THE PURCHASED ASSETS. WITHOUT
LIMITING THE GENERALITY OF THE FOREGOING, EXCEPT FOR THE REPRESENTATIONS AND
WARRANTIES SET FORTH IN ARTICLE IV: SELLER EXPRESSLY DISCLAIMS ALL OTHER
REPRESENTATIONS AND WARRANTIES REGARDING LIABILITIES, OWNERSHIP, LEASE,
MAINTENANCE OR OPERATION OF THE PURCHASED ASSETS, THE TITLE, CONDITION, VALUE OR
QUALITY OF THE PURCHASED ASSETS OR THE PROSPECTS (FINANCIAL AND OTHERWISE),
RISKS AND OTHER INCIDENTS OF THE PURCHASED ASSETS; AND SELLER EXPRESSLY
DISCLAIMS ALL REPRESENTATIONS AND WARRANTIES OF MERCHANTABILITY, USAGE,
SUITABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE WITH RESPECT TO THE PURCHASED
ASSETS, OR ANY PART THEREOF, OR AS TO THE WORKMANSHIP THEREOF, OR THE ABSENCE OF
ANY DEFECTS THEREIN, WHETHER LATENT OR PATENT, OR COMPLIANCE WITH ENVIRONMENTAL
REQUIREMENTS, OR THE APPLICABILITY OF ANY GOVERNMENTAL AUTHORITY, INCLUDING ANY
ENVIRONMENTAL LAWS, OR WHETHER SELLER POSSESSES SUFFICIENT REAL PROPERTY OR
PERSONAL PROPERTY TO OPERATE THE PURCHASED ASSETS. EXCEPT AS OTHERWISE EXPRESSLY
PROVIDED HEREIN, SELLER FURTHER EXPRESSLY DISCLAIMS ALL REPRESENTATIONS OR
WARRANTIES REGARDING THE ABSENCE OF HAZARDOUS SUBSTANCES OR LIABILITY OR
POTENTIAL LIABILITY ARISING UNDER ENVIRONMENTAL LAWS WITH RESPECT TO THE
PURCHASED ASSETS. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, EXCEPT AS
OTHERWISE EXPRESSLY PROVIDED HEREIN, SELLER EXPRESSLY DISCLAIMS ALL
REPRESENTATIONS AND WARRANTIES OF ANY KIND REGARDING THE CONDITION OF THE
PURCHASED ASSETS OR THE SUITABILITY OF THE PURCHASED ASSETS FOR OPERATION AS A
POWER PLANT OR AS A FUEL PROCESSING FACILITY, AS APPLICABLE, AND NO SCHEDULE OR
EXHIBIT TO THIS AGREEMENT, NOR ANY OTHER MATERIAL OR INFORMATION PROVIDED, OR
COMMUNICATIONS MADE, BY SELLER OR ITS REPRESENTATIVES, INCLUDING ANY BROKER OR
INVESTMENT BANKER, WILL CAUSE OR CREATE ANY SUCH REPRESENTATION OR WARRANTY,
50
<PAGE>
EXPRESS OR IMPLIED, AS TO THE TITLE, CONDITION, VALUE OR QUALITY OF THE
PURCHASED ASSETS.
SELLER EXPRESSLY DISCLAIMS ALL REPRESENTATIONS AND WARRANTIES WITH
RESPECT TO THE NAMES "CONEMAUGH STATION" AND "KEYSTONE STATION", INCLUDING ALL
REPRESENTATIONS AND WARRANTIES OF (1) TITLE; (2) LENGTH, NATURE, EXCLUSIVITY AND
CONTINUITY OF USE; (3) STRENGTH OR FAME; AND (4) NONINFRINGEMENT AND NONDILUTION
OF TRADEMARK, SERVICE MARK, TRADE NAME OR OTHER PROPRIETARY RIGHTS OF ANY THIRD
PARTY. BUYER HEREBY ACKNOWLEDGES THAT THE NAMES "CONEMAUGH STATION" AND
"KEYSTONE STATION" EACH HAVE A GEOGRAPHIC CONNOTATION ASSOCIATED WITH THE
LOCATION OF CERTAIN OF THE PURCHASED ASSETS.
10.8 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given on the day when delivered personally or by
facsimile transmission (with confirmation), on the next Business Day when
delivered to a nationally recognized overnight courier or five (5) Business Days
after deposited as registered or certified mail (return receipt requested), in
each case, postage prepaid, addressed to the recipient Party at its address set
forth below (or at such other address or facsimile number for a Party as shall
be specified by like notice; provided, however, that any notice of a change of
address or facsimile number shall be effective only upon receipt thereof):
(a) If to Seller, to:
Conectiv
800 King Street
P.O. Box 231
Wilmington, Delaware 19899
Attention: Chairman
Facsimile: (302) 429-3367
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
One Rodney Square
Wilmington, Delaware 19801
Attention: Steven J. Rothschild, Esquire
Facsimile: (302) 651-3001
51
<PAGE>
(b) if to Buyer, to:
NRG Energy, Inc.
1221 Nicollet Mall, Suite 700
Minneapolis, Minnesota 55403
Attention: Vice President and General Counsel
Facsimile: (612) 373-5392
with a copy to:
Gray, Plant, Mooty, Mooty & Bennett, P.A.
3400 City Center
33 South Sixth Street
Minneapolis, Minnesota 55402
Attention: Joseph T. Kinning, Esquire
Facsimile: (612) 333-0066
10.9 Assignment. This Agreement shall be binding upon and inure to the
benefit of the Parties and their respective successors and permitted assigns,
but neither this Agreement nor any of the rights, interests, obligations or
remedies hereunder shall be assigned by any Party hereto, including by operation
of law, without the prior written consent of the other Parties, nor is this
Agreement intended to confer upon any other Person any rights, interests,
obligations or remedies hereunder. Notwithstanding the foregoing, (i) Seller may
assign all or any portion of its rights, interests, obligations and remedies
hereunder to Conectiv, a Delaware corporation, or any of Conectiv's wholly owned
subsidiaries; provided, however, that no such assignment shall (A) materially
impair or delay the consummation of the transactions contemplated hereby or (B)
relieve or discharge Seller from any of its obligations hereunder; and (ii)
Buyer may assign all or any portion of its rights, interests, obligations and
remedies hereunder to (A) any of its wholly owned subsidiaries or (B) a trustee,
lending institution or other Person solely for purposes of financing the
transactions contemplated hereby; provided, however, that no such assignment
shall (A) materially impair or delay the consummation of the transactions
contemplated hereby or (B) relieve or discharge Buyer from any of its
obligations hereunder.
10.10 Governing Law; Forum; Service of Process. This Agreement shall
be governed by and construed in accordance with the laws of the State of
Delaware (without giving effect to conflicts of law principles) as to all
matters, including validity, construction, effect, performance and remedies.
Venue in any and all suits, actions and proceedings related to the subject
matter of this Agreement shall be in the state and federal courts located in and
for the State of Delaware (the "Courts"), which shall have exclusive
jurisdiction for such purpose, and the Parties hereby irrevocably submit to the
exclusive jurisdiction of such courts and irrevocably waive the defense of an
inconvenient forum to the maintenance of any such suit, action or proceeding.
Service of process may be made in any manner recognized by such Courts. Each of
52
<PAGE>
the Parties hereby irrevocably waives its right to a jury trial arising out of
any dispute in connection with this Agreement or the transactions contemplated
hereby.
10.11 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
10.12 Interpretation. The article and section headings contained in
this Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
construction of this Agreement. Ambiguities and uncertainties in the wording of
this Agreement shall not be construed for or against any Party, but shall be
construed in the manner that most accurately reflects the Parties' intent as of
the date of this Agreement. Each Party acknowledges that it has been represented
by counsel in connection with the review and execution of this Agreement, and,
accordingly, there shall be no presumption that this Agreement or any provision
hereof be construed against the Party that drafted this Agreement.
10.13 Schedules and Exhibits. Except as otherwise provided in this
Agreement, all Exhibits and Schedules referred to herein are intended to be and
hereby are made a part of this Agreement.
10.14 Entire Agreement. This Agreement (including the Schedules and
Exhibits), together with the Confidentiality Agreement, embodies the entire
agreement and understanding of the Parties hereto in respect of the transactions
contemplated by this Agreement and the Additional Agreements and supersedes all
prior agreements and understandings between or among the Parties with respect to
such transactions. There are no representations, warranties, covenants or
agreements between or among the Parties with respect to the subject matter set
forth in such agreements, other than those expressly set forth or referred to
herein or therein. Without limiting the generality of the foregoing, Buyer
hereby acknowledges and agrees that there are no representations, warranties,
covenants or agreements between or among the Parties with respect to the subject
matter set forth in such agreements contained in any material made available to
Buyer pursuant to the terms of the Confidentiality Agreement (including the
Offering Memorandum dated June 18, 1999, previously provided to Buyer by or on
behalf of Seller, Reed/Navigant Consulting Group and Credit Suisse First Boston,
Inc.).
[SIGNATURE PAGE FOLLOWS]
53
<PAGE>
IN WITNESS WHEREOF, Seller and Buyer have caused this Purchase and
Sale Agreement to be duly executed and delivered by their respective duly
authorized officers as of the date first above written.
DELMARVA POWER & LIGHT COMPANY
By: /s/ Thomas S. Shaw
------------------
Name: Thomas S. Shaw
Title: Executive Vice President
NRG ENERGY, INC.
By: /s/ Craig A. Mataczynski
-----------------------------------
Name: Craig A. Mataczynski
Title: Senior Vice President
<PAGE>
APPENDIX H
WORKPAPERS
AND
RATES
<PAGE>
Description of Appendix H Attachments
-------------------------------------
Attachment 1:
- ------------
Attachment 1 demonstrates that the "Total Divestiture" proposal
results in overall lower revenue requirements to Delmarva Power & Light
Company's Virginia retail customers than current revenues, with updated fuel
costs, or revenues reflecting divestiture of generation assets under a
traditional regulatory approach. This Attachment illustrates that current
revenues, including updated fuel costs, result in revenues of $28,223,815 for
the 12 month period ending July 31, 1999. Delmarva Power & Light Company's
"Total Divestiture" proposal results in revenues of $27,496,272 for the same
time period. This is a $727,543 or 2.58% revenue reduction when compared to
current revenue levels, adjusted for updated fuel costs. Under a traditional
regulatory approach (reflecting removal of generation and associated costs and
replacement of this capacity by capacity purchased at market-based capacity
prices and fuel costs replaced by Virginia hourly load priced at the PJM
Locational Marginal Price (LMP) adjusted for losses and gross receipts taxes)
the revenues would be $28,257,779 for the 12 month period ending July 31, 1999.
This represents a revenue increase of $33,964 or .12% above current revenue
levels, adjusted for updated fuel costs.
Attachment 2:
- ------------
Page 1 of Attachment 2 summarizes impact on the revenue requirement of
removing generation plant and associated costs from the Virginia jurisdictional
revenue requirement calculation. The impact of this removal, before the
inclusion of replacement capacity for the generation capacity removed, is a
reduction in the revenue requirement of $8,074,896. This figure is used in the
calculation of revenues under the traditional regulatory approach on page 1 of
Attachment 1.
Page 2 of Attachment 2 summarizes the impact of updating fuel costs
and basing the fuel cost on the actual fuel costs from October 1998 through
September 1999. The average fuel rate based on this calculation is $0.02067 per
kWh. This figure is used in the calculation of current revenues of page 1 of
Attachment 1.
Page 2 of Attachment 2 also includes the calculation of the fuel rate
based on the Virginia hourly load data applied to PJM energy rates which results
in a fuel rate of $0.03890 per kWh. This figure is used in the calculation of
revenues under the traditional regulatory approach on page 1 of Attachment 1.
Finally, page 2 of Attachment 2 contains the calculation of the
replacement capacity costs for the Virginia retail electric jurisdiction of
$2,024,326 per year, based on the cost of capacity as of May 2000 and 1999 peak
load for the Virginia retail jursidiction. This figure is used in the
calculation of revenues under the traditional regulatory approach on page 1 of
Attachment 1.
Attachment 3:
- ------------
Page 1 of Attachment 3 provides a summary of the present revenues by
customer rate class using August 1, 1998 through July 31, 1999 base revenues and
fuel rates based on actual fuel costs for the period October 1, 1998 through
September 30, 1999. In addition, page 1 of Attachment 3 provides a summary of
revenues for Phases I, II and III reflecting proposed bases rate decrease and
frozen fuel rates.
Page 2 of Attachment 3 provides a summary of the Phase III revenues
developed on page 1 of Attachment 3 and "Total Divestiture" revenues which
reflect fuel charges set at the contract level and base rates adjusted to yield
the same overall revenues as the Phase III revenues.
Attachment 4:
- ------------
Pages 1 through 9 of Attachment 4 provide the specific rates by
customer rate class for Phases I, II and III of the proposed rate decrease and
the "Final Proposed Rates" reflecting the "Total Divestiture" proposal.
<PAGE>
<TABLE>
<CAPTION>
Appendix H
Attachment 1
Page 1 of 1
DELMARVA POWER & LIGHT COMPANY
Comparison of Current Revenues, Traditional Regulatory Approach and
the Total Divestiture Proposal
Demonstrating that the Total Divestiture Proposal
RESULTS IN LOWER OVERALL REVENUE REQUIREMENTS TO DELMARVA POWER & LIGHT COMPANY'S VIRGINIA RETAIL CUSTOMERS
Test Period: 12 Months Ending July 31, 1999
- ------------------------------------------------------------------------------------------------------------------------------------
Current Revenues: Current Base Revenues for the 12 Month Period Ending 7/31/99. Actual Fuel Costs for the 12
Month Period Ending 9/30/99 adjusted for 8/1/98 - 7/31/99 sales levels.
- ------------------------------------------------------------------------------------------------------------------------------------
Traditional Regulatory Approach: Removal of Generation Plant and Associated Costs and Replacement of Capacity by Market-Based
Capacity Price Fuel Costs Replaced by Virginia Hourly Load Priced at PJM LMP Adjusted for
Losses and Gross Receipts Tax.
- ------------------------------------------------------------------------------------------------------------------------------------
Total Divestiture Proposal: Total Divestiture of Generation. Capacity and Fuel Costs Set At Contract Price. Total Revenues
Set Equal To Phase III Total Revenues.
- ------------------------------------------------------------------------------------------------------------------------------------
Traditional Difference Compared Difference Compared
Regulatory To Current Revenues Total To Current Revenues
Current Approach ------------------- Divestiture -------------------
Revenues Revenues $ % Revenues $
(A) (B) (C) (D) (E) (F)
Line (B)-(A) (C)/(A) (E)-(A) (F)/(A)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Current Base Revenues $21,324,902 $21,324,902
2 Removal of Generating Plant and $8,074,896
Associated Costs
------------------------
3 Subtotal (Line 1 + Line 2) $21,324,902 $13,250,006
4 Replacement Capacity $2,024,332
------------------------
5 Total Base Rates (Line 3 + Line 4) $21,324,902 $15,274,338 $16,181,654
6 Fuel Costs at PJM LMP (Avg. Per kWh) $0.02067 $0.03890 $0.03390
7 kWh Sales (12 Mths Ended 7/13/99) 333,764,540 333,764,540 333,764,540
8 Fuel Costs (Line 6 x Line 7) $6,898,913 $12,983,441 $11,314,618
- ------------------------------------------------------------------------------------------------------------------------------------
9 TOTAL REVENUE REQUIREMENTS (LINE 5 + LINE 8) $28,223,815 $28,257,779 $33,964 0.12% $27,496,272 -$727,543 -2.58%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Appendix H
Attachment 2
Page 1 of 2
Delmarva Power and Light Company
Analysis of Virginia Revenue Requirement
by Plant for 12 M/E 7/31/99
----------------------------------------
(1) (2) (3)
Line Total
No. Peach Bottom Salem Nuclear
Rate Base
---------
<C> <C> <C> <C>
1 Net Plant $77,864,411 $156,436,560 $234,300,971
2 CWIP $7,710,147 $447,055 $8,157,202
3 Deferred Tax - Federal ($13,682,407) ($36,544,598) ($50,227,005)
4 ITC - (Balance) ($1,662,419) ($3,339,949) ($5,002,368)
-----------------------------------------------------------------------------
5 Net Rate Base $70,229,732 $116,999,068 $187,228,800
6 =============================================================================
7 Virginia Allocation Factor 0.027963 0.027963 0.027963
8
9 Virginia Rate Base $1,963,834 $3,271,645 $5,235,479
10
11 VA Authorized ROR (1998 AIF) 9.012% 9.012% 9.012%
12
13 ROR * Rate Base $176,981 $294,841 $471,821
14
15 Earnings
16 O&M Net of Fuel $18,005,649 $22,752,844 $40,758,493
17 Depreciation $6,611,036 $9,374,762 $15,985,798
18 Other Taxes $178,000 $52,000 $230,000
-----------------------------------------------------------------------------
19 Total Operating Expenses $24,794,685 $32,179,606 $56,974,291
=============================================================================
20 Effective Tax Rate 39.4765% ($9,788,074) ($12,703,382) ($22,491,456)
21
22 Earnings $15,996,611 $19,476,224 $34,482,835
23
24 Virginia Allocator 0.027963 0.27963 0.027963
-----------------------------------------------------------------------------
25 Virginia Retail Earnings $419,630 $544,614 $964,244
26 =============================================================================
27 Net Virginia Earnings $596,611 $839,454 $1,436,065
28
29 Revenue Conversion Factor 1.5795 1.5795 1.5795
30
31 REVENUE REQUIREMENT $942,346 $1,325,918 $2,268,264
<PAGE>
<CAPTION>
(4) (5) (6) (7) (8)
Line Fossil Plants
No. Indian River Vienna Conemaugh Keystone To Be Sold
Rate Base
---------
<S> <C> <C> <C> <C> <C>
1 Net Plant $261,142,568 $19,705,741 $21,009,121 $10,988,532 $312,845,962
2 CWIP $2,737,358 $754,818 $99,122 $63,503 $3,654,801
3 Deferred Tax - Federal ($46,485,698) ($4,557,300) ($2,167,607) ($1,554,720) ($54,765,325)
4 ITC - (Balance) ($9,514,435) ($9,514,435)
--------------------------------------------------------------------------------------------------------
5 Net Rate Base $207,879,793 $15,903,259 $18,940,636 $9,497,315 $252,221,003
6 ========================================================================================================
7 Virginia Allocation Factor 0.027963 0.027963 0.027963 0.027963 0.027963
8
9 Virginia Rate Base $5,812,943 $444,703 $529,637 $265,573 $7,052,856
10
11 VA Authorized ROR (1998 AIF) 9.012% 9.012% 9.012% 9.012% 9.012%
12
13 ROR * Rate Base $523,862 $40,077 $47,731 $23,933 $635,603
14
15 Earnings
16 O&M Net of Fuel $33,861,097 $5,520,443 $2,418,021 $2,013,114 $43,812,676
17 Depreciation $20,358,608 $2,008,369 $1,296,039 $807,353 $24,470,369
18 Other Taxes $330,631 $299,035 $110,000 $95,000 $834,666
--------------------------------------------------------------------------------------------------------
19 Total Operating Expenses $54,550,336 $7,827,847 $3,824,060 $2,915,467 $69,117,711
========================================================================================================
20 Effective Tax Rate 39.4765% ($21,534,564) ($3,090,160) ($1,509,605) ($1,150,924) ($27,285,253)
21
22 Earnings $33,015,773 $4,737,687 $2,314,455 $1,764,543 $41,832,458
23
24 Virginia Allocator 0.027963 0.027963 0.027963 0.027963 0.027963
--------------------------------------------------------------------------------------------------------
25 Virginia Retail Earnings $923,220 $132,480 $64,719 $49,342 $1,169,761
26 ========================================================================================================
27 Net Virginia Earnings $1,447,082 $172,557 $112,450 $73,275 $1,805,364
28
29 Revenue Conversion Factor 1.5795 1.5795 1.5795 1.5795 1.5795
30
31 REVENUE REQUIREMENT $2,285,667 $272,553 $177,615 $115,738 $2,851,573
<PAGE>
<CAPTION>
(9) (10) (11) (12) (13)
Line Fossil Plants
No. Edgemoor Hay Road DPL CT's Other Total
Rate Base
---------
<C> <C> <C> <C> <C> <C>
1 Net Plant $124,191,263 $205,367,543 $4,381,287 $333,940,093 $881,087,026
2 CWIP $2,462,807 $2,051,200 $90,378 $4,604,385 $16,416,388
3 Deferred Tax - Federal ($23,694,864) ($20,100,174) ($1,007,434) ($44,802,472) ($149,794,802)
4 ITC - (Balance) ($4,524,768) ($37,185) ($794) ($4,562,747) ($19,079,550)
--------------------------------------------------------------------------------------------------------
5 Net Rate Base $98,434,438 $187,281,384 $3,463,437 $289,179,259 $728,629,062
6 ========================================================================================================
7 Virginia Allocation Factor 0.027963 0.027963 0.027963 0.027963 0.027963
8
9 Virginia Rate Base $2,752,522 $5,236,949 $96,848 $8,086,320 $20,374,654
10
11 VA Authorized ROR (1998 AIF) 9.012% 9.012% 9.012% 9.012% 9.012%
12
13 ROR * Rate Base $248,057 $471,954 $8,728 $728,739 $1,836,164
14
15 Earnings
16 O&M Net of Fuel $26,944,300 $13,139,105 $3,489,816 $43,573,221 $128,144,390
17 Depreciation $13,161,336 $9,259,693 $586,466 $23,007,495 $63,463,662
18 Other Taxes $775,345 $94,419 $35,358 $905,122 $1,969,788
--------------------------------------------------------------------------------------------------------
19 Total Operating Expenses $40,880,981 $22,493,217 $4,111,640 $67,485,838 $193,577,840
========================================================================================================
20 Effective Tax Rate 39.4765% ($16,138,380) ($8,879,535) ($1,623,132) ($26,641,047) ($76,417,756)
21
22 Earnings $24,742,601 $13,613,682 $2,488,508 $40,844,791 $117,160,084
23
24 Virginia Allocator 0.027963 0.027963 0.027963 0.027963 0.027963
--------------------------------------------------------------------------------------------------------
25 Virginia Retail Earnings $691,877 $380,679 $69,586 $1,142,143 $3,276,147
26 ========================================================================================================
27 Net Virginia Earnings $939,935 $852,633 $78,314 $1,870,882 $5,112,311
28
29 Revenue Conversion Factor 1.5795 1.5795 1.5795 1.5795 1.5795
30
31 REVENUE REQUIREMENT $1,484,627 $1,346,734 $123,697 $2,955,058 $8,074,896
</TABLE>
<PAGE>
Appendix H
Attachment 2
Page 2 of 2
Delmarva Power & Light Company
Calculation of Virginia Retail Electric Fuel Rate
Based on Actual Fuel Cost Data From October 1998 - September 1999
Based On
Existing System
Fuel Costs
---------------
System Fuel and Interchange Cost $ 270,262,191
System Output (kWh) 14,328,091,679
Cost per kWh Output $0.01886
x Loss Factor 1.06730
Cost per kWh Sold $0.02013
Less: Base Cost of Fuel 0
Current Year Factor --------------
$0.02013
Fuel Rate Before Gross Receipts Tax $0.02013
Gross Receipts Tax Factor 1.02680
--------------
Fuel Rate with Gross Receipts Tax $0.02067
Delmarva Power & Light Company
Calculation of Virginia Retail Electric Fuel Rate
Based on Virginia Hourly Load Data Applied To PJM Energy Rates Only
For The Period October 1998 - September 1999
Total Virginia Retail Fuel Costs (VA Hr. Load * PJM Rates) $ 13,029,528
Virginia Output (Total Hourly Virginia load data) 367,153,987
Cost per kWh Output $0.03549
x Loss Factor 1.06730
Cost per kWh Sold $0.03788
Less: Base Cost of Fuel 0
-------------
Current Year Factor $0.03788
Fuel Rate Before Gross Receipts Tax $0.03788
Gross Receipts Tax Factor 1.02680
-------------
Fuel Rate with Gross Receipts Tax $0.03890
Delmarva Power & Light Company
Calculation of Capacity Dollars For The Virginia Retail Electric Jurisdiction
Based on The Maximum Virginia Load Recorded on July 5, 1999
Maximum Virginia Load Recorded on 7/5/99 (KW) 84,803
Multiplied by
Capacity Reserve Margin for PJM 109%
-------------
Virginia Load Grossed Up 92,435
Multiplied by
Cost Of Capacity as of May 2000 ($/KW Year) $ 21.90
Total Cost of Capacity per Year $ 2,024,332
<PAGE>
<TABLE>
<CAPTION>
Appendix H
Attachment 3
Page 1 of 2
DELMARVA POWER & LIGHT COMPANY
Summary of Present Revenue Using 8/1/98 through 7/31/99 Booked Base Revenue and 10/1/98 through 9/30/99 Fuel Costs
and
Phase I, II and III Revenues reflecting proposed base Rate Decreases and Fuel Charges frozen at
10/1/98 through 9/30/99 Actual Fuel Costs
Residential
-------------------------------------------------------------
Line Classification R RSH Subtotal R-TOU-ND Total
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Sales (kWh) 94,922,502 46,715,473 141,637,975 27,070 141,665,045
2 Number of Customers 13,402 3,639 17,041 3 17,044
3 Base Revenue $7,460,320 $3,443,191 $10,903,512 $1,914 $10,905,425
4 Fuel Rate $0.02067 $0.02067 $0.02067
5 Fuel Revenue $1,962,048 $965,609 $2,927,657 $560 $2,928,216
6 Total Revenue $9,422,368 $4,408,800 $13,831,169 $2,473 $13,833,642
- --------------------------------------------------------------------------------------------------------------
7 Phase I Decrease 0.70% 0.70% 0.70%
8 Phase I Revenue Decrease $65,957 $30,862 $96,818 $17 $96,835
9 Percent Base Rate Decrease 0.88% 0.90% 0.90%
10 Phase I Base Revenues $7,394,364 $3,412,330 $10,806,694 $1,896 $10,808,590
11 Fuel Revenues $1,962,048 $965,609 $2,927,657 $560 $2,928,216
12 Total Phase I Revenues $9,356,412 $4,377,939 $13,734,350 $2,456 $13,736,806
- --------------------------------------------------------------------------------------------------------------
13 Phase II Decrease 0.90% 0.90% 0.90%
14 Phase II Revenue Decrease $84,208 $39,401 $123,609 $22 $123,631
15 Percent Base Rate Decrease 1.14% 1.15% 1.17%
16 Phase II Base Revenues $7,310,156 $3,372,928 $10,683,084 $1,874 $10,684,959
17 Fuel Revenues $1,962,048 $965,609 $2,927,657 $560 $2,928,216
18 Total Phase II Revenues $9,272,204 $4,338,537 $13,610,741 $2,434 $13,613,175
- --------------------------------------------------------------------------------------------------------------
19 Phase III Decrease 1.00% 1.00% 1.00%
20 Phase III Revenue Decrease $92,722 $43,385 $136,107 $24 $136,132
21 Percent Base Rate Decrease 1.27% 1.29% 1.30%
22 Phase III Base Revenues $7,217,434 $3,329,543 $10,546,977 $1,850 $10,548,827
23 Fuel Revenues $1,962,048 $965,609 $2,927,657 $560 $2,928,216
24 Total Phase III Revenues $9,179,482 $4,295,152 $13,474,634 $2,409 $13,477,043
- --------------------------------------------------------------------------------------------------------------
25 Percent Base Rate Change -3.26% -3.30% -3.27% -3.33% -3.27%
(Phases I, II and III)
26 Percent Fuel Charge Rate Change 0.00% 0.00% 0.00% 0.00% 0.00%
(Phases I, II and III)
27 Percent Change in Total Revenues -2.58% -2.58% -2.58% -2.58% -2.58%
(Phases I, II and III)
<PAGE>
General Service-Secondary
--------------------------------------------------
Line Classification SGS-S ORL LGS-S Total
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 Sales (kWh) 86,168,464 32,646 23,140,560 109,341,670
2 Number of Customers 2,808 6 14 2,828
3 Base Revenue $5,565,569 $3,043 $1,046,538 $6,615,149
4 Fuel Rate $0.02067 $0.02067 $0.02067
5 Fuel Revenue $1,781,102 $675 $478,315 $2,260,092
6 Total Revenue $7,346,671 $3,717 $1,524,853 $8,875,242
- ---------------------------------------------------------------------------------------------------
7 Phase I Decrease 0.70% 0.70% 0.70%
8 Phase I Revenue Decrease $51,427 $26 $10,674 $62,127
9 Percent Base Rate Decrease 0.92% 0.86% 1.02%
10 Phase I Base Revenues $5,514,142 $3,016 $1,035,864 $6,553,023
11 Fuel Revenues $1,781,102 $675 $478,315 $2,260,092
12 Total Phase I Revenues $7,295,244 $3,961 $1,541,179 $8,813,115
- ---------------------------------------------------------------------------------------------------
13 Phase II Decrease 0.90% 0.90% 0.90%
14 Phase II Revenue Decrease $65,657 $33 $13,628 $79,318
15 Percent Base Rate Decrease 1.19% 1.10% 1.32% $0
$0
16 Phase II Base Revenues $5,448,485 $2,983 $1,022,236 $6,473,705
17 Fuel Revenues $1,781,102 $675 $478,315 $2,260,092
18 Total Phase II Revenues $7,229,587 $3,658 $1,500,552 $8,733,797
- ---------------------------------------------------------------------------------------------------
19 Phase III Decrease 1.00% 1.00% 1.00%
20 Phase III Revenue Decrease $72,296 $37 $15,006 $87,338
21 Percent Base Rate Decrease 1.33% 1.23% 1.47% $6,386,367
22 Phase III Base Revenues $5,376,189 $2,947 $1,007,231 $2,260,092
23 Fuel Revenues $1,781,102 $675 $478,315 $8,646,459
24 Total Phase III Revenues $7,157,291 $3,621 $1,485,546
- ---------------------------------------------------------------------------------------------------
25 Percent Base Rate Change -3.40% -3.15% -3.76% -3.46%
(Phases I, II and III)
26 Percent Fuel Charge Rate Change 0.00% 0.00% 0.00% 0.00%
(Phases I, II and III)
27 Percent Change in Total Revenues -2.58% -2.58% -2.58% -2.58%
(Phases I, II and III)
<PAGE>
General
Service
Primary Lighting
----------------------- TOTAL
Line Classification GS-P OL RETAIL
- --------------------------------------------------------------------------------------
1 Sales (kWh) 79,440,964 3,316,861 333,764,540
2 Number of Customers 11 1,618 21,502
3 Base Revenue $3,429,280 $375,047 $21,324,902
4 Fuel Rate $0.02067 $0.02067
5 Fuel Revenue $1,642,045 $68,560 $6,898,913
6 Total Revenue $5,071,324 $443,607 $28,223,815
- --------------------------------------------------------------------------------------
7 Phase I Decrease 0.70% 0.70%
8 Phase I Revenue Decrease $35,499 $3,105 $197,567
9 Percent Base Rate Decrease 1.04% 0.83%
10 Phase I Base Revenues $3,393,780 $371,942 $21,127,335
11 Fuel Revenues $1,642,045 $68,560 $6,898,913
12 Total Phase I Revenues $5,035,825 $440,502 $28,026,248
