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File No. 70-______
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM U-1
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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 company filing this statement and addresses
of principal executive offices)
------------------------------------------------------------------
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)
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I. DESCRIPTION OF THE PROPOSED TRANSACTION...............................1
A. Introduction.................................................1
B. Description of the Parties ..................................2
C. Description of the Peach Bottom Assets.......................3
D. Background on the Transaction................................3
E. Benefits of the Transaction..................................4
II. FEES, COMMISSIONS AND EXPENSES........................................5
III. APPLICABLE STATUTORY PROVISIONS.......................................6
IV. OTHER REGULATORY APPROVAL.............................................6
V. PROCEDURE.............................................................6
VI. EXHIBITS AND FINANCIAL STATEMENTS.....................................7
A. EXHIBITS.....................................................7
B. FINANCIAL STATEMENTS.........................................7
VII. INFORMATION AS TO ENVIRONMENTAL EFFECT................................8
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I. DESCRIPTION OF THE PROPOSED TRANSACTION
A. Introduction
This Form U-1 Application/Declaration
("Application/Declaration") seeks approvals pursuant to Section 12(d), and Rule
44 thereunder, of the Public Utility Holding Company Act of 1935, as amended
(the "Act"), 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.1 It is
estimated that the total proceeds to be shared by ACE and DPL will be
approximately $25.1 million. In addition, PECO will assume ACE and DPL's
liabilities for decommissioning 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 in the first quarter of 2000,
and respectfully request Commission action by February 29, 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 owned nuclear plants. 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. In addition, PSEG Nuclear
will be buying the additional minority ownership interests in other nuclear
plants. In each of the PSEG Nuclear transactions, however, the buyer will be 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.
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1 The Nuclear Fuel Supplies that would qualify as Utility Assets as of the
anticipated closing date would be approximately $20 million.
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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 Delmarva'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.2 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%.
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. 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.
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2 In addition, because of their ownership interest in Peach Bottom (and other
plants located in Pennsylvania), both ACE and DPL are subject to minimal
regulation by the PaPUC. The PaPUC does not regulate rates for either company.
2
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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 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.
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 as of October 1, 1999. Maryland is scheduled to begin
retail choice on July 1, 2000. Virginia is scheduled to begin phasing in retail
choice on January 1, 2002.
In light of these state utility restructuring initiatives, and
the evolving competitive marketplace, Conectiv has made the strategic decision
to divest a substantial portion of its baseload generation assets, including its
partial ownership interests in several nuclear power plants. Towards this end,
ACE and DPL commenced the process of auctioning these generation assets earlier
this year. Two auctions were envisioned - one involving the fossil plants and
the other involving nuclear plants. The fossil auction is ongoing; winning
bidders have not yet been selected. This Application relates to the sale of the
nuclear plants.
ACE and DPL have relatively small minority interests in three
nuclear power plants, including Peach Bottom. The other co-owners are PECO and
PSE&G. As ACE and DPL proceeded with the nuclear auction, sending out an
offering memorandum to potential bidders on July 2, 1999, it became apparent
that the co-owners - PECO and PSE&G - represented the most logical buyers for
the interests. Because ACE and DPL are minority owners that do not operate the
plants, any prospective purchaser (other than PECO or PSE&G) necessarily would
take a relatively passive non-operating role. In contrast, the co-owners already
have an existing ownership and operating role regarding the nuclear plants.
PECO, for example, is the operator of Peach Bottom. On August 30, 1999, ACE and
DPL received an offer from the co-owners to acquire all of their respective
interests in the nuclear generation assets. In light of this, and in light of
the right of first refusal, ACE and DPL commenced arm's length negotiations with
PECO and PSE&G.3 These negotiations resulted in Purchase Agreements between ACE
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3 The ownership agreements regarding these power plants include provisions
creating rights of first refusal: if one co-owner seeks to sell its interest, it
must give the other co-owners an opportunity to match any offer received from
third parties.
3
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and PECO and between DPL and PECO. These agreements are attached hereto as
Exhibit B-1 and Exhibit B-2 respectively.
