<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 1998
or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from __________ to __________
Commission file number 1-2301
BOSTON EDISON COMPANY
(Exact name of registrant as specified in its charter)
Massachusetts 04-1278810
- ------------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
800 Boylston Street, Boston, Massachusetts 02199
- ------------------------------------------ -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 617-424-2000
------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes x No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at May 11, 1998
- ----- ---------------------------
Common Stock, $1 par value 48,514,973 shares
<PAGE> 2
Part I - Financial Information
Item 1. Financial Statements
- -----------------------------
<TABLE>
Boston Edison Company
Consolidated Statements of Income
(Unaudited)
(in thousands, except per share amounts)
<CAPTION>
Three Months Ended March 31,
1998 1997
-------- --------
<S> <C> <C>
Operating revenues $394,555 $422,725
-------- --------
Operating expenses:
Fuel and purchased power 149,661 181,168
Operations and maintenance 94,839 99,795
Depreciation and amortization 46,039 45,523
Demand side management programs 8,067 6,990
Taxes - property and other 29,526 29,171
Income taxes 15,814 12,489
-------- --------
Total operating expenses 343,946 375,136
-------- --------
Operating income 50,609 47,589
Other expense, net (2,788) (140)
-------- --------
Operating and other income 47,821 47,449
-------- --------
Interest charges:
Long-term debt 22,907 23,399
Other 2,331 3,404
Allowance for borrowed funds
used during construction (276) (289)
-------- --------
Total interest charges 24,962 26,514
-------- --------
Net income 22,859 20,935
Preferred stock dividends 2,919 3,817
-------- --------
Earnings available for common
shareholders $ 19,940 $ 17,118
======== ========
Weighted average common shares
outstanding 48,515 48,515
====== ======
Earnings per share of common stock - basic
and diluted $0.41 $0.35
===== =====
Dividends declared per share of
common stock $0.47 $0.47
===== =====
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE> 3
<TABLE>
Boston Edison Company
Consolidated Balance Sheets
(Unaudited)
(in thousands)
<CAPTION>
March 31, December 31,
1998 1997
---------- ------------
<S> <C> <C>
Assets
- ------
Utility plant in service, at original cost $4,483,096 $4,458,638
Less: accumulated depreciation 1,755,578 1,713,079
---------- ----------
2,727,518 2,745,559
Nuclear fuel, net 62,442 67,935
Construction work in progress 31,889 40,633
---------- ----------
Net utility plant 2,821,849 2,854,127
Nuclear decommissioning trust 157,661 151,634
Equity investments 43,497 35,455
Other investments 7,442 7,107
Current assets:
Cash and cash equivalents 15,441 4,140
Accounts receivable 167,752 192,220
Accrued unbilled revenues 16,648 30,048
Fuel, materials and supplies,
at average cost 49,810 60,834
Prepaid expenses and other 27,347 31,283
---------- ----------
Total current assets 276,998 318,525
---------- ----------
Regulatory assets:
Power contracts 68,284 71,445
Income taxes, net 45,340 51,096
Deferred customer charges 28,108 0
Redemption premiums 26,033 27,019
Postretirement benefits costs 22,228 22,441
Fossil divestiture 21,248 21,248
Other 18,418 16,994
---------- ----------
Total regulatory assets 229,659 210,243
Other deferred debits 39,807 45,256
---------- ----------
Total assets $3,576,913 $3,622,347
========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE> 4
<TABLE>
Boston Edison Company
Consolidated Balance Sheets
(Unaudited)
(in thousands)
<CAPTION>
March 31, December 31,
1998 1997
---------- ------------
<S> <C> <C>
Capitalization and Liabilities
- ------------------------------
Common stock equity:
Common stock $ 744,878 $ 744,652
Retained earnings 325,783 328,802
---------- ----------
Total common stock equity 1,070,661 1,073,454
---------- ----------
Cumulative preferred stock:
Nonmandatory redeemable series 83,000 83,000
Mandatory redeemable series 78,250 78,093
---------- ----------
Total preferred stock 161,250 161,093
---------- ----------
Long-term debt 957,039 1,057,076
---------- ----------
Total capitalization 2,188,950 2,291,623
---------- ----------
Current liabilities:
Long-term debt/preferred stock
due within one year 102,267 102,667
Notes payable 199,000 137,013
Accounts payable 84,489 87,015
Accrued interest 12,239 24,289
Dividends payable 24,748 24,748
Other 146,331 128,061
---------- ----------
Total current liabilities 569,074 503,793
---------- ----------
Deferred credits:
Accumulated deferred income taxes 481,231 485,738
Accumulated deferred investment tax credits 59,530 60,736
Nuclear decommissioning liability 161,086 155,182
Power contracts 68,284 71,445
Other 48,758 53,830
---------- ----------
Total deferred credits 818,889 826,931
Commitments and contingencies __________ __________
Total capitalization and liabilities $3,576,913 $3,622,347
========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE> 5
<TABLE>
Boston Edison Company
Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
<CAPTION>
Three Months Ended March 31,
1998 1997
--------- ---------
<S> <C> <C>
Operating activities:
Net income $ 22,859 $ 20,935
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 56,263 53,067
Deferred income taxes and investment
tax credits 367 (3,650)
Allowance for borrowed funds used during
construction (276) (289)
Net changes in:
Accounts receivable and accrued
unbilled revenues 37,868 2,712
Fuel, materials and supplies 10,616 9,560
Accounts payable (2,526) (32,306)
Other current assets and liabilities 10,156 1,576
Other, net (30,425) (8,644)
--------- ---------
Net cash provided by operating activities 104,902 42,961
--------- ---------
Investing activities:
Plant expenditures (excluding AFUDC) (14,839) (31,485)
Nuclear fuel expenditures (959) 23
Investments (14,069) (5,810)
--------- ---------
Net cash used in investing activities (29,867) (37,272)
--------- ---------
Financing activities:
Issuances:
Common stock 0 144
Long-term debt 0 100,000
Long-term debt redemptions (100,000) (100,000)
Net change in notes payable 61,987 19,336
Dividends paid (25,721) (26,619)
--------- ---------
Net cash used in financing activities (63,734) (7,139)
--------- ---------
Net increase (decrease) in cash and cash
equivalents 11,301 (1,450)
Cash and cash equivalents at beginning of year 4,140 5,651
--------- ---------
Cash and cash equivalents at end of period $ 15,441 $ 4,201
========= =========
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Interest, net of amounts capitalized $ 36,084 $ 35,888
========= =========
Income taxes $ 10,233 $ 6,700
========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE> 6
Notes to Unaudited Consolidated Financial Statements
- ----------------------------------------------------
A) Basis of Presentation
---------------------
The accompanying unaudited consolidated financial statements should be read in
conjunction with the Boston Edison Company (the Company) 1997 Annual Report on
Form 10-K. The financial information presented as of March 31 has been
prepared from the Company's books and records without audit by independent
accountants. Financial information as of December 31 has been derived from
the audited financial statements of the Company, but does not include all
disclosures required by generally accepted accounting principles (GAAP). In
the opinion of the Company's management, all adjustments (which are of a
normal recurring nature) necessary for a fair presentation of the financial
information for the periods indicated have been included. Certain
reclassifications have been made to the prior year data to conform with the
current presentation.