- --------------------------------------------------------------------------------------
13 Phase II Decrease 0.90% 0.90%
14 Phase II Revenue Decrease $45,322 $3,965 $252,236
15 Percent Base Rate Decrease 1.34% 1.07%
16 Phase II Base Revenues $3,348,458 $367,978 $20,875,099
17 Fuel Revenues $1,642,045 $68,560 $6,898,913
18 Total Phase II Revenues $4,990,503 $436,537 $27,774,012
- --------------------------------------------------------------------------------------
19 Phase III Decrease 1.00% 1.00%
20 Phase III Revenue Decrease $49,905 $4,365 $277,740
21 Percent Base Rate Decrease 1.49% 1.19%
22 Phase III Base Revenues $3,298,553 $367,978 $20,597,359
23 Fuel Revenues $1,642,045 $68,560 $6,898,913
24 Total Phase III Revenues $4,940,598 $436,537 $27,496,272
- --------------------------------------------------------------------------------------
25 Percent Base Rate Change -3.81% -3.05% -3.41%
(Phases I, II and III)
26 Percent Fuel Charge Rate Change 0.00% 0.00% 0.00%
(Phases I, II and III)
27 Percent Change in Total Revenues -2.58% -2.58% -2.58%
(Phases I, II and III)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Appendix H
Attachment 3
Page 2 of 2
DELMARVA POWER & LIGHT COMPANY
Summary of Phase III Revenues reflecting proposed base Rate Decreases and Fuel Charges
frozen at 10/1/98 through 9/30/99 Actual Fuel Costs
and
Total Divestiture Rates reflecting Fuel Charges set at the Contract level and Base
Rates adjusted to yield the same overall revenue as the Phase III Revenues
Residential
-------------------------------------------------------------
Line Classification R RSH Subtotal R-TOU-ND Total
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Sales (kWh) 94,922,502 46,715,473 141,637,975 27,070 141,665,045
2 Number of Customers 13,402 3,639 17,041 3 17,044
- --------------------------------------------------------------------------------------------------------------
3 Phase III Base Revenues $7,217,434 $3,329,543 $10,546,977 $1,850 $10,548,827
4 Phase III Fuel Charges $1,962,048 $965,609 $2,927,657 $560 $2,928,216
5 Phase III Total Revenues $9,179,482 $4,295,152 $13,474,634 $2,409 $13,477,043
- --------------------------------------------------------------------------------------------------------------
6 Final Divestiture Fuel Rate $0.03390 $0.03390 $0.03390
7 Total Fuel Revenues $3,217,873 $1,583,655 $4,801,527 $918 $4,802,445
8 Difference in Fuel Rates From Phase III $1,255,825 $618,046 $1,873,870 $358 $1,874,229
9 kWh Adj. To Base Rates -$0.01323 -$0.03390 -$0.01323
- --------------------------------------------------------------------------------------------------------------
10 Final Base Rate Revenues $5,961,609 $2,711,497 $8,673,107 $1,492 $8,674,598
11 Final Fuel Revenues $3,217,873 $1,583,655 $4,801,527 $918 $4,802,445
12 Final Total Revenues $9,179,482 $4,295,152 $13,474,634 $2,409 $13,477,043
- --------------------------------------------------------------------------------------------------------------
13 Present Base Rate Revenues $7,460,320 $3,443,191 $10,903,512 $1,914 $10,905,425
14 Fuel Revenues 10/98-9/99 $1,962,048 $965,609 $2,927,657 $560 $2,928,216
15 Present Total Revenues $9,422,368 $4,408,800 $13,831,169 $2,478 $13,833,642
- --------------------------------------------------------------------------------------------------------------
16 Percent Change in Base Rate Revenues -20.09% -21.25% -20.46% -22.05% -20.46%
(Current to Final)
17 Percent Change in Fuel Rate Revenues 64.01% 64.01% 64.01% 64.01% 64.01%
(Current to Final)
18 Percent Change in Total Revenues -2.58% -2.58% -2.58% -2.58% -2.58%
(Current to Final)
- --------------------------------------------------------------------------------------------------------------
<PAGE>
General Service-Secondary
--------------------------------------------------
Line Classification SGS-S ORL LGS-S Total
- ---------------------------------------------------------------------------------------------------
1 Sales (kWh) 86,168,464 32,646 23,140,560 109,341,670
2 Number of Customers 2,808 6 14 2,828
- ---------------------------------------------------------------------------------------------------
3 Phase III Base Revenues $5,376,189 $2,947 $1,007,231 $6,386,367
4 Phase III Fuel Charges $1,781,102 $675 $478,315 $2,260,092
5 Phase III Total Revenues $7,157,291 $3,621 $1,485,546 $8,646,459
- ---------------------------------------------------------------------------------------------------
6 Final Divestiture Fuel Rate $0.03390 $0.03390 $0.03390
7 Total Fuel Revenues $2,921,111 $1,107 $784,465 $3,706,683
8 Difference in Fuel Rates From Phase III $1,140,009 $432 $306,150 $1,446,590
9 kWh Adj. To Base Rates -$0.01323 -$0.01323 -$0.01323
- ---------------------------------------------------------------------------------------------------
10 Final Base Rate Revenues $4,236,180 $2,515 $701,081 $4,939,776
11 Final Fuel Revenues $2,921,111 $1,107 $784,465 $3,706,683
12 Final Total Revenues $7,157,291 $3,621 $1,485,546 $8,646,459
- ---------------------------------------------------------------------------------------------------
13 Present Base Rate Revenues $5,565,569 $3,043 $1,046,538 $6,615,149
14 Fuel Revenues 10/98-9/99 $1,781,102 $675 $478,315 $2,260,092
15 Present Total Revenues $7,346,671 $3,717 $1,524,853 $8,875,242
- ---------------------------------------------------------------------------------------------------
16 Percent Change in Base Rate Revenues -23.89% -17.35% -33.01% -25.33%
(Current to Final)
17 Percent Change in Fuel Rate Revenues 64.01% 64.01% 64.01% 64.01%
(Current to Final)
18 Percent Change in Total Revenues -2.58% -2.58% -2.58% -2.58%
(Current to Final)
- ---------------------------------------------------------------------------------------------------
<PAGE>
General
Service
Primary Lighting
----------------------- TOTAL
Line Classification GS-P OL RETAIL
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 Sales (kWh) 79,440,964 3,316,861 333,764,540
2 Number of Customers 11 1,618 21,502
- --------------------------------------------------------------------------------------
3 Phase III Base Revenues $3,298,553 $363,612 $20,597,359
4 Phase III Fuel Charges $1,642,045 $68,560 $6,898,913
5 Phase III Total Revenues $4,940,598 $432,172 $27,496,272
- --------------------------------------------------------------------------------------
6 Final Divestiture Fuel Rate $0.03390 $0.03390
7 Total Fuel Revenues $2,693,049 $112,442 $11,314,618
8 Difference in Fuel Rates From Phase III $1,051,004 $43,882 $4,415,705
9 kWh Adj. To Base Rates -$0.01323 -$0.01323
- --------------------------------------------------------------------------------------
10 Final Base Rate Revenues $2,247,549 $319,730 $16,181,654
11 Final Fuel Revenues $2,693,049 $112,442 $11,314,618
12 Final Total Revenues $4,940,598 $432,172 $27,496,272
- --------------------------------------------------------------------------------------
13 Present Base Rate Revenues $3,429,280 $375,047 $21,324,902
14 Fuel Revenues 10/98-9/99 $1,642,045 $68,560 $6,898,913
15 Present Total Revenues $5,071,324 $443,607 $28,223,815
- --------------------------------------------------------------------------------------
16 Percent Change in Base Rate Revenues -34.46% -14.75% -24.12%
(Current to Final)
17 Percent Change in Fuel Rate Revenues 64.01% 64.01% 64.01%
(Current to Final)
18 Percent Change in Total Revenues -2.58% -2.58% -2.58%
(Current to Final)
- --------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Appendix H
Attachment 4
Page 1 of 9
DELMARVA POWER & LIGHT COMPANY
Residential Service
Phase I Proposed Phase II Proposed Phase III Proposed Final Final
Rate Current Adjustment Phase I Adjustment Phase II Adjustment Phase III Rate Proposed
Element Rate Factor Rates Factor Rates Factor Rates Adjustment Rates
Line (A) (B) (C) (D) (E) (F) (G) (H) (I) (J)
(B)x(C) (D)x(E) (F)x(G) (H)+(I)
- -----------------------------------------------------------------------------------------------------------------------------------
<S><C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 First 5 kWh or less $4.43 99.12% $4.39 98.86% $4.34 98.73% $4.28 -$0.07 $4.21
2 Summer
3 Next 495 kWh $0.07859 99.12% $0.07790 98.86% $0.07701 98.73% $0.07603 -$0.01323 $0.06280
4 Excess kWh $0.07314 99.12% $0.07249 98.86% $0.07166 98.73% $0.07075 -$0.01323 $0.05752
5 Winter
6 Next 495 kWh $0.07859 99.12% $0.07790 98.86% $0.07701 98.73% $0.07603 -$0.01323 $0.06280
7 Excess kWh $0.06176 99.12% $0.06121 98.86% $0.06051 98.73% $0.05974 -$0.01323 $0.04651
8
9
10 Class Revenue $9,219,118
11 Number of Customers 160,828
12 kWh Sales 94,922,502
13 Fuel Charges $1,765,879
14 DSM -$7,081
15 Base Rates $7,460,320 99.12% $7,394.364 98.86% $7,310,156 98.73% $7,217,434 -$1,255,825 $5,961,609
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Appendix H
Attachment 4
Page 2 of 9
DELMARVA POWER & LIGHT COMPANY
Residential Service-Space Heating
Phase I Proposed Phase II Proposed Phase III Proposed Final Final
Rate Current Adjustment Phase I Adjustment Phase II Adjustment Phase III Rate Proposed
Element Rate Factor Rates Factor Rates Factor Rates Adjustment Rates
Line (A) (B) (C) (D) (E) (F) (G) (H) (I) (J)
(B)x(C) (D)x(E) (F)x(G) (H)+(I)
- -----------------------------------------------------------------------------------------------------------------------------------
<S><C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 First 5 kWh or less $4.43 99.10% $4.39 98.85% $4.34 98.71% $4.28 -$0.07 $4.21
2 Summer
3 Next 495 kWh $0.07859 99.10% $0.07789 98.85% $0.07699 98.71% $0.07600 -$0.01323 $0.06277
4 Excess kWh $0.07314 99.10% $0.07248 98.85% $0.07164 98.71% $0.07072 -$0.01323 $0.05749
5 Winter
6 Next 495 kWh $0.07859 99.10% $0.07789 98.85% $0.07699 98.71% $0.07600 -$0.01323 $0.06277
7 Excess kWh $0.06176 99.10% $0.06121 98.85% $0.06050 98.71% $0.05972 -$0.01323 $0.04649
8
9
10 Class Revenue $4,277,360
11 Number of Customers 43,664
12 kWh Sales 46,715,473
13 Fuel Charges $846,782
14 DSM -$12,613
15 Base Rates $3,443,191 99.10% $3,412,330 98.85% $3,372,928 98.71% $3,329,543 -$618,046 $2,711,497
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Appendix H
Attachment 4
Page 3 of 9
DELMARVA POWER & LIGHT COMPANY
Residential Service-TOU
Phase I Proposed Phase II Proposed Phase III Proposed Final Final
Rate Current Adjustment Phase I Adjustment Phase II Adjustment Phase III Rate Proposed
Element Rate Factor Rates Factor Rates Factor Rates Adjustment Rates
Line (A) (B) (C) (D) (E) (F) (G) (H) (I) (J)
(B)x(C) (D)x(E) (F)x(G) (H)+(I)
- -----------------------------------------------------------------------------------------------------------------------------------
<S><C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Customer Charge $6.40 99.10% $6.34 98.83% $6.27 98.70% $6.19 $6.19
2 Summer
3 On-Peak $0.17984 99.10% $0.17823 98.83% $0.07615 98.70% $0.17386 -$0.01323 $0.16063
4 Off-Peak $0.03223 99.10% $0.03194 98.83% $0.03157 98.70% $0.03116 -$0.01323 $0.01793
5 Winter
6 On-Peak $0.14813 99.10% $0.14680 98.83% $0.14509 98.70% $0.14321 -$0.01323 $0.12998
7 Off-Peak $0.03223 99.10% $0.03194 98.83% $0.03157 98.70% $0.03116 -$0.01323 $0.01793
8
9
10 Class Revenue $2,428
11 Number of Customers 36
12 kWh Sales 27,070
13 Fuel Charges $514
14 DSM $0
15 Base Rates $1,914 99.10% $1,897 98.83% $1,874 98.70% $1,850 -$358 $1,492
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Appendix H
Attachment 4
Page 4 of 9
DELMARVA POWER & LIGHT COMPANY
Small General Service-Secondary
Phase I Proposed Phase II Proposed Phase III Proposed Final Final
Rate Current Adjustment Phase I Adjustment Phase II Adjustment Phase III Rate Proposed
Element Rate Factor Rates Factor Rates Factor Rates Adjustment Rates
Line (A) (B) (C) (D) (E) (F) (G) (H) (I) (J)
(B)x(C) (D)x(E) (F)x(G) (H)+(I)
- -----------------------------------------------------------------------------------------------------------------------------------
<S><C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Customer Charge $6.80 99.08% $6.74 98.81% $6.66 98.67% $6.57 $6.57
2 Demand
3 Summer
4 First 20 kW $0.000 99.08% $0.000 98.81% $0.000 98.67% $0.000 $0.000
5 Over 20 kW $8.562 99.08% $8.483 98.81% $8.382 98.67% $8.271 $8.271
6 Winter
7 First 20 kW $0.000 99.08% $0.000 98.81% $0.000 98.67% $0.000 $0.000
8 Over 20 kW $6.863 99.08% $6.800 98.81% $6.719 98.67% $6.630 $6.630
9 Energy
10 Summer $0.08028 $0.07954 98.81% $0.07859 98.67% $0.07755 -$0.01323 $0.06432
11 First 3,500 kWh $0.03306 99.08% $0.03275 98.81% $0.03236 98.67% $0.03193 -$0.01323 $0.01870
12 Over 3,500 kWh 99.08%
13 Winter
14 First 3,500 kWh $0.08028 99.08% $0.07954 98.81% $0.07859 98.67% $0.07755 -$0.01323 $0.06432
15 Over 3,500 kWh $0.02867 99.08% $0.02841 98.81% $0.02807 98.67% $0.02770 -$0.01323 $0.01447
16 Off-Peak Revenue $4.85 99.08% $4.81 98.81% $4.75 98.67% $4.68 $4.68
17 Class Revenue $7,189,321
18 Number of Customers 33,696
19 kWh Sales 86,168,464
20 Fuel Charges $1,623,182
21 DSM $570
22 Base Rates $5,565,569 99.08% $5,514,142 98.81% $5,448,485 98.67% $5,376,189 -$1,140,009 $4,236,180
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Appendix H
Attachment 4
Page 5 of 9
DELMARVA POWER & LIGHT COMPANY
Large General Service-Secondary
Phase I Proposed Phase II Proposed Phase III Proposed Final Final
Rate Current Adjustment Phase I Adjustment Phase II Adjustment Phase III Rate Proposed
Element Rate Factor Rates Factor Rates Factor Rates Adjustment Rates
Line (A) (B) (C) (D) (E) (F) (G) (H) (I) (J)
(B)x(C) (D)x(E) (F)x(G) (H)+(I)
- -----------------------------------------------------------------------------------------------------------------------------------
<S><C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Customer Charge $19.42 98.98% $19.22 98.68% $6.66 98.53% $18.69 $18.69
2 Demand
3 Summer $8.078 98.98% $8.00 98.68% 98.53% $7.78 $7.78
4 Winter $6.678 98.98% $6.61 98.68% 98.53% $6.43 $6.43
5 Energy
6 Summer
7 On-Peak $0.03529 98.98% $0.03493 98.68% $0.03447 98.53% $0.03396 -$0.01323 $0.02073
8 Off-Peak $0.02559 98.98% $0.02533 98.68% $0.02500 98.53% $0.02463 -$0.01323 $0.01140
9 Winter
10 On-Peak $0.03529 98.98% $0.03493 98.68% $0.03447 98.53% $0.03396 -$0.01323 $0.02073
11 Off-Peak $0.02559 98.98% $0.02533 98.68% $0.02500 98.53% $0.02463 -$0.01323 $0.01140
12 Off-Peak Service $0.08028 98.98% $0.07946 98.68% $0.07841 98.53% $0.07726 -$0.01323 $0.06403
13 Class Revenue $1,523,771
14 Number of Customer 167
15 kWh Sales 23,140,560
16 Fuel Charges $472,893
17 DSM $4,340
18 Base Rates $1,046,538 98.98% $1,035,864 98.68% $1,002,236 98.53% $1,007,231 -$306,150 $701,081
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Appendix H
Attachment 4
Page 6 of 9
DELMARVA POWER & LIGHT COMPANY
Large General Service-Secondary
Phase I Proposed Phase II Proposed Phase III Proposed Final Final
Rate Current Adjustment Phase I Adjustment Phase II Adjustment Phase III Rate Proposed
Element Rate Factor Rates Factor Rates Factor Rates Adjustment Rates
(A) (B) (C) (D) (E) (F) (G) (H) (I) (J)
Line (B)x(C) (D)x(E) (F)x(G) (H)+(I)
- -----------------------------------------------------------------------------------------------------------------------------------
<S><C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Customer Charge $29.00 98.96% $28.70 98.66% $28.32 98.51% $27.90 $27.90
2 Demand
3 Summer $7.756 98.96% $7.676 98.66% $7.573 98.51% $7.460 $7.460
4 Winter $5.858 98.96% $5.797 98.66% $5.720 98.51% $5.635 $5.635
5 Energy
6 Summer
7 On-Peak $0.03071 98.96% $0.03039 98.66% $0.02998 98.51% $0.02953 -$0.01323 $0.01630
8 Off-Peak $0.02104 98.96% $0.02082 98.66% $0.02054 98.51% $0.02023 -$0.01323 $0.00700
9 Winter
10 On-Peak $0.03071 98.96% $0.03039 98.66% $0.02998 98.51% $0.02953 -$0.01323 $0.01630
11 Off-Peak $0.02104 98.96% $0.02082 98.66% $0.02054 98.51% $0.02023 -$0.01323 $0.00700
12 Off-Peak Service $0.07595 98.96% $0.07516 98.66% 0.07416 98.51% $0.07305 -$0.01323 $0.05982
13 Class Revenue $4,925,887
14 Less RTP $96,411
15 Adj. Class Rev. $4,829,476
16 Number of Customers 137
17 kWh Sales 87,695,982
18 RTP kWh Sales 8,255,018
19 Adj. kWh Sales 79,440,964
20 Fuel Charges $1,562,343
21 RTP Fuel Charges $89,197
22 Adj. Fuel Charges $1,473,146
23 DSM -$72,950
24 Base Rates $3,436,494
25 RTP Base Rates $0
26 Adj. Base Rates $3,429,280 98.96% $3,393,780 98.66% $3,348,458 98.51% $3,298,553 -$1,160,218 $2,138,355
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Appendix H
Attachment 4
Page 7 of 9
DELMARVA POWER & LIGHT COMPANY
Private Area Lighting
Est.
Phase I Proposed Phase II Proposed Phase III Proposed Avg. Final Final
Rate Current Adjustment Phase I Adjustment Phase II Adjustment Phase III Mthly. Rate Proposed
Element Rate Factor Rates Factor Rates Factor Rates kWh Adjustment Rates
(A) (B) (C) (D) (E) (F) (G) (H) (I) (J) (K)
Line (B)x(C) (D)x(E) (F)x(G) (H)+(I)
- -----------------------------------------------------------------------------------------------------------------------------------
<S><C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Group A
2 Mercury Vapor
3 8,600 Lumen (175 Watt) $7.18 99.17% $7.12 98.93% $7.04 98.81% $6.96 70 -$0.01323 $6.03
4 High Pressure Sodium
5 5,800 Lumen (70 Watt) $6.34 99.17% $6.29 98.93% $6.22 98.81% $6.15 36 -$0.01323 $5.67
6 9,500 Lumen (100 Watt) $6.92 99.17% $6.86 98.93% $6.79 98.81% $6.71 50 -$0.01323 $6.05
7 Group B
8 Mercury Vapor
9 8,600 Lumen (175 Watt) $7.83 99.17% $7.77 98.93% $7.69 98.91 $7.60 70 -$0.01323 $6.67
10 22,500 Lumen (400 Watt) $13.54 99.17% $13.43 98.93% $13.29 98.81% $13.13 155 -$0.01323 $11.08
11 63,000 Lumen (1,000 Watt) $21.39 99.17% $21.21 98.93% $20.98 98.81% $20.73 374 -$0.01323 $15.78
12 High Pressure Sodium
13 5,800 Lumen (70 Watt) $7.61 99.17% $7.55 98.93% $7.47 98.81% $7.38 36 -$0.01323 $6.90
14 9,500 Lumen (100 Watt) $8.21 99.17% $8.14 98.93% $8.05 98.81% $7.95 50 -$0.01323 $7.29
15 16,000 Lumen (150 Watt) $10.05 99.17% $9.97 98.93% $9.86 98.81% $9.74 71 -$0.01323 $8.80
16 25,000 Lumen (250 Watt) $16.26 99.17% $16.13 98.93% $15.96 98.81% $15.77 109 -$0.01323 $14.33
17 50,000 Lumen (400 Watt) $19.01 99.17% $18.85 98.93% $18.65 98.81% $18.43 164 -$0.01323 $16.26
18
19 Class Revenue $192,077
20 Number of Customers 18,994
21 kWh Sales 1,542,895
22 Fuel Charges $29,433
23 DSM $0
24 Base Rates $162,644 99.17% $161,298 98.93% $159,579 98.81% $157,685 -$20,413 $137,273
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Appendix H
Attachment 4
Page 8 of 9
DELMARVA POWER & LIGHT COMPANY
Public Lighting Service
Est.
Phase I Proposed Phase II Proposed Phase III Proposed Avg. Final Final
Rate Current Adjustment Phase I Adjustment Phase II Adjustment Phase III Mthly. Rate Proposed
Element Rate Factor Rates Factor Rates Factor Rates kWh Adjustment Rates
(A) (B) (C) (D) (E) (F) (G) (H) (I) (J) (K)
Line (B)x(C) (D)x(E) (F)x(G) (H)+(I)
- ------------------------------------------------------------------------------------------------------------------------------------
<S><C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Group A
2 Mercury Vapor
3 4,200 Lumen (100 Watt)
4 Existing Pole Hi-Pole $5.78 99.17% $5.73 98.93% $5.67 98.81% $5.60 46 -$0.01323 $4.99
5 8,600 Lumen (175 Watt)
6 Existing Pole Hi-Pole $7.83 99.17% $7.77 98.93% $7.69 98.81% $7.60 70 -$0.01323 $6.67
7 Metal Lo-Pole $11.77 99.17% $11.67 98.93% $11.55 98.81% $11.41 70 -$0.01323 $10.48
8 Metal Energy $9.31 99.17% $9.23 98.93% $9.13 98.81% $9.02 70 -$0.01323 $8.09
9 Cust. Owned Energy $3.23 99.17% $3.20 98.93% $3.17 98.81% $3.13 70 -$0.01323 $2.20
10 12,100 Lumen (400 Watt)
11 Existing Pole Hi-Pole $10.73 99.17% $10.64 98.93% $10.53 98.81% $10.41 99 -$0.01323 $9.10
12 Cust. Owned Lamp & Only $7.72 99.17% $7.66 98.93% $7.58 98.81% $7.49 99 -$0.01323 $6.18
13 Cust. Owned Energy $4.57 99.17% $4.53 98.93% $4.48 98.81% $4.43 99 -$0.01323 $3.12
14 22,500 Lumen (400 Watt)
15 Existing Pole Hi-Pole $13.53 99.17% $13.42 98.93% $13.28 98.81% $13.12 155 -$0.01323 $11.07
16 Metal Lo-Pole $17.47 99.17% $17.33 98.93% $17.15 98.81% $16.95 155 -$0.01323 $14.90
17 Cust. Owned Lamp & Only $9.73 99.17% $9.65 98.93% $9.55 98.81% $9.44 155 -$0.01323 $7.39
18 Cust. Owned Energy $7.16 99.17% $7.10 98.93% $7.02 98.81% $6.94 155 -$0.01323 $4.89
19 High Pressure Sodium
20 5,800 Lumen (70 Watt)
21 Existing Pole $7.61 99.17% $7.55 98.93% $7.47 98.81% $7.38 36 -$0.01323 $6.90
22 Cust. Owned Lamp & Only $5.48 99.17% $5.43 98.93% $5.37 98.81% $5.31 36 -$0.01323 $4.83
23 Cust. Owned Energy $1.67 99.17% $1.66 98.93% $1.64 98.81% $1.62 36 -$0.01323 $1.14
24 9,500 Lumen (100 Watt) -%0.01323 $0.00
25 Existing Pole $8.21 99.17% $8.14 98.93% $8.05 98.81% $7.95 50 -$0.01323 $7.29
26 Cust. Owned Lamp & Only $5.92 99.17% $5.87 98.93% $5.81 98.81% $5.74 50 -$0.01323 $5.08
27 Cust. Owned Energy $2.31 99.17% $2.29 98.93% $2.27 98.81% $2.24 50 -$0.01323 $1.58
28 16,000 Lumen (150 Watt)
29 Existing Pole $10.05 99.17% $9.97 98.93% $9.86 98.81% $9.74 71 -$0.01323 $8.80
30 Cust. Owned Lamp & Only $7.24 99.17% $7.18 98.93% $7.10 98.81% $7.02 71 -$0.01323 $6.08
31 Cust. Owned Energy $3.28 99.17% $3.25 98.93% $3.22 98.81% $3.18 71 -$0.01323 $2.24
32 25,000 Lumen (250 Watt)
33 Existing Pole $16.26 99.17% $16.13 98.93% $15.96 98.81% $15.77 109 -$0.01323 $14.33
34 Cust. Owned Energy $5.04 99.17% $5.00 98.93% $4.95 98.81% $4.89 109 -$0.01323 $3.45
35 50,000 Lumen (400 Watt)
36 Existing Pole $19.01 99.17% $18.85 98.93% $18.65 98.81% $18.43 164 -$0.01323 $16.26
37 Cust. Owned Lamp & Only $13.68 99.17% $13.57 98.93% $13.43 98.81% $13.27 164 -$0.01323 $11.10
38 Incandescent (Traffic
Signals Only)
39 0-40 Watts 0.35 99.17% $0.35 98.93% $0.35 98.81% $0.35 6 -$0.01323 $0.27
40 41-80 Watts $1.03 99.17% $1.02 98.93% $1.01 98.81% $1.00 18 -$0.01323 $0.76
41 81-120 Watts $1.71 99.17% $1.70 98.93% $1.68 98.81% $1.66 30 -$0.01323 $1.26
42 121-160 Watts 2.16 99.17% $2.14 98.93% $2.12 98.81% $2.09 38 -$0.01323 $1.59
43 161-200 Watts $2.40 99.17% $2.38 98.93% $2.35 98.81% $2.32 42 -$0.01323 $1.76
44
45 Ornamental or Decorative
Luminaries $2.22 99.17% $2.20 98.93% $2.18 98.81% $2.15 $2.15
46 Poles
47 Wood 25 ft. To 40 ft. $4.44 99.17% $4.40 98.93% $4.35 98.81% $4.30 $4.30
48 Fiberglass or Alum.,
Embedded, < 25 ft. $4.44 99.17% $4.40 98.93% $4.35 98.81% $4.30 $4.30
49 Fiberglass or Alum.,
Embedded, 25-35 ft. $8.87 99.17% $8.80 98.93% $8.71 98.81% $8.61 $8.61
50 Fiberglass or Alum.,
Bolt Base, 25-35 ft. $9.86 99.17% $9.78 98.93% $9.68 98.81% $9.57 $9.57
51
52 Class Revenue $245,577
53 Number of Customers 426
54 kWh Sales 1,773,966
55 Fuel Charges $33,174
56 DSM $0
57 Base Rates $212,403 99.17% $210,644 98.93% $208,369 98.81% $205,927 -$23,470 $182,457
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Appendix H
Attachment 4
Page 9 of 9
DELMARVA POWER & LIGHT COMPANY
Outdoor Recreational Lighting
Phase I Proposed Phase II Proposed Phase III Proposed Final Final
Rate Current Adjustment Phase I Adjustment Phase II Adjustment Phase III Rate Proposed
Element Rate Factor Rates Factor Rates Factor Rates Adjustment Rates
(A) (B) (C) (D) (E) (F) (G) (H) (I) (J)
Line (B)x(C) (D)x(E) (F)x(G) (H)+(I)
- -----------------------------------------------------------------------------------------------------------------------------------
<S><C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Customer Charge $6.80 99.14% $6.74 98.90% $6.67 98.77% $6.59 $6.59
2 Energy Charge $0.08028 99.14% $0.07959 98.90% $0.07871 98.77% $0.07774 -$0.01323 $0.06451
3
4 Revenue $3,652
5 Number of Customers 72
6 kWh Sales 32,646
7 Fuel Charges $610
8 DSM $0
9 Base Rates $3,043 99.14% $3,016 98.90% $2,983 98.77% $2,947 -$432 $2,515
</TABLE>
UNITED STATES OF AMERICA
BEFORE THE
FEDERAL ENERGY REGULATORY
COMMISSION
Atlantic City Electric Company ) Docket No. ECOO-___-000
Delmarva Power & Light Company )
PECO Energy Company )
JOINT APPLICATION OF ATLANTIC CITY
ELECTRIC COMPANY, DELMARVA POWER &
LIGHT COMPANY, AND PECO ENERGY COMPANY
FOR AUTHORIZATION OF THE SALE OF
JURISDICTIONAL FACILITIES
December 9, 1999
<PAGE>
UNITED STATES OF AMERICA
BEFORE THE
FEDERAL ENERGY REGULATORY COMMISSION
Atlantic City Electric Company ) Docket No. EC00-_____-00
Delmarva Power & Light Company )
PECO Energy Company )
JOINT APPLICATION OF ATLANTIC CITY
ELECTRIC COMPANY, DELMARVA POWER &
LIGHT COMPANY, AND PECO ENERGY COMPANY
FOR AUTHORIZATION OF THE SALE OF
JURISDICTIONAL FACILITIES
I. INTRODUCTION
This Application is submitted on behalf of Atlantic City Electric
Company (ACE), Delmarva Power & Light Company (DP&L), and PECO Energy Company
(PECO) (collectively, Applicants). Pursuant to Section 203 of the Federal Power
Act (FPA), the Applicants seek Commission approval for a transfer of ownership
interests in jurisdictional transmission facilities associated with Peach Bottom
Atomic Power Station (Peach Bottom). ACE and DP&L, subsidiaries of Conectiv,
seek to divest their interests in Peach Bottom in connection with state
restructuring proceedings in Delaware, Maryland, and New Jersey. In each of
these states, retail electric customers have been given the ability to choose
alternative electric suppliers or will have such ability in the year 2000. The
proposed transaction is in the public interest and should be approved.
<PAGE>
A. Description Of The Proposed Transaction
The power plant (and associated transmission facilities) that is the
subject of the proposed transaction is currently owned jointly by the Applicants
(along with Public Service Electric and Gas Company (PSE&G)),1/ as more fully
described below.
1. Peach Bottom
Peach Bottom is a nuclear plant located in York County, Pennsylvania.
It has a summer capacity of 2,186 MW and includes jurisdictional transmission
facilities described below. ACE and DP&L each own a 7.51 percent interest in
Peach Bottom; PECO and PSE&G each own a 42.49 percent interest in that facility.
Under the proposed transaction, ACE and DP&L will both transfer one-half of
their interests (3.755 percent each) to PECO. In a separate transaction, ACE &
DP&L will both transfer one-half of their interests (3.755 percent each) to PSEG
Nuclear.2/ After the proposed transactions, PECO and PSEG Nuclear each will own
a fifty percent interest in Peach Bottom. PECO operates Peach Bottom today and
will continue to do so after the transaction proposed herein.
- ---------------
1/ It is anticipated that, by the time of closing, PSE&G will have transferred
its interest in Peach Bottom to PSEG Nuclear LLC (PSEG Nuclear). See Pub.
Serv. Elec. & Gas Co., et al., 88 FERC paragraph 61,299 at 61,916-17 (1999)
(granting approval for such transfer).
2/ PSEG Nuclear is a wholly-owned subsidiary of PSEG Power LLC. PSEG Power LLC
is the named purchaser on the purchase agreements, attached hereto as
Attachment B. However, the purchase agreements provide that PSEG Power LLC
may assign its rights, interests, obligations, and remedies to an
affiliate. PSEG Power LLC intends to transfer the right to purchase the
interests in the nuclear plant to PSEG Nuclear.
- 2 -
<PAGE>
B. The Proposed Transaction Is Consistent With The Public Interest
The proposed transaction is consistent with the public interest. It
will not adversely affect competition, will not raise rates for wholesale
customers, and will not impair state or federal regulation. Although a showing
of affirmative benefits to the public is not required by the FPA, the proposed
transaction will benefit the public interest by facilitating the restructuring
of the electric power industry in the Mid-Atlantic region.
1. The proposed transaction will have no adverse effect on
competition
As shown in the attached Affidavit of Bruce Sloan, a principal in the
firm of PHB Hagler Bailly, the proposed transaction will have no adverse effect
on competition. Ms. Sloan's market power analysis demonstrates that the proposed
transaction will not significantly increase market concentration and will not
create market power concerns within the relevant geographic markets.
2. The proposed transaction will have no adverse effect on rates
PECO does not have any captive or cost-based wholesale power sales
customers.
The proposed transaction will have no material effect on wholesale
sales made by ACE or DP&L. ACE has no wholesale customers. As more fully
explained below, most of DP&L's wholesale customers are served under contracts
with fixed (or fixed escalator) demand and energy charges and without fuel
clauses. Thus, the proposed transaction can have no negative effects on these
customers. Additionally, DP&L serves two wholesale customers under
soon-to-expire contracts that contain fuel clauses. As shown below, the proposed
- 3 -
<PAGE>
transaction is unlikely to materially impact the rates of these wholesale
customers.
PECO's retail ratepayers will be protected by Pennsylvania's retail
access plan. Retail ratepayers of ACE and DP&L will be protected by the retail
access plans in Delaware, Maryland, and New Jersey. DP&L's Virginia retail
customers would be affected only to the extent permitted by the Virginia State
Corporation Commission (VSCC), which retains jurisdiction over DP&L's Virginia
retail rates.
Transmission rates will continue to be those charged pursuant to the
PJM tariff.