E. Benefits of the Transaction
The Transaction is the result of arm's length negotiations, is
in the public interest and should be approved. 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.
The Transaction offers substantial long-term benefits for
Conectiv, adding new financial strength and decreasing exposure to risk. As a
result, Conectiv will be well-positioned in the energy marketplace. This
increased strength will, in turn, benefit Conectiv's customers. In addition,
consistent with New Jersey state law, ACE will apply the proceeds it receives to
partially offset stranded costs charged to customers in New Jersey as a result
of settlements in state restructuring proceedings. Regarding DPL, the
Transaction should not materially 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 unregulated activities consistent with its corporate strategy.
Furthermore, in an aspect of the transaction that is
relatively unique compared to other nuclear divestitures, ACE and DPL will avoid
substantially all liability for nuclear decommissioning of Peach Bottom. By
eliminating this financial risk, along with the other risks associated with
owning a minority interest in a nuclear power plant, ACE and DPL will obtain
additional benefits that will redound to both customers and shareholders.
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 in the first quarter of 2000, and respectfully request Commission
action by February 29, 2000.
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F. Discussion of Rules 53 and 54
Rule 53 requires, among other things, that the aggregate
investment in EWGs and foreign utility companies ("FUCOs") not exceed 50 percent
of a system's consolidated retained earnings. Currently, Conectiv has one
insignificant indirect interest in an EWG in the amount of $6 million. As noted
in Post-Effective Amendment No. 7 in File No. 70-9095, it is projected that
Conectiv will no longer comply with Rule 53 in January 2000. An order has been
requested authorizing Conectiv to invest in EWGs an amount equal to 50 percent
of average retained earnings at the end of the preceding four quarterly periods,
as adjusted to include $225 million in retained earnings that were not
attributed to Conectiv under the accounting for the merger.
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. Employees of Conectiv's
domestic public utility companies will not render services, directly or
indirectly, to any EWGs or FUCOs in the Conectiv System, thereby satisfying Rule
53(a)(3).
In connection with any Form U-1 seeking approval of EWG or
FUCO financing, Conectiv will submit copies of such Form U-1 and every
certificate filed pursuant to Rule 24 to every federal, state or local regulator
having jurisdiction over the retail rates of the public utility companies in the
Conectiv System. Rule 53(a)(4) therefore 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.
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 EWG or a 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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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 $ *
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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
electrical generating assets.
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 instant Transaction is subject to approval by other
federal and state agencies. 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 reviewing an overall plan for the functional separation of
generation, transmission and distribution activities.
V. PROCEDURE
Conectiv requests that the Commission issue and publish, not
later than January 28, 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 not later than February 29, 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
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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.
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 Order (to be filed by amendment)...........................
D-2 PA State Order (to be filed by amendment)...........................
D-3 VA State Order (to be filed by amendment)...........................
D-4 FERC Order (to be filed by amendment)...............................
D-5 NRC Order (to be filed by amendment)................................
E-1 Not Applicable......................................................
F-1 Opinion of Counsel (to be filed by amendment).......................
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..............................................................
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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: January 7, 2000
Conectiv
-----------------------------
By: /s/ Philip S. Reese
Treasurer
Delmarva Power & Light Company
-----------------------------
By: /s/ Philip S. Reese
Treasurer
Atlantic City Electric Company
-----------------------------
By: /s/ Philip S. Reese
Treasurer
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(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.
<PAGE>
(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
<PAGE>
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.
<PAGE>
(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.
<PAGE>
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
<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
<PAGE>
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.
<PAGE>
(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 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.
<PAGE>
(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.
<PAGE>
(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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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.
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(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
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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
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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
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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.
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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):
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(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
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(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.
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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]
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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: _______________________________
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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
<PAGE>
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
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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
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<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:
<PAGE>
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
<PAGE>
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.
<PAGE>
(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;
<PAGE>
(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)
<PAGE>
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
<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
----------------------------------------------------------------------------------
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 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