As a rate-regulated company Boston Edison has been subject to Statement of
Financial Accounting Standards No. 71, Accounting for the Effects of Certain
Types of Regulation (SFAS 71), under GAAP. The application of SFAS 71 results
in differences in the timing of recognition of certain expenses from that of
other businesses and industries. As a result of the Massachusetts electric
industry restructuring legislation enacted in November 1997 and the
Massachusetts Department of Telecommunications and Energy (DTE) order
regarding the Company's related settlement agreement, as of December 31, 1997,
the Company is no longer applying the provisions of SFAS 71 to its generation
business. Under the Company's restructuring settlement agreement,
approximately 75% of the net assets of Pilgrim Nuclear Power Station are
recoverable through the non-bypassable transition charge of the Company's
distribution business which continues to be subject to rate-regulation. The
remaining 25% is collected under Pilgrim's wholesale life of the unit
contracts. Accounting authoritative bodies, including the Securities and
Exchange Commission, are deliberating as to whether such assets which are
recoverable through a transition charge should continue to be classified as
plant in service or should be reclassified to a regulatory asset. In either
case, no write-off of Pilgrim net assets is expected due to the recovery
mechanism in the settlement agreement. Refer to Note C of Item 8 in the
Company's 1997 Annual Report on Form 10-K for more information on the
accounting implications of the electric utility industry restructuring and the
Company's related settlement agreement.
Under the terms of the settlement agreement, the Company recovers its
generation and purchased power costs from customers. The settlement agreement
allows the Company to defer the difference between these costs and the amounts
billed to customers with a return for future recovery. The net underrecovery
of these recovery mechanisms was $28.1 million and is reflected as deferred
customer charges on the consolidated balance sheet at March 31, 1998. At
March 31, 1998, the Company was approximately $36 million over recovered from
its fuel and purchased power clause. The Company has proposed to the DTE to
offset this against the standard offer portion of the deferral.
The preparation of financial statements in conformity with GAAP requires the
Company to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosures of contingent assets and liabilities at
<PAGE> 7
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from these
estimates.
The results of operations for the three-month periods ended March 31, 1998 and
1997 are not indicative of the results which may be expected for an entire
year. The Company's kilowatt-hour sales and revenues are typically higher in
the winter and summer than in the spring and fall as sales tend to vary with
weather conditions. Accordingly, the Company's third quarter earnings are
typically higher than the other periods of the year.
B) Nature of Operations
--------------------
Within the newly restructured electric utility industry, the Company is
focusing its operations in the transmission and distribution of energy. In
April 1998, the Company began soliciting expressions of interest for the sale
of Pilgrim Nuclear Power Station. The Company's intention to sell its nuclear
generating assets is part of its previously announced strategy to exit the
generation business. Finalization of the sale of the Company's fossil
generating assets is expected in May 1998. The Company provides "Standard
Offer" service to all customers of record as of the retail access date,
March 1, 1998. Default service is provided to customers not receiving power
from either the standard offer or a competitive supplier. The Company
delivers electricity at retail to an area of 590 square miles, including the
City of Boston and 39 surrounding cities and towns. It also supplies
electricity at wholesale for resale to other utilities and municipal electric
departments. The Company will continue to develop and implement electric
demand side management programs as well as provide funding for renewable
energy projects pursuant to the Massachusetts electric industry restructuring
legislation enacted in November 1997. In addition, the Company conducts
unregulated activities through its wholly owned subsidiary, Boston Energy
Technology Group (BETG). Refer to Note A of Item 8 in the Company's 1997
Annual Report on Form 10-K for information regarding the Company's
telecommunications and energy marketing joint ventures.
The Company received approval of its reorganization plan to form a holding
company structure from the DTE on April 17, 1998. The Holding Company, BEC
Energy, is expected to be established in May 1998 following the anticipated
final approval from the Securities and Exchange Commission. Upon completion
of the reorganization, Boston Edison will be a wholly owned subsidiary of BEC
Energy. BETG, currently a wholly owned unregulated subsidiary, will cease
being a subsidiary of Boston Edison and become a wholly owned subsidiary of
BEC Energy. The common shareholders of Boston Edison will become shareholders
of BEC Energy. The existing debt and preferred stock of Boston Edison will
remain obligations of the regulated utility business.