3. The proposed transaction will have no adverse effect on
regulation
Finally, the proposed transaction will not have any adverse effect on
either state or federal regulation. The divestiture of ACE's and DP&L's
interests in Peach Bottom must be approved by the Pennsylvania Public Utility
Commission (PPUC) and the New Jersey Board of Public Utilities (NJBPU). Filings
with the Delaware Public Service Commission (DPSC), the Maryland Public Service
Commission (MPSC), and the VSCC also will be made in order to obtain specific
public-interest findings under the Public Utility Holding Company Act (PUHCA) or
applicable state law. This Commission will continue to exercise jurisdiction
over all of the wholesale transactions of PECO. The proposed transaction will
not result in any transfer of jurisdiction from this Commission to the
Securities and Exchange Commission (SEC).
Because the proposed transaction is consistent with the public
interest, Applicants request that the Commission grant its approval.
- 4 -
<PAGE>
II. OVERVIEW OF THE PROPOSED TRANSACTION
A. Description Of The Parties
1. ACE
ACE is a public utility that owns and operates electric generation,
transmission, and distribution facilities that it uses to supply retail electric
service in New Jersey. ACE is a wholly-owned subsidiary of Conectiv, a
registered public utility holding company under PUHCA. ACE is the owner, in
whole or in part, of 1,303 MW of summer net capacity in fossil-fired generating
stations (including turbines and peaking units), and 390 MW of summer net
capacity in nuclear generating stations. ACE is a member of the PJM Power Pool
and has made its transmission facilities available for open access transmission
service pursuant to the PJM Open Access Transmission Tariff administered by the
PJM Interconnection, L.L.C., an Independent System Operator.
2. DP&L
DP&L is a public utility that owns and operates electric generation,
transmission, and distribution facilities that it uses to supply retail electric
service in the Delmarva Peninsula, comprised of Delaware, the Eastern Shore
counties of Maryland, and Virginia. DP&L provides separately-tariffed wholesale
sales service to ten customers in addition to various wholesale transactions
undertaken pursuant to an approved market-based rate tariff. DP&L also is a
wholly-owned subsidiary of Conectiv, a registered public utility holding company
under PUHCA. DP&L is the owner, in whole or in part, of 2,373 MW of summer net
capacity in fossil-fired generating stations (including turbine and peaking
units), and 328 MW of summer net capacity in nuclear generating stations. DP&L
- 5 -
<PAGE>
is a member of the PJM Power Pool and has made its transmission facilities
available for open access transmission service pursuant to the PJM Open Access
Transmission Tariff administered by the PJM Interconnection. L.L.C., an
Independent System Operator.
3. PECO
PECO is a corporation organized and existing under the laws of the
Commonwealth of Pennsylvania, with its principal office in Philadelphia,
Pennsylvania. PECO is a "public utility" under Section 201 of the FPA. PECO is
affiliated with the following jurisdictional subsidiaries: AmerGen Energy
Company L.L.C. (AmerGen), a limited liability company formed with British
Energy, Inc. to acquire and operate nuclear generating assets, of which PECO
owns a fifty percent interest; Horizon Energy, Inc. d/b/a Exelon Energy, an
affiliated power marketer; PECO Energy Power Company; Susquehanna Electric
Company; and Susquehanna Power Company.
PECO currently owns approximately 9,200 MW of generating capacity, all
of which is located in PJM. PECO also owns approximately 1,121 miles of high
voltage transmission lines, all of which are controlled by PJM.
PECO serves approximately 1.5 million electricity customers and
provides natural gas service to more than 400,000 customers in Pennsylvania.
Pursuant to the Electricity Generation Customer Choice and Competition Act and
as a part of a settlement approved by the PPUC authorizing PECO's retail access
program (the Settlement), PECO has implemented a full-scale retail access
program in its service area under which retail customers may purchase their
- 6 -
<PAGE>
electric generation supplies from alternative suppliers. Under the program, PECO
is phasing in full retail access over two years. As of the date of this
Application, two-thirds of the retail loads in PECO's service territory are free
to choose their electric service provider. By January 1, 2000, all retail
customers in PECO's territory will have that freedom. PECO remains the provider
of electric distribution services in its service territory. As part of the
restructuring of the Pennsylvania utility market, retail ratepayers received a
rate decrease in 1999 and will receive an additional rate decrease in 2000,
PECO's distribution charges are capped through June 30, 2005, and the total
charges to customers generally cannot exceed PECO's rates that were on file as
of December 31, 1996.
The Commonwealth of Pennsylvania recently enacted legislation under
which retail gas customers will also be entitled to purchase their gas supply
requirements from alternative suppliers. Upon the implementation of the
legislation, PECO will not hold any exclusive franchises to sell gas to retail
customers, although it expects it will serve as a provider of last resort to its
existing retail gas customers and continue to provide distribution services to
those "provider of last resort" customers.
- 7 -
<PAGE>
B. Description Of The Divestiture And Sale Of Peach Bottom
As noted above, Peach Bottom currently is owned by ACE, DP&L, PECO,
and PSE&G.3/ ACE owns a 7.51 percent interest in Peach Bottom. DP&L owns a 7.51
percent interest. PECO owns a 42.49 percent interest and PSE&G owns a 42.49
percent interest. The plant is operated by PECO. Under the proposed transaction
(and a separate transaction with PSEG Nuclear), ACE and DP&L each will transfer
one-half of its interest (3.755 percent each) to PECO and one-half of its
interest (3.755 percent each) to PSEG Nuclear. Consequently, after the proposed
transactions, PECO and PSEG Nuclear each will have a fifty percent share in
Peach Bottom. PECO will continue to operate Peach Bottom. As provided in the
Purchase Agreements, proportionate shares of DP&L's and ACE's nuclear
decommissioning trust fund balances will be transferred to PECO's
decommissioning trust funds for Peach Bottom.
III. THE PROPOSED TRANSACTION IS CONSISTENT WITH THE PUBLIC
INTEREST
A. The Proposed Transaction Meets The Requirements Of The FPA
Section 203 of the FPA provides that the Commission "shall approve"
the disposition of jurisdictional facilities if such disposition is "consistent
with the public interest." Thus, the Commission should approve an application
pursuant to Section 203 if the applicant demonstrates that the transaction is
compatible with the public interest.4/ As shown below, the proposed transaction
- ---------------
3/ See note 1, supra.
4/ Pacific Power & Light v. FPC, 111 F.2d 1014,1016-17 (9th Cir. 1940); Kansas
Power & Light Co., 54 FERC paragraph 61,077 at 61,251-52 (1991).
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<PAGE>
is consistent with the public interest because it will not adversely affect
competition, will not adversely impact rates, and will not impair either state
or federal regulation. Although a showing of affirmative benefits to the public
is not required under Section 203,5/ the proposed transaction will affirmatively
benefit the public interest because it will facilitate the restructuring of the
electric power industry in the Mid-Atlantic region.
B. The Proposed Transaction Meets The Requirements Of The Merger Policy
Statement
In its Merger Policy Statement, the Commission adopted a three-part
test for evaluating whether a proposed merger or acquisition is consistent with
the public interest.6/ Under this test, the Commission will approve an
acquisition if the applicant shows that the acquisition will not have negative
effects on competition, on wholesale rates, and on the effectiveness of
regulation by state and federal agencies. In recent orders, the Commission has
applied the same three-part test to Section 203 applications involving the
transfer of generation assets and related jurisdictional transmission
facilities.7/
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5/ Id.
6/ Merger Policy Statement, Inquiry Concerning the Commission's Merger Policy
Under the Federal Power Act: Policy Statement, Order No. 592, FERC Stats. &
Regs. paragraph 30,110 (1996) (Merger Policy Statement), on reh'g, Order
No. 592-A, 79 FERC paragraph 61,321 (1997).
7/ See, e.g., New York State Elec. & Gas Corp., 86 FERC paragraph 61,020
(1999), reh'g denied, 86 FERC paragraph 61,284 (1999); Boston Edison Co.,
82 FERC paragraph 61,311 (1998); New England Power Co., 82 FERC paragraph
61,179 (1998), on reh'g, 83 FERC paragraph 61,275 (1998).
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<PAGE>
1. The Proposed Transaction Will Have No Adverse
Effect On Competition
The proposed transaction will not adversely affect competition. The
attached Affidavit of Ms. Bruce Sloan explains that the Commission should
approve the proposed transaction because it will not create market power
problems within the relevant markets. Ms. Sloan's analysis treats as a single
transaction both (i) the purchase by PECO that is the subject of this
Application, and (ii) the concurrent transfer to PSEG Nuclear of one-half of
ACE's and one-half of DP&L's interest in Peach Bottom, the transfer of all of
ACE's and DP&L's interests in Salem Nuclear Generating Station to PSEG-Nuclear,
and the transfer of all of ACE's interest in Hope Creek Nuclear Generating
Station to PSEG Nuclear, that are the subject of another application filed in a
separate docket. This is a conservative approach because the combined
transaction will have a larger impact on market concentration than will each
separate transaction. In addition, all the generation assets owned by any
affiliate of PSEG Nuclear are included as if controlled by a single entity, as
are the generation assets owned by any affiliate of PECO.
Ms. Sloan's analysis consists of two parts. First, it examines energy
and short-term capacity products by defining the relevant geographic markets
using the Commission's traditional Tier 1 analysis, with PJM as the hub. Second,
it conducts an Appendix A analysis in accordance with the Commission's Merger
Guidelines.8/ Although the Commission has indicated that an Appendix A analysis
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8/ See Merger Policy Statement at 30,128-37.
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<PAGE>
may not be necessary in divestiture proceedings,9/ Ms. Sloan presents both a
hub-and-spoke analysis and an Appendix A analysis. Both of these analyses show
that the proposed transaction will not adversely affect competition. Ms. Sloan's
analysis reflects updated assumptions concerning the ownership of generation
and, in particular, reflects the significant amount of divestiture that is
currently underway.
The Commission has held that, in the PJM market, which is in the midst
of transitioning to retail competition, economic capacity provides the
appropriate measure for purposes of analyzing market power, and that no analysis
of uncommitted capacity (i.e., economic capacity in excess of "native load") is
necessary.10/ Accordingly, Ms. Sloan examines economic capacity as the relevant
product market.
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9/ See, e.g., Central Maine Power Co., 85 FERC paragraph 61,272 at 62,090 n.10
and 62,092 (1998) (noting in an asset divestiture case that the Applicants
had submitted a market concentration study that did not "comport with the
Appendix A screen analysis enunciated in the Commission's merger policy
statement," and holding that "[w]ith respect to the Divestiture
Transaction's potential effect on competitors in the NEPOOL region, we
agree with Applicants that an Appendix A screen analysis is unnecessary in
this instance"); cf. New England Power Co., 82 FERC paragraph 61,179 at
61,662 (1998) (holding that the hub-and-spoke test was an appropriate test
for analyzing market power when requesting market-based rate authority "and
that the Merger Guidelines analysis need be submitted only if the applicant
is unable to demonstrate a lack of generation dominance with the
hub-and-spoke test"), order on clarification, 83 FERC paragraph 61,275
(1998).
10/ See EME Homer City, L.P., 86 FERC paragraph 61,016 at 61,039 (1999)
(explaining that when the underlying market is transitioning to retail
competition and the applicant is purchasing a divested generating unit that
is currently used to serve native load, installed capacity "provides the
more relevant information about generation dominance").
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<PAGE>
In its traditional Tier 1, hub-and-spoke analysis, the Commission has
established a twenty percent safe harbor.11/ That is, firms that possess less
than a twenty percent market share are deemed incapable of exercising market
power. Ms. Sloan's Tier 1 analysis shows that, both before and after the
proposed transaction, Applicants' market shares are below twenty percent.
The Commission's Appendix A guidelines establish safe harbor
thresholds based on the Department of Justice/Federal Trade Commission Merger
Guidelines. Those guidelines rely upon an analysis, both pre- and post-merger,
of the Herfindahl-Hershman Index (HHI) for each relevant market. A market with a
post-merger HHI of 1000 or less is considered unconcentrated and the merger is
presumed to raise no market power concerns. A market with a post-merger HHI of
between 1000 and 1800 is considered moderately concentrated and the merger is
presumed to raise no market power concerns if the merger results in an HHI
change of no more than 100. A market with a post-merger HHI of over 1800 is
considered highly concentrated and the merger is presumed to raise no market
power concerns if the merger results in an HHI change of no more than 50.
For the Appendix A analysis, Ms. Sloan designates PJM as the relevant
geographic market. In EME Homer City Generation, L.P., the Commission determined
that PJM should be considered one destination market because it has an ISO and a
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11/ See, e.g., New England Power Pool, 85 FERC paragraph 61,379 at 62,472
(1998).
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<PAGE>
single-system open access transmission tariff.12/ Because transmission
constraints can cause purchasers of energy in constrained areas to pay higher
transmission charges under PJM's locational marginal price (LMP) mechanism, Ms.
Sloan also examined geographic submarkets designated as PJM-West, PJM-Central,
and PJM-East. The Commission has approved the designation of these sub-markets
in past decisions.13/ Ms. Sloan's Appendix A analysis examines economic capacity
over nine different time periods to reflect a broad range of system conditions
and across Summer, Winter, and Shoulder seasons.
Ms. Sloan's analysis shows that after the proposed transaction, all
four markets - PJM, PJM-West, PJM-Central, and PJM-East - fall within applicable
safe harbor screening thresholds. On a PJM-wide basis, and in PJM-West, the
market remains unconcentrated and the HHI is below 1000 in all periods. The
PJM-Central market is moderately concentrated, with HHIs ranging between 1016
and 1283. The change in HHI in PJM-Central resulting from the proposed
transaction is less than 30, except in the winter and shoulder season off-peak
time periods, which show changes of 55 and 43, respectively. This change in HHI
should raise no concern because it is well below the 100 point threshold that is
of concern for moderately concentrated markets and barely exceeds the 50 point
threshold for highly concentrated markets. More significantly, it occurs in an
off-peak period, which the Commission has held represents less of a concern than
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12/ See 86 FERC paragraph 61,016 at 61,039 n.3 (1999).
13/ See Atlantic City Elec. Co., 86 FERC paragraph 61,248 at 61,903 (1999),
modified on other grounds, 86 FERC paragraph 61,310 (1999).
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<PAGE>
peak periods.14/ The PJM-East market is also moderately concentrated with HHIs
that range between 1096 and 1398. The change in HHI is less than 35, except in
the winter off-peak and shoulder season off-peak periods, which show changes of
77 and 59, respectively.15/
Finally, as Ms. Sloan reports, new entrants to the electricity
generation market will not be disadvantaged by the proposed transaction. The
Applicants do not control generation sites that could be used to exclude
potential competitors. Nor do the Applicants control fuel resources or fuel
transportation facilities that could be used to block access to upstream
resources.
In conclusion, Ms. Sloan's analysis demonstrates that the proposed
transaction should be approved because it will not cause market power concerns
in any relevant market.
2. The Proposed Transaction Will Have No Adverse Effect On Rates
The proposed transaction is consistent with the public interest
because it will have no adverse effect on rates.
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14/ In Atlantic City Elec. Co., the Commission approved market-based rates for
companies within PJM even though the market power analysis showed higher
market shares and concentration measures in off-peak periods. The
Commission explained that during off peak periods, "lower demand levels
will tend to keep prices low." 86 FERC paragraph 61,248 at 61,903 (1999),
modified on other grounds, 86 FERC paragraph 61,310 (1999). The Commission
also noted that its traditional analysis of generation dominance focused
only on annual system peak and that "[i]mplicit in this traditional
analysis is the possibility that, in other hours, market shares are higher
than 20 percent ...." Id.
15/ See id (indicating that off-peak periods present less of a concern than do
peak periods).
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<PAGE>
a. Transmission rates
ACE, DP&L, and PECO have transferred control of their transmission
assets to the PJM Interconnection, L.L.C. Service over these facilities is
provided pursuant to the PJM tariff, approved by the Commission.16/ After the
proposed transaction, services still will be provided pursuant to the same
tariff and will continue to be administered by the PJM Interconnection, L.L.C.
Hence, the proposed transaction will have no adverse impact on transmission
rates.
b. Wholesale rates
PECO does not have any captive or cost-based wholesale power sales
customers.17/
ACE has no wholesale customers. DP&L serves ten wholesale customers
under full or partial requirements contracts. Seven of these contracts have
fixed (or fixed escalator) demand and energy charges without fuel clauses. An
eighth contract that contains fixed prices without a fuel clause is with Old
Dominion Electric Cooperative (ODEC). That contract was executed on November 29,
1999, and filed with the Commission the next day with a proposed effective date
of December 1, 1999. If permitted to go into effect, this contract with ODEC,
along with the other seven contracts without fuel clauses, cannot be affected by
the proposed transaction.
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16/ Pennsylvania-New Jersey-Maryland Interconnection, 81 FERC paragraph 61,257
(1997), order on clarification, 82 FERC paragraph 61,068 (1998), request
for reh'g denied, 85 FERC paragraph 61,111 (1998), modified by, 86 FERC
paragraph 61,247 (1999).
17/ PECO's last remaining cost-based power sales agreement has been terminated.
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<PAGE>
DP&L also makes wholesale sales to the Town of Seaford, Delaware
(Seaford) and the City of Berlin, Maryland (Berlin). These wholesale sales are
made pursuant to contracts that will expire according to their terms in 2003 and
2001, respectively.
Capacity and non-fuel energy charges for Seaford and Berlin are tied
to retail rates in, respectively, Delaware and Maryland. Pursuant to settlements
reached in DP&L's Delaware and Maryland retail jurisdictions, DP&L's retail
rates are frozen for the next three years. Thus, the proposed transaction will
have no effect on the capacity and non-fuel rates charged to these wholesale
customers.
DP&L's wholesale contracts with Seaford and Berlin contain fuel
adjustment clauses. Neither of these wholesale contracts contains a commitment
to source electricity from a particular generation unit or set of units. The
energy from DP&L's interests in Peach Bottom (which represents only about nine
percent 18/ of DP&L's system energy needs) will be replaced through interchange
and/or bilateral power purchases at PJM market prices. Thus, depending upon
market prices, charges for fuel to Seaford and Berlin may be either lower or
higher than if the proposed transaction had not occurred. While DP&L does not
anticipate that either Seaford or Berlin will be materially impacted by the
proposed transaction, particularly given the de minimus time left before these
contracts will expire, DP&L would be willing to give these two customers an
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18 The combined sales quantities from Peach Bottom and Sale Nuclear Generating
Station provided about 16% of DP&L's system electric output in 1998.
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<PAGE>
"open season" to permit them to terminate these contracts as of the date of
closing of the proposed transaction, or within fourteen months thereafter, and
to execute new contracts with DP&L or another wholesale supplier. DP&L commits
that it will not collect any related stranded costs from these two customers if
they exercise this open season option.19/
c. Retail rates
(i) Rates paid by retail customers of PECO will remain the
same
As described above, PECO has implemented a retail access program under
which all of its retail customers are fully protected from any potential rate
impacts of the proposed transaction by their freedom to purchase electric
generation services from PECO's competitors and by a state-imposed rate
reduction and cap. By order of the PPUC approving PECO's retail access program
Settlement, as of January 1, 2000, all of PECO's existing retail electric
customers may choose to purchase electric generation services from alternative
electric generation suppliers. For those retail electric customers that elect
not to take service from an alternative electric generation supplier, PECO will
be the provider of last resort (PLR) of generation service for retail electric
customers in its service area. The Settlement also provides PLR customers with a
rate reduction for the years 1999 and 2000 and a rate cap effective through
2005. PECO's retail customers therefore are protected from any potential rate
impacts of the proposed transaction by their right to choose alternative
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19/ Cf. Jersey Cent. Power & Light Co., 87 FERC paragraph 61,014 at 61,039
(1999).
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<PAGE>
electric generation suppliers, and PECO's PLR customers are protected by the
rate reduction and rate caps embodied as part of the Settlement.
(ii) Rates paid by retail customers of ACE and DP&L will
be unchanged or remain subject to state regulation
The sale of interests in Peach Bottom is not likely to have a material
effect on the retail rates of customers in any of the retail jurisdictions of
ACE or DP&L. ACE's retail rates, subject to the jurisdiction of the NJBPU, have
been recently reestablished in a comprehensive retail choice/restructuring
proceeding in which a schedule of retail rate reductions was adopted, ultimately
reducing rates by ten percent relative to levels in place in 1997, and the rates
reflecting the scheduled reductions are capped until July 31, 2003. The sale of
interests in the nuclear assets does not affect these scheduled rate reductions.
DP&L's retail rates are subject to the jurisdiction of the DPSC, the
MMPSC, and the VSCC. Pursuant to a comprehensive retail choice/restructuring
order, DP&L's retail rates in Delaware are frozen between October 1, 1999 and
September 30, 2002 for non-residential rate classes, and between October 1, 1999
and September 30, 2003 for residential rate classes, subject to a limited number
of adjustments not applicable here (e.g., extraordinary costs such as new taxes,
or new environmental fees and assessments). DP&L's Maryland retail rates will be
reset July 1, 2000, under a retail customer choice/restructuring settlement
approved by the MPSC, which settlement calls for retail rates to be frozen until
June 30, 2003 for non-residential rate classes and until June 30, 2004, for
residential rate classes, subject to a limited number of adjustments, not
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<PAGE>
applicable here.20/ DP&L reports to the VSCC monthly fuel costs and its actual
earned return each quarter relative to DP&L's authorized rate of return. The
sale of Peach Bottom will not affect the VSCC's powers under Virginia law to
review the appropriateness of DP&L's base and fuel rates.
3. The Proposed Transaction Will Have No Adverse Impact On State
Or Federal Regulation
The Commission focuses on two issues when deciding whether a proposed
transaction could impair effective regulation: (i) whether the transaction would
shift regulatory authority from the Commission to the SEC or otherwise diminish
Commission authority and (ii) whether affected states have the authority to act
on the proposed sale transaction.21/ The proposed transaction here is consistent
with the public interest because it will not impact either federal or state
regulation.
The proposed transaction will neither impair nor diminish the
Commission's jurisdiction in any respect. The Commission will continue to have
jurisdiction over all of the wholesale sales that PECO will make from Peach
Bottom. In addition, the proposed transaction will not result in any transfer of
jurisdiction from the Commission to the SEC.
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20/ The frozen rates in Maryland are based on current base rates and actual
fuel costs for the 12-month period ending April 30, 2000. The settlement
contains a consumer-protection provision that provides that, if generating
units are actually sold prior to April 30, 2000, an adjustment may be made
to reflect any effect of the transfer on actual fuel costs.
21/ Merger Policy Statement at 30,124-25.
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<PAGE>
The proposed transaction also will not have any adverse impact on
state regulation. Delaware, Maryland, New Jersey, Pennsylvania, and Virginia are
each making determinations concerning all or portions of the proposed
divestitures of the ACE and DP&L nuclear interests. State Commissions of each of
these states will continue to exercise jurisdiction over retail sales in their
respective states.
IV. OTHER REQUIREMENTS PURSUANT TO SECTION 33.2 OF THE
COMMISSION'S REGULATIONS
A. Name And Address Of Principal Business Office Of:
1. ACE
Atlantic City Electric Company
c/o Conectiv
800 King Street
P.O. Box 231
Wilmington, DE 19801
(302) 429-3016
2. DP&L
Delmarva Power & Light Company
c/o Conectiv
800 King Street
P.O. Box 231
Wilmington, DE 19801
(302) 429-3016
3. PECO
PECO Energy Company
2301 Market Street
Philadelphia, PA 19103
(215) 841-6863
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<PAGE>
B. Names And Addresses Of Persons Authorized To Receive Notice And
Communications With Respect To The Application
1. ACE
J. Mack Wathen
Director, Regulatory Affairs
Conectiv
800 King Street, P.O. Box 231
Wilmington, DE 19801
(302) 429-3285
(302) 429-3230 (Facsimile)
[email protected]
Randall V. Griffin
Senior Counsel
Conectiv
800 King Street, P.O. Box 231
Wilmington, DE 19801
(302) 429-3016
(302) 429-3801 (Facsimile)
[email protected]
John N. Estes, III
Skadden, Arps, Slate, Meager & Flom LLP
1440 New York Ave., N.W.
Washington, D.C. 20005-2111
(202) 371-7950
(202) 393-5760 (Facsimile)
[email protected]
2. DP&L
J. Mack Wathen
Director, Regulatory Affairs
Conectiv
800 King Street, P.O. Box 231
Wilmington, DE 19801
(302) 429-3285
(302) 429-3230 (Facsimile)
[email protected]
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<PAGE>
Randall V. Griffin
Senior Counsel
Conectiv
800 King Street, P.O. Box 231
Wilmington, DE 19801
(302) 429-3016
(302) 429-3801 (Facsimile)
[email protected]
John N. Estes, III
Skadden, Arps, Slate, Meager & Flom LLP
1440 New York Ave., N.W.
Washington, D.C. 20005-2111
(202) 371-7950
(202) 393-5760 (Facsimile)
[email protected]
3. PECO
Ward L. Smith
PECO Energy Company
2301 Market Street, S23-1
Philadelphia, PA 19103
(215) 841-6863
(215) 568-3389 (Facsimile)
[email protected]
Floyd L. Norton, IV
Morgan, Lewis & Bockius LLP
1800 M Street, N.W.
Washington, D.C. 20036
(202) 467-7620
(202) 467-7176 (Facsimile)
[email protected]
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<PAGE>
C. Designation Of Territories Served, By Counties And States
1. ACE
New Jersey Counties
Atlantic
Burlington
Camden
Cape May
Cumberland (portions)
Gloucester
Ocean
Salem
2. DP&L 22/
Delaware Counties
New Castle
Kent
Sussex
Maryland Counties
Caroline
Cecil
Dorchester
Harford
Kent
Queen Anne's
Somerset
Talbot
Wicomico
Worcester
Virginia Counties
Accomack
Northhampton
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22/ In addition to D&L's service within the following counties, various other
utilities, municipalities, and electric cooperatives serve loads within
portions of such counties.
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<PAGE>
3. PECO
PECO provides retail electric and natural gas service in Pennsylvania,
in all or portions of the following counties: Bucks, Lancaster (gas only),
Montgomery, Chester, York (electric only), and Delaware. PECO also serves
electric customers in the City of Philadelphia.
D. Description Of Jurisdictional Facilities At Peach Bottom
The proposed transaction will transfer to PECO one-half of ACE's
interest and one-half of DP&L's interest in generator step-up transformers and
associated equipment, as well as all other jurisdictional facilities.
E. Description Of Sale And Statements As To Consideration
The proposed transaction involves the sale of one-half of ACE's
interest in Peach Bottom and one-half of DP&L's interest in Peach Bottom to
PECO. PECO will pay ACE $2,550,000 plus an amount equal to 3.755 percent of the
net book value, as of the closing date, of the Nuclear Fuel Supplies. PECO will
pay DP&L $2,550,000 plus an amount equal to 3.755 percent of the net book value,
as of the closing date, of the Nuclear Fuel Supplies.
F. Statement Of Facilities At Peach Bottom To Be Disposed Of, Giving A
Description Of Their Present Use And Their Use After Disposition
The jurisdictional facilities to be disposed of at Peach Bottom
consist primarily of ACE's and DP&L's interests in generator step-up
transformers and associated equipment. These facilities are currently used to
step up generation produced by Peach Bottom. After the proposed transaction,
these facilities will be used for the same purpose.
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<PAGE>
G. Statement Of The Cost Of The Facilities At Peach Bottom Involved In
The Sale
The net book value of the jurisdictional facilities involved in the
proposed transaction is $247,197.
H. Statement As To The Effect Of The Sales On Any Contracts For The
Purchase, Sale, Or Interchange Of Electric Energy
As discussed above, the transfer of generation and related
transmission assets will not affect the rates, terms, or conditions under any
contract for the purchase, sale, or interchange of electric energy for resale.
I. Statement As To Other Required Regulatory Approvals
1. State Utility Commissions
Authorization for the proposed transaction, or portions thereof, will
be obtained from the NJBPU, the PPUC, and the VSCC.23/
2. The Securities and Exchange Commission
Conectiv, as a registered holding company, will seek authorization for
the proposed transaction from the SEC, pursuant to Section 12(d) of PUHCA.
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23/ In addition, these state commissions, as well as the DPUC and the MPSC have
been or will be requested to make findings under Section 32(c) of PUHCA
regarding the related transactions between ACE, DP&L, and PSEG Nuclear.
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<PAGE>
3. The Nuclear Regulatory Commission
Applicants will seek Nuclear Regulatory Commission approval, pursuant
to the Atomic Energy Act, of the transfer of ACE's and DP&L's interests in Peach
Bottom.
4. Hart-Scott-Rodino
Applicants will seek clearance of the proposed transaction from the
Department of Justice and the Federal Trade Commission pursuant to the
Hart-Scott-Rodino Antitrust Improvements Act.
J. Statement Of Facts Demonstrating That The Sales Will Be Consistent
With The Public Interest
The relevant facts demonstrating that the instant transaction is in
the public interest have been set forth above in the body of this Application
and in the attached Affidavit of Ms. Bruce Sloan.
K. Brief Statement Of Franchises Held
1. ACE
ACE has the necessary franchises to furnish electric service in
various municipalities or territories in New Jersey in which it currently
provides such service.
2. DP&L
DP&L has the necessary franchises to furnish electric service in
various municipalities or territories in Delaware, Maryland, New Jersey,
Pennsylvania, and Virginia in which it currently provides such service.
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<PAGE>
3. PECO
As of January 1, 2000, PECO will not hold any franchises to provide
generation service to retail electric customers in Pennsylvania. PECO will
continue to furnish distribution service as a regulated monopoly within its
Pennsylvania franchise area. In accordance with the terms of a settlement
approved by the PPUC consistent with the Pennsylvania Electric Generation
Customer Choice and Competition Act, all of PECO's retail electric customers
will be entitled to purchase their electric generation supply requirements from
alternative electric generation suppliers. PECO will serve as provider of last
resort to retail electric customers in the City of Philadelphia, Pennsylvania,
and Bucks, Montgomery, Chester, (a portion of) York, and Delaware Counties,
Pennsylvania.
PECO holds franchises to provide retail gas service in Bucks,
Montgomery, Chester, Delaware, and Lancaster Counties, Pennsylvania. The
Commonwealth of Pennsylvania recently enacted legislation under which retail gas
customers will also be entitled to purchase their gas supply requirements from
alternative suppliers. Upon the implementation of the legislation, PECO will not
hold any exclusive franchises to sell gas to retail customers, although it
expects it will serve as provider of last resort to its existing retail gas
customers and continue to provide distribution service to all retail customers
within its service territory.
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<PAGE>
L. Form Of Notice
A form of notice of the instant Application suitable for publication
in the Federal Register is attached hereto. An electronic version of the notice
is also submitted herewith on a 3 1/2" diskette, in WordPerfect 5.1 for DOS.
V. EXHIBITS REQUIRED BY SECTION 33.3 OF THE COMMISSION'S REGULATIONS
Concerning the exhibits required by Section 33.3 of the Commission's
Regulations, Applicants state as follows:
Exhibit A: Applicants request waiver of the requirement to include
Exhibit A.
Exhibit B: Applicants request waiver of the requirement to include
Exhibit B.
Exhibit C: Applicants attach hereto generalized accounting
entries, indicating how the proposed transaction will
be reflected on their books. To the extent necessary,
Applicants request waiver of the requirement to include
Exhibit C.
Exhibit D: Applicants request waiver of the requirement to include
Exhibit D.
Exhibit E: Applicants request waiver of the requirement to include
Exhibit E.
Exhibit F: Applicants request waiver of the requirement to include
Exhibit F.
Exhibit G: As discussed in the body of this Application,
Applicants are seeking approval from a number of
federal and state regulatory bodies. Applicants commit
to provide copies of these applications (with exhibits)
to any party (including Commission staff) that requests
them. Applicants additionally commit to provide
Commission staff with any orders received as a result
of such applications prior to a Commission order on
this Section 203 Application. To the extent necessary,
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<PAGE>
Applicants request waiver of the requirement to include
Exhibit G.
Exhibit H: Applicants attach hereto the Purchase Agreement
concerning the proposed transaction.
Exhibit I: Applicants attach hereto a general geographic map
indicating the location of the nuclear plant at issue.
VI. REQUEST FOR EXPEDITED APPROVAL
As demonstrated above, the proposed transaction is in the public
interest. Accordingly, Applicants respectfully request that the Commission
approve the Application without a hearing and that it issue an order as
expeditiously as possible. Specifically, Applicants plan to close by March 31,
2000. The Purchase Agreements require that Commission approval be final and
non-appealable. The Applicants therefore request Commission action by February
15, 2000.
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<PAGE>
VII. CONCLUSION
WHEREFORE, for the reasons stated herein, the Applicants respectfully
request that the Commission approve this Application under Section 203 of the
Federal Power Act no later than February 15, 2000.
On behalf of Atlantic City Electric Company and Delmarva Power & Light Company:
/s/ Randall V. Griffin /s/ John N. Estes, III
- ------------------------------------- -------------------------------------
Randall V. Griffin John N. Estes, III
Senior Counsel Skadden, Arps, Slate, Meagher & Flom
Conectiv 1440 New York Avenue, N.W.