C) Contingencies
-------------
1. Hazardous Waste
The Company is an owner or operator of approximately 30 properties where oil
or hazardous materials were spilled or released. As such, the Company is
required to clean up these remaining properties in accordance with a timetable
developed by the Massachusetts Department of Environmental Protection. There
<PAGE> 8
are uncertainties associated with these costs due to the complexities of
cleanup technology, regulatory requirements and the particular characteristics
of the different sites. The Company continues to evaluate the cleanup costs
of these sites. The Company also faces possible liability as a potentially
responsible party in the cleanup of six multi-party hazardous waste sites in
Massachusetts and other states where it is alleged to have generated,
transported or disposed of hazardous waste at the sites. The Company is one
of many potentially responsible parties and currently expects to have only a
small percentage of the total potential liability for these sites. Through
March 31, 1998, the Company had approximately $7 million accrued related to
its cleanup liabilities. The Company is unable to fully determine a range of
reasonably possible cleanup costs in excess of the accrued amount, however
based on its assessments of the specific site circumstances, it does not
believe that it is probable that it will incur additional costs that will have
a material impact on its financial condition. However, it is reasonably
possible that additional provisions for cleanup costs that may result from a
change in estimates could have a material impact on the results of a reporting
period in the near term.
2. Connecticut Yankee Atomic Power Company
In December 1996, the Board of Directors of Connecticut Yankee Atomic Power
Company (CYAPC), which owns and operates the Connecticut Yankee nuclear
electric generating unit, unanimously voted to retire the unit. The decision
was based on an economic analysis of the costs of operating the unit compared
to the costs of closing the unit and incurring replacement power costs through
the period of its operating license. In early 1997, CYAPC filed for rate
relief at the Federal Energy Regulatory Commission (FERC) seeking to recover
certain post-operating costs, including decommissioning. Raising concerns
regarding the plant operator's prudency prior to the shut down decision, the
Connecticut Department of Public Utility Control (DPUC) has contested CYAPC's
estimate of these costs. The DPUC argues that the FERC should deny recovery
of substantial post-operating costs, including a significant amount related to
decommissioning and the return on CYAPC's undepreciated investment. Hearings
before an Administrative Law Judge have been completed. The Company, a 9.5%
equity investor in CYAPC and power purchaser, is currently unable to determine
the ultimate outcome of this proceeding or the impact on the Company.
3. Generating Unit Performance Program
The Company's generating unit performance program ceased March 1, 1998. Under
this program the recovery of incremental purchased power costs resulting from
generating unit outages prior to March 1, 1998 are subject to regulatory
review. Proceedings relative to generating unit performance remain pending
before the DTE. The Company is unable to fully determine a range of
reasonably possible disallowance costs in excess of amounts accrued, although,
based on its assessments of the information currently available, it does not
believe that it is probable that any such additional costs will have a
material impact on its financial condition. However, it is reasonably
possible that additional disallowance costs that may result from a change in
estimates could have a material impact on the results of a reporting period in
the near term.
<PAGE> 9
4. Industry Restructuring Legal Proceedings/Referendum Campaign
The DTE order approving the Company's settlement agreement has been appealed
by certain parties to the Massachusetts Supreme Judicial Court. In addition,
along with other Massachusetts investor-owned utilities, the Company has been
named as a defendant in a class action suit seeking to declare certain
provisions of the Massachusetts electric industry restructuring legislation
unconstitutional. The Company is currently unable to determine the outcome of
these proceedings or the impact on the Company.
In addition, opponents of the Massachusetts electric industry restructuring
legislation that was enacted in November 1997 have obtained sufficient
signatures to place a referendum before Massachusetts voters on the November
1998 state wide general election ballot that calls for the repeal of the
legislation. The Company, along with a broad-based group of consumer,
business and environmental interests, is opposing this effort. A court
challenge has been filed opposing the placement of the referendum on the
ballot and a decision is expected by August 1998. The Company is currently
unable to predict the eventual outcome of this referendum or the impact on the
Company.
5. Litigation
In October 1997, the DTE opened a proceeding to investigate the Company's
compliance with the 1993 order which permitted the formation of BETG and
authorized the Company to invest up to $45 million in unregulated activities.
The Company is currently unable to determine the outcome of this proceeding or
the impact on the Company.
In the normal course of its business the Company is also involved in certain
other legal matters. The Company is unable to fully determine a range of
reasonably possible legal costs in excess of amounts accrued, although, based
on the information currently available, it does not believe that it is
probable that any such additional costs will have a material impact on its
financial condition. However, it is reasonably possible that additional legal
costs that may result from a change in estimates could have a material impact
on the results of a reporting period in the near term.
D) Income Taxes
------------
The following table reconciles the statutory federal income tax rate to the
annual estimated effective income tax rate for 1998 and the actual effective
income tax rate for 1997.
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Statutory tax rate 35.0% 35.0%
State income tax, net of federal income
tax benefit 4.8 4.5
Investment tax credit amortization (2.2) (3.3)
Other (0.1) 0.1
---- ----
Effective tax rate 37.5% 36.3%
==== ====
</TABLE>
<PAGE> 10
E) Financing Activity
------------------
In March 1998, $100 million of 5.95% debentures matured.
Item 2. Management's Discussion and Analysis
- ---------------------------------------------
Results of Operations - Three Months Ended March 31, 1998 vs. Three Months
- --------------------------------------------------------------------------
Ended March 31, 1997
- --------------------
Earnings per share of common stock for the three months ended March 31, 1998
were $0.41 as compared to $0.35 for the three months ended March 31, 1997.
The increase reflects higher kilowatt-hour sales to the commercial sector
resulting from the strong economic conditions in the Boston area. Operations
and maintenance expense decreased due to lower overall spending as a result of
the Company's continuing cost control efforts. The increase in 1998 earnings
also reflects lower financing costs primarily due to a lower average short-
term debt balance and a decrease in preferred dividends due to the preferred
stock redemptions in the second quarter of 1997. These positive impacts on
earnings were partially offset by an increase in unregulated subsidiary
expenses.