800 King Street Washington, DC 20005-2111
P.O. Box 231 (202) 371-7950
Wilmington, Delaware 19801
(302) 429-3016
On behalf of PECO Energy Company:
/s/ Ward L. Smith /s/ Floyd L. Norton, IV
- ------------------------------------- -------------------------------------
Ward L. Smith Floyd L. Norton, IV
PECO Energy Company Michael C. Griffen
2301 Market Street Morgan, Lewis & Bockius LLP
Philadelphia, PA 19103 1800 M Street, N.W.
(215) 841-6863 Washington, D.C. 20036
(202) 467-7000
December 9, 1999
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<PAGE>
UNITED STATES OF AMERICA
BEFORE THE
FEDERAL ENERGY REGULATORY COMMISSION
Atlantic City Electric Company ) Docket No. ECOO-___-000
Delmarva Power & Light Company )
PECO Energy Company )
NOTICE OF FILING
Take notice that on December 9, 1999, Atlantic City Electric Company
(ACE), Delmarva Power & Light Company (DP&L), and PECO Energy Company (PECO)
(collectively, Applicants) tendered for filing an application under Section 203
of the Federal Power Act for approval of the transfer of certain jurisdictional
facilities in connection with the sale of ACE's and DP&L's interests in Peach
Bottom Atomic Power Station to PECO.
Any person desiring to be heard or to protest this filing should file
a petition to intervene, comments, or protest with the Federal Energy Regulatory
Commission, 888 First Street, N.E., Washington, D.C. 20426, in accordance with
Rules 211 and 214 of the Commission's Rules of Practice and Procedure (18 C.F.R.
section 385.211 and 18 C.F.R. section 395.214). All petitions to intervene,
comments, or protests should be filed on or before __________. Comments and
protests will be considered by the Commission in determining the appropriate
action to be taken, but will not serve to make protestants parties to the
proceeding. Any person wishing to become a party must file a petition to
intervene. Copies of the filing are on file with the Commission and are
available for public inspection. This filing may also be viewed on the Internet
at http://www.ferc.fed.us/online/rims.htm (call 202-208-2222 for assistance).
David P. Boergers
Secretary
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ATTACHMENT A
AFFIDAVIT OF BRUCE M. SLOAN
<PAGE>
AFFIDAVIT OF BRUCE M. SLOAN
INTRODUCTION
My name is Bruce M. Sloan. I am a Principal at PHB Hagler Bailly, Inc
("PHB"). My business address is 1776 Eye Street, N.W., Washington, D.C. 20006. I
have over 25 years experience in economic consulting and hold a Bachelor of Arts
degree with honors in economics from Connecticut College and a Masters in
Business Administration degree from George Mason University. Much of my academic
training and professional experience has concerned competitive issues facing
regulated utilities. My work in the last ten years has concentrated on the
electric utility industry. Exhibit No. __ (BMS-1) contains a description of my
qualifications.
PURPOSE FOR THE STUDY
The purpose of the study is two-fold. First, it is being submitted in
support of two Applications to be filed with the Federal Energy Regulatory
Commission ("FERC" or the "Commission") for approval under Section 203 of the
Federal Power Act for the transfer of jurisdictional facilities in connection
with a transaction more fully described below. One Application is being filed
jointly by Atlantic City Electric Company, Delmarva Power & Light Company
(together "Conectiv") and PSEG Nuclear, LLC ("PSEG Nuclear"). The other
Application is being filed jointly by Conectiv and PECO Energy Company ("PECO").
Second, this study is being submitted in support of an Application to
be filed jointly by Conectiv, PECO and Public Service Electric & Gas Company
("PSEG") (an affiliate of PSEG Nuclear) with the Pennsylvania Public Utility
Commission ("Pa. PUC") for the issuance of certificates of public convenience
evidencing Pa. PUC approval of the transfers of Pennsylvania jurisdictional
assets from Conectiv to PECO and PSEG Nuclear in connection with the transaction
more fully described below. In particular, this study provides the basis for the
Pa. PUC to make findings, pursuant to Section 2811(e) of the Pennsylvania Public
Utility Code, that the proposed acquisition is not likely to result in
anticompetitive or discriminatory conduct, including the unlawful exercise of
market power, which would prevent Pennsylvania retail electric customers from
obtaining the benefits of a properly functioning competitive retail market for
electric generation.
<PAGE>
In this affidavit, I address the effect of the Applicants' proposed
sale and purchase of generation assets ("Proposed Purchases"), as described in
the Applications, on market concentration in PJM and first-tier markets. This
analysis examines the energy and short-term capacity products by defining the
relevant geographic market using the Commission's traditional hub-and-spoke
approach with PJM as the buying hub. In addition, I have conducted an Appendix A
analysis, which supports my conclusions about market concentration and market
power arising from the Proposed Purchases.
DESCRIPTION OF THE TRANSACTIONS
Conectiv is divesting certain generation assets to PECO and PSEG Power
LLC ("PSEG Power"). Specifically, Conectiv is divesting its 15.02 percent
interest in the Peach Bottom Atomic Nuclear Station, Units 2 and 3, totaling 328
MW, in equal amounts to PECO and PSEG Power (164 MW each). In addition, PSEG
Power will purchase from Conectiv a 14.82 percent interest in the Salem Nuclear
Generating Station, Units 1 and 2, totaling 328 MW. PSEG Power will also
purchase from Conectiv a 5 percent interest in Hope Creek Nuclear Generating
Station, or 52 MW. In total, Conectiv will be divesting 708 MW and PECO will
acquire 164 MW and PSEG Power will acquire 544 MW. The PSEG Power purchase will
be made by PSEG Nuclear, LLC, a subsidiary of PSEG Power, that will own and, in
the case of Salem and Hope Creek, operate the plants.
SUMMARY OF ANALYSIS
The Applicants' proposed purchases do not create any market power
concerns in the relevant geographic markets defined as PJM, PJM-West,
PJM-Central and PJM-East and other first-tier destination markets. This
conclusion is based on the market power analyses explained below.
The hub-and-spoke analysis of installed capacity of PJM and first-tier
markets indicates that the PJM market is unconcentrated pre- and
post-transaction. The pre-transaction Herfindahl-Hirshman Index ("HHI") is only
764 and the change in HHI is only 5. This analysis indicates that the proposed
purchases do not raise any market power concerns.
2
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The Appendix A analysis I have conducted considers the market
implications of the proposed purchases by looking at economic capacity market
measures in PJM and first-tier markets for eleven time periods (eleven time
periods over three seasons during 2001). The analysis considers the market
concentration in three markets within PJM prior to and after Conectiv's
divestiture of its generating units to PECO and PSEG Power, as well. The
pre-transaction analysis shows that the PJM market is unconcentrated with an HHI
of less than 1,000. If transmission constraints segment PJM into three smaller
geographic markets, the PJM-West market is unconcentrated and the PJM-Central
and PJM-East markets are moderately concentrated markets with HHIs around 1,300.
There is little or no change in HHIs in any of the first-tier markets due to the
proposed purchases.
The post-transaction analysis considers the effect of the proposed
purchases of both PECO and PSEG Power on market concentration. This analysis is
conservative because the consolidation of the transactions will have a larger
impact on market concentration than individually looking at the impact of each
transaction as a unique event in the marketplace. The change in HHI due to the
consolidation of the transactions is below 100 in all of the time periods and is
even below 50 in all but two off-peak periods (in PJM-Central, shoulder season
and in PJM-East, shoulder season). These results indicate that the proposed
purchases do not create potential market power problems within the relevant
geographic markets. Therefore, the Commission should grant the Applicants'
request to approve the proposed purchases.
DESCRIPTION OF THE APPLICANTS
CONECTIV
Conectiv became a holding company after a series of merger
transactions between Delmarva Power & Light Company ("DP&L") and Atlantic City
Electric Company ("ACE"). DP&L and ACE are public utilities which supply and
deliver electricity at wholesale and retail. DP&L also supplies and delivers
natural gas to its customers. DP&L serves retail customers on the Delmarva
Peninsula and portions of Maryland and Virginia. ACE serves retail customers in
southern New Jersey. Conectiv owns 4, 455 MW of generating capacity. In 2001,
Conectiv has commitments to purchase 973 MW of capacity under long-term (year or
longer) contracts and commitments to sell 348 MW of capacity (of which 160 MW is
3
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due to terminate during 2001). Conectiv is a member of the Pennsylvania-New
Jersey-Maryland Interconnection LLC ("PJM"), which I discuss in detail below.
PECO ENERGY COMPANY
PECO is an electric and gas utility serving electric customers at
retail in the five-county Philadelphia, Pennsylvania area and serving retail
natural gas customers in five suburban counties. In 2001, PECO will own 9,262
MW, of which 4,119 MW is nuclear. PECO has long-term commitments in 2001 to
purchase 60 MW and long-term commitments to sell 964 MW. PECO is a member of
PJM. Beginning in January 1999, the Electricity Generation Customer Choice and
Competition Act ("PA Competition Act") required the unbundling of retail
electric services in Pennsylvania. Customer choice of electricity providers is
being phased in between January 1999 and January 2000.
PECO and British Energy have formed a joint venture, AmerGen Energy
Company, LLC ("AmerGen"), to acquire interests in and operate nuclear generating
stations in the United States. British Energy owns and operates 8 nuclear plants
in the United Kingdom, with 12,000 MW. To date, AmerGen entered into agreements
to acquire five nuclear generating stations totaling approximately 4,167 MW.1
All of these asset acquisitions have purchased power agreements ("PPA's") with
the sellers to buyback some or all of the output from these units. These PPAs
will terminate ranging from December 31, 2001 (Three Mile Island) to 12 years
after the closing of the agreement (Vermont Yankee). PECO will market any energy
available from these units on behalf of AmerGen.2
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1 These proposed acquisitions include: Three Mile Island (786 MW) from GPU;
Nine Mile Point (1.292 MW) from Niagara Mohawk Power Corporation ("NMPC")
and New York State Electric & Gas Company ("NYSEG"); Clinton (930 MW) from
Illinois Power Company ("IP"); Oyster Creek (619 MW) from GPU; and Vermont
Yankee (540 MW) from the owners of the Vermont Yankee Nuclear Corporation.
2 In connection with the PPA for Clinton, IP will only purchase 75 percent of
the output through 2004. Therefore, PECO will market the remaining 25
percent share (232 MW). In addition, in connection with the PPAs for Nine
Mile Point 1 and 2, AmerGen will sell back 95 percent of Unit 1 to NMPC
(with 31 MW to market) and 56 percent of Unit 2 to NMPC and NYSEG (with 297
MW to market). In my market power analyses, I attribute the full 560 MW
available to AmerGen to sell in the marketplace to PECO.
4
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PECO Energy has entered into a merger agreement with Unicom
Corporation ("Unicom"), the parent company of Commonwealth Edison Company
("ComEd"), a public utility. Upon completion of this merger, PECO Energy and
AmerGen will be affiliates of ComEd. The parties have not yet applied for all
the regulatory approvals needed to complete their merger and will not complete
the merger until such approvals have been obtained. ComEd generating resources
(19,925 MW) are consolidated with PECO generating resources in the analyses.
The market analysis considers the ComEd/PECO merger to be completed by
2001. This assumption is conservative because it potentially overstates the
capacity available to PECO in the event that the merger is not consummated.
PECO's retail natural gas sales and transportation activities are
provided by PECO Energy Distribution ("PED"), a division of PECO, and are
regulated by Pa. PUC. PED's natural gas supply is acquired under contracts with
suppliers with terms up to five years. It has long-term firm transportation
contracts to move its gas supply to the market area with Texas Eastern
Transmission Corporation ("Texas Eastern") and Transcontinental Gas Pipe Line
Corporation ("Transcontinental"). PECO also has acquired underground storage
from Texas Eastern. Transcontinental Equitrans, Inc. and CNG Transmission
Corporation. Exelon Energy, Horizon and PECO Gas Supply, subsidiaries of PECO,
participate in retail gas sales outside of PED's service territory.
PSEG POWER LLC
PSEG Power LLC ("PSEG Power") is a wholly-owned subsidiary of Public
Service Enterprise Group, an exempt public utility holding company under PUCHA.
PSEG Power is the parent of PSEG Nuclear LLC ("PSEG Nuclear"), which was
established in connection with New Jersey's retail access plan. On September 29,
1999, the Commission approved the transfer of all of the nuclear facilities
owned by PSE&G to PSEG Nuclear.3 PSEG Nuclear sells all of the power from the
nuclear plants that it owns to PSEG Energy Resources & Trade LLC, which is also
a wholly-owned subsidiary of PSEG Power. It is anticipated that, by the time
that the proposed transaction closes, PSEG Nuclear will own PSE&G's interests in
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3 Public Service Electric & Gas Co., 88 FERC paragraph 61,299 at 61,916-17
(1999)
5
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Peach Bottom, Salem, and Hope Creek. PSEG Nuclear will be the purchaser of ACE's
and DP&L's interests in these three plants.
PJM
PJM is a power pool and Independent System Operator ("ISO") which
integrates, through central dispatch, the generation and operations of its
member companies. PJM consists of over 130 members located in all or part of
Pennsylvania, New Jersey, Maryland, Delaware, Virginia and the District of
Columbia. There is approximately 56,000 MW of pooled generating capacity within
PJM. PJM is directly interconnected to Virginia Electric Power Company ("VP"),
Allegheny Power System ("APS"), FirstEnergy, NMPC, NYSEG and Consolidated Edison
Company ("ConEd").
PJM was established in its current form on March 31, 1997, when the
members of PJM's predecessor organization converted it from an unincorporated
association into a limited liability company. In November 1997, the Commission
issued an order authorizing the establishment of PJM as an ISO and authorized
PJM to operate an hourly energy market known as the PJM Power Exchange ("PJM
PX"). PJM dispatches generation based on a security/reliability constrained
economic dispatch to minimize generation production cost in PJM. Transmission
for this dispatch system is priced according to a Locational Marginal Pricing
("LMP") regime.
LMP was implemented in PJM in April 1998. LMP is based on the marginal
cost of supplying the next increment of electric energy at a location (bus). The
LMP price is calculated as the marginal cost of supplying the next increment of
load at the location taking into account both the cost of generation and the
congestion cost of the transmission system. The congestion charge for an energy
transaction is the difference between the LMP at the generation location and the
LMP at the load location (times the total energy transferred).
Along with the implementation of LMP, PJM developed a financial
entitlement called Fixed Transmission Rights ("FTRs"), which provide load
serving entities ("LSEs") and transmission customers of PJM with a financial
hedge or contract to protect them from the possibility of increased costs due to
transmission congestion. FTRs are generation source-to-load specific
designations. PJM grants FTRs to LSEs through the purchase of network
6
<PAGE>
transmission service, and the amount of FTRs that a LSE may receive is based on
its anticipated peak load. In addition, LSEs may request FTRs from PJM through
the purchase of firm point-to-point transmission service. Market participants
can acquire and sell FTRs in a secondary market on a bilateral basis. On April
15, 1999, PJM commenced an FTR auction to allow PJM market participants to
purchase FTRs.4 On March 10, 1999, the Commission issued an order granting PJM
utilities the authority to charge market-based prices for sales of energy and
certain ancillary services into the PJM PX.5
ANALYTIC FRAMEWORK FOR THE ANALYSIS
The Commission has stated that the proper way to analyze an asset
divestiture/acquisition is to assess changes in existing market structure due to
the transaction(s).6 The structural analysis involves five fundamental analytic
steps: 1) identify the relevant product market; 2) identify the relevant
geographic market; 3) identify potential suppliers of each product in the
relevant geographic market; 4) assess market concentration, and 5) assess
competitive effects, including future entry conditions. In Order No. 592
("Merger Policy Statement"), the Commission adopted the Department of Justice
("DOJ") and Federal Trade Commission ("FTC") Merger Guidelines for measuring
market concentration levels by the HHI. To determine whether a proposed merger
will have a significant anticompetitive impact, the DOJ and FTC consider the
level of the HHI prior to the transaction (pre-merger HHI), the level of HHI
after the merger (the post-merger HHI) and the change in HHI that results from
the merger. Therefore, the critical issue is whether the proposed change in
ownership of generation assets is likely to increase concentration in the market
and reduce competition in the future.
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4 PJM Highlights April/May 1999, Volume 2, Issue 4.
5 Atlantic City Electric Company, et.al, 86 FERC paragraph 61,248 (1999).
6 Federal Energy Commission, Order No. 592A, FERC Statutes and Regulations 79
FERC paragraph 61,321 (1997).
7
<PAGE>
RELEVANT PRODUCT MARKET
In the past, the Commission has been concerned with three relevant
product markets: nonfirm energy, short-term capacity (firm energy) and long-term
capacity.7 Installed capacity has been used to measure a supplier's market share
in the energy product market on the grounds that all of a unit's capacity could
be used to produce energy, especially during off-peak periods. The uncommitted
capacity measure has been associated with short-term capacity market measures on
the grounds that year-round capacity could be sold only from the uncommitted
portion of an unit's capacity. Long-term capacity is no longer considered
because the Commission has concluded as a general matter that the potential for
entry ensures that the long-term capacity market is competitive.8
According to the Commission's recent approach to markets being
deregulated and in transition, installed capacity is the relevant product to be
addressed in cases involving electricity firms seeking market-based rates. In
EME Homer City Generation, L.P., the Commission stated:
The Commission typically evaluates uncommitted capacity (the
difference between installed capacity and native load obligations,
measured at the annual system peak) as a separate product. Currently,
all of Homer City's capacity is uncommitted, while virtually all of
the capacity owned by its competitors is committed. However, retail
competition programs in the PJM and New York markets are premised on
the release of native load obligations and the concomitant release of
capacity from committed to uncommitted. As retail access becomes a
reality, any capacity currently committed to serve the released retail
loads will become uncommitted as soon as the customer decides to
switch .... [W]e conclude that, in these circumstances (i.e., when the
underlying market that is being evaluated is transitioning to retail
competition, and the applicant is purchasing a divested generating
unit that is currently used to serve native loads), the installed
capacity figure (discussed above) provides the more relevant
information about the generation dominance. 86 FERC paragraph 61,106
at 61,038-40 (1999).
In December 1996, in the Merger Policy Statement, the Commission
adopted a "delivered price test" to measure generation market power. Appendix A
of Order No. 592 (the "Competitive Analysis Screen") specifies that a detailed
analytic be calculated to measure the concentration of generation markets. This
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7 Baltimore Gas & Electric and Potomac Electric Power Company, 76 FERC
paragraph 61,111 at 61,572 (1996).
8 Promoting Wholesale Competition Through Open Access Non-Discriminatory
Transmission Services by Public Utilities; Recovery of Stranded Costs by
Public Utilities and Transmitting Utilities, Order No. 888, FERC Statutes
and Regulations paragraph 31,036 at 31,657 (1996). ("Order No. 888").
8
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measure, economic capacity, is all economic supply that can be delivered into a
destination market at a delivered cost less than 105 percent of the destination
market price. Available economic capacity is economic capacity adjusted for
native load and reserve requirements. Appendix A competitive screening
methodology considers physical transmission constraints in determining the
potential supply available to a destination market.
Given the advanced state of deregulation and customer choice in the
relevant geographic markets, I focused on the installed capacity measure for the
hub-and-spoke analysis and the economic capacity measure for the Appendix A
competitive screening analysis to analyze potential generation market power. In
these markets, all load is assumed to be available to be supplied by competitive
suppliers and all suppliers are assumed to be uncommitted to native load.
RELEVANT GEOGRAPHIC MARKETS
Traditionally, the Commission has defined the relevant geographic
market as utilities directly interconnected with the applicants, or first-tier
utilities. Order No. 592 continues to define the relevant geographic market in
terms of first-tier destination markets. Additional, the Commission considers
other utilities who historically have been customers of the applicants as
potential additional destination markets.
All of the Applicants are members of PJM. In recent prior decisions,
the Commission has determined that PJM can be considered one destination market
because it is an ISO and has a single-system open access transmission tariff.9
Under this geographic market definition, the supply alternatives to every
purchaser within PJM will be the same, when important transmission interfaces
are not constrained.
However, as noted above, when important transmission system interfaces
are constrained, LMP will cause price differentials. At these times, purchasers
of energy in constrained areas will pay a higher transmission charge reflecting
the higher marginal price of each increment of energy utilizing the constrained
interface. These constrained interfaces act to define smaller relevant
geographic markets within the PJM buying hub.
9
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The Commission has accepted smaller geographic definitions of the
relevant PJM markets based on three well-defined groups of transmission lines
that are sensitive to voltage instability and voltage collapse. These segments
of the PJM transmission system are referred to as the Western, Central and
Eastern interfaces. The primary flow of energy in PJM is west to east.
Therefore, LMP causes prices in the east to be higher than the areas to the
west, when transmission constraints occur.
Given the potential transmission constraints that periodically occur
within PJM and the existence of LMP that differentiates the supply alternatives
within PJM, there are four relevant geographic markets to be considered (other
than first-tier markets): all PJM; PJM-West; PJM-Central; and PJM-East. Most of
the Applicants' generation is located in PJM-East. However, each owns generation
in PJM-Central and PJM-West.
In summary, when transmission constraints are not limiting, the
relevant geographic market is all PJM. PJM-West is the area in PJM to the east
of the Western Interface. When the Western Interface is constrained, the
relevant geographic market is the section within PJM that is east of the Western
Interface, i.e. West-Central-East. PJM-Central is defined as the area in PJM to
the east of the Central Interface. Thus, when the Central Interface is
constrained, the relevant geographic market is defined as PJM-Central, i.e.
Central-East. PJM-East is defined as the area within PJM that is east of the
Eastern Interface. When the Eastern Interface is constrained, the relevant
geographic market is only PJM-East.
DESCRIPTION OF METHODOLOGY
I evaluated the likely competitive effects of the proposed purchases
using the methodology described in Appendix A and utilizing PHB's Competitive
Analysis Screening model ("CASm"), which implements the delivered price test and
other calculations required in Appendix A. CASm is a linear programming model
developed specifically to perform the calculations required in undertaking the
Appendix A delivered price test. I examined eleven time periods for the economic
capacity measure, selected to reflect a broad range of system conditions.
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9 EME Homer City Generation, L.P., 86 FERC paragraph 61,016 (1999).
10
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Broadly, I evaluated hourly load data to aggregate similar hours. I defined
periods within three seasons (Summer, Winter and Shoulder) to reflect the
differences in unit availability and transmission capacity as well as base flows
on the network.
The periods evaluated (and the designations used to refer to these
periods in exhibits) are:
SUMMER (June-July-August)
SUPER PEAK 1 (S_P1): Top 25 load hours
SUPER PEAK 2 (S_SP2): Top 150 load hours
SUPER PEAK 3 (S_P3): Top 500 load hours
PEAK (S_P): Remaining peak hours
OFF-PEAK (S_OP): All off-peak hours
WINTER (December-January-February)
SUPER PEAK (W_SP): Top 150 load hours
PEAK (W_P): Remaining peak hours
OFF-PEAK (W_OP): All off-peak hours
SHOULDER (March-April-May-September-October-November)
SUPER PEAK (SH_SP): Top 150 load hours
PEAK (SH_P): Remaining peak hours
OFF-PEAK (SH_OP): All off-peak hours
For each destination market, I evaluated conditions assuming market
prices ranging from $15/MWh in Shoulder Off-Peak period (SH_OP) to $100/MWh in
the Summer Super Peak period (S_SP1). This broad range of prices, in combination
with the time periods, should be reflective of a sufficient range of system
11
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conditions such that the full effect of the proposed purchases is captured in
the analysis.
I intend my analysis to approximate conditions in the year 2001. The
analysis reflects all announced asset divestitures and purchases.10 To do this,
first, I conducted the Appendix A competitive screening test assuming the
existing market structure and using publicly available data on transmission
capacity. These inputs were adjusted to reflect capacity and transmission
reratings to reflect 2001 conditions. In addition, the model I used assumes
capacity is prorated based on a "squeeze down" method.11 The model incorporates
simultaneous transmission import capability based on a common limiting element
approach consistent with the Commission's approach outlined in FirstEnergy.12
MARKET POWER STANDARD
As stated in the Merger Policy Statement, the Commission has adopted
the DOJ/FTC Merger Guidelines for calculating HHIs to measure market
concentration levels. As such, markets with a post-merger HHI of less than 1000
are considered "unconcentrated." The DOJ and FTC generally consider mergers in
such markets unlikely to have anticompetitive effects. Markets with post-merger
HHIs of 1000 to 1800 are considered "moderately concentrated." In those markets,
mergers that result in an HHI change of 100 points or fewer are considered
unlikely to have anticompetitive effects. Finally, post-merger HHIs of more than
1800 are considered to indicate "highly concentrated" markets. The Guidelines
suggest that in these markets, mergers that increase HHI by 50 points or less
are unlikely to have a significant anticompetitive impact, while mergers that
increase that HHI by more than 100 points are presumed likely to reduce market
competitiveness.
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10 The assumptions concerning divestitures and purchases are listed in Exhibit
No. __ (BMS-4).
11 Under this method, shares of available transmission are allocated at each
interface, diluting as they get closer to the destination market. When
there is economic supply (i.e., having a delivered cost less than 105
percent of the market price in the particular destination market) competing
to get through a constrained transmission interface into a control area,
the transmission capability is allocated to the suppliers in proportion to
the amount of economic supply each supplier has outside the interface.
12 Ohio Edison Company, et. al., 80 FERC paragraph 61,039 at 61,104 (1997).
12
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HUB-AND-SPOKE MARKET ANALYSIS
The results of the hub-and-spoke analysis are presented in Exhibit No.
(BMS-2). This analysis measures the concentration in the market defined as PJM
and its first-tier hubs. The first-tier hubs include: the NYISO, FirstEnergy, VP
and APS. The market also includes merchant generation planned to be on-line in
2001. As measured by installed capacity, the relevant geographic market is
unconcentrated with an HHI of 764, and a change in HHI of only 5. Therefore, I
conclude that the proposed purchase does not significantly increase
concentration in the market and that there are no market power concerns in
connection with the proposed transaction.
APPENDIX A ANALYSIS
Consistent with the guidance in the Merger Policy Statement, I
analyzed economic capacity. Given the advanced state of deregulation and
customer choice within PJM. I did not measure available economic capacity
because such an exercise would be speculative and not particularly meaningful as
a measure of competitive impact caused by the proposed transaction.
The summary of the pre-transaction economic capacity measures is
presented in Exhibit No. (BMS-3). PJM is a unconcentrated market with HHIs under
1,000. As would be expected, as you move east, the markets become more
concentrated. The PJM-East market has an HHI of 1,398 in Summer Super Peak 1.
This represents a moderately concentrated market.
As noted earlier, the post-transaction analysis of the markets looks
at the consolidated effect of the transactions on the markets, rather than
considering the effect of each transaction as a unique event in the marketplace.
Consolidating the transactions in this matter has the effect of overstating the
HHI statistic because each transaction will only contribute a portion of the
total change in HHI and to the overall concentration in the market. Also, I have
only modeled divestitures in which the solicitations have been completed and a
buyer has been selected. If more divestitures occur by the year 2001, the market
concentration will be lower than what is modeled. Exhibit No. (BMS-3) presents a
summary of the results of the post-transaction market analysis. As shown on the
exhibit, all markets pass the HHI screen.
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The PJM market remains unconcentrated, and the HHI in all periods is
below 1,000. The change in HHI due to the proposed transaction in PJM is 100 or
less, thereby passing the DOJ/FTC Merger Guidelines and the Commission Merger
Policy Statement standards indicating no market power concerns. The PJM-West
market is also unconcentrated, with HHIs below 1,000 and the change in HHI is
100 or less. Therefore, the proposed purchases do not create market power
concerns in the PJM-West market. The PJM-Central market is moderately
concentrated with HHIs ranging from 1,016 to 1,282. The change in HHI in the
PJM-Central market is less than 100. The proposed transaction does not cause
market power concerns in PJM-Central. The PJM-East market is also moderately
concentrated, with HHIs ranging from 1,096 to 1,398. The change in HHI in the
PJM-East is less than 100. The proposed purchases do not cause market power
concerns in PJM-East. In addition, there is little or no change in HHI in any
first-tier market. Therefore, I conclude that the proposed transaction does not
cause market power concerns in any of the markets examined, as measured by
economic capacity.
BARRIERS TO ENTRY
It is appropriate to consider the potential exercise of market power
through the creation of entry barriers. New entrants to the electricity
generation market would not be disadvantaged by the proposed transaction. First,
Applicants do not control generation sites that could be used to exclude
potential rivals. Second, Applicants do not control fuel resources and fuel
transportation facilities that could be used by potential rivals to block access
to upstream resources. Finally, announced plans for new entry indicates that
there do not exist barriers to entry.
CONCLUSIONS
I have undertaken a hub-and-spoke and an Appendix A competitive
screening analysis of the proposed purchases in accorandance with the Commission
requirements as set forth in the Merger Policy Statement. The analyses are
conservative because they measure increased concentration in the market arising
from the consolidation of two separate transactions, rather than the individual
effect on concentration from each transaction separately. The analyses
demonstrate that the proposed purchases do not cause market power concerns in
any relevant geographic market. Thereby, under the DOJ/FTC Merger Guidelines and
the Commision Merger Policy Statement. I conclude that the proposed purchases
are unlikely to have adverse competitive effects.
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In addition, for all of the reasons discussed above, my analysis
demonstrates that the proposed acquisition satisfies the standards for approval
under Section 2811(e) of the Pennsylvania Public Utility Code because the
proposed acquisition is not likely to result in anticompetitive or
discriminatory conduct, including the unlawful exercise of market power, which
would prevent Pennsylvania retail electric customers from obtaining the benefits
of a properly functioning competitive retail market for electric generation.
15
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City of Washington
District of Columbia
AFFIDAVIT
Bruce M. Sloan being duly sworn (affirmed) according to law, deposes and says
that she is a Principal of PHB Hagler Bailley, Inc. (the "Company"); that she is
authorized to and does make this Affidavit for the Company; and that the facts
set forth in the foregoing Application are true and correct to the best of her
knowledge, information and belief and she expects the Company to be able to
prove the same at any hearing hereof.
/s/ Bruce M. Sloan
----------------------------------------
Bruce M. Sloan
Sworn to and subscribed before me
this 7th day of December 1999.
(My commission expires Jan. 1, 2003)
16
<PAGE>
Exhibit No. _____ (BMS-1)
BRUCE MACKALL SLOAN PRINCIPAL
- --------------------------------------------------------------------------------
Bruce Mackall Sloan has had extensive experience with the electric utility
industry in connection with mergers, antitrust litigation, transmission access
issues and QF contract provisions. She also has specialized in the
telecommunications industry and has been involved in antitrust and regulatory
case work. She brings a combination of experience, training, presentation skills
and management ability that places her in the top rank of her profession.
Examples of her service to clients include the following:
o Principal, Putnam, Hayes and Bartlett, Inc. Washington, D.C., December
1998. Primary work involves market power issues in connection with the
regulated utilities industries (electric, gas and telecommunications.)
o Senior Consultant, EconONE Research, Inc. in Washington, D.C. from
July 1997 to December 1998. Her primary work involves competitive
market analysis in connection with regulatory filings market-based.
Rates for electric utilities and natural gas storage and hub services
provider before the Federal Energy Regulatory Commission (FERC) and
various other consulting work on behalf of electric utilities and
natural gas companies concerning deregulation issues including
currently working on vertical market power issues regarding the Enova
merger before the California Public Utility Commission. Other work
involves antitrust issues regarding the deregulation of local
telephone service.
o Senior Consultant, Micronomics, Inc. in Washington, D.C. from December
1995 to July 1997. Primary work involves competitive market analysis
in connection with regulatory filings for market-based rates for
electric utilities and natural gas storage and hub services provider
before the Federal Energy Regulatory Commission (FERC) and various
other consulting work on behalf of electric utilities and natural gas
companies concerning deregulation issues. Other work involved entry of
Bell Operating Companies in video services markets. Antitrust work
consisted of analytic studies of pricing behavior or pharmaceutical
firms and analysis of competition to cable services in connection with
the merger of two competing cable providers.
o Senior Economist, Law & Economics Consulting Group, Washington, D.C.,
February 1995-November 1995. Extensive work on competitive market
analysis in connection with regulatory filings for market-based rates
and in connection with two major electric utility merger filings
before the Federal Energy Regulatory Commission (FERC). Antitrust work
consisted of analyzing the pricing behavior of the duopolist cellular
service providers in the Los Angeles market to determine whether there
existed tacit collusion between the providers. In addition, analyzed
the market for ring laser gyroscopes in the commercial avionics market
on behalf of Honeywell to determine whether there existed predatory
pricing in response to a damage claim by Litton. Rebuttal of damages
was based on the assessment of the marketing activities in this
market.
<PAGE>
Exhibit No. _____ (BMS-2)
BRUCE MACKALL SLOAN
PRINCIPAL 2
- --------------------------------------------------------------------------------
o Senior Associate, Putnam, Hayes & Bartlett, Washington, D.C., 1990-
1995. Extensive regulatory work consisted of competitive market
analyses in connection with four major electric utility mergers.
Significant participation in preparation of a report to the
Massachusetts Department of Public Utilities concerning utility merger
policy. Various analyses were undertaken in connection with incentive
regulation schemes for electric and natural gas clients as a possible
alternative to cost-based regulation within state and federal
jurisdictions. Participated in an electric utility breach of contract
suit by a qualifying facility on behalf of Pacific Gas & Electric.