Operating revenues
Operating revenues decreased 6.7% during the first quarter of 1998 as follows:
<TABLE>
<CAPTION>
(in thousands)
- ------------------------------------------------------
<S> <C>
Retail electric revenues $(28,410)
Wholesale revenues (324)
Short-term sales and other revenues 564
- ------------------------------------------------------
Decrease in operating revenues $(28,170)
======================================================
</TABLE>
The decrease in retail electric revenues is primarily due to the timing effect
of fuel and purchased power cost recovery. Prior to its cessation as of
March 1, 1998, the fuel clause charge was lower than the prior year as the
1997 charge reflected the recovery of substantial prior period
undercollections. Fuel clause revenues were offset by fuel and purchased
power expenses and, therefore, had no net effect on earnings. The decrease in
retail electric revenues also reflects the 10% retail rate reduction which
became effective for electricity usage as of the retail access date, March 1,
1998. Retail kilowatt-hour sales increased by 0.7% as the positive impact of
the strong economic conditions affecting the commercial sector was partially
offset by milder weather in the first quarter.
Operating expenses
Fuel and purchased power expenses decreased $31.5 million. The decrease
reflects lower purchased power costs due to a 24% reduction in power contract
purchases. The decrease also reflects lower Company fuel costs resulting from
lower oil prices, and the timing effect of the Company's fuel and purchased
power and standard offer cost collection mechanisms.
Operations and maintenance expense decreased approximately $5 million. The
decrease is primarily due to lower overall spending as a result of the
Company's continuing cost control efforts.
<PAGE> 11
Other expense
The increase in other expense, net is due to an increase in BETG equity losses
in 1998. The final closing for the Company's telecommunications joint venture
with RCN occurred in June 1997.
Interest charges
Interest charges on short-term debt decreased due to a lower average
outstanding short-term debt balance in 1998, offset slightly by a higher
effective interest rate in 1998.
Allowance for borrowed funds used during construction, which represents the
financing costs of construction, decreased due to a lower average construction
work in progress balance in 1998.
Preferred stock dividends
Preferred stock dividends decreased as a result of the redemption of 40,000
shares of 7.27% series cumulative preferred stock in May 1997 and 400,000
shares of 8.25% series in June 1997.
Electric Revenues
- -----------------
Effective March 1, 1998, the retail access date, the Company's electric
delivery business provides its "Standard Offer" customers service at rates
designed to give 10% savings from rates previously in effect. These customers
will realize an additional 5% average savings, after an adjustment for
inflation, by September 1, 1999. The cost of providing standard offer
service, which includes fuel and purchased power costs, is recovered from
customers on a fully reconciling basis. New retail customers in the Company's
service territory and previously existing customers that are no longer
eligible for the standard offer due to choosing a competitive supplier are on
default service. The price of default service is based on the average
competitive market price for power. Refer also to the Electric Revenues
section of Item 7 of the Company's 1997 Annual Report on Form 10-K.
As part of the Company's restructuring settlement agreement, the annual
performance adjustment charge ceased and the cost recovery mechanism for
Pilgrim Station changed effective March 1, 1998. Approximately 25% of the
operations and capital costs, including a return on investment, continues to
be collected under wholesale life of the unit contracts. Refer to the
Electric Revenues section of Item 7 of the Company's 1997 Annual Report on
Form 10-K for a description of Pilgrim's new cost recovery mechanism.
The rates of the Company's distribution business will remain unchanged,
subject to a minimum and maximum return on average common equity (ROE) from
March 1, 1998 through December 31, 2000. Refer to the Electric Revenues
section of Item 7 of the Company's 1997 Annual Report on Form 10-K for detail
regarding the minimum and maximum ROE. Under the Company's settlement
agreement, the cost of providing transmission service to distribution
customers is recovered on a fully reconciling basis.
<PAGE> 12
Liquidity
- ---------
The Company supplements internally generated funds as needed, primarily
through the issuance of short-term commercial paper and bank borrowings. The
Company has authority from the FERC to issue up to $350 million of short-term
debt. Boston Edison Company also has a $200 million revolving credit
agreement and arrangements with several banks to provide additional short-term
credit on an uncommitted and as available basis. The Company has $220 million
remaining under its approved long-term financing plan with the DTE which is
available through 1998. Proceeds from issuances under this plan are to be
used to refinance short and long-term securities and to fund capital
expenditures.
At March 31, 1998, BETG had $30 million outstanding under its revolving credit
agreement. The purpose of this line is to fund BETG's capital requirements
above Boston Edison Company's $45 million limited investment. This debt will
be refinanced upon the formation of BEC Energy.
On April 23, 1998, the Company's Board of Directors authorized the repurchase
of up to four million shares of common stock. The common stock may be
repurchased from time to time on the open market, through block or privately-
negotiated transactions, or a combination. Timing of the repurchase will
depend heavily on market conditions. The Company contemplates repurchasing
the shares after completion of the sale of its fossil generating assets to
Sithe Energies, and final regulatory approval of the Holding Company. Both
events are expected to occur in May 1998.
The Company anticipates using the after-tax proceeds from the sale of the
fossil generating assets to retire debt and preferred stock, as well as to
repurchase common stock.
Year 2000 Computer Issue
- ------------------------
The Company has developed a plan to address the year 2000 issue that includes
modification of certain applications and replacement of systems that are not
year 2000 compliant. The cost associated with modification of existing
applications will be expensed as incurred. In addition, the Company has made
a decision to use this opportunity to upgrade some of its less efficient
centralized business systems. Replacement costs associated with these systems
will be capitalized and amortized over future periods. The Company
anticipates completion of the year 2000 project in the third quarter of 1999.
The Accounting Standards Executive Committee of the American Institute of
Certified Public Accountants issued Statement of Position 98-1, Accounting for
the Costs of Computer Software Developed or Obtained for Internal Use (SOP
98-1) in March 1998. SOP 98-1, effective in 1999, provides specific guidance
on whether to capitalize or expense costs within its scope. The Company does
not expect this SOP to have a material impact on its financial position or
results of operations.
<PAGE> 13
Other Matters
- -------------
Safe Harbor Cautionary Statement
The Company occasionally makes forward-looking statements such as forecasts
and projections of expected future performance or statements of its plans and
objectives. These forward-looking statements may be contained in filings with
the Securities and Exchange Commission, press releases and oral statements.
Actual results could potentially differ materially from these statements.
Therefore, no assurances can be given that the outcomes stated in such
forward-looking statements and estimates will be achieved. Refer also to the
safe harbor cautionary statements included in the Company's 1997 Annual Report
on Form 10-K.
The preceding sections include certain forward-looking statements about
environmental and legal issues and year 2000.
The impacts of various environmental and legal issues could differ from
current expectations. New regulations or changes to existing regulations
could impose additional operating requirements or liabilities other than
expected. The effects of changes in specific hazardous waste site conditions
and cleanup technology could affect estimated cleanup liabilities. The
impacts of changes in available information and circumstances regarding legal
issues could affect the estimated litigation costs.
The timing and total costs related to the Company's year 2000 plan could
differ from its expectations. Factors that may cause such differences include
the ability to locate and correct all relevant computer codes and the
availability of personnel trained in this area. In addition, the Company
cannot predict the nature or impact on operations of third party
noncompliance.
<PAGE> 14
Part II - Other Information
Item 5. Other Information
- --------------------------
The following additional information is furnished in connection with the
Registration Statement on Form S-3 of the Registrant (File No. 33-57840),
filed with the Securities and Exchange Commission on February 3, 1993.
Price and dividend information per share of common stock:
<TABLE>
<CAPTION>
Price
------------------------- Dividend
High Low Paid
--------- -------- --------
<S> <C> <C> <C>
First quarter 1998 $41 15/16 $35 1/16 $0.470
</TABLE>
The market value per share of the Company's common stock as of the close of
business on May 11, 1998 was $41 9/16 per share as reported in the Wall Street
Journal.
Ratio of earnings to fixed charges and ratio of earnings to fixed charges and
preferred stock dividend requirements:
Twelve months ended March 31, 1998:
----------------------------------
Ratio of earnings to fixed charges 3.01
Ratio of earnings to fixed charges and preferred
stock dividend requirements 2.58
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
a) Exhibits filed herewith:
Exhibit 4 - Instruments Defining the Rights of Security Holders,
Including Indentures
The Company agrees to furnish to the Securities and
Exchange Commission, upon request, a copy of any
agreements or instruments defining the rights of
holders of any long-term debt whose authorization
does not exceed 10% of the Company's total assets.
Exhibit 10 - Material Contracts
10.1 - Boston Edison Company and Sithe Energies, Inc.
Purchase and Sale and Transition Agreements dated
December 10, 1997
Exhibit 12 - Computation of Ratio of Earnings to Fixed Charges
12.1 - Computation of ratio of earnings to fixed charges
for the twelve months ended March 31, 1998
<PAGE> 15
12.2 - Computation of ratio of earnings to fixed charges
and preferred stock dividend requirements for the
twelve months ended March 31, 1998
Exhibit 15 - Letter Re Unaudited Interim Financial Information
15.1 - Report of Independent Accountants
Exhibit 27 - Financial Data Schedule
27.1 - Schedule UT
Exhibit 99 - Additional Exhibits
99.1 - Letter of Independent Accountants
Re Form S-3 Registration Statements filed by the
Company on February 3, 1993 (File No. 33-57840)
and May 31, 1995 (File No. 33-59693); Form S-8
Registration Statements filed by the Company on
October 10, 1985 (File No. 33-00810), July 28, 1986
(File No. 33-7558), December 31, 1990 (File No. 33-
38434), June 5, 1992 (33-48424 and 33-48425),
March 17, 1993 (33-59662 and 33-59682) and April 6,
1995 (33-58457) and in the Form S-4 Registration
Statement filed by Boston Edison Holdings, currently
known as BEC Energy, on March 17, 1997 (File No.
333-23439)
b) A Form 8-K dated February 10, 1998 announced the DTE's approval of
the Company's restructuring settlement agreement. This Form 8-K also
stated the Company's determination that the provisions of SFAS 71 no
longer apply to the generation portion of its business.
<PAGE> 16
Signature
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BOSTON EDISON COMPANY
---------------------
(Registrant)
Date: May 14, 1998 /s/ Robert J. Weafer, Jr.
------------------------------
Robert J. Weafer, Jr.