Prepared two competitive market analyses on behalf of a natural gas
storage owner to obtain market-based rates from FERC.
Telecommunications experience consisted of preparation of an analysis
of the federal telecommunications contract system with AT&T and Sprint
in connection with FTS 2000. This analysis consisted of review of
prices paid by the federal government versus prices available in the
commercial market as well as availability of services. Litigation
experience consisted of participation in rebuttal of the largest
commercial damage claim filed in Canada by seven oil companies
alleging lost sales of syncrude oil over a multi-year period. Rebuttal
entailed a detailed analysis of the crude and refined products markets
in Canada and the U.S. In addition, assisted in the development of a
typewriter dumping case for Smith Corona for use in an International
Trade Commission (ITC) proceeding.
o Senior Analyst, National Economic Research Associates, Inc.,
Washington, D.C. 1973-1974, 1975-1990. Extensive work in both
antitrust and energy areas. Primary antitrust work involved work over
a five-year period on behalf of AT&T in pending litigation with MCI,
Southern Pacific Communications Corporation, equipment manufacturers
and the Department of Justice over competitive market issues. Electric
utility work primarily consisted of antitrust litigation (price
squeeze issues and uranium price fixing issues), work on competitive
issues regarding the Southern California Edision/San Diego Gas &
Electric merger, as well as a general policy work on behalf of the
utilities. Energy work consisted of assessment of available energy
supplies (coal, oil and natural gas).
o Project Manager and Technical Writer, Greiner Environment Sciences,
Inc., Baltimore, MD 1974-1975. Responsibilities at Greiner consisted
of economic analysis to assess the enviromental impact of proposed
highways, shopping centers and and mining project and the preparation
of the draft and final environmental impact statements to be submitted
to government agencies necessary to obtain project approvals. Other
work consisted of analysis of fuel availability and price of several
electric utilities.
<PAGE>
BRUCE MACKALL SLOAN
PRINCIPAL 3
- --------------------------------------------------------------------------------
Additional Info
EDUCATION
M.B.A., George Mason University, Fairfax, VA, May 1995
Attended Oxford University, May 1994
B.A., (Honors), Economics, Connecticut College, New London, CT, 1973
A.A., Social Sciences, Bradford Junior College, Bradford, MA, 1971
OTHER
Member, Board of Directors of Graham Smokeless Coal Company 1982 to Present
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. _____ (BMS-2)
CONECTIV HUB-AND-SPOKE ANALYSIS
INSTALLED CAPACITY
(MW)
2001
PRE-TRANSACTION POST-TRANSACTION
Total Market HHI Total Market HHI
Capacity Share Capacity Share
PJM
<S> <C> <C> <C> <C> <C> <C>
Conectiv 6,758 4.1% 17 6,050 3.7% 14
PSEG 11,168 6.8% 46 11,712 7.1% 51
PECO (1) 29,807 18.1% 329 29,971 18.2% 333
Allegheny Electric Company 286 0.2% 0 286 0.2% 0
Baltimore Gas and Electric 6,429 3.9% 15 6,429 3.9% 15
City of Dover, DE 191 0.1% 0 191 0.1% 0
Easton Utilities Commission 56 0.0% 0 56 0.0% 0
General Public Utilities 7,838 4.8% 23 7,838 4.8% 23
Pennsylvania Power and Light 8,636 5.3% 28 8,636 5.3% 28
Potomac Electric Power Co. 6,856 4.2% 17 6,856 4.2% 17
UGI Corp. 67 0.0% 0 67 0.0% 0
City of Vineland, NJ 132 0.1% 0 132 0.1% 0
NYPP
Central Hudson Gas and Electric 1,150 0.7% 0 1,150 0.7% 0
Con Edison 4,543 2.8% 8 4,543 2.8% 8
Energy East (NYSEG) (2) 3,680 2.2% 5 3,680 2.2% 5
Long Island Power Authority 4,793 2.9% 9 4,793 2.9% 9
Orange and Rockland Utilities 44 0.0% 0 44 0.0% 0
Niagara Mohawk 6,770 4.1% 17 6,770 4.1% 17
New York Power Authority 7,114 4.3% 19 7,114 4.3% 19
Rochester Gas and Electric 1,838 1.1% 1 1,838 1.1% 1
OTHER
Allegheny Power System 8,814 5.4% 29 8,814 5.4% 29
First Energy 14,426 8.8% 77 14,426 8.8% 77
Virginia Power 17,624 10.7% 115 17,624 10.7% 115
UNITS DIVESTED TO IPPS
AES Corp. 1,421 0.9% 1 1,421 0.9% 1
Edison Mission 942 0.6% 0 942 0.6% 0
NRG 1,657 1.0% 1 1,657 1.0% 1
KeySpan 2,167 1.3% 2 2,167 1.3% 2
Westwood (Cinergy Capital and 30 0.0% 0 30 0.0% 0
Trading)
Sithe (3) 0 0.0% 0 0 0.0% 0
Southern 1,782 1.1% 1 1,782 1.1% 1
Northbrook (4) 0 0.0% 0 0 0.0% 0
Orion Holdings 1,840 1.1% 1 1,840 1.1% 1
MRA NUGs 1,928 1.2% 1 1,928 1.2% 1
WPS/Sunbury (5) 0 0.0% 0 0 0.0% 0
PLANNED UNITS (TOTAL PER OWNER)
CNG 600 0.4% 0 600 0.4% 0
Columbia Energy/Westcoast Power 500 0.3% 0 500 0.3% 0
MidAtlantic 390 0.2% 0 390 0.2% 0
National Power Partners (6) 140 0.1% 0 140 0.1% 0
OES (6) 140 0.1% 0 140 0.1% 0
Williams (7) 950 0.6% 0 950 0.6% 0
FP&L Cogen Plant (PA) 725 0.4% 0 725 0.4% 0
TOTAL: 164,231 100.0% 764 164,231 100.0% 769
Change in HHI 5
(1) Includes ComEd generation (19,925 MW) and AmerGen generation (560 MW).
(2) Includes capacity owned by Energy East affiliates Carthage Energy, LLC and Energy East South Glen Falls, LLC.
(3) Capacity sold back to GPU through 2001.
(4) Capacity sold back to Niagara Mohawk through 2003.
(5) Capacity sold back to PP&L indefinitely ("a portion" of the power is sold back, but modeled as if all sold back).
(6) Each has a 50% share of the Shadyside plant.
(7) Includes purchase of all 700 MW of AES Ironwood output.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. __ (BMS-3)
Appendix A Analysis
Economic Capacity
(MW)
PRE-TRANSACTION POST-TRANSACTION HHI
Market Period Price Market CON PECO PSEG HHI CON PECO PSEG HHI BOTH
Size Mkt Shr Mkt Shr Mkt Shr Pre-Merger Mkt Shr Mkt Shr Mkt Shr Post-Merger ACQ.
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
APS S_SP1 $100 42,834 0.0% 0.9% 0.0% 1,940 0.0% 0.9% 0.0% 1,940 0
APS S_SP2 $75 42,831 0.0% 0.9% 0.0% 1,941 0.0% 0.9% 0.0% 1,941 0
APS S_SP3 $50 42,245 0.0% 0.9% 0.0% 1,910 0.0% 0.9% 0.0% 1,910 0
APS S_P $30 38,614 0.0% 1.0% 0.0% 1,764 0.0% 1.0% 0.0% 1,764 0
APS S_OP $20 32,517 0.0% 0.9% 0.0% 1,805 0.0% 0.9% 0.0% 1,805 0
APS W_SP $25 38,273 0.1% 1.7% 0.2% 1,731 0.1% 1.7% 0.2% 1,731 0
APS W_P $20 30,018 0.2% 0.6% 0.3% 1,955 0.1% 0.6% 0.3% 1,955 0
APS W_OP $15 20,668 0.3% 6.9% 0.6% 1,695 0.2% 7.0% 0.7% 1,695 0
APS SH_SP $40 42,506 0.2% 1.5% 0.3% 1,568 0.1% 1.5% 0.3% 1,568 0
APS SH_P $25 36,425 0.2% 2.3% 0.4% 1,522 0.2% 2.3% 0.4% 1,522 0
APS SH_OP $15 20,122 0.5% 5.1% 1.1% 1,362 0.3% 5.1% 1.2% 1,363 1
FENER S_SP1 $100 42,943 0.0% 1.1% 0.0% 1,929 0.0% 1.1% 0.0% 1,929 0
FENER S_SP2 $75 42,938 0.0% 1.0% 0.0% 1,929 0.0% 1.0% 0.0% 1,929 0
FENER S_SP3 $50 42,372 0.0% 1.1% 0.0% 1,901 0.0% 1.1% 0.0% 1,901 0
FENER S_P $30 39,096 0.0% 1.2% 0.0% 1,767 0.0% 1.2% 0.0% 1,767 0
FENER S_OP $20 36,173 0.0% 1.5% 0.0% 1,741 0.0% 1.5% 0.0% 1,741 0
FENER W_SP $25 39,427 0.1% 2.1% 0.2% 1,721 0.1% 2.1% 0.2% 1,906 0
FENER W_P $20 33,503 0.1% 3.5% 0.3% 1,906 0.1% 3.5% 0.3% 1,661 0
FENER W_OP $15 25,388 0.2% 8.0% 0.5% 1,661 0.2% 8.0% 0.6% 1,550 0
FENER SH_SP $40 43,197 0.2% 1.8% 0.3% 1,550 0.1% 1.8% 0.3% 1,550 0
FENER SH_P $25 37,687 0.2% 2.6% 0.4% 1,511 0.2% 2.6% 0.4% 1,511 0
FENER SH_OP $15 24,879 0.4% 8.0% 0.9% 1,436 0.3% 8.0% 1.0% 1,436 0
PJM ALL S_SP1 $100 59,324 8.2% 11.6% 15.5% 921 7.1% 11.8% 16.3% 936 15
PJM ALL S_SP2 $75 59,120 8.2% 11.6% 15.3% 917 7.2% 11.9% 16.1% 931 14
PJM ALL S_SP3 $50 58,586 8.2% 11.7% 15.2% 920 7.2% 12.0% 16.0% 934 14
PJM ALL S_P $30 48,483 8.0% 12.6% 12.4% 854 6.7% 12.9% 13.3% 868 14
PJM ALL S_OP $20 40,617 8.0% 10.4% 11.3% 866 6.4% 10.8% 12.5% 880 14
PJM ALL W_SP $25 44,989 7.4% 11.8% 11.1% 829 6.0% 12.1% 12.1% 843 14
PJM ALL W_P $20 41,921 8.0% 10.8% 11.0% 860 6.5% 11.2% 12.1% 873 13
PJM ALL W_OP $15 34,031 5.3% 11.8% 12.1% 849 3.4% 12.2% 13.5% 879 30
PJM ALL SH_SP $40 48,649 8.6% 12.0% 13.1% 861 7.6% 12.2% 14.0% 872 11
PJM ALL SH_P $25 39,950 7.5% 11.3% 10.7% 797 6.2% 11.6% 11.7% 809 12
PJM ALL SH_OP $15 30,070 5.3% 11.0% 11.5% 818 3.6% 11.4% 12.9% 845 27
PJM C+E S_SP1 $100 42,070 11.3% 15.6% 21.3% 1,253 9.8% 15.9% 22.5% 1,282 29
PJM C+E S_SP2 $75 41,865 11.4% 15.6% 21.0% 1,246 9.9% 15.9% 22.1% 1,274 28
PJM C+E S_SP3 $50 41,343 11.4% 15.8% 21.0% 1,255 9.9% 16.2% 22.1% 1,283 28
PJM C+E S_P $30 33,605 11.2% 17.3% 17.2% 1,151 9.4% 17.7% 18.6% 1,179 28
PJM C+E S_OP $20 27,550 11.2% 14.5% 15.3% 1,142 8.9% 15.0% 17.0% 1,168 26
PJM C+E W_SP $25 31,416 10.4% 16.0% 15.2% 1,095 8.4% 16.5% 16.7% 1,122 27
PJM C+E W_P $20 28,348 11.5% 15.1% 15.5% 1,176 9.3% 15.6% 17.2% 1,202 26
PJM C+E W_OP $15 23,840 7.1% 15.4% 15.4% 1,085 4.5% 16.0% 17.4% 1,140 55
PJM C+E SH_SP $40 34,462 12.0% 16.2% 18.1% 1,091 10.5% 16.6% 19.2% 1,112 21
PJM C+E SH_P $25 28,918 10.2% 14.9% 14.3% 1,017 8.3% 15.3% 15.7% 1,038 21
PJM C+E SH_OP $15 22.096 6.9% 14.3% 14.0% 973 4.5% 14.9% 15.8% 1,016 43
Page 1 of 2
<PAGE>
PRE-TRANSACTION POST-TRANSACTION HHI
Market Period Price Market CON PECO PSEG HHI CON PECO PSEG HHI BOTH
Size Mkt Shr Mkt Shr Mkt Shr Pre-Merger Mkt Shr Mkt Shr Mkt Shr Post-Merger ACQ.
PJM EAST S_SP1 $100 34,641 13.2% 17.0% 24.5% 1,367 11.8% 17.3% 25.7% 1,398 31
PJM EAST S_SP2 $75 34,436 13.3% 17.1% 24.1% 1,355 11.9% 17.3% 25.3% 1,385 30
PJM EAST S_SP3 $50 33,966 13.4% 17.3% 24.1% 1,364 12.0% 17.6% 25.3% 1,395 31
PJM EAST S_P $30 26,545 13.5% 19.4% 19.9% 1,247 11.7% 19.7% 21.5% 1,275 28
PJM EAST S_OP $20 21,416 13.9% 16.2% 18.1% 1,201 11.6% 16.6% 20.1% 1,228 27
PJM EAST W_SP $25 23,397 13.1% 19.0% 18.1% 1,215 11.0% 19.3% 19.8% 1,244 29
PJM EAST W_P $20 20,999 14.6% 17.7% 18.5% 1,281 12.3% 18.1% 20.4% 1,307 26
PJM EAST W_OP $15 17,240 8.9% 19.3% 19.8% 1,286 6.0% 19.8% 22.2% 1,363 77
PJM EAST SH_SP $40 27,142 14.6% 18.3% 21.3% 1,222 13.1% 18.5% 22.5% 1,245 23
PJM EAST SH_P $25 21,840 12.7% 17.2% 16.8% 1,074 10.8% 17.5% 18.4% 1,096 22
PJM EAST SH_OP $15 16,219 8.6% 17.0% 17.8% 1,093 6.0% 20.0% 20.0% 1,152 59
PJM W+C+E S_SP1 $100 59,211 8.2% 11.6% 15.5% 910 7.2% 11.8% 16.3% 925 15
PJM W+C+E S_SP2 $75 59,006 8.2% 11.6% 15.3% 906 7.2% 11.9% 16.1% 920 14
PJM W+C+E S_SP3 $50 58,473 8.2% 11.7% 15.2% 908 7.2% 12.0% 16.0% 923 15
PJM W+C+E S_P $30 48,390 8.0% 12.6% 12.4% 842 6.7% 12.9% 13.4% 856 14
PJM W+C+E S_OP $20 40,519 8.0% 10.4% 11.3% 850 6.5% 10.8% 12.5% 863 13
PJM W+C+E W_SP $25 43,151 7.5% 12.3% 11.5% 834 6.1% 12.7% 12.6% 849 15
PJM W+C+E W_P $20 40,083 8.2% 11.4% 10.6% 854 6.6% 11.8% 11.8% 866 12
PJM W+C+E W_OP $15 32,639 5.2% 11.8% 11.5% 822 3.3% 12.3% 13.0% 853 31
PJM W+C+E SH_SP $40 48,649 8.6% 12.0% 13.1% 842 7.6% 12.2% 14.0% 853 11
PJM W+C+E SH_P $25 39,950 7.5% 11.2% 10.7% 785 6.2% 11.5% 11.7% 797 12
PJM W+C+E SH_OP $15 30,070 5.3% 11.0% 11.5% 801 3.6% 11.4% 12.9% 827 26
VP S_SP1 $100 42,886 0.0% 0.9% 0.0% 1,984 0.0% 0.9% 0.0% 1,984 0
VP S_SP2 $75 42,882 0.0% 0.9% 0.0% 1,985 0.0% 0.9% 0.0% 1,985 0
VP S_SP3 $50 42,259 0.0% 0.9% 0.0% 1,952 0.0% 0.9% 0.0% 1,952 0
VP S_P $30 40,571 0.0% 0.8% 0.0% 1,924 0.0% 0.8% 0.0% 1,924 0
VP S_OP $20 33,685 0.0% 0.9% 0.0% 1,855 0.0% 0.9% 0.0% 1,855 0
VP W_SP $25 40,338 0.1% 1.3% 0.2% 1,812 0.1% 1.3% 0.2% 1,812 0
VP W_P $20 32,424 0.1% 3.3% 0.3% 1,996 0.1% 3.3% 0.3% 1,996 0
VP W_OP $15 20.717 0.3% 8.3% 0.6% 1,746 0.2% 8.3% 0.7% 1,747 1
VP SH_SP $40 42,679 0.2% 1.6% 0.3% 1,604 0.1% 1.6% 0.3% 1,604 0
VP SH_P $25 37,653 0.2% 2.3% 0.4% 1,543 0.2% 2.3% 0.4% 1,543 0
VP SH_OP $15 20.362 0.5% 8.8% 1.1% 1,389 0.3% 8.9% 1.2% 1,390 1
Page 2 of 2
</TABLE>
<PAGE>
EXHIBIT NO. (BMS-4)
ACQUISITIONS / DIVESTITURES / BUYBACKS 2001
1. Conectiv
Divests Peach Bottom to PECO (164 MW)
Divests Peach Bottom to PSE&G (164 MW)
Divests Salem to PSE&G (328 MW)
Divests Hope Creek to PSE&G (52 MW)
2. Con Ed
Divests 2,167 MW to Keyspan
Divests 1,469 MW to NRG
Divests 1,840 MW to Orion
Divests 810 MW to SOCO
3. First Energy
Acquires Seneca from GPU (88 MW)
4. GPU
Divests Three Mile Island to AmerGen (786 MW) - buyback 2001
Divests Oyster Creek to AmerGen (619 MW) - buyback 2003
Divests 4,127 MW to Sithe - buyback 2001
Divests Seneca to First Energy (88 MW)
Divests Yards Creek to PSE&G (200 MW)
Divests Homer City to Edison Mission Energy (942 (MW) - buyback 2000
5. LIPA
Acquires Nine Mile Pt-2 from NYPA (205 MW) - sellback 2003
6. Niagara Mohawk
Divests Huntley/Dunkirk to NRG (1,349 MW) - buyback 6/03
Divests Oswego to NRG (1,379 MW) - buyback 6/03
Divests 72 Hydros to Orion (551 MW) - buyback 9/01
<PAGE>
Divests Nine Mile Pt-1 to AmerGen (618 MW) - buyback 95% 2005
Divests Nine Mile Pt-2 to AmerGen (674 MW) - buyback 56% 2003
Divests (settles out) with QFs (1,928 MW)
Divests Albany to PSE&G (376 MW) - buyback 9/03
7. NYSEG
Divests 1,421 MW to AES
Divests Homer City to Edison Mission Energy (942 MW)
Divests Nine Mile Pt-2 to AmerGen (206 MW) - buyback 56% 2003
8. Orange and Rockland
Divests all generation to SOCO (810 MW)
9. PECO/AmerGen
Acquires Three Mile Island from GPU (786 MW) - sellback 2003
Acquires Nine Mile Point-1 from NiMo (618 MW) - sellback 95% 2003
Acquires Nine Mile Point Pt-2 from NiMo (674 MW) - sellback 56% 2003
Acquires Nine Mile Point Pt-2 from NYSEG (206 MW) - sellback 56% 2003
Acquires Clinton from Illin Pwr (930 MW) - sellback 75% 2004
Acquires Oyster Creek from GPU (619 MW) - sellback 2003
Acquires Peach Bottom from Connectiv (164 MW)
Acquires Vermont Yankee from Yankee Group (504 MW) - sellback 2003
10. PP&L
Divests to WPS (404 MW)
11. PSE&G
Acquires Yards Creek from GPU (200 MW)
Acquires Peach Bottom from Connectiv (200 MW)
Acquires Salem from Connectiv (328 MW)
Acquires Hope Creek from Connectiv (52 MW)
Acquires Albany from NiMo (375 MW) - sellback 9/03
<PAGE>
12. Rochester Gas & Electric
Divests Oswego to NRG (188 MW) - buyback 2003
[PSE&G Logo]
Public Service Electric P.O. Box 236 Hancocks Bridge, New Jersey 08038-0236
and Gas Company
Nuclear Business Unit
December 20, 1999
LR-N99529
LCR H99-13 & LCR S99-23
Docket Nos. 50-272, 50-311 & 50-354
U.S. Nuclear Regulatory Commission
Attention: Document Control Desk
Washington, D.C. 20555
Re: Salem Generating Station, Unit 1, Operating License No. DPR-70
Salem Generating Station, Unit 2, Operating License No. DPR-75
Hope Creek Generating Station, Unit 1, Operating License No. NPF-57
Proposed Transfer of Non-Operating Ownership Interests
Gentlemen:
In accordance with Section 184 of the Atomic Energy Act and 10 C.F.R.
section 50.80, Public Service Electric and Gas Company ("PSE&G"), PSEG Nuclear
LLC ("PSEG Nuclear"), Atlantic City Electric Company ("ACE"), and Delmarva Power
and Light Company ("DP&L") request Nuclear Regulatory Commission ("NRC") consent
to the transfer of the minority, non-Operating ownership interests of ACE and
DP&L in the Salem Generating Station, Units 1 and 2, and the Hope Creek
Generating Station, to PSEG Nuclear LLC. PSE&G also requests, pursuant to 10
C.F.R. sections 50.90 - 50.92, conforming administrative license amendments to
reflect this transfer of ownership interests.1
- ---------------
1 On June 4, 1999, PSE&G applied to the NRC for consent to transfer PSE&G's
42.49% interests in the two Salem units and the 95.0% interest in Hope
Creek, as well as operational responsibility for all three units, to PSEG
Nuclear. The consent and conforming administrative license amendments have
not yet been issued and the proposed restructuring has not yet been
completed. In the event that the NRC completes its review of this proposed
transfer, and the transaction addressed here will close prior to the
restructuring, the ownership of the ACE and DP&L shares will be transferred
to PSE&G, the current NRC licensee, for an interim period until the
restructuring and transfer to PSEG Nuclear is completed.
2 PECO Energy owns a 42.59% non-operating interest in each of the two Salem
units. Those interests are not involved in the present proposed transfer.
<PAGE>
Document Control Desk -2-
LR-N99529
PSE&G currently owns 42.59% each of Salem Units - 1 and 2, and 95% of
the Hope Creek unit. PSE&G is also the operator of the Salem and Hope Creek
stations. The current, combined ownership interests of ACE and DP&L are 14.82%
of each of the Salem units. ACE holds a 5.0% interest in the Hope Creek unit.2
(ACE and DP&L are wholly-owned subsidiaries of Conectiv.)
On September 27, 1999, PSEG Power LLC (an affiliate of PSE&G and the
parent of PSEG Nuclear), PECO Energy, ACE, and DP&L executed purchase agreements
related to all of ACE's and DP&L's nuclear generating interests. As relevant to
this application, the parties agreed that ACE and DP&L will transfer their
interests in the Salem and Hope Creek units to PSEG Power.3 The purchase
agreements allow PSEG Power to assign its right to purchase the shares to PSEG
Nuclear. Upon receipt of necessary regulatory approvals and completion of the
transactions, PSEG Power will either assign that right to PSEG Nuclear and PSEG
will acquire the interests, or PSEG Power will acquire the interests and
transfer them to PSEG Nuclear.
The information related to the proposed transfer and the conforming
license amendments, as required by 10 C.F.R. sections 50.80, 50.33, and 50.90,
is included in Attachment 1. As explained therein, the proposed transfer will
not:
(1) involve any physical change to the facility or to operating
procedures;
(2) alter the day-to-day management of the plant by PSEG
Nuclear;
(3) result in foreign ownership, control or domination of the
licenses;
(4) affect the financial qualifications of PSEG Nuclear or the
financial assurance for decommissioning of the units; or
(5) require any NRC antitrust review.
- ---------------
3 The ACE and DP&L interests in nuclear generating assets include, in
addition to the Salem and Hope Creek interests addressed herein, interests
in the Peach Bottom Atomic Power Station, Units 2 and 3. The transfer of
the Peach Bottom ownership interests to PECO Energy and PSE&G are being
addressed in a separate application to the NRC.
<PAGE>
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LR-N99529
In summary, the proposed transfers and conforming administrative
amendments will not be inimical to the common defense and security or result in
any undue risk to public health and safety. The transaction will merely increase
PSEG Nuclear's ownership shares in the three units as well as its corresponding
entitlements to energy and capacity from the units. The proposed transferee is
qualified to be the holder of the licenses now held by ACE and DP&L, and the
transfer of the licenses is consistent with applicable laws and with the
regulations and orders of the NRC.
The Attachment includes a mark-up of the facility operating licenses
and relevant portions of the plant Technical Specifications reflecting the
transfers (Appendices 1 through 3). The Attachment also includes an evaluation
of the conforming amendments, which confirms the NRC's generic findings in 10
C.F.R. section 2.135(a) that the amendments involve no significant hazards
consideration (Appendix 4).
The consent of ACE and DP&L to the filing of this transfer application
is indicated in Appendix 5.
The parties to this transaction are presently planning to complete the
transfer by March 31, 2000. Accordingly, NRC approval is requested by no later
than March 15, 2000, to be made effective at that time with an effectiveness
period through March 14, 2001, to provide sufficient time for administrative
activities and contingencies related to completing the transaction.
If the NRC reviewers have questions or require additional information
concerning this transfer, please contact Jeffrie J. Keenan, counsel for PSEG
Nuclear at (856) 339-5429.
Sincerely,
/s/ Mark B. Bezilla
----------------------------------------
Attachment
Affidavit
<PAGE>
Document Control Desk -4-
LR-N99529
C Mr. H. Miller, Administrator - Region I
U. S. Nuclear Regulatory Commission
475 Allendale Road
King of Prussia, PA 19406
Mr. R. Ennis
Licensing Project Manager - Hope Creek
U. S. Nuclear Regulatory Commission
One White Flint North
Mail Stop 8B1
11555 Rockville Pike
Rockville, MD 20852
Mr. W. Gleaves
Licensing Project Manager - Salem
U. S. Nuclear Regulatory Commission
One White Flint North
Mail Stop 8B1A
11555 Rockville Pike
Rockville, MD 20852
USNRC Senior Resident Inspector (X24)
Mr. K. Tosch, Manager IV
Bureau of Nuclear Engineering
P. O. Box 415
Trenton, NJ 08625
<PAGE>
Document Control Desk -5-
LR-N99529
BC President & CNO (X10)
Vice President - Technical Support (X10)
Director - QA/NT/EP (X01)
Manager - Licensing and Regulation (N21)
Manager - Financial Control & Co-Owner Affairs (N07)
Program Manager - Nuclear Review Board (N38)
J. Keenan, Esq. (N21)
NBU RM (N64)
Microfilm Copy
File Nos. 2.3.1 (Hope Creek LCR H99-13 and S99-23)
<PAGE>
REF: LCR H99-13
LCR S99-23
LR-N99529
STATE OF NEW JERSEY )
) SS.
COUNTY OF SALEM )
M. B. Bezilla, being duly sworn according to law deposes and says:
I am Vice President - Operations of Public Service Electric and Gas Company, as
such, I find the attachment accompanying this correspondence (LR-N99529),
concerning the Salem Generating Station, Units 1 and 2, and the Hope Creek
Station, Unit 1, are true to the best of my knowledge, information and belief.
/s/ Mark B. Bezilla
----------------------------------------
Subscribed and Sworn to before me
this 20th day of December, 1999
/s/ Jennifer M. Turner
- ---------------------------------
Notary Public of New Jersey
My Commission Expires July 25, 2000
<PAGE>
Document Control Desk Attachment 1
LR-N99529
Information Submitted
In Support of Proposed License Transfer and Conforming
Administrative License Amendments
(NRC Facility Operating License Nos. DPR-70, DPR-75 and NPF-57)
I. INTRODUCTION
Public Service Electric and Gas Company ("PSE&G"), PSEG Nuclear LLC
("PSEG Nuclear"), Atlantic City Electric Company ("ACE"), and Delmarva Power and
Light Company ("DP&L"), submit the following information and request, pursuant
to 10 C.F.R. section 50.80, Nuclear Regulatory Commission ("NRC") consent to the
transfer of the minority, non-operating ownership interests of ACE and DP&L in
the Salem Generating Station, Units 1 and 2, and the Hope Creek Generating
Station. These interests will be transferred to PSEG Nuclear. The transfers do
not involve any physical change to the nuclear pants, nor will they result in
any changes in the day-to-day operations of the three units. These units will be
operated by PSEG Nuclear using the same management and operating staff as at the
present time.1
PSE&G currently own 42.59% each of Salem Units 1 and 2, and
95% of the Hope Creek unit. As addressed in 6 separate license transfer
application, PSE&G is presently in the process of transferring those interests
to PSEG Nuclear. ACE and DP&L collectively own 14.82% of each of the two Salem
units. ACE holds a 5.0% interest in the Hope Creek unit.2
On September 27, 1999, PSEG Power LLC ("PSEG Power") (the parent
company of PSEG Nuclear), PECO Energy, ACE, and DP&L executed purchase
- ---------------
1 On June 4, 1999, PSE&G applied to the NRC for consent to transfer PSE&G's
42.59% interests in the two Salem units and the 95.0% interest in Hope
Creek, as well as operational responsibility for all three units, to PSEG
Nuclear. The consent and conforming administrative license amendments have
not yet been issued and the proposed corporate restructuring has not yet
been completed. In the event that the NRC completes its review of this
proposed transfer and the transaction addressed here will close prior to
the restructuring, the ownership of the ACE and DP&L shares will be
transferred to PSE&G, the current NRC licensee, for an interim period until
the restructuring and transfer to PSEG Nuclear is completed.
2 PECO Energy owns a 42.59% non-operating interest in each of the two Salem
units. These interests are not involved in this proposed transfer.
Page 1 of 10
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LR-N99529
agreements related to all of ACE's and DP&L's nuclear generating interests. As
relevant to this application, the parties agreed that ACE and DP&L will transfer
their interests in the Salem and Hope Creek units to PSEG Power. The purchase
agreements allow PSEG Power to assign its right to purchase the ACE and DP&L
interests to PSEG Nuclear. Upon receipt of necessary regulatory approvals and
completion of the transactions, PSEG Nuclear will either acquire the interests
from ACE and DP&L directly, or from PSEG Power. In either event, the present
ownership interests of ACE and DP&L will be consolidated with PSEG Nuclear's
interests in the same plants. PSEG Nuclear's share of the Salem units at that
time will be 57.41 %; PSEG Nuclear will own 100% of Hope Creek.
ACE and DP&L also currently own interests in the Peach Bottom Atomic
Power Station, Units 2 and 3. The transfers of these interests to PSEG Nuclear
and PECO Energy are being addressed in a separate application to the NRC.
Because the proposed transfers addressed in this application affect
named licensees (ACE and DP&L), the licensees also request NRC approval of
certain administrative amendments to conform the operating licenses and plant
Technical Specifications to reflect the transfers. Proposed license and
Technical Specification changes are shown in mark-ups included as Appendix 1
(Salem Unit 1), Appendix 2 (Salem Unit 2), and Appendix 3 (Hope Creek). The
safety evaluation confirming that these proposed changes involve no significant
hazards consideration is provided in Appendix 4.
Administrative changes to controlled documents other than the
operating licenses and the Technical Specifications may be necessary upon
completing the transfers of the ownership interests (e.g., to delete references
to ACE or DP&L). These changes will be made in due course, consistent with
applicable internal processes.
The consent of ACE and DP&L to the filing of this transfer application
is provided in Appendix 5.
II. STATEMENT OF PURPOSE OF TRANSFER AND NATURE OF THE TRANSACTION MAKING THE
TRANSFER NECESSARY OR DESIRABLE
The purpose of the transfer is to reflect the transaction discussed
above, which is in response to the restructuring of the electric utility
industry in New Jersey and Pennsylvania. ACE and DP&L have, in exercising their
business judgment, opted to divest their respective interests in the nuclear
generating assets. PSEG Power and PSEG Nuclear have opted to purchase those
interests. Following completion of a corporate restructuring, PSEG Nuclear will
hold the current licensed interests of PSE&G, present owner and the operator of
the three units involved. As a result of the transaction, PSEG Nuclear will
Page 2 of 10
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LR-N99529
obtain a proportionate increase in its entitlements to capacity and energy from
the units, and will assume a proportionate increase in obligations for
operation, maintenance, and eventual decommissioning of the units.