Vice President-Finance,
Controller and Chief
Accounting Officer
<PAGE>
PURCHASE AND SALE AGREEMENT
BY AND BETWEEN
BOSTON EDISON COMPANY, SELLER
AND
SITHE ENERGIES, INC., BUYER
DATED AS OF DECEMBER 10, 1997
<PAGE> i
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE 1
DEFINITIONS, SCHEDULES AND EXHIBITS.................................... -1-
1.1 Definitions................................................ -1-
-----------
1.2 Schedules and Exhibits..................................... -1-
----------------------
ARTICLE 2
PURCHASE AND SALE OF ASSETS............................................ -1-
2.1 Transfer of Assets......................................... -1-
------------------
2.2 Excluded Assets............................................ -3-
---------------
2.3 Assumption of Liabilities.................................. -4-
-------------------------
2.4 Excluded Liabilities....................................... -5-
--------------------
2.5 Closing.................................................... -6-
-------
2.6 Purchase Price and Payment................................. -6-
-------------------------
2.7 Adjustments to Purchase Price.............................. -6-
-----------------------------
2.8 Allocation of Purchase Price............................... -7-
----------------------------
2.9 [Reserved]................................................. -8-
2.10 Closing Deliveries by Seller............................... -8-
----------------------------
2.11 Closing Deliveries by Buyer................................ -9-
---------------------------
ARTICLE 3
REPRESENTATIONS, WARRANTIES AND DISCLAIMERS OF SELLER.................. -11-
3.1 Organization, Existence and Authority...................... -11-
-------------------------------------
3.2 Execution, Delivery and Enforceability..................... -11-
--------------------------------------
3.3 No Violation or Default.................................... -11-
-----------------------
3.4 Contracts.................................................. -11-
---------
3.5 No Consents................................................ -12-
-----------
3.6 Litigation................................................. -12-
----------
3.7 Brokers.................................................... -12-
-------
3.8 Permits.................................................... -12-
-------
3.9 Compliance with Laws and Permits........................... -12-
--------------------------------
3.10 Condemnation............................................... -13-
------------
3.11 Title...................................................... -13-
-----
3.12 Taxes...................................................... -13-
-----
3.13 Labor Matters.............................................. -13-
-------------
3.14 Benefit Plans.............................................. -13-
-------------
3.15 Environmental Matters...................................... -13-
---------------------
3.16 Disclaimers Regarding Assets............................... -14-
----------------------------
<PAGE> ii
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER................................ 15
4.1 Organization, Existence and Authority...................... 15
-------------------------------------
4.2 Execution, Delivery and Enforceability..................... 15
--------------------------------------
4.3 No Violation or Default.................................... 15
-----------------------
4.4 No Consents................................................ 16
-----------
4.5 Litigation................................................. 16
----------
4.6 Brokers.................................................... 16
-------
4.7 [Reserved]................................................. 16
4.8 No Knowledge of Seller's Breach............................ 16
-------------------------------
4.9 Qualified Buyer............................................ 16
---------------
4.10 Title Policy Commitment.................................... 16
-----------------------
4.11 [Reserved]................................................. 16
4.12 "AS IS" Sale............................................... 16
------------
4.13 Buyer's Affiliate.......................................... 17
-----------------
ARTICLE 5
FURTHER ASSURANCES, REGULATORY MATTERS
AND AGREEMENTS PENDING CLOSING......................................... 17
5.1 Cooperation to Consummate Transaction...................... 17
-------------------------------------
5.2 Access to Information and Assets........................... 18
--------------------------------
5.3 Compliance with HSR Act.................................... 18
-----------------------
5.4 Advice of Changes.......................................... 19
-----------------
ARTICLE 6
CONFIDENTIALITY........................................................ 19
6.1 Public Announcement........................................ 19
-------------------
6.2 Confidentiality............................................ 19
---------------
6.3 Regulatory Agencies........................................ 20
-------------------
6.4 Survival................................................... 20
--------
6.5 Buyer Contact with Vendors and Employees; Cooperation...... 20
-----------------------------------------------------
ARTICLE 7
TAXES, PRORATIONS AND CLOSING COSTS.................................... 21
7.1 Taxes...................................................... 21
-----
7.2 Proration of Income and Expenses........................... 22
--------------------------------
7.3 Proration Method........................................... 22
----------------
7.4 Costs and Expenses......................................... 22
------------------
ARTICLE 8
CASUALTY AND CONDEMNATION.............................................. 23
8.1 Casualty Loss.............................................. 23
-------------
<PAGE> iii
ARTICLE 9
OPERATION PENDING CLOSING.............................................. 24
9.1 Operation and Maintenance of Assets Pending Closing........ 24
---------------------------------------------------
9.2 Capital Expenditures....................................... 26
--------------------
ARTICLE 10
AGREEMENTS RELATIVE TO PERIOD AFTER CLOSING............................ 26
10.1 Post Closing Cooperation by Buyer.......................... 26
---------------------------------
10.2 Further Assurances......................................... 26
------------------
10.3 Notification of Transfer................................... 28
------------------------
10.4 NEPOOL..................................................... 28
------
10.5 Local Area Transmission Support............................ 28
-------------------------------
10.6 Employees.................................................. 28
---------
ARTICLE 11
ENVIRONMENTAL MATTERS.................................................. 30
11.1 Environmental Conditions................................... 30
------------------------
11.2 Obligations of Seller...................................... 30
---------------------
11.3 Environmental Commitments.................................. 30
-------------------------
ARTICLE 12
INDEMNIFICATION, RELEASE AND RELATED MATTERS........................... 30
12.1 Indemnification by Seller.................................. 30
-------------------------
12.2 Indemnification by Buyer................................... 31
------------------------
12.3 Buyer's Release of Seller.................................. 31
-------------------------
12.4 Notice of Claim............................................ 32
---------------
12.5 Defense of Third Party Claims.............................. 32
-----------------------------
12.6 Cooperation................................................ 33
-----------
12.7 Mitigation and Limitation on Claims........................ 33
-----------------------------------
12.8 No Recourse................................................ 34
-----------
12.9 Survival of Representations and Warranties................. 34
------------------------------------------
12.10 Survival of Indemnification Provisions..................... 34
--------------------------------------
12.11 Remedies Exclusive......................................... 34
------------------
ARTICLE 13
CONDITIONS PRECEDENT TO OBLIGATIONS OF
BUYER AT THE CLOSING................................................... 34
13.1 Warranties and Covenants................................... 35
------------------------
13.2 Regulatory Approvals....................................... 35
--------------------
13.3 No Litigation.............................................. 35
-------------
13.4 Seller's Closing Deliveries................................ 35
---------------------------
13.5 HSR Act.................................................... 35
-------
13.6 No Termination............................................. 35
--------------
<PAGE> iv
13.7 Transition Agreement....................................... 35
--------------------
ARTICLE 14
CONDITIONS PRECEDENT TO OBLIGATIONS OF
SELLER AT THE CLOSING.................................................. 35
14.1 Warranties and Covenants................................... 35
------------------------
14.2 Regulatory Approvals....................................... 36
--------------------
14.3 DPU Approval............................................... 36
------------
14.4 No Litigation.............................................. 36
-------------
14.5 Buyer s Closing Deliveries................................. 36
--------------------------
14.6 HSR Act.................................................... 36
-------
14.7 No Termination............................................. 36
--------------
14.8 Transition Agreement....................................... 36
--------------------
ARTICLE 15
TERMINATION AND REMEDIES............................................... 36
15.1 Termination................................................ 36
-----------
15.2 Effect of Termination Without Default...................... 38
-------------------------------------
ARTICLE 16
MISCELLANEOUS AGREEMENTS............................................... 38
16.1 Dispute Resolution......................................... 38
------------------
16.2 Bulk Transfer Laws......................................... 38
------------------
16.3 Notices.................................................... 38
-------
16.4 Assignability.............................................. 39
-------------
16.5 No Survival................................................ 40
-----------
16.6 No Third Party Beneficiaries............................... 40
----------------------------
16.7 No Joint Venture........................................... 40
----------------
16.8 Construction of Agreement.................................. 40
-------------------------
16.9 Effect of Closing.......................................... 41
-----------------
16.10 Conflicts.................................................. 41
---------
16.11 Consent to Jurisdiction.................................... 41
-----------------------
16.12 Changes in Law............................................. 41
--------------
16.13 Entire Agreement........................................... 41
----------------
16.14 Amendment.................................................. 41
---------
16.15 No Waiver.................................................. 41
---------
16.16 Counterparts............................................... 42
------------
16.17 Severability............................................... 42
------------
16.18 Interpretation............................................. 42
--------------
16.19 Captions................................................... 42
--------
16.20 Governing Law.............................................. 43
-------------
</TABLE>
<PAGE> 1
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT ("Agreement'') is executed as of
December 10, 1997, by and between BOSTON EDISON COMPANY, a Massachusetts
corporation and electric company ("Seller"), and SITHE ENERGIES, INC., a
Delaware corporation ("Buyer").
RECITALS:
A. Seller desires to sell to Buyer certain Assets (as defined in
Section 2.1 below) which constitute all of Seller's fossil generation
facilities, and Buyer desires to purchase these Assets from Seller, all on
the terms and conditions hereinafter set forth.
B. Seller and Buyer are entering into this Agreement to evidence
their respective duties, obligations and responsibilities with respect to this
purchase and sale of Assets.
NOW, THEREFORE, in consideration of the respective representations,
warranties, covenants and agreements contained in this Agreement, Seller and
Buyer hereby agree as follows:
ARTICLE 1
DEFINITIONS, SCHEDULES AND EXHIBITS
1.1 Definitions. The capitalized terms used in this Agreement (or in the
-----------
Schedules and Exhibits to this Agreement) shall have the meanings set forth in
Schedule 1.1 attached hereto.
- ------------
1.2 Schedules and Exhibits. A list of Schedules and Exhibits to this
----------------------
Agreement is attached as Schedule 1.2 hereto.
------------
ARTICLE 2
PURCHASE AND SALE OF ASSETS
2.1 Transfer of Assets. Subject to the terms and satisfaction of all
------------------
conditions of this Agreement, Seller will sell, convey, assign, transfer and
deliver to Buyer and Buyer will purchase and acquire from Seller, at the
Closing, free and clear of all encumbrances, other than the Permitted
Encumbrances, and subject to Section 2.2, all right, title and interest in
and to the following assets constituting, or used in and necessary for the
operation of, the Facilities identified on Schedule 2.1, each as in existence
------------
on the date of this Agreement (collectively, "Assets"):
(a) Real Property. Those certain parcels of real property as
-------------
described in Schedule 2.1(a), together with all easements and other
---------------
appurtenant rights of Seller therein, if any
<PAGE> 2
(collectively, the "Real Property"), but subject to those exceptions listed in
Schedule 2.1(a) and except as otherwise constituting part of the Excluded
- ---------------
Assets.
(b) Improvements. The Improvements described in Schedule 2.1(b),
------------ ---------------
but subject to those exceptions listed in Schedule 2.1(b), and except as
---------------
otherwise constituting part of the Excluded Assets.
(c) Personal Property. Except for the Excluded Assets, all
-----------------
tangible personal property of the Seller used principally in the operation of
the Facilities, including all mobile machinery and equipment, vehicles, tools,
furniture and furnishings, Inventories and process wastes from ongoing
operations to the extent stored on the Sites in the ordinary course.
(d) Transferable Permits. The Transferable Permits pertaining to
--------------------
Seller's operation of the Facilities at the Sites, as described in Schedule
--------
2.1(d) and Schedule 3.8.
- ------ ------------
(e) Contracts. All Contracts pertaining to Seller's operation of
---------
the Facilities, including without limitation those described in Schedule
--------
2.1(e).
- ------
(f) Records. All Records pertaining to the ownership and
-------
operation of the Facilities (subject to the right of the Seller to retain
copies of same for its use).
(g) Allowances. The Allowances as described in Schedule 2.1(g),
---------- ---------------
including all Allowances held by the United States Environmental Protection
Agency in its Special Allowance Reserve for the benefit of the Seller pursuant
to the Clean Air Act.
(h) Air Emission Credits. The Air Emission Credits owned or held
--------------------
by the Seller as of the Closing Date. Schedule 2.1(h) describes the Air
---------------
Emission Credits owned or held by the Seller as of the Effective Date.