III. GENERAL CORPORATE INFORMATION REGARDING PSEG NUCLEAR
A. Name of Licensee
Following approval and completion of both the PSE&G restructuring and
the present transfer, the license holder of the ACE and DP&L interests will be
PSEG Nuclear. (In the event that the restructuring is not completed prior to
closing the present transaction, the transferee for an interim period will be
the present licensee, PSE&G.)3
B. Address: PSEG Nuclear
80 Park Plaza
Newark, New Jersey 07102
C. Description of Business
As discussed in the license transfer application of June 4, 1999,
addressing the transfer of the Salem and Hope Creek operating licenses from
PSE&G to PSEG Nuclear, PSE&G Nuclear is a limited liability company organized
under the laws of the State of Delaware. PSEG Nuclear is a wholly-owned
subsidiary of PSEG Power, which is a wholly-owned subsidiary of Public Service
Enterprise Group, Inc. ("Enterprise"). PSEG Nuclear was formed to acquire the
interests in nuclear stations owned by Enterprise and its subsidiaries, and to
operate the Salem and Hope Creek units. PSEG Nuclear will be engaged principally
in the nuclear generation of electricity as an exempt wholesale generator
authorized to sell electricity at market-based rates.
- ---------------
3 See note 1 above.
Page 3 of 10
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LR-N99529
D. Organization and Management
DIRECTORS
Frank Cassidy
Harold W. Keiser
Steven R. Teitelman
OFFICERS
Harold W. Keiser
President
Louis Storz
Senior Vice President, Nuclear Operations
Morton A. Plawner
Treasurer
Elbert Simpson
Senior Vice President and Chief Administrative Officer
Mark B. Bezilla
Vice President, Nuclear Operations
David F. Garchow
Vice President, Nuclear Technical
Martin J. Trum
Vice President, Nuclear Maintenance
Timothy J. O'Connor
Vice President, Nuclear Plant Support
Edward J. Biggins
Secretary
E. Class of License
The operating licenses for Salem, Units 1 and 2, were issued under
Section 104b of the Atomic Energy Act ("AEA"). The Hope Creek operating license
was issued under Section 103 of the AEA. The proposed license transfer would not
involve a change in the class of operating license.
F. Foreign Ownership and Control
The shares of common stock of Enterprise are publicly traded and
widely held. PSEG Nuclear is wholly-owned by PSEG Power, which is a wholly-owned
subsidiary of Enterprise. The directors and officers of PSEG Nuclear, PSEG
Power, and Enterprise are U.S. citizens. Neither PSEG Nuclear, PSEG Power, nor
Enterprise is owned, controlled, or dominated by any alien, foreign corporation,
or foreign government.
Page 4 of 10
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IV. TECHNICAL QUALIFICATIONS
No changes to the management and organizations presently engaged in
operation of the Salem and Hope Creek units will result from the proposed
transfer of ACE's and DP&L's non-operating ownership interests to PSEG Nuclear.
As the successor to PSE&G, PSEG Nuclear will be technically qualified to operate
the facilities.
V. FINANCIAL QUALIFICATIONS
PSEG Nuclear is not an "electric utility." Under NRC's regulations,
PSEG Nuclear must demonstrate its financial qualifications with respect to the
acquisition of additional ownership shares of Salem Units 1 and 2, Hope Creek,
and Peach Bottom Units 2 and 3.
In the license transfer applications of June 4, 1999 and July 1, 1999,
related to transferring PSE&G's current 42.59% interests in the two Salem units,
95.0% interest in the Hope Creek unit, and 42.49% interests in the Peach Bottom
units to PSEG Nuclear, PSEG Nuclear demonstrated its financial qualifications
with respect to its shares of the operating costs of the five nuclear units. The
present proposed transfer, involving the acquisition of additional interests in
these units, does not impact PSEG Nuclear's financial qualifications as
demonstrated therein.
NRC's regulations4 and guidance5 require non-electric utility
applicants to submit estimates for total annual operating costs for each of the
first 5 years of operation of the facilities, as well as information on the
source(s) of funds to cover those operating costs. The information provided in
the June 4, 1999 transfer application included estimates of the operating costs
for which PSEG Nuclear will be responsible due to its ownership of shares of
five nuclear units. In acquiring the ownership interests of ACE and DP&L, PSEG
Nuclear is increasing its pro-rata share of the financial obligations related to
these units and therefore its operating costs will increase proportionately.
PSEG Nuclear is likewise proportionately increasing its entitlements to capacity
and energy from the units.
- ---------------
4 10 C.F.R. section 50.33(f)(2).
5 See NUREG-1577, Rev. 1, "Standard Review Plan on Power Reactor Licensee
Financial Qualifications and Decommissioning Funding Assurance" (March
1999).
6 Under the New Jersey restructuring plan, in order to provide a transition
to a competitive retail market, PSE&G retains a three-year obligation to
provide BGS to those customers who remain with the utility. The BGS will be
supplied on the basis of competitive bid beginning in year four.
Page 5 of 10
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PSEG Nuclear's sources of funds remain the same and remain more than
sufficient to cover the additional operating costs. PSEG Nuclear will recover
these costs by sales of energy and capacity to PSEG Energy Resources and Trade
LLC ("PSEG ERT"), the affiliated power marketer. The power purchase agreement
between PSEG Nuclear and PSEG ERT, which has been filed with the Federal Energy
Regulatory Commission, obligates PSEG ERT to take all energy or capacity from
PSEG Nuclear's generating assets, and to make payments to PSEG Nuclear covering
all costs incurred in operating and maintaining the units.
The source of funds to cover the nuclear generating costs will be
sales of power by PSEG ERT, including power from all five nuclear generating
units in which PSEG Nuclear has an ownership interest and power from the
non-nuclear generating capacity held by PSEG Fossil LLC ("PSEG Fossil"). As
discussed in the June 4, 1999 transfer application for Salem and Hope Creek,
PSEG ERT will sell power for at least three years to PSE&G, the affiliated
electric utility, in order for PSE&G to meet the full retirements of PSE&G's
obligation to provide Basic Generation Service ("BGS").6 PSE&G will sell
remaining power on the competitive wholesale market at market prices. The June
4, 1999 transfer application included market price and capacity factor
assumptions.7
PSEG Power is the holding company that wholly-owns PSEG Nuclear, PSEG
ERT, and PSEG Fossil. In the June 4, 1999 transfer application, PSE&G also
provided an Income Statement and Cash Flow Projection for PSEG Power from
January 1, 2000 through December 31, 2004. This Income Statement and Cash Flow
Projection incorporated business models and assumptions that included 5000 Mw of
projected additional generation capacity, specifically including (and modeling)
acquisition of the additional nuclear generation interests to be obtained from
ACE and DP&L from both cost and revenue perspectives. While the company's
business models and financial projections are currently being revised, this
Income Statement and Cash Flow Projection previously provided remains a valid
indicator of the financial qualifications of PSEG Nuclear to obtain the
interests here at issue.8
- ---------------
7 Nuclear output used to satisfy the BGS obligation may in fact generate
revenue at rates in excess of the projected market.
8 PSE&G is currently developing and revising financial projections for the
ratings agencies and the debt offering for PSEG Power. To the extent
necessary, PSE&G would in the near future be able to provide revised income
and cash flow projections. PSE&G does not expect the revisions (with
modified assumptions) to alter the conclusions of either this application
or the June 4, 1999 application.
Page 6 of 10
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In sum, PSEG Power will be a financially robust entity with diverse
generating assets and substantial revenue streams. PSEG Power will more than
recover its marginal costs related to the additional nuclear interests by sale
of the additional energy and capacity. PSEG ERT will have the ability to meet
the obligation to PSEG Nuclear under the PSEG Nuclear - PSEG ERT power purchase
agreement. Moreover, PSEG Power will be established with an investment grade
bond rating, and will have access to commercial paper markets.
VI. DECOMMISSIONING FINANCIAL ASSURANCE
The transfer of the ACE and DP&L shares of the Salem units and Hope
Creek will have no effect on the financial assurance for decommissioning the
units. First, the proposed transfer has no effect upon PSE&Gs and PSEG Nuclear's
approved decommissioning funding mechanism for the current 42.59% pro-rata share
of Salem decommissioning costs and the 95% pro-rata share of Hope Creek
decommissioning costs. Financial assurance is provided by existing Nuclear
Decommissioning Trusts ("NDTs") for the plants, with continued funding through a
New Jersey non-bypassable Societal Benefits Charge ("SBC").
Second, the purchase agreements between PSEG Power and ACE and DP&L
require that the funds in ACE's and DP&L's existing NDTs be transferred to PSEG
Power. PSEG Power's intent is that the funds will be transferred to PSEG
Nuclear.9 These funds will be combined with the existing PSE&G Salem and Hope
Creek NDTs.
With respect to the existing ACE and DP&L NDTs (both qualified and
nonqualified), these funds are presently sufficient to satisfy the pro-rata
shares of the NRC formula amounts for the radiological decontamination and
decommissioning of the units, as calculated pursuant to 10 C.F.R. section
50.75(c), NRC Regulatory Guide 1.159, and NUREG-1307. As shown in Appendix 6,
when earnings on the current funds are credited at a two percent annual real
rate of return through the end of each unit's license terms, as allowed by 10
C.F.R. section 50.75(e)(1)(ii), the fund amounts exceed the pro rata shares of
the NRC formula amount associated with 10 C.F.R. section 50.75(b) and (c)
radiological decommissioning.
- ---------------
9 PSEG Nuclear also intends to address the federal tax implications of this
transfer by private letter ruling from the Internal Revenue Service
("IRS"), or by legislative or regulatory changes, and expects to make the
transfer of the NDTs on a tax-free basis. Obtaining such a ruling, however,
is not a prerequisite to closing on this transaction or to the transfer of
the NDTs.
Page 7 of 10
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VII. PRICE-ANDERSON INDEMNITY AND NUCLEAR INSURANCE
Following the transfer of ACE's and DP&L's interests to PSEG Nuclear,
conforming changes in nuclear liability and nuclear property coverage and in the
Price-Anderson indemnity agreement will be made, as necessary, in due course.
The information provided in connection with PSEG Nuclear's financial
qualifications demonstrates that PSEG Nuclear will retain the ability to pay the
pro-rata increase in deferred premiums in compliance with 10 C.F.R. section
140.21.
VIII. ANTITRUST CONSIDERATIONS
Salem Units 1 and 2 were licensed under Section 104b of the AEA and,
in accordance with Section 105 of the AEA, are not subject to antitrust review
by the NRC.10 Hope Creek was licensed under Section 103 of the AEA and,
therefore, the NRC previously conducted an antitrust review with respect to the
unit when it was originally licensed. There are no antitrust license conditions
in the Salem or Hope Creek licenses.
In accordance with the Commission's recent decision in Kansas Gas and
Electric Company (Wolf Creek Generating Station, Unit 1), CLI-99-19, 49 NRC 441
(1999), further antitrust review of a post-operating license transfer
application is not required under the AEA. Accordingly, the NRC need not
consider antitrust issues in connection with the proposed transfers.
IX. RESTRICTED DATA
The proposed transfer does not involve any Restricted Data or
Classified National Security Information or any change in access to such
Restricted Data or Classified National Security Information. PSE&G's and PSEG
Nuclear's existing restrictions on access to Restricted Data and Classified
National Security Information will be unaffected by the proposed transfer.
- ---------------
10 See NUREG-1574, "NRC Standard Review Plan on Antitrust Reviews," Sections
1.1, 1.3, and 1.5 (December 1997).
Page 8 of 10
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X. ENVIRONMENTAL CONSIDERATIONS
The requested license transfers and the accompanying conforming
administrative amendments are exempt from environmental review because they fall
within the categorical exclusion appearing at 10 C.F.R. section 51.22(c)(21) for
which neither an Environmental Assessment nor an Environmental Impact Statement
is required. Moreover, the proposed license transfers do not involve any
amendments to the licenses or other changes that would directly affect the
actual operation of the Salem or Hope Creek units in any substantive way. The
proposed transfers and amendments do not involve an increase in the amounts, or
a change in the types, of any radiological effluents that may be allowed to be
released off-site. Further, no increase in the individual or cumulative
occupational radiation exposure is expected, and the proposed transfers and
license changes have no environmental impact.
XI. OTHER REQUIRED APPROVALS/SCHEDULE
In addition to the NRC approval of the transaction, approval of the
transfers of ACE's and DP&L's undivided interests in the Salem and Hope Creek
units will be required from the Federal Energy Regulatory Commission.
The parties intend to close on the asset purchase by March 31, 2000.
Accordingly, PSE&G, PSEG Nuclear, ACE, and DP&L respectfully request NRC review
and action on this submittal on a schedule consistent with this plan, and in any
event no later than March 15, 2000. The parties request that the NRC consent to
the transfer at any time for one year from the date of issuance of the NRC's
order, to allow for completion of the activities associated with closing the
transaction, receipt of required regulatory approvals, and contingencies.
The parties will keep the NRC informed of any significant changes in
the status of the other required approvals or the planned closing date.
Page 9 of 10
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APPENDICES
1. Mark-up of Operating License and Technical Specifications: Salem Unit 1
2. Mark-up of Operating License and Technical Specifications: Salem Unit 2
3. Mark-up of Operating License and Technical Specifications: Hope Creek
4. No Significant Hazards Consideration Determination
5. Affirmation of Thomas S. Shaw (on behalf of ACE and DP&L)
6. Nuclear Decommissioning Trust Funds: Status and Sufficiency
Page 10 of 10
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Appendix 1
SALEM UNIT 1 MARKED UP FACILITY OPERATING LICENSE
SALEM UNIT 1 CHANGES
References to Atlantic City Electric Company and Delmarva Power and Light
Company are being deleted in the following Sections:
LICENSE SECTION, PAGE NUMBER ACTION DESCRIPTION
Heading, page 1 Deleted references to Atlantic City Electric
Company and Delmarva Power and Light Company
Paragraph 1A, page 1 Deleted references to Atlantic City Electric
Company and Delmarva Power and Light Company
Paragraph 2, page 2 Deleted references to Atlantic City Electric
Company and Delmarva Power and Light Company
Paragraph 2A, page 2 Deleted references to Atlantic City Electric
Company and Delmarva Power and Light Company
Paragraph 2B(1), page 3 Deleted references to Atlantic City Electric
Company and Delmarva Power and Light Company
Appendix C Deleted references to Atlantic City Electric
Company and Delmarva Power and Light Company
<PAGE>
UNITED STATES
NUCLEAR REGULATORY COMMISSION
WASHINGTON, DC 20555
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
PHILADELPHIA ELECTRIC COMPANY
DOCKET NO. 50-272
SALEM NUCLEAR GENERATING STATION, UNIT NO. 1
FACILITY OPERATING LICENSE
Amendment No. 3
License No. DPR-70
1. The Nuclear Regulatory Commission (the Commission) having found that:
A. The application for license filed by the Public Service Electric and
Gas Company and Philadelphia Electric Company, (the licensees) and the
application for license amendment dated November 8, 1976, filed by
Public Service Electric and Gas Company comply with the standards and
requirements of the Atomic Energy Act (the Act) of 1954, as amended,
and the Commission's rules and regulations set forth in 10 CFR Chapter
I and all required notifications to other agencies or bodies have been
duly made;
B. Construction of the Salem Nuclear Generating Station, Unit No. 1
(facility) has been substantially completed in conformity with
Provisional Construction Permit No. CPPR-52 and the application, as
amended, the provisions of the Act and the rules and regulations of
the Commission;
C. The facility will operate in conformity with the application, as
amended, the provisions of the Act, and the rules and regulations of
the Commission;
D. There is reasonable assurance: (i) that the activities authorized by
this amended operating license can be conducted without endangering
the health and safety of the public, and (ii) that such activities
will be conducted in compliance with the rules and regulations of the
Commission;
E. Public Service Electric and Gas Company is technically qualified and
the licensees are financially qualified to engage in the activities
authorized by this amended operating license in accordance with the
rules and regulations of the Commission;
<PAGE>
- 2 -
F. The licensees have satisfied the application provisions of 10 CFR Part
140, "Financial Protection Requirements and Indemnity Agreements," of
the Commission's regulations;
G. The issuance of this amended operating license will not be inimical to
the common defense and security or to the health and safety of the
public;
H. After weighing the environmental, economic, technical, and other
benefits of the facility against environmental and other costs and
considering available alternatives, the issuance of Amendment No. 3 to
Facility Operating License No. DPR-70 subject to the conditions for
protection of the environment set forth in the Technical
Specifications, Appendix B is in accordance with 10 CFR Part 51 (and
with former Appendix D to 10 CFR Part 50) of the Commission's
regulations and all applicable requirements have been satisfied; and
I. The receipt, possession, and use of source, byproducts and special
nuclear material as authorized by this amended license will be in
accordance with the Commission's regulations in 10 CFR Parts 30, 40,
and 70, including 10 CFR Sections 30.33, 40.32, and 70.23 and 70.31.
2. Facility Operating License No. DPR-70, issued to the Public Service
Electric and Gas Company and Philadelphia Electric Company, is hereby
amended in its entirety, to read as follows:
A. This amended license applies to the Salem Nuclear Generating Station,
Unit No. 1, a pressurized water nuclear reactor and associated
equipment (the facility), owned by the Public Service Electric and Gas
Company and Philadelphia Electric Company and operated by Public
Service Electric and Gas Company. The facility is located on the
applicants' site in Salem County, New Jersey, on the southern end of
Artificial Island on the east bank of the Delaware River in Lower
Alloways Creek Township, and is described in the "Final Safety
Analysis Report" as supplemented and amended (Amendments 10 through
39) and the Environmental Report as supplemented and amended
(Amendments 1 through 3).
B. Subject to the conditions and requirements incorporated herein, the
Commission hereby licenses
<PAGE>
- 3 -
(1) Public Service Electric and Gas Company and Philadelphia Electric
Company to possess the facility at the designated location in
Salem County, New Jersey, in accordance with the procedures and
limitations set forth in this amended license;
(2) Public Service Electric and Gas Company, pursuant to Section 104b
of the Act and 10 CFR Part 50, "Licensing of Production and
Utilization Facilities," to possess, use and operate the
facility;
(3) Public Service Electric and Gas Company, pursuant to the Act and
10 CFR Part 70, to receive, possess and use at any time special
nuclear material as reactor fuel, in accordance with the
limitations for storage and amounts required for reactor
operation, as described in the Final Safety Analysis Report, as
supplemented and amended;
(4) Public Service electric and Gas Company, pursuant to the Act and
10 CFR Parts 30, 40 and 70 to receive, possess and use at any
time any byproducts, source and special nuclear material as
sealed neutron sources for reactor startup, sealed sources for
reactor instrumentation and radiation monitoring equipment
calibration, and as fission detectors in amounts as required;
(5) Public Service Electric and Gas Company, pursuant to the Act and
10 CFR Parts 30, 40 and 70 to receive, possess and use in amounts
as required any byproduct, source or special nuclear material
without restriction to chemical or physical form, for sample
analysis or instrument calibration or associated with radioactive
apparatus or components; and
(6) Public Service Electric and Gas Company, pursuant to the Act and
10 CFR Parts 30 and 70, to possess, but not separate, such
byproduct and special nuclear materials as may be produced by the
operation of the facility.
C. This amended license shall be deemed to contain and is subject to the
conditions specified in the following Commission regulations in 10 CFR
Chapter I: Part 20, Section 30.34 of Part 30, Section 40.41 of Part 40,
Sections 50.54 and 50.59 of Part 50, and Section 70.32 of part 70; and is
subject to all applicable provisions of the Act and to the rules,
regulations, and orders of the Commission now or hereafter in effect and is
subject to the additional conditions specified or incorporated below:
<PAGE>
APPENDIX C
ADDITIONAL CONDITIONS
OPERATING LICENSE NO. DPR-70
Public Service Electric and Gas Company and Philadelphia Electric Company shall
comply with the following conditions on the schedules noted below:
<TABLE>
<CAPTION>
Amendment Additional Condition Implementation Date
Number
<S> <C> <C>
192 The licensee is authorized to relocate certain Technical The amendment ___
Specification requirements to licensee controlled documents. implemented ____
Implementation of this amendment shall include the relocation of days from _____
these technical specification requirements to the appropriate
documents, as described in the licensee's application dated
January 11, 1996, as supplemented by letters dated February 26,
May 22, June 27, July 12, December 22, 1996 and March 17, 1997,
and evaluated in the staff's safety evaluation attached to this
amendment.
194 The licensee is authorized to upgrade the initiation circuitry The amendment shall
for the power operated relief valves, as described in the implemented prior to
licensee's application dated January 31, 1997, as supplemented by entry into Mode __
letters dated March 14, April 8, and April 28, 1997, and the current ___ for
evaluated in the staff's safety evaluation attached to this Salem, Unit 1
amendment.
196 The licensee shall complete all modifications associated with the The amendment shall
amendment request concerning Containment Fan Cooler Units (CFCU) be implemented prior
response time dated October 25, 1996, as described in the letters to entry into Mode
supplementing the amendment request dated December 11, 1996, ___ the current ___
January 28, March 27, April 24, June 3, and June 12, 1997, prior for Salem Unit 1.
to entry into Mode 3 following refueling outage 12. All
modifications made in support of this amendment request and
described in the referenced submittals shall be in conformance
with the existing design basis for Salem Unit 1, and programmatic
controls for tank monitoring instrumentation shall be as
described in the letter dated April 24, 1997. Post modification
testing and confirmatory analyses shall be as described in the
letter dated March 27, 1997 Future changes to the design
described in these submittals may be made in accordance with the
provisions of 10 CFR 50.59. Further, the administrative controls
associated with CFCU operability and containment integrity
described in the letters dated March 27, and April 24, 1997 shall
not be relaxed or changed without prior staff review until such
time as the license has been amended to include the
administrative controls as technical specification requirements.
198 The licensee shall perform an evaluation of the containment liner The amendment shall
anchorage by November 30, 1997, for the loading induced on the be implement within
containment liner during a Main Stream Line Break event to 30 days from July 10,
confirm the assumptions provided in the Preliminary Safety 1997.
Analysis Report and Updated Final Safety Analysis Report.
</TABLE>
1
<PAGE>
UNITED STATES
NUCLEAR REGULATORY COMMISSION
WASHINGTON, DC 20555
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
PHILADELPHIA ELECTRIC COMPANY
DOCKET NO. 50-311
SALEM NUCLEAR GENERATING STATION, UNIT NO. 2
FACILITY OPERATING LICENSE
License No. DPR-75
1. The Nuclear Regulatory Commission (the Commission) having found that:
A. The application for license filed by the Public Service Electric and
Gas Company and the Philadelphia Electric Company (hereinafter
referred to as the licensees) complies with the standards and
requirements of the Atomic Energy Act of 1954, as amended (the Act),
and the Commission's regulations set forth in 10 CFR Chapter I and all
required notifications to other agencies or bodies have been duly
made;
B. Construction of the Salem Nuclear Generating Station, Unit No. 2
(facility) has been substantially completed in conformity with
Construction Permit No. CPPR-53 and the application, as amended, the
provisions of the Act and the regulations of the Commission;
C. The facility will operate in conformity with the application, as
amended, the provisions of the Act, and the regulations of the
Commission;
D. There is reasonable assurance: (i) that the activities authorized by
this operating license can be conducted without endangering the health
and safety of the public, and (ii) that such activities will be
conducted in compliance with the Commission's regulations set forth in
10 CFR Chapter I;
E. Public Service Electric and Gas Company is technically qualified to
engage in the activities authorized by this operating license in
accordance with the Commission's regulations set forth in 10 CFR
Chapter I;
<PAGE>
- 2 -
F. The licensees are financially qualified to engage in the activities
authorized by this license in accordance with the Commission's
regulations set forth in 10 CFR Chapter I;
G. The licensees have satisfied the applicable provisions of 10 CFR Part
140 "Financial Protection Requirements and Indemnity Agreements," of
the Commission's regulations;
H. The issuance of this operating license will not be inimical to the
common defense and security or to the health and safety of the public;
I. After weighing the environmental, economic, technical, and other
benefits of the facility against environmental and other costs and
considering available alternatives, the issuance of Facility Operating
License No. DPR-75 subject to the conditions for protection of the
environment set forth herein is in accordance with 10 CFR Part 50
Appendix D of the Commission's regulations and all applicable
requirements have been satisfied; and
J. The receipt, possession, and use of source, byproducts and special
nuclear material as authorized by this license will be in accordance
with the Commission's regulations in 10 CFR Parts 30, 40, and 70.
2. Pursuant to approval by the Nuclear Regulatory Commission at meetings on
January 14, 1981, April 28, 1981, and May 19, 1981, the License for
Fuel-Loading and Low-Power Testing issued on April 18, 1980 is superseded
by Facility Operating License No. DPR-75 hereby issued to Public Service
Electric and Gas Company and Philadelphia Electric Company, (licensees) to
read as follows:
A. This license applies to the Salem Nuclear Generating Station, Unit No.
2, a pressurized water nuclear reactor and associated equipment (the
facility), owned by the licensees. The facility is located on the
southern end of Artificial Island on the east bank of the Delaware
River in Lower Alloways Creek Township in Salem County, New Jersey and
is described in the "Final Safety Analysis Report" as supplemented and
amended and the Environmental Report as supplemented and amended.
B. Subject to the conditions and requirements incorporated herein, the
Commission hereby licenses
(1) Public Service Electric and Gas Company and Philadelphia Electric
Company to possess the facility at the designated location in
Salem County, New Jersey, in accordance with the procedures and
limitations set forth in this amended license;
<PAGE>
- 3 -
(2) Public Service Electric and Gas Company, pursuant to Section 104b
of the Act and 10 CFR Part 50, "Licensing of Production and
Utilization Facilities," to possess, use and operate the
facility;
(3) Public Service Electric and Gas Company, pursuant to the Act and
10 CFR Part 70, to receive, possess and use at any time special
nuclear material as reactor fuel, in accordance with the
limitations for storage and amounts required for reactor
operation, as described in the Final Safety Analysis Report, as
supplemented and amended;
(4) Public Service Electric and Gas Company, pursuant to the Act and
10 CFR Parts 30, 40 and 70 to receive, possess and use at any
time any byproducts, source and special nuclear material as
sealed neutron sources for reactor startup, sealed sources for
reactor instrumentation and radiation monitoring equipment
calibration, and as fission detectors in amounts as required;
(5) Public Service Electric and Gas Company, pursuant to the Act and
10 CFR Parts 30, 40 and 70 to receive, possess and use in amounts
as required any byproduct, source or special nuclear material
without restriction to chemical or physical form, for sample
analysis or instrument calibration or associated with radioactive
apparatus or components; and
(6) Public Service Electric and Gas Company, pursuant to the Act and
10 CFR Parts 30 and 70, to possess, but not separate, such
byproduct and special nuclear materials as may be produced by the
operation of the facility.
C. This amended license shall be deemed to contain and is subject to the
conditions specified in the following Commission regulations in 10 CFR
Chapter I: Part 20, Section 30.34 of Part 30, Section 40.41 of Part 40,
Sections 50.54 and 50.59 of Part 50, and Section 70.32 of part 70; and is
subject to all applicable provisions of the Act and to the rules,
regulations, and orders of the Commission now or hereafter in effect and is
subject to the additional conditions specified or incorporated below:
<PAGE>
APPENDIX C
ADDITIONAL CONDITIONS
OPERATING LICENSE NO. DPR-75
Public Service Electric and Gas Company and Philadelphia Electric Company shall
comply with the following conditions on the schedules noted below:
<TABLE>
<CAPTION>
Amendment Additional Condition Implementation Date
Number
<S> <C> <C>
175 The licensee is authorized to relocate certain Technical The amendment shall
Specification requirements to licensee controlled documents. be implemented
Implementation of this amendment shall include the relocation of within __ days from
these technical specification requirements to the appropriate March ___ 1997
documents, as described in the licensee's application dated
January 11, 1996, as supplemented by letters dated February 26,
May 22, June 27, July 12, December 22, 1996 and March 17, 1997,
and evaluated in the staff's safety evaluation attached to this
amendment.
177 The licensee is authorized to upgrade the initiation circuitry The amendment ___
for the power operated relief valves, as described in the implemented prior to
licensee's application dated January 31, 1997, as supplemented by entry into Mode ___
letters dated March 14, April 8, and April 28, 1997, and the current ___ for
evaluated in the staff's safety evaluation attached to this Salem Unit 2.
amendment.
179 All modifications made in support of the amendment request The amendment ___
concerning Containment Fan Cooler Units (CFCU) response time implemented prior to
dated October 25, 1996, as described in the letters supplementing entry into Mode ___
the amendment request dated December 11, 1996, January 28, March the current ___ for
27, April 24, June 3, and June 12, 1997, shall be in conformance Salem Unit 2.
with the existing design basis for Salem Unit 2, and programmatic
controls for tank monitoring instrumentation shall be as
described in the letter dated April 24, 1997. Post modifications
testing and confirmatory analyses shall be as described in the
letter dated March 27, 1997. Future changes to the design
described in these submittals may be made in accordance with the
provisions of 10 CFR 50.59. Further, the administrative controls
associated with CFCU operability and containment integrity
described in the letters dated March 27, and April 24, 1997 shall
not be relaxed or changed without prior staff review until such
time as the license has been amended to include the
administrative controls as technical specification requirements.
181 The licensee shall perform an evaluation of the containment liner The amendment shall
anchorage by November 30, 1997, for the loading induced on the be implement within
containment liner during a Main Stream Line Break event to 30 days from July __,
confirm the assumption provided in the Preliminary Safety 1997.
Analysis Report and Updated Final Safety Analysis Report.
</TABLE>
1
<PAGE>
Document Control Desk Attachment 1
LR-N99529
Appendix 3
HOPE CREEK 1 MARKED UP FACILITY OPERATING LICENSE
HOPE CREEK CHANGES
References to Atlantic City Electric Company are being deleted in the following
Sections:
LICENSE SECTION, PAGE NUMBER ACTION DESCRIPTION
Heading, page 1 Delete references to Atlantic City Electric
Company
Paragraph 1A, 1E and footnote, Delete references to Atlantic City Electric
page 1 Company and footnote references to Atlantic
City Electric Company
Paragraph 2, page 2 Delete references to Atlantic City Electric
Company
Paragraph 2A, page 2 Delete references to Atlantic City Electric
Company
Paragraph 2B(2), page 2 Delete paragraph
Appendix C Deleted references to Atlantic City Electric
Company
<PAGE>
UNITED STATES
NUCLEAR REGULATORY COMMISSION
WASHINGTON, DC 20555
PUBLIC SERVICE ELECTRIC & GAS COMPANY
DOCKET NO. 50-354
HOPE CREEK GENERATING STATION
FACILITY OPERATING LICENSE
License No. NPF-57
1. The Nuclear Regulatory Commission (the Commission or the NRC) has found
that:
A. The application for license filed by the Public Service Electric & Gas
Company acting on behalf of itself (the licensee) complies with the
standards and requirements of the Atomic Energy Act of 1954, as
amended (the Act), and the Commission's regulations set forth in 10
CFR Chapter I, and all required notifications to other agencies or
bodies have been duly made;
B. Construction of the Hope Creek Generating Station (the facility) has
been substantially completed in conformity with Construction Permit
No. CPPR-120 and the application, as amended, the provisions of the
Act and the regulations of the Commission;
C. The facility will operate in conformity with the application, as
amended, the provisions of the Act, and the regulations of the
Commission (except as exempted from compliance in Section 2.D. below);
D. There is reasonable assurance: (i) that the activities authorized by
this operating license can be conducted without endangering the health
and safety of the public, and (ii) that such activities will be
conducted in compliance with the Commission's regulations set forth in
10 CFR Chapter I (except as exempted from compliance in Section 2.D.
below);
E. Public Service Electric and Gas Company is technically qualified to
engage in the activities authorized by this license in accordance with
the Commission's regulations set forth in 10 CFR Chapter I;
F. The licensee has satisfied the application provisions of 10 CFR Part
140, "Financial Protection Requirements and Indemnity Agreements," of
the Commission's regulations;
G. The issuance of this license will not be inimical to the common
defense and security or to the health and safety of the public;
<PAGE>
- 2 -
H. After weighing the environmental, economic, technical, and other
benefits of the facility against environmental and other costs and
considering available alternatives, the issuance of Facility Operating
License No. NPF-57, subject to the conditions for protection of the
environment set forth in the Environmental Protection Plan attached as
Appendix B, is in accordance with 10 CFR Part 51 of the Commission's
regulations and all applicable requirements have been satisfied; and
I. The receipt, possession, and use of source, byproducts and special
nuclear material as authorized by this license will be in accordance
with the Commission's regulations in 10 CFR Parts 30, 40, and 70.
2. Based on the foregoing findings and approval by the Nuclear Regulatory
Commission at a meeting on July 21, 1986, the License for Fuel Loading and
Low Power Testing, License No. NPF-50, issued on April 11, 1986, is
superseded by Facility Operating License NPF-57 hereby issued to Public
Service Electric & Gas Company (the licensee), to read as follows:
A. This license applies to the Hope Creek Generating Station, a boiling
water nuclear reactor and associated equipment (the facility) owned by
Public Service Electric & Gas Company. The facility is located on the
licensee' site on the east bank of the Delaware River in Lower
Alloways Creek Township, Salem County, New Jersey. The facility is
located approximately eight miles southwest of Salem, New Jersey and
is described in the Public Service Electric & Gas Company's Final
Safety Analysis Report, as supplemented and amended, and in the
Environmental Report, as supplemented and amended.
B. Subject to the conditions and requirements incorporated herein, the
Commission hereby licenses
(1) Public Service Electric & Gas Company (PSE&G), pursuant to
Section 103 of the Act and 10 CFR Part 50, to posses, use and
operate the facility at the above designated location in Salem
County, New Jersey, in accordance with the procedures and
limitations set forth in this license;
(2) PSE&G, pursuant to the Act and 10 CFR Part 70, to receive,
possess and use at any time special nuclear material as reactor
fuel, in accordance with the limitations for storage and amounts
required for reactor operation, as described in the Final Safety
Analysis Report, as supplemented and amended:
<PAGE>
APPENDIX C
ADDITIONAL CONDITIONS
OPERATING LICENSE NO. DPR-57
Public Service Electric and Gas Company shall comply with the following
conditions on he schedules noted below:
<TABLE>
<CAPTION>
Amendment Additional Condition Implementation Date
Number
<S> <C> <C>
97 The Licensee is authorized to relocate certain Technical The amendment
Specification requirements to licensee-controlled documents. shall be
Implementation of this amendment shall include the relocation of implemented
these technical specification requirements to the appropriate within 60 days
documents, as described in the licensee's application dated from March 21,
January 11, 1996, as supplemented by letters dated February 26, 1997.
May 22, June 27, July 12, December 23, 1996, ad March 17, 1997,
and evaluated in the staff's safety evaluation attached to this
amendment.
103 The licensee shall relocate the list of "Motor Operated Valves - The amendment
Thermal Overload Protection (BYPASSED)" from the Technical shall be
Specifications (Table 3.8.4.2-1) to the Updated Final Safety implemented
Analysis Report, as described in the licensee's application dated within 60 days
July 7, 1997, and evaluated in the staff's safety evaluation from September
attached to this amendment. 16, 1997.
105 The licensee shall use the Banked Pattern Withdrawal System or an The amendment
improved version such as the Reduced Notch Worth Procedure as shall be
described in the licensee's application dated June 19, 1997, and implemented
evaluated in the staff's safety evaluation attached to this within 60 days
amendment. from September
30, 1997.
110 The licensee shall relocate the suppression chamber water The amendment
volume, as contained in Technical Specifications 3.5.3.a, shall be
3.5.3.b, 3.6.2.1.a.1 and 5.2.1 to the Updated Final Safety implemented
Analysis Report, as described in the licensee's application dated within 60 days
August 20, 1997, and evaluated in the staff's safety evaluation 1997.
attached to this amendment.
114 The licensee is authorized to perform single cell charging of The amendment
connected cells in OPERABLE class 1E batteries as described in shall be
the licensee's application dated September 8, 1998 as implemented
supplemented by letter dated December 8, 1998, and evaluated in within 60 days
the staff's safety evaluation attached to this amendment. from February 9,
1999.
</TABLE>
1
<PAGE>
Document Control Desk Attachment 1
LR-N99529
APPENDIX 4
LICENSE CHANGE REQUEST (LCR)
The Operating License and Technical Specification changes proposed by LCR S99-23
for the Salem Generating Station, Units 1 and 2, are described and shown in
Appendix 1 and Appendix 2 of this Application. The Operating License and
Technical Specification changes proposed by LCR H99-13 for the Hope Creek
Generating Station as described in Appendix 3 of this Application. The purpose
of these changes is to revise or replace references to Atlantic City Electric
Company ("ACE") and Delmarva Power & Light Company ("DP&L"). The reason and
justification for these changes, as well as additional background information,
is contained in following section and Attachment 1 of this letter. The following
section provides the 10 C.F.R. section 50.92 No Significant Hazards
Consideration determination for these changes. The proposed amendment changes
were reviewed by the Salem and Hope Creek Station Operations Review Committee.
NO SIGNIFICANT HAZARDS CONSIDERATION DETERMINATION
Although not required by the rule governing license transfer, which became
effective December 3, 1998, this No Significant Hazards Consideration evaluation
is included to facilitate NRC Staff review of the application and the conforming
license amendments.
Description of the Change
The proposed changes involve only administrative or conforming changes to the
Operating Licenses and plant Technical Specifications to delete ACE and DP&L as
licensed owners to reflect the transfers in ACE's and DP&L's non-operating
ownership interests in Salem Units 1 and 2, and ACE's non-operating ownership
interest in Hope CreeK to PSEG Nuclear LLC.
Basis for Proposed No Significant Hazards Consideration Determination
1. The conforming amendments do not involve a significant increase in the
probability or consequences of an accident previously evaluated.
The proposed amendments do not involve a significant increase in the probability
of consequences of an accident previously evaluated because of the following:
Page 1 of 3
<PAGE>
Document Control Desk Attachment 1
LR-N99529
The changes do not involve any change in the design, configuration, or operation
of the nuclear plants. PSEG Nuclear1 will be the licensed operator with all
necessary operating authorities and technical qualifications. All Limiting
Conditions for Operation, Limiting Safety System Settings and Safety Limits
specified in the Technical Specifications remain unchanged. Also, the Physical
Security Plans and related plans, the Operator Training and Requalification
Programs, the Quality Assurance Programs, and the Emergency Plans are not being
changed by the proposed amendment.
2. The conforming amendments do not create the possibility of a new or
different kind of accident from any accident previously evaluated.
The proposed amendments do not create the possibility of a new or different kind
of accident from any accident previously because of the following:
The changes do not involve any change in the management at the plants or in its
design, configuration, or operation. The current plant design and design bases
will remain the same. The current plant safety analyses remain complete and
accurate in addressing the design basis events and in analyzing plant response
and consequences.
The Limiting Conditions for Operations, Limiting Safety System Settings and
Safety Limits specified in the Technical Specifications are not affected by the
change. As such, the plant conditions for which the design basis accident
analyses were performed remain valid. The change does not introduce a new mode
of plant operation or new accident precursors, does not involve any physical
alterations to plant configurations, or make changes to system set points that
could initiate a new or different kind of accident.
3. The proposed amendments do not involve a significant reduction in a margin
of safety.
The proposed amendments do not involve any reduction in a margin of safety
because of the following:
The changes do not affect the financial qualifications of the remaining
licensees (PSEG Nuclear and PECO Energy in the case of Salem Units 1 and 2, and
PSEG Nuclear in the case of Hope Creek) or the management of the plant.
Likewise, the changes do not involve the design, configuration, or operation of
the nuclear plants. The change does not affect either the way in
- ---------------
1 This evaluation refers to PSEG Nuclear as the qualified licensee. By
separate application, PSE&G requested NRC approval to transfer PSE&G's
ownership interests and operating responsibilities to PSEG Nuclear.
Page 2 of 3
<PAGE>
Document Control Desk Attachment 1
LR-N99529
which the plant structures, systems, and components perform their safety
function or their design and licensing bases. Plant safety margins are
established through Limiting Conditions for Operation, Limiting Safety System
Settings and Safety Limits specified in the Technical Specifications. Because
there is no change to the physical design of the plant, there is no change to
any of these margins.
Page 3 of 3
<PAGE>
Document Control Desk Attachment 1
LR-N99529
Appendix 5
Affirmation of Thomas S. Shaw (on behalf of ACE and DP&L)
Consent of ACE and DP&L to the filing of this transfer application.
<PAGE>
License Nos. DPR-70 Docket Nos. 50-272
DPR-75 50-311
NPF-57 50-354
APPENDIX 5
AFFIRMATION OF THOMAS S. SHAW
I, Thomas S. Shaw, being duly sworn, state as follows:
1. I am executive Vice-President of Atlantic City Electric Company ("ACE"),
and Executive Vice President of Delmarva Power & Light Company ("DP&L").
2. ACE and DP&L have agreed to transfer their respective minority,
non-operating ownership interests in the Salem Generating Station, Units 1
and 2, to PSEG Power LLC ("PSEG Power"), and ACE has agreed to transfer its
minority, non-operating ownership interest in the Hope Creek Generating
Station to PSEG Power. PSEG Power has informed ACE and DP&L that it intends
to transfer rights to acquire the assets under the purchase agreements to
PSEG Nuclear LLC ("PSEG Nuclear").
3. ACE and DP&L have further agreed to authorize PSEG Nuclear to file on their
behalf an application for the consent of the Nuclear Regulatory Commission
("NRC") to the transfer of their above referenced interests in the Salem
Generating Station, Units 1 and 2, and the Hope Creek Generating Station,
to PSE&G Nuclear.
/s/ Thomas S. Shaw
----------------------------------------
Thomas S. Shaw
Executive Vice-President
Atlantic City Electric Company and
Delmarva Power & Light Company
STATE OF Delaware
COUNTY OF New Castle
Subscribed and sworn to me, a Notary Public, in and for the County and
State above named, this 14th day of December 1999.
/s/ Elizabeth Miller
----------------------------------------
My Commission Expires: October 31, 2001
<PAGE>
Document Control Desk Attachment 1
LR-N99529
Appendix 6
Nuclear Decommission Trust Funds: Status and Sufficiency
<PAGE>
APPENDIX 6
NUCLEAR DECOMMISSIONING TRUST FUNDS
CO-OWNER SHARE BASED ON NRC FILING OF MARCH 1999
SALEM 1 SALEM 2 HC
------- ------- --
PRE-ACQUISITION
PSE&G 123,819 123,819 342,263
PECO 123,819 123,819
CONECTIV 43,084 43,084 18,014
------- ------- -------
TOTAL 290,722 290,722 360,277
------- ------- -------
POST ACQUISITION
PSE&G 166,903 166,903 360,277
PECO 123,819 123,819
CONECTIV 0 0 0
TOTAL 290,722 290,722 360,277
------- ------- -------
NOTE: Atlantic City Electric and Delmarva Power and Light are wholly-owned
subsidiaries.
<PAGE>
FUNDING STATUS WITH 0% COST ESCALATION AND NOMINAL 2%
REAL RATE OF RETURN
SALEM UNIT 1
NRC NRC
YEAR CONTRIB'N EARNINGS BALANCE MINIMUM STATUS
- ---- --------- -------- ------- ------- ------
1998 0 41,035 43,084 95.24%
1999 0 821 41,856 43,084 97.15%
2000 0 837 42,693 43,084 99.09%
2001 0 854 43,547 43,084 101.07%
2002 0 871 44,418 43,084 103.10%
2003 0 888 45,306 43,084 105.16%
2004 0 906 46,212 43,084 107.26%
2005 0 924 47,136 43,084 109.41%
2006 0 943 48,079 43,084 111.59%
2007 0 962 49,041 43,084 113.83%
2008 0 981 50,021 43,084 116.10%
2009 0 1,000 51,022 43,084 118.42%
2010 0 1,020 52,042 43,084 120.79%
2011 0 1,041 53,083 43,084 123.21%
2012 0 1,062 54,145 43,084 125.67%
2013 0 1,083 55,228 43,084 128.19%
2014 0 1,105 53,332 43,084 130.75%
2015 0 1,127 57,459 43,084 133.36%
2016 0 1,149 58,608 43,084 136.03%
NOTE: Based on NRC minimum certification amount as of 12/31/98.
<PAGE>
FUNDING STATUS WITH 0% COST ESCALATION AND NOMINAL 2%
REAL RATE OF RETURN
SALEM UNIT 2
NRC NRC
YEAR CONTRIB'N EARNINGS BALANCE MINIMUM STATUS
- ---- --------- -------- ------- ------- ------
1998 0 30,426 43,084 70.62%
1999 0 609 31,035 43,084 72.03%
2000 0 621 31,655 43,084 73.47%
2001 0 633 32,288 43,084 74.94%
2002 0 646 32,934 43,084 76.44%
2003 0 659 33,593 43,084 77.97%
2004 0 672 34,265 43,084 79.53%
2005 0 685 34,950 43,084 81.12%
2006 0 699 35,649 43,084 82.74%
2007 0 713 36,362 43,084 84.40%
2008 0 727 37,089 43,084 86.09%
2009 0 742 37,831 43,084 87.81%
2010 0 757 38,588 43,084 89.56%
2011 0 772 39,359 43,084 91.35%
2012 0 787 40,146 43,084 93.18%
2013 0 803 40,949 43,084 95.05%
2014 0 819 41,768 43,084 96.95%
2015 0 835 42,604 43,084 98.89%
2016 0 852 43,456 43,084 100.86%
2017 0 869 44,325 43,084 102.88%
2018 0 886 45,211 43,084 104.94%
2019 0 904 46,116 43,084 107.04%
2020 0 922 47,038 43,084 109.18%
NOTE: Based on NRC minimum certification amount of 12/31/98.
<PAGE>
FUNDING STATUS WITH 0% COST ESCALATION AND NOMINAL 2%
REAL RATE OF RETURN
HOPE CREEK
NRC NRC
YEAR CONTRIB'N EARNINGS BALANCE MINIMUM STATUS
- ---- --------- -------- ------- ------- ------
1998 0 9,681 18,014 53.74%
1999 0 223 9,904 18,014 54.98%
2000 0 228 10,131 18,014 56.24%
2001 0 233 10,364 18,014 57.54%
2002 0 238 10,603 18,014 58.86%
2003 0 244 10,847 18,014 60.21%
2004 0 249 11,096 18,014 61.60%
2005 0 255 11,351 18,014 63.01%
2006 0 261 11,612 18,014 64.46%
2007 0 267 11,880 18,014 65.95%
2008 0 273 12,153 18,014 67.46%
2009 0 280 12,432 18,014 69.01%
2010 0 286 12,718 18,014 70.60%
2011 0 293 13,011 18,014 72.23%
2012 0 299 13,310 18,014 73.89%
2013 0 306 13,616 18,014 75.59%
2014 0 313 13,929 18,014 77.33%
2015 0 320 14,250 18,014 79.10%
2016 0 328 14,577 18,014 80.92%
2017 0 335 14,913 18,014 82.78%
2018 0 343 15,256 18,014 84.69%
2019 0 351 15,607 18,014 86.64%
2020 0 359 15,966 18,014 88.63%
2021 0 367 16,333 18,014 90.67%
2022 0 376 16,708 18,014 92.75%
2023 0 384 17,093 18,014 94.89%
2024 0 393 17,486 18,014 97.07%
2025 0 402 17,888 18,014 99.30%
2026 0 411 18,299 18,014 101.58%
NOTE: Based on NRC minimum certification amount as of 12/31/98.
<PAGE>
DERIVATION OF ESCALATION FACTOR, 1999 ESCALATED COST AND
CO-OWNER'S SHARE OF ESCALATED COSTS FOR SALEM UNIT NO. 1
ESCALATION FACTOR - YEAR 1999
AS OF 12/31/98
WEIGHTED
ESCALATION
ESCALATION FACTOR PERCENTAGE FACTOR
Labor 1.662 65.00% 1.080
Energy 0.848 13.00% 0.110
Burial 7.173 22.00% 1.578
-----
1999 Escalation Factor 2.769
1999 ESCALATED COST
THOUSANDS
100% Minimum Decommission Costs per NRC -
1986 Dollars (b) $105,000
1999 Escalation Factor 2.769
--------
Escalated Costs in 1999 $290,723
CO-OWNERS' SHARE OF ESCALATED COST
Public Service Electric and Gas Company - 42.59% $123,819
PECO Energy - 42.59% $123,819
Conectiv - 14.82% $43,804
<PAGE>
DERIVATION OF ESCALATION FACTOR, 1999 ESCALATED COST AND
CO-OWNER'S SHARE OF ESCALATED COSTS FOR SALEM UNIT NO. 2
ESCALATION FACTOR - YEAR 1999
AS OF 12/31/98
WEIGHTED
ESCALATION
ESCALATION FACTOR PERCENTAGE FACTOR
Labor 1.662 65.00% 1.080
Energy 0.848 13.00% 0.110
Burial 7.173 22.00% 1.578
-----
1999 Escalation Factor 2.769
1999 ESCALATED COST
THOUSANDS
100% Minimum Decommission Costs per NRC -
1986 Dollars (b) $105,000
1999 Escalation Factor 2.769
--------
Escalated Costs in 1999 $290,723
CO-OWNERS' SHARE OF ESCALATED COST
Public Service Electric and Gas Company - 42.59% $123,819
PECO Energy - 42.59% $123,819
Conectiv - 14.82% $43,804
<PAGE>
DERIVATION OF ESCALATION FACTOR, 1999 ESCALATED COST AND
CO-OWNER'S SHARE OF ESCALATED COSTS FOR HOPE CREEK UNIT NO. 1
ESCALATION FACTOR - YEAR 1999
AS OF 12/31/98
WEIGHTED
ESCALATION
ESCALATION FACTOR PERCENTAGE FACTOR
Labor 1.662 65.00% 1.080
Energy 0.635 13.00% 0.083
Burial 6.966 22.00% 1.533
-----
1999 Escalation Factor 2.696
1999 ESCALATED COST
THOUSANDS
Thermal Rating (Mwt) 3,293
times 9
--------
$29,637
plus 104,000
-------
100% Minimum Decommission Cost per NRC-
1986 Dollars 133,637
1999 Escalation Factor 2,696
-------
Escalated Cost in 1999 $360,277
CO-OWNERS' SHARES OF ESCALATED COST
Public Service Electric and Gas Company - 95% $342,263
Atlantic City Electric Company - 5% $18,014
<TABLE>
<CAPTION>
16 C.F.R. Part 803 - Appendix Approved by OMB
NOTIFICATION AND REPORT FORM FOR CERTAIN MERGERS AND ACQUISITIONS 3084-0005
Expires 2-28-98
- ------------------------------------------------------------------------------------------------------------------------------------
THE INFORMATION REQUIRED TO BE SUPPLIED ON THESE ANSWER SHEETS IS SPECIFIED IN THE INSTRUCTIONS
Attach the Affidavit required by section 803.5 to this page
- ------------------------------------------------------------------------------------------------------------------------------------
IS THIS ACQUISITION A CASH TENDER OFFER?
<S> <C>
[ ] Yes [x] No
- ------------------------------------------------------------------------------------------------------------------------------------
ITEM 1
(a) NAME AND HEADQUARTERS ADDRESS OF PERSON FILING
Conectiv
800 King Street
P.O. Box 231
Wilmington, DE 19899
- ------------------------------------------------------------------------------------------------------------------------------------
(b) PERSON FILING NOTIFICATION IS
<S> <C> <C>
[ ] an acquiring person [x] an acquired person [ ] both
- ------------------------------------------------------------------------------------------------------------------------------------
(c) LIST NAMES OF ULTIMATE PARENT ENTITIES OF ALL ACQUIRING LIST NAMES OF ULTIMATE PARENT ENTITIES OF ALL ACQUIRED PERSONS
PERSONS
<S> <C>
PECO Energy Company Conectiv
- ------------------------------------------------------------------------------------------------------------------------------------
(d) THIS ACQUISITION IS (put an X in all the boxes that apply)
<S> <C>
[x] an acquisition of assets [ ] a consolidation (see section 801.2)
[ ] a merger (see section 801.2) [ ] an acquisition of voting securities
[ ] an acquisition subject to section 801.2(e) [ ] a secondary acquisition
[ ] a formation of a joint venture or other corporation (see section 801.40) [ ] an acquisition subject to section 801.31
[ ] an acquisition subject to section 801.30 (specify type) __________________________________________________________________
[ ] other (specify)___________________________________________________________________________________________________________
- ------------------------------------------------------------------------------------------------------------------------------------
(e) INDICATE THE HIGHEST NOTIFICATION THRESHOLD IN SECTION 801.(h) FOR WHICH THIS FORM IS BEING FILED (acquiring person only)
Not applicable
("N/A")
<S> <C> <C> <C>
[ ] 15 million [ ] 15% [ ] 25% [ ] 50%
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
(f) VALUE OF VOTING SECURITIES TO BE HELD AS A RESULT OF THE VALUE OF ASSETS
ACQUISITION
N/A Approximately $17.5 million, subject to
adjustment. See response to Item 2(a).
- ------------------------------------------------------------------------------------------------------------------------------------
(g) PUT AN "X" IN THE APPROPRIATE BOX TO DESCRIBE ENTITY FILING NOTIFICATION
<S> <C> <C>
[x] Corporation [ ] Partnership [ ] Other (specify) ___
- ------------------------------------------------------------------------------------------------------------------------------------
(h) DATA FURNISHED BY
<S> <C>
[x] calendar year [ ] fiscal year (specify period) (month/year) to (month/year)
- ------------------------------------------------------------------------------------------------------------------------------------
THIS FORM IS REQUIRED BY LAW and must be filed separately by each person which, by reason of a merger, consolidation or
acquisition, is subject to section 7A of the Clayton Act, 15 U.S.C. section 18a, as added by Section 201 of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, Pub. L. No. 94-435, 90 Stat. 1390, and rules promulgated thereunder (hereinafter referred to
as "the rules" or by section number). The statute and rules are set forth in the Federal Register at 43 FR 33450; the rules may
also be found at 16 CFR Parts 801-03. Failure to file this Notification and Report Form, and to observe the required waiting
periods before consummating the acquisition in accordance with the applicable provisions of 15 U.S.C. section 18a and the rules,
subjects any "person," as defined in the rules, or any individuals responsible for noncompliance, to liability for a penalty of
not more than $10,000 for each day during which such person is in violation of 15 U.S.C. section 18a.
All information and documentary material filed in or with this Form is confidential. It is exempt from disclosure under the
Freedom of Information Act, and may be made public only in an administrative or judicial proceeding, or disclosed to Congress or
duly authorized committee or subcommittee of Congress.
Complete and return two notarized copies (with one set of documentary attachment of this Notification and Report Form to Premerger
Notification Office, Bureau of Competition, Room 303, Federal Trade Commission, Washington, D.C. 20580, and three notarized copies
(with one set of documentary attachments) to Director of Operations, Antitrust Division, Room 3218, Department of Justice,
Washington, D.C. 20530. The central office for information and assistance with respect to matters in connection with this
Notification and Report Form is Room 303, Federal Trade Commission, Washington, D.C. 20580, phone (202) 326-3100.
- ------------------------------------------------------------------------------------------------------------------------------------
DISCLOSURE NOTICE - Public reporting burden for this report is estimated to vary from 8 to 160 hours per response, with an average
of 39 hours per response, including time for reviewing instructions, searching existing data sources, gathering and maintaining
the data needed, and completing and reviewing the collection of information. Send comments regarding the burden estimate or any
other aspect of this report, including suggestions for reducing this burden.
- ------------------------------------------------------------------------------------------------------------------------------------
FTC Form C 4 (rev. 09/95)
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
NAME OF PERSON FILING NOTIFICATION DATE
Conectiv December 10, 1999
- --------------------------------------------------------------------------------
(1) PUT AN X IN THE APPROPRIATE BOX AND GIVE THE NAME AND ADDRESS OF ENTITY
FILING NOTIFICATION (if other than ultimate parent entity)
[x] NA [ ] This report is being filed [ ] This report is being filed
on behalf of a foreign on behalf of the ultimate
person pursuant to section parent entity by another
803.4 entity within the same
person authorized by it to
file pursuant to section
803.2(a).
- --------------------------------------------------------------------------------
NAME OF ENTITY FILING NOTIFICATION ADDRESS
N/A
- --------------------------------------------------------------------------------
(j) NAME AND ADDRESS OF ENTITY MAKING ACQUISITION OR WHOSE ASSETS OR VOTING
SECURITIES ARE BEING ACQUIRED IF DIFFERENT FROM THE ULTIMATE PARENT ENTITY
IDENTIFIED IN ITEM 1(a)
Delmarva Power & Light Company
Atlantic City Electric Company
800 King Street
P.O. Box 231
Wilmington, DE 19899
- --------------------------------------------------------------------------------
PERCENT OF VOTING SECURITIES HELD BY EACH ENTITY IDENTIFIED IN ITEM 1(a)
N/A
- --------------------------------------------------------------------------------
ITEM 2
2(a) DESCRIPTION OF ACQUISITION
Acquiring Person
PECO Energy Company
965 Chesterbrook Boulevard
Wayne, PA 19087-5691
Acquired Person
Conectiv
through its wholly-owned subsidiaries,
Delmarva Power & Light Company and
Atlantic City Electric Company
800 King Street, P.O. Box 231
Wilmington, DE 19899
Pursuant to two purchase agreements (together, the "Purchase
Agreements"), (i) by and among Atlantic City Electric Company ("ACE"), PECO
Energy Company ("Buyer") and PSEG Power,1 LLC ("PSEG") relating to Peach Bottom
No. 2 and 3 Nuclear Units (the "Peach Bottom Station"); and (ii) by and among
Delmarva Power & Light Company ("DP&L" and, together with ACE, the "Sellers"),
Buyer and PSEG relating to the Peach Bottom Station, each dated as of September
27, 1999, Buyer intends to acquire from Sellers a 7.51% interest as tenant in
common without the right of partition in the Peach Bottom Station. The general
classes of assets to be acquired by Buyer are listed in response to Item
- ---------------
1 A separate Premerger Notification and Report Form will be filed with
respect to the sale to PSEG.
2
<PAGE>
2(b)(i). The total consideration to be paid for the assets is $5.1 million, plus
the net book value, as of the closing date, of the nuclear fuel supplies. Based
upon currently available information and assuming a closing date of March 31,
2000, total consideration for the nuclear fuel supplies is expected to be
approximately $12.4 million, conditioned upon no changes in the above
assumptions. Total consideration for the assets to be acquired is thus estimated
to be approximately $17.5 million.
The transaction is conditioned upon, inter alia, (i) the expiration or
early termination of the applicable waiting period under the HSR Act and (ii)
all other material federal, state and local consents and approvals. The parties
intend to close the transaction as soon as practicable after all the
above-referenced consents and approvals have been obtained.
For a more detailed description of the proposed transaction, see the
Agreements, attached hereto as Exhibit 2(d)(1).
3
<PAGE>
- --------------------------------------------------------------------------------
NAME OF PERSON FILING NOTIFICATION DATE
Conectiv December 10, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2(b)(i) ASSETS TO BE ACQUIRED (to be completed only for assets acquisitions)
1. Peach Bottom Station
2 General Electric boiling water reactors
located: Susquehanna River
Peach Bottom Township
York County, PA
Pursuant to the Purchase Agreements, Buyer is acquiring from Seller a
7.51% interest in the Peach Bottom Station and certain other related assets
(together with the corresponding interest in the nuclear fuel supplies) for
consideration of approximately $17.5 million, subject to adjustment. The
consideration has not yet been allocated among (together with the corresponding
interests in the nuclear fuel supplies) the above-listed general classes of
assets.
- --------------------------------------------------------------------------------
2(b)(ii) ASSETS HELD BY ACQUIRING PERSON
None
- --------------------------------------------------------------------------------
2(c) VOTING SECURITIES TO BE ACQUIRED
(c)(i) LIST AND DESCRIPTION OF VOTING SECURITIES AND LIST OF
NON-VOTING SECURITIES:
N/A
(c)(ii) TOTAL NUMBER OF SHARES OF EACH CLASS OF SECURITY:
N/A
(c)(iii) TOTAL NUMBER OF SHARES OF EACH CLASS OF SECURITY BEING
ACQUIRED:
N/A
(c)(iv) IDENTITY OF PERSONS ACQUIRING SECURITIES:
N/A
(c)(v) DOLLAR VALUE OF SECURITIES IN EACH CLASS BEING ACQUIRED:
N/A
(c)(vi) TOTAL NUMBER OF EACH CLASS OF SECURITIES HELD BY ACQUIRING
PERSON AS A RESULT OF THE ACQUISITION:
N/A
(c)(vii) PERCENTAGE OF EACH CLASS OF SECURITIES HELD BY ACQUIRING
PERSON AS A RESULT OF THE ACQUISITION:
N/A
(c)(viii) DOLLAR VALUE OF SECURITIES TO BE HELD AS A RESULT OF THE
ACQUISITION:
N/A
4
<PAGE>
- --------------------------------------------------------------------------------
NAME OF PERSON FILING NOTIFICATION DATE
Conectiv December 10, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(d) SUBMIT A COPY OF THE MOST RECENT VERSION OF CONTRACT OR AGREEMENT (or
letter of intent to merge or acquire)
DO NOT ATTACH THIS DOCUMENT TO THIS PAGE ATTACHMENT OR REFERENCE NUMBER
OF CONTRACT OR AGREEMENT
Purchase Agreement by and among 2(d)(1)
ACE, Buyer and PSEG, dated as of
September 27, 1999 (relating to
Peach Bottom Station)
Purchase Agreement by and among 2(d)(2)
DP&L, Buyer and PSEG, dated as of
September 27, 1999 (relating to
Peach Bottom Station).
5
<PAGE>
- --------------------------------------------------------------------------------
NAME OF PERSON FILING NOTIFICATION DATE
Conectiv December 10, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ITEM 3
ASSETS AND VOTING SECURITIES HELD AS A RESULT OF THE ACQUISITION
(a) PERCENTAGE OF ASSETS
Approximately .28% of Conectiv
(b) PERCENTAGE OF VOTING SECURITIES
N/A
(c) AGGREGATE TOTAL VALUE
Approximately $17.5 million, subject to adjustment. See response to Item 2(a).
- --------------------------------------------------------------------------------
ITEM 4 PERSONS FILING NOTIFICATION MAY PROVIDE BELOW AN OPTIONAL INDEX OF
DOCUMENTS REQUIRED TO BE SUBMITTED BY ITEM 4
(See Item by Item instructions). THESE DOCUMENTS SHOULD NOT BE
ATTACH TO THIS PAGE.
(a) DOCUMENTS FILED WITH THE UNITED STATES ATTACHMENT OR REFERENCE NUMBER
SECURITIES AND EXCHANGE COMMISSION
Conectiv, Form 10-K for the year ending 4(a)(1)
December 31, 1998.
Conectiv, Form 10-Q for the quarter ended 4(a)(2)
March 31, 1999.
Conectiv, Form 10-Q for the quarter ended 4(a)(3)
June 30, 1999
Conectiv, Form 10-Q for the quarter ended 4(a)(4)
September 30, 1999
Delmarva Power & Light Company, Form 10-K 4(a)(5)
for the year ended December 31, 1998
Delmarva Power & Light Company, Form 10-Q 4(a)(6)
for the quarter ended March 31, 1999.
Delmarva Power & Light Company, Form 10-Q 4(a)(7)
for the quarter ended June 30, 1999
Delmarva Power & Light Company, Form 10-Q 4(a)(8)
for the quarter ended September 30, 1999
Atlantic City Electric Company, Form 10-K 4(a)(9)
for the year ended December 31, 1998
Atlantic City Electric Company, Form 10-Q 4(a)(10)
for the quarter ended March 31, 1999.
Atlantic City Electric Company, Form 10-Q 4(a)(11)
for the quarter ended June 30, 1999
6
<PAGE>
- --------------------------------------------------------------------------------
NAME OF PERSON FILING NOTIFICATION DATE
Conectiv December 10, 1999
- --------------------------------------------------------------------------------
Atlantic City Electric Company, Form 10-Q 4(a)(12)
for the quarter ended September 30, 1999
Conectiv, Form 8-K, dated January 25, 1999. 4(a)(13)
Conectiv, Form 8-K, dated February 17, 1999. 4(a)(14)
Conectiv, Form 8-K, dated March 29, 1999. 4(a)(15)
Conectiv, Form 8-K, dated May 11, 1999. 4(a)(16)
Atlantic City Electric Company, Form 8-K, 4(a)(17)
dated February 17, 1999
Delmarva Power & Light Company, Form 8-K, 4(a)(18)
dated January 25, 1999.
Delmarva Power & Light Company, Form 8-K, 4(a)(19)
dated March 29, 1999.
Conectiv and Atlantic City Electric Company, 4(a)(20)
jointly filed Form 8-K, dated July 15, 1999.
Conectiv and Delmarva Power & Light Company, 4(a)(21)
jointly filed Form 8-K, dated August 31, 1999.
Conectiv, Delmarva Power & Light Company, and 4(a)(22)
Atlantic City Electric Company, jointly filed
Form 8-K, dated September 30, 1999.
Conectiv and Atlantic City Electric Company, 4(a)(23)
jointly filed Form 8-K, dated September 2,
1999.
Conectiv Proxy Statement, dated February 24, 4(a)(24)
1999
- --------------------------------------------
(b) ANNUAL REPORTS, ANNUAL AUDIT REPORTS, ATTACHMENT OR REFERENCE NUMBER
AND REGULARLY PREPARED BALANCE SHEETS
Conectiv 1998 Annual Report 4(b)(1)
7
<PAGE>
- --------------------------------------------------------------------------------
NAME OF PERSON FILING NOTIFICATION DATE
Conectiv December 10, 1999
- --------------------------------------------------------------------------------
(c) STUDIES, SURVEYS, ANALYSES, AND ATTACHMENT OR REFERENCE NUMBER
NAME OF PERSON FILING NOTIFICATION
"Offering Memorandum for the Proposed 4(c)(1)
Sale of Nuclear Generation Assets"
jointly prepared by Reed Consulting
Group and Credit Suisse First Boston,
dated July 2, 1999
Board presentation, dated April 27, 4(c)(2)
1999, prepared by Thomas S. Shaw,
Executive Vice President, Conectiv,
with attached draft "Appendix to
Board Presentation" prepared by Art
Agra, Vice President, Finance &
Business Development, Conectiv, dated
April 20, 1999. (Appendix not provided
to the Board of Directors)
"Major Assumption for Valuation Model" 4(c)(3)
prepared by Dan Dougherty, Manager,
Finance Energy Commodities, Conectiv
for Thomas S. Shaw, Executive Vice
President, Conectiv, dated November 8,
1999.
Voluntary Submission Pursuant to C.F.R. section 803.1(b):
Affidavit of Bruce M. Sloan, Principal, Hegler & Bailey, Inc., dated
December 8, 1999.
8
<PAGE>
- --------------------------------------------------------------------------------
NAME OF PERSON FILING NOTIFICATION DATE
Conectiv December 10, 1999
- --------------------------------------------------------------------------------
ITEM 5 (See the "References" listed in the General Instructions to the Form.
Refer to the 1987 edition of the Standard Industrial Classification
Manual for the 4-digit (SIC Code) industry codes. Refer to the
Numerical List of Manufactured and Mineral Products, 1992 Census of
Manufactures and Census of Mineral Industries (MC92-R-1) for the
5-digit product class and 7-digit product codes. Report revenues for
the 5-digit and 7-digit codes in the columns labeled "Product code
published.")
5(a) DOLLAR REVENUES BY INDUSTRY
1992 TOTAL
4-DIGIT INDUSTRY CODE DESCRIPTION DOLLAR REVENUES
($000's)
4911 Electric services $ 80,159*
- ---------------
* This figure represents Conectiv's 1992 revenues attributable to the Peach
Bottom Station assets which is the subject of this filing.
9
<PAGE>
- --------------------------------------------------------------------------------
NAME OF PERSON FILING NOTIFICATION DATE
Conectiv December 10, 1999
- --------------------------------------------------------------------------------
ITEM 5(b)(i) DOLLAR REVENUES BY MANUFACTURED PRODUCTS
1992 TOTAL
7-DIGIT INDUSTRY CODE DESCRIPTION DOLLAR REVENUES
($000's)
N/A
10
<PAGE>
- --------------------------------------------------------------------------------
NAME OF PERSON FILING NOTIFICATION DATE
Conectiv December 10, 1999
- --------------------------------------------------------------------------------
ITEM 5(b)(ii) PRODUCTS ADDED OR DELETED
YEAR
[ ]
DESCRIPTION (7-DIGIT PRODUCT CODE) TOTAL DOLLAR REVENUES
($000's)
N/A
11
<PAGE>
- --------------------------------------------------------------------------------
NAME OF PERSON FILING NOTIFICATION DATE
Conectiv December 10, 1999
- --------------------------------------------------------------------------------
ITEM 5(b)(iii) DOLLAR REVENUES BY MANUFACTURED PRODUCT CLASS
YEAR
[ ]
5-DIGIT PRODUCT DESCRIPTION TOTAL DOLLAR REVENUES
CLASS CODE ($000's)
N/A
12
<PAGE>
YEAR
4-DIGIT [1998]
INDUSTRY DESCRIPTION TOTAL DOLLAR REVENUES
CLASS CODE ($000's)
4911 Electric services. $ 66,772**
- ---------------
** This figure represents Conectiv's 1998 revenues attributable to the Peach
Bottom Station assets which are the subject of this filing.
13
<PAGE>
- --------------------------------------------------------------------------------
NAME OF PERSON FILING NOTIFICATION DATE
Conectiv December 10, 1999
- --------------------------------------------------------------------------------
5(d) COMPLETE ONLY IF ACQUISITION IS THE FORMATION OF A JOINT VENTURE OR
OTHER CORPORATION
- --------------------------------------------------------------------------------
5(d)(i) NAME AND ADDRESS OF THE JOINT VENTURE OR OTHER CORPORATION
N/A
- --------------------------------------------------------------------------------
5(d)(ii)
(A) CONTRIBUTIONS THAT EACH PERSON FORMING THE JOINT VENTURE OR OTHER
CORPORATION HAS AGREED TO MAKE
N/A
- --------------------------------------------------------------------------------
(B) DESCRIPTION OF ANY CONTRACTS OR AGREEMENTS
N/A
- --------------------------------------------------------------------------------
(C) DESCRIPTION OF ANY CREDIT GUARANTEES OR OBLIGATIONS
N/A
- --------------------------------------------------------------------------------
(D) DESCRIPTION OF CONSIDERATION WHICH EACH PERSON FORMING THE JOINT
VENTURE OR OTHER CORPORATION WILL RECEIVE
N/A
- --------------------------------------------------------------------------------
5(d(iii) DESCRIPTION OF THE BUSINESS IN WHICH THE JOINT VENTURE OR OTHER
CORPORATION WILL ENGAGE
N/A
- --------------------------------------------------------------------------------
5(d)(iv) SOURCE OF DOLLAR REVENUES BY 4-DIGIT SIC CODE (non-manufacturing) AND
BY 5-DIGIT PRODUCT CLASS (manufacturing)
N/A
14
<PAGE>
- --------------------------------------------------------------------------------
NAME OF PERSON FILING NOTIFICATION DATE
Conectiv December 10, 1999
- --------------------------------------------------------------------------------
ITEM 6
6(a) ENTITIES WITHIN PERSON FILING NOTIFICATION
N/A
- --------------------------------------------------------------------------------
6(b) SHAREHOLDERS OF PERSON FILING NOTIFICATION
N/A
15
<PAGE>
- --------------------------------------------------------------------------------
NAME OF PERSON FILING NOTIFICATION DATE
Conectiv December 10, 1999
- --------------------------------------------------------------------------------
6(c) HOLDINGS OF PERSON FILING NOTIFICATION
N/A
- --------------------------------------------------------------------------------
ITEM 7 DOLLAR REVENUES
7(a) 4-DIGIT SIC CODE AND DESCRIPTION.
4911 Electric services.
- --------------------------------------------------------------------------------
7(b) NAME OF EACH PERSON WHICH ALSO DERIVED DOLLAR REVENUES
PECO Energy Company
16
<PAGE>
- --------------------------------------------------------------------------------
NAME OF PERSON FILING NOTIFICATION DATE
Conectiv December 10, 1999
- --------------------------------------------------------------------------------
7(c) GEOGRAPHIC MARKET INFORMATION
7(c)(i): N/A
7(c)(ii): Delaware - Kent County
New Castle County
Sussex County
Maryland - Caroline County
Cecil County
Dorchester County
Harford County
Kent County
Queen Anne's County
Somerset County
Talbot County
Wicomico County
Worester County
New Jersey - Atlantic County
Burlington County
Camden County
Cape May County
Cumberland County
Gloucester County
Ocean County
Salem County
Pennsylvania- York County
Virginia - Accomack County
Northampton County
7(c)(iii): N/A
7(c)(iv): N/A
7(c)(v): N/A
7(c)(vi): N/A
17
<PAGE>
- --------------------------------------------------------------------------------
NAME OF PERSON FILING NOTIFICATION DATE
Conectiv December 10, 1999
- --------------------------------------------------------------------------------
ITEM 8 VENDOR-VENDEE RELATIONSHIP
[x] NO [ ] YES (if yes and you are the vendee, complete the following)
PRODUCT PURCHASES VENDOR DOLLAR AMOUNT
- --------------------------------------------------------------------------------
ITEM 9 PRIOR ACQUISITIONS (to be completed by acquiring person only)
N/A
18
<PAGE>
- --------------------------------------------------------------------------------
NAME OF PERSON FILING NOTIFICATION DATE
Conectiv December 10, 1999
- --------------------------------------------------------------------------------
ITEM 10 IDENTIFICATION OF PERSON TO CONTACT REGARDING THIS REPORT
- --------------------------------------------------------------------------------
10(a) NAME OF CONTACT PERSON TITLE OF CONTACT PERSON
Brian C. Mohr Counsel
FIRM NAME AND BUSINESS ADDRESS BUSINESS TELEPHONE NUMBER
Skadden, Arps, Slate, Meagher & (202) 371-7774
Flom LLP
1440 New York Avenue, NW
Washington, DC 20005
- --------------------------------------------------------------------------------
10(b) IDENTIFICATION OF AN INDIVIDUAL LOCATED IN THE UNITED STATES
DESIGNATED FOR THE LIMITED PURPOSE OF RECEIVING NOTICE OF ISSUE OF A
REQUEST FOR ADDITIONAL INFORMATION OR DOCUMENTS. (See section
803.20.(b)(2)(iii))
- --------------------------------------------------------------------------------
NAME TITLE
N/A
ADDRESS BUSINESS TELEPHONE NUMBER
- --------------------------------------------------------------------------------
CERTIFICATION
- --------------------------------------------------------------------------------
This NOTIFICATION AND REPORT FORM, together with any and all appendices and
attachments thereto, was prepared and assembled under my supervision in
accordance with instructions issued by the Federal Trade Commission. Subject to
the recognition that, where so indicated, reasonable estimates have been made
because books and records do not provide the required data, the information is,
to the best of my knowledge, true, correct, and complete in accordance with the
statute and rules.
- --------------------------------------------------------------------------------
NAME (please print or type) TITLE
Thomas S. Shaw Executive Vice President, Conectiv
- --------------------------------------------------------------------------------
SIGNATURE DATE
/s/ Thomas S. Shaw December 10, 1999
- --------------------------------------------------------------------------------
Subscribed and sworn to before me at the
County of New Castle, State of Delaware
this 10th day of December, 1999
Signature /s/ Nina J. Hertz
-----------------
My Commission expires: ______________
[SEAL]
19
<PAGE>
<TABLE>
<CAPTION>
Exhibit FS-1 DPL
DELMARVA POWER & LIGHT COMPANY
PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
TWELVE MONTHS ENDED SEPTEMBER 30, 1999
(Dollars in Thousands)
(Unaudited)
Excluding Write-
Down of Peach Write-down of
Bottom Due To Peach Bottom Due Actual
Deregulation To Deregulation Results
-----------------------------------------------------
OPERATING REVENUES
<S> <C> <C> <C>
Electric $ 1,339,921 $ 1,339,921
Gas 831,776 831,776
Other services 30,531 30,531
-----------------------------------------------------
2,202,228 - 2,202,228
-----------------------------------------------------
OPERATING EXPENSES
Electric fuel and purchased power 609,271 609,271
Gas purchased 779,831 779,831
Other services' cost of sales 25,374 25,374
Purchased electric capacity 45,727 45,727
Special charges 11,134 11,134
Operation and maintenance 258,697 258,697
Depreciation 129,769 129,769
Taxes other than income taxes 41,391 41,391
-----------------------------------------------------
1,901,194 - 1,901,194
-----------------------------------------------------
OPERATING INCOME 301,034 - 301,034
-----------------------------------------------------
OTHER INCOME
Allowance for equity funds used during construction 1,746 1,746
Other income 6,376 6,376
-----------------------------------------------------
8,122 - 8,122
-----------------------------------------------------
INTEREST EXPENSE
Interest charges 80,075 80,075
Allowance for borrowed funds used during
construction and capitalized interest (1,582) (1,582)
-----------------------------------------------------
78,493 - 78,493
-----------------------------------------------------
PREFERRED STOCK DIVIDEND
REQUIREMENTS OF SUBSIDIARIES 5,688 5,688
-----------------------------------------------------
INCOME BEFORE INCOME TAXES AND
EXTRAORDINARY ITEM 224,975 - 224,975
INCOME TAXES, EXCLUDING INCOME TAXES
APPLICABLE TO EXTRAORDINARY ITEM 88,426 88,426
-----------------------------------------------------
INCOME BEFORE EXTRAORDINARY ITEM 136,549 - 136,549
EXTRAORDINARY ITEM (Net of $147,780 of income taxes) (203,153) (50,469) (253,622)
-----------------------------------------------------
NET INCOME (LOSS) (66,604) (50,469) (117,073)
DIVIDENDS ON PREFERRED STOCK 4,344 4,344
-----------------------------------------------------
EARNINGS APPLICABLE TO COMMON STOCK $ (70,948) $ (50,469) $ (121,417)
=====================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit FS-2 DPL
DELMARVA POWER & LIGHT COMPANY
PRO FORMA CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)
As of September 30, 1999
----------------------------------------------------------------------------------
Balances Before
Write-Down of Write-down of Pro Forma
Peach Bottom Due Peach Bottom Due Effect of Sale Pro Forma
To Deregulation To Deregulation Actual Balances of Peach Bottom Balances
----------------------------------------------------------------------------------
ASSETS
<S> <C> <C> <C> <C> <C>
Current Assets
Cash and cash equivalents $ 8,649 $ 8,649 $ 16,929 $ 25,578
Accounts receivable 304,739 304,739 304,739
Allowance for Doubtful Accounts (6,309) (6,309) (6,309)
Accounts receivable from associated companies - - -
Inventories, at average cost
Fuel (coal, oil and gas) 42,515 42,515 42,515
Materials and supplies 33,792 (1,989) 31,803 31,803
Prepayments 12,800 12,800 12,800
Deferred energy costs 22,724 22,724 22,724
Deferred income taxes, net 18,252 18,252 18,252
----------------------------------------------------------------------------------
437,162 (1,989) 435,173 16,929 452,102
----------------------------------------------------------------------------------
Investments
Funds held by trustee 74,605 74,605 (32,913) 41,692
Notes receivable 653 653 653
Other investments 1,007 1,007 1,007
----------------------------------------------------------------------------------
76,265 - 76,265 (32,913) 43,352
----------------------------------------------------------------------------------
Property, Plant and Equipment
Electric generation 1,446,696 (139,488) 1,307,208 (4,108) 1,303,100
Electric transmission and distribution 1,380,081 1,380,081 (648) 1,379,433
Gas transmission and distribution 255,990 255,990 255,990
Other electric and gas facilities 190,611 190,611 190,611
Other property, plant, and equipment 5,468 5,468 5,468
----------------------------------------------------------------------------------
3,278,846 (139,488) 3,139,358 (4,756) 3,134,602
Less: Accumulated depreciation 1,475,698 (66,374) 1,409,324 (33,308) 1,376,016
----------------------------------------------------------------------------------
Net plant in service 1,803,148 (73,114) 1,730,034 28,552 1,758,586
Construction work-in-progress 97,816 (7,710) 90,106 (846) 89,260
Leased nuclear fuel, at amortization cost 24,754 24,754 (11,722) 13,032
Goodwill, net 70,342 70,342 70,342
----------------------------------------------------------------------------------
1,996,060 (80,824) 1,915,236 15,984 1,931,220
----------------------------------------------------------------------------------
Deferred Charges and Other Assets
Prepaid employee benefits costs 121,398 121,398 121,398
Deferred recoverable income taxes 69,033 69,033 69,033
Recoverable stranded costs 44,333 44,333 44,333
Unamortized debt expense 11,262 11,262 11,262
Deferred debt refinancing costs 8,050 8,050 8,050
Other 15,164 15,164 15,164
----------------------------------------------------------------------------------
269,240 - 269,240 269,240
----------------------------------------------------------------------------------
Total Assets $ 2,778,727 $ (82,813) $ 2,695,914 $ - $ 2,695,914
==================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit FS-2 DPL
DELMARVA POWER & LIGHT COMPANY
PRO FORMA CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)
As of September 30, 1999
----------------------------------------------------------------------------------
Balances Before
Write-Down of Write-down of Pro Forma
Peach Bottom Due Peach Bottom Due Effect of Sale Pro Forma
To Deregulation To Deregulation Actual Balances of Peach Bottom Balances
----------------------------------------------------------------------------------
CAPITALIZATION AND LIABILITIES
<S> <C> <C> <C> <C> <C>
Current Liabilities $ - $ - $ -
Short-term debt 1,545 1,545 1,545
Long-term debt due within one year 104,830 104,830 104,830
Variable rate demand bonds 174,391 174,391 174,391
Accounts payable 39,614 39,614 (16,251) 39,614
Taxes accrued 25,914 25,914 25,914
Interest accrued 7,360 7,360 7,360
Dividends payable 12,491 12,491 12,491
Current capital lease obligation - - -
Deferred energy costs 24,848 24,848 24,848
Above-market purchased energy contracts
Excess Merrill Creek Reservoir capacity and 20,666 20,666 20,666
other electric restructuring liabilities 24,688 24,688 24,688
----------------------------------------------------------------------------------
Other 436,347 - 436,347 (16,251) 420,096
----------------------------------------------------------------------------------
Deferred Credits and Other Liabilities
Deferred income taxes, net 367,966 (36,021) 331,945 16,251 348,196
Deferred investment tax credits 35,463 35,463 35,463
Long-term capital lease obligation 13,362 13,362 13,362
Above-market purchased energy contracts 57,002 57,002 57,002
Excess Merrill Creek Reservoir capacity and -
other electric restructuring liabilities 43,698 3,677 47,375 47,375
Other 25,454 25,454 25,454
----------------------------------------------------------------------------------
542,945 (32,344) 510,601 16,251 526,852
----------------------------------------------------------------------------------
Capitalization
Common stock, $2.25 par value; shares
authorized: 1,000,000; shares
outstanding: 1,000 2 2 2
Additional paid-in capital 528,893 528,893 528,893
Retained earnings 182,571 (50,469) 132,102 132,102
----------------------------------------------------------------------------------
Total common stockholder's equity 711,466 (50,469) 660,997 - 660,997
Cumulative preferred stock 89,703 89,703 89,703
DPL obligated mandatorily redeemable
preferred securities of subsidiary trust
holding solely DPL debentures 70,000 70,000 70,000
Long-term debt 928,266 928,266 928,266
----------------------------------------------------------------------------------
1,799,435 (50,469) $ 1,748,966 - 1,748,966
----------------------------------------------------------------------------------
Total Capitalization and Liabilities $ 2,778,727 $ (82,813) $ 2,695,914 $ - $ 2,695,914
==================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit FS-3 ACE
ATLANTIC CITY ELECTRIC COMPANY
PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
TWELVE MONTHS ENDED SEPTEMBER 30, 1999
(Dollars in Thousands)
(Unaudited)
Excluding Write-
Down of Peach Write-down of
Bottom Due To Peach Bottom Due Actual
Deregulation To Deregulation Results
-----------------------------------------------
<S> <C> <C> <C>
OPERATING REVENUES $ 1,067,622 $ 1,067,622
OPERATING EXPENSES
Electric fuel and purchased power 315,777 315,777
Other services' cost of sales 5,465 5,465
Purchased electric capacity 172,285 172,285
Special charges 42,260 42,260
Operation and maintenance 225,440 225,440
Depreciation 114,626 114,626
Taxes other than income taxes 39,566 39,566
-----------------------------------------------
915,419 - 915,419
-----------------------------------------------
OPERATING INCOME 152,203 - 152,203
-----------------------------------------------
OTHER INCOME
Allowance for equity funds used during construction 636 636
Other income 9,889 9,889
-----------------------------------------------
10,525 - 10,525
-----------------------------------------------
INTEREST EXPENSE
Interest charges 60,978 60,978
Allowance for borrowed funds used during
construction and capitalized interest (666) (666)
-----------------------------------------------
60,312 - 60,312
-----------------------------------------------
PREFERRED STOCK DIVIDEND
REQUIREMENTS OF SUBSIDIARIES 7,449 7,449
-----------------------------------------------
INCOME BEFORE INCOME TAXES AND
EXTRAORDINARY ITEM 94,967 - 94,967
INCOME TAXES, EXCLUDING INCOME TAXES
APPLICABLE TO EXTRAORDINARY ITEM 38,895 38,895
-----------------------------------------------
INCOME BEFORE EXTRAORDINARY ITEM 56,072 - 56,072
EXTRAORDINARY ITEM (Net of $12,413 of income taxes) (17,483) (17,483)
-----------------------------------------------
NET INCOME (LOSS) 38,589 - 38,589
DIVIDENDS ON PREFERRED STOCK 2,172 2,172
GAIN ON PREFERRED STOCK REDEMPTION 2,545 2,545
-----------------------------------------------
EARNINGS APPLICABLE TO COMMON STOCK $ 38,962 $ - $ 38,962
===============================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit FS-4 ACE
ATLANTIC CITY ELECTRIC COMPANY
PRO FORMA CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)
As of September 30, 1999
----------------------------------------------------------------------------------
Balances Before
Write-Down of Write-down of Pro Forma
Peach Bottom Due Peach Bottom Due Effect of Sale Pro Forma
To Deregulation To Deregulation Actual Balances of Peach Bottom Balances
----------------------------------------------------------------------------------
ASSETS
<S> <C> <C> <C> <C> <C>
Current Assets
Cash and cash equivalents $ 114,390 $ 114,390 $ 17,132 $ 131,522
Accounts receivable 161,442 161,442 161,442
Allowance for Doubtful Accounts (3,500) (3,500) (3,500)
Inventories, at average cost
Fuel (coal and oil) 21,545 21,545 21,545
Materials and supplies 13,123 (1,989) 11,134 11,134
Deferred income taxes, net 26,008 26,008 26,008
Prepaid New Jersey sales and excise taxes 17,134 17,134 17,134
Other prepayments 1,395 1,395 1,395
----------------------------------------------------------------------------------
351,537 (1,989) 349,548 17,132 366,680
----------------------------------------------------------------------------------
Investments
Funds held by trustee 105,286 105,286 (52,015) 53,271
Other investments 103 103 103
----------------------------------------------------------------------------------
105,389 - 105,389 (52,015) 53,374
----------------------------------------------------------------------------------
Property, Plant and Equipment
Electric generation 603,253 (134,698) 468,555 (3,964) 464,591
Electric transmission and distribution 1,218,530 1,218,530 (667) 1,217,863
Other electric facilities 129,067 129,067 129,067
Other property, plant, and equipment 8,772 8,772 8,772
----------------------------------------------------------------------------------
1,959,622 (134,698) 1,824,924 (4,631) 1,820,293
Less: Accumulated depreciation 746,800 (65,243) 681,557 (52,671) 628,886
----------------------------------------------------------------------------------
Net plant in service 1,212,822 (69,455) 1,143,367 48,040 1,191,407
Construction work-in-progress 59,036 (11,243) 47,793 (837) 46,956
Leased nuclear fuel, at amortization cost 30,539 30,539 (12,320) 18,219
----------------------------------------------------------------------------------
1,302,397 (80,698) 1,221,699 34,883 1,256,582
----------------------------------------------------------------------------------
Deferred Charges and Other Assets
Recoverable stranded costs 562,801 96,535 659,336 659,336
Unrecovered purchased power costs 33,965 33,965 33,965
Deferred recoverable income taxes 21,867 21,867 21,867
Unrecovered New Jersey state excise taxes 28,424 28,424 28,424
Deferred debt refinancing costs 13,621 13,621 13,621
Deferred other postretirement benefit costs 33,104 33,104 33,104
Unamortized debt expense 13,893 13,893 13,893
Other 18,580 18,580 18,580
----------------------------------------------------------------------------------
726,255 96,535 822,790 - 822,790
----------------------------------------------------------------------------------
Total Assets $ 2,485,578 $ 13,848 $ 2,499,426 - $ 2,499,426
==================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit FS-4 ACE
ATLANTIC CITY ELECTRIC COMPANY
PRO FORMA CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)
As of September 30, 1999
-------------------------------------------------------------------------
Balances Before
Write-Down of Write-down of Pro Forma Effect
Peach Bottom Due each Bottom Due Actual of Sale of Pro Forma
To Deregulation To Deregulation Balances Peach Bottom Balances
-------------------------------------------------------------------------
CAPITALIZATION AND LIABILITIES
Current Liabilities
<S> <C> <C> <C>
Short-term debt $ 30,000 $ - $ 30,000 $ 30,000
Long-term debt due within one year 46,075 46,075 46,075
Variable rate demand bonds 22,600 22,600 22,600
Accounts payable 62,764 62,764 62,764
Taxes accrued 77,796 77,796 (16,347) 61,449
Interest accrued 13,377 13,377 13,377
Dividends payable 18,520 18,520 18,520
Current capital lease obligation 15,480 15,480 15,480
Deferred energy costs 53,422 53,422 53,422
Other 43,483 43,483 43,483
-------------------------------------------------------------------------
383,517 - 383,517 (16,347) 367,170
-------------------------------------------------------------------------
Deferred Credits and Other Liabilities
Deferred income taxes, net 321,294 10,516 331,810 16,347 348,157
Regulatory liability for New Jersey income tax benefit 40,831 40,831 40,831
Other electric restructuring liabilities 13,621 3,332 16,953 16,953
Deferred investment tax credits 40,242 40,242 40,242
Long-term capital lease obligation 15,059 15,059 15,059
Pension benefit obligation 14,440 14,440 14,440
Other postretirement benefit obligation 45,960 45,960 45,960
Other 21,141 21,141 21,141
-------------------------------------------------------------------------
512,588 13,848 526,436 16,347 542,783
-------------------------------------------------------------------------
Capitalization
Common stock, $3 par value; shares authorized:
25,000,000 ; shares outstanding: 18,320,937 54,963 54,963 54,963
Additional paid-in capital 493,007 493,007 493,007
Retained earnings 189,945 189,945 189,945
-------------------------------------------------------------------------
Total common stockholder's equity 737,915 - 737,915 - 737,915
Preferred stock subject to mandatory redemption 23,950 23,950 23,950
Preferred stock not subject to mandatory redemption 6,231 6,231 6,231
ACE obligated mandatorily redeemable preferred
securities of subsidiary trusts holding solely ACE
debentures 95,000 95,000 95,000
Long-term debt 726,377 726,377 726,377
-------------------------------------------------------------------------
1,589,473 - 1,589,473 - 1,589,473
-------------------------------------------------------------------------
0
Total Capitalization and Liabilities $ 2,485,578 $ 13,848 $ 2,499,426 $ - $ 2,499,426
========================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit FS-5 CON
CONECTIV
PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
TWELVE MONTHS ENDED SEPTEMBER 30, 1999
(Dollars in Thousands, Except Per Share Amounts)
(Unaudited)
(Continued from the previous page)
Excluding Write-
Down of Peach Write-down of
Bottom Due To Peach Bottom Due Actual
Deregulation To Deregulation Results
----------------------------------------------
EARNINGS (LOSS) APPLICABLE TO:
Common stock
<S> <C> <C> <C>
Income before extraordinary item $ 114,056 $ 114,056
Extraordinary item, net of income taxes (215,584) (50,469) (266,053)
Total $ (101,528) $ (50,469) $(151,997)
Class A common stock
Income before extraordinary item $ 10,404 $ 10,404
Extraordinary item, net of income taxes (5,053) (5,053)
Total $ 5,351 $ - $ 5,351
Common Stock
Average Shares Outstanding (000)
Common stock 96,739 96,739
Class A common stock 6,316 6,316
Earnings (Loss) per average share - - basic and diluted
Common stock
Before extraordinary item $ 1.18 $ 1.18
Extraordinary item (2.23) (0.52) (2.75)
Total $ (1.05) $ (0.52) $ (1.57)
Class A common stock
Before extraordinary item $ 1.65 $ 1.65
Extraordinary item (0.80) (0.80)
Total $ 0.85 $ 0.85
Dividends declared per share
Common stock $ 1.21 $ 1.21
Class A common stock $ 3.20 $ 3.20
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit FS-6 CON
CONECTIV
PRO FORMA CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)
As of September 30, 1999
-------------------------------------------------------------------------
Balances Before
Write-Down of Write-down of Pro Forma Effect
Peach Bottom Due Peach Bottom Due Actual of Sale of Pro Forma
To Deregulation To Deregulation Balances Peach Bottom Balances
-------------------------------------------------------------------------
CAPITALIZATION AND LIABILITIES
CURRENT LIABILITIES
<S> <C> <C> <C>
Short-term debt $ 623,532 $ 623,532 $ 623,532
Long-term debt due within one year 67,019 67,019 67,019
Variable rate demand bonds 158,430 158,430 158,430
Accounts payable 256,368 256,368 256,368
Taxes accrued 97,707 97,707 (32,598) 65,109
Interest accrued 46,245 46,245 46,245
Dividends payable 28,258 28,258 28,258
Deferred energy costs 53,422 53,422 53,422
Current capital lease obligation 28,033 28,033 28,033
Above-market purchased energy contracts 25,885 25,885 25,885
Excess Merrill Creek Reservoir capacity and other
electric restructuring liabilities 27,773 27,773 27,773
Other 87,229 87,229 87,229
-------------------------------------------------------------------------
1,499,901 - 1,499,901 (32,598) 1,467,303
-------------------------------------------------------------------------
DEFERRED CREDITS AND OTHER LIABILITIES
Other postretirement benefits obligation 97,522 97,522 97,522
Deferred income taxes, net 728,659 (25,505) 703,154 32,598 735,752
Deferred investment tax credits 75,705 75,705 75,705
Regulatory liability for New Jersey income tax benefit 40,831 40,831 40,831
Long-term capital lease obligation 28,452 28,452 28,452
Above-market purchased energy contracts 57,222 57,222 57,222
Excess Merrill Creek Reservoir capacity and other
electric restructuring liabilities 57,099 7,009 64,108 64,108
Other 54,391 54,391 54,391
-------------------------------------------------------------------------
1,139,881 (18,496) 1,121,385 32,598 1,153,983
-------------------------------------------------------------------------
CAPITALIZATION
Common stock: $0.01 par value;
150,000,000 shares authorized; shares outstanding--
87,742,313 in 1999, and 100,516,768 in 1998 1,020 1,020 1,020
Class A common stock, $0.01 par value;
10,000,000 shares authorized; shares outstanding--
5,742,604 in 1999, 6,560,612 in 1998 57 57 57
Additional paid-in capital--common stock 1,473,135 1,473,135 1,473,135
Additional paid-in capital--Class A common stock 93,742 93,742 93,742
Retained earnings 64,858 (50,469) 14,389 14,389
-------------------------------------------------------------------------
1,632,812 (50,469) 1,582,343 - 1,582,343
Treasury shares, at cost:
14,242,773 shares in 1999; 185,030 shares in 1998 (362,365) (362,365) (362,365)
Unearned compensation (1,868) (1,868) (1,868)
-------------------------------------------------------------------------
Total common stockholders' equity 1,268,579 (50,469) 1,218,110 - 1,218,110
Preferred stock of subsidaries:
Not subject to mandatory redemption 95,933 95,933 95,933
Subject to mandatory redemption 188,950 188,950 188,950
Long-term debt 1,907,866 1,907,866 1,907,866
-------------------------------------------------------------------------
3,461,328 (50,469) 3,410,859 - 3,410,859
-------------------------------------------------------------------------
TOTAL CAPITALIZATION AND LIABILITIES $ 6,101,110 $ (68,965) $ 6,032,145 $ - $ 6,032,145
=========================================================================
</TABLE>
<PAGE>
Exhibit FS-8
NOTES TO FINANCIAL STATEMENTS
I. Pro Forma Consolidated Statements of Income for Conectiv, Inc, (Exhibit FS-6
CON) Delmarva Power & Light Company (Exhibit FS-1 DPL), and Atlantic City
Electric Company (Exhibit FS-3 ACE). The three (3) columns on each proforma
statement of income represent the following:
Column 1: The results of operations for the twelve months ended September
30, 1999 excluding the write down of Peach Bottom in the third quarter of
1999 which resulted from discontinuing the application of Statement of
Financial Accounting Standards (SFAS) No. 71, "Accounting for the Effects
of Certain Types of Regulation," to Delmarva Power and Light Company's
(DPL) and Atlantic City Electric Company's (ACE) electricity supply
businesses because of deregulation.
Column 2: The effect of the write-down of Peach Bottom in the third quarter
of 1999 due to discontinuance of SFAS No. 71 to DPL's and ACE's electricity
supply businesses because of deregulation.
Column 3: The actual results of operations for the twelve months ended
September 30, 1999.
Note: Since Peach Bottom was written down to its estimated fair market
value (net of estimated selling costs) in the third quarter of 1999, the
sale of Peach Bottom is not expected to result in a significant gain or
loss. Accordingly, no pro forma effects from the sale of Peach Bottom are
included on the Pro Forma Consolidated Statements of Income.
II. Pro Forma Consolidated Balance Sheets for Conectiv, Inc, (Exhibit FS-5 CON)
Delmarva Power & Light Company (Exhibit FS-2 DPL), and Atlantic City Electric
Company (Exhibit FS-4 ACE). The five(5) columns on each proforma balance sheet
represent the following:
Column 1: The consolidated balances as of September 30, 1999 before the
write-down of Peach Bottom in the third quarter of 1999 which resulted
<PAGE>
from discontinuing the application of SFAS No. 71 to DPL's and ACE's
electricity supply businesses because of deregulation.
Column 2: The effect of the write-down of Peach Bottom in the third quarter
of 1999 due to discontinuance of SFAS No. 71 to DPL's and ACE's electricity
supply businesses because of deregulation.
Column 3: The actual Consolidated Balance Sheet as of September 30, 1999.
Column 4: The pro forma effects of the sale of Peach Bottom.
Column 5: The Consolidated Balance Sheet as of September 30, 1999 on a pro
forma basis to include the expected effects of the sale of Peach Bottom.
2