(i) Warranties; Guarantees. All unexpired, transferable
----------------------
warranties and guarantees received by Seller from third parties with respect
to any of the Assets, as of the Closing Date, if any.
(j) Name. The rights of Seller in and to the name(s) of the
----
Facilities, if any, set forth on Schedule 2.1(j). It is expressly understood
---------------
that Seller is not assigning or transferring to Buyer any right to use any
trademarks, trade names or corporate names or the like which comprise the name
"Boston Edison Company," "BECO", "BEC", "BEC Energy", or any derivative
thereof.
(k) Causes of Action. The rights of Seller in and to any causes
----------------
of action against third parties relating to any Real Property or personal
property, Improvements, Permits, Taxes or Contracts, if any, including any
claims for refunds, prepayments, offsets, recoupment, insurance proceeds,
condemnation awards and the like relating specifically to the Facilities or
the Sites and relating to any period from and after the Closing Date.
<PAGE> 3
(l) Ownership Interest in Wyman 4 Unit. Seller's 5.88 percent
----------------------------------
interest in the Wyman 4 Unit, including Seller's entitlement to 36 MW of
capacity from the Wyman 4 Unit, and all of Seller's obligations under any
contracts relating to the Wyman 4 Unit and the associated transmission
agreements listed on Schedule 2.1(l).
---------------
(m) Intellectual Property. All copyrights, patents, trademarks
---------------------
relating to the Assets, and applications for or licenses of any of the
foregoing.
2.2 Excluded Assets. Notwithstanding anything to the contrary in this
---------------
Agreement, nothing in this Agreement will constitute or be construed as
conferring on Buyer, and Buyer is not acquiring, any right, title or interest
in or to (a) any properties, assets, business, operation, or division of
Seller or any Affiliate not expressly set forth in Section 2.1, or (b) the
following specific assets which are associated with the Assets, but are
specifically excluded from the sale and the definition of Assets herein (the
"Excluded Assets"):
(a) Transmission and Telecommunication Assets. The real and
-----------------------------------------
personal property comprising or constituting a part of any of the electrical
transmission or distribution (as opposed to generation) facilities of Seller
located at the Sites or forming part of the Facilities (whether or not
regarded as a "transmission" or "generation" asset for regulatory or
accounting purposes), including all switchyard facilities, substation
facilities and support equipment, as well as all Permits, Contracts and
Warranties, to the extent they relate to the Transmission Assets (the
"Transmission Assets"), and those certain assets and facilities used by Seller
or others pursuant to agreements with Seller for telecommunications purposes;
all as identified on Schedule 2.2(a) attached hereto.
---------------
(b) Accounts Receivable and Cash. All accounts and notes
----------------------------
receivable (trade or otherwise), cash and cash equivalents, checkbooks and
canceled checks, bank deposits and property or income tax receivables.
(c) Wholesale Power Contracts. All contracts between Seller and
-------------------------
customers purchasing electric capacity and energy from Seller under wholesale
rates, or otherwise subject to regulation by the FERC.
(d) Power Purchase Agreements. All agreements between Seller and
-------------------------
power producers selling electric capacity and energy to Seller under wholesale
rates.
(e) Causes of Action. The rights of Seller in and to any causes
----------------
of action against third parties relating to any Real Property or personal
property, Improvements, Permits, Taxes or Contracts, if any, including any
claims for refunds, prepayments, offsets, recoupment, insurance proceeds,
condemnation awards and the like, whether received as payment or credit
against future liabilities, relating specifically to the Facilities or the
Sites and relating to any period through the Closing Date, including, without
limitation, any refunds relating to property taxes
<PAGE> 4
paid by Seller with respect to the Facilities, the Sites or the Assets for any
period prior to the Closing Date, regardless of when actually paid; provided,
however, that Seller will not settle any such causes of action in any manner
which would have a Material Adverse Effect.
(f) Names. The rights of Seller to names "Boston Edison
-----
Company", "BECO", "BEC", "BEC Energy" and any derivatives thereof, and all
trademarks and trade names associated therewith.
2.3 Assumption of Liabilities. Except as provided in Section 2.4, from
-------------------------
and after the Closing Date, Buyer will assume, satisfy, pay, perform and
retain, without recourse to Seller, the following obligations and liabilities
of the Seller (collectively, the "Assumed Liabilities"):
(a) Liability for all Environmental Conditions and any Remediation
arising from such Environmental Conditions;
(b) Liability for any Hazardous Substances present in, on or
incorporated into the Improvements;
(c) Liability arising from the ownership or possession of equipment,
structures, surface impoundments or any other facility used for the treatment,
storage, handling or disposal of Hazardous Substances; and
(d) All obligations and liabilities associated with the use or
operation of the Assets or the business conducted with the Assets in each case
arising after the Closing, including but not limited to (i) any obligation to
decommission, remove, deactivate, demolish, or close the Facilities or the
Sites or any portion thereof (including any obligation under Section 193,
Section 1A(b)(2) of the Act, and any obligation to restore the Sites to their
natural state, (ii) any obligation arising from the use or operation of
surface impoundments or any other facility used for the treatment, storage or
disposal of Hazardous Substances, (iii) all compliance obligations with
respect to all Transferable Permits, (iv) all obligations arising or accruing
from and after the Closing under the Contracts, and (x) the contracts, leases,
and other agreements entered into by Seller with respect to the Assets which
would be required to be disclosed on Schedule 3.4 but for the exception
------------
provided in clause (b) of Section 3.4 of this Agreement, and (y) the
contracts, leases and other agreements entered into by Seller with respect to
the Assets after the date of this Agreement consistent with the terms of this
Agreement (including, without limitation, Capital Commitments and agreements
with respect to real and personal property Taxes on any of the Assets entered
into between Seller and any local government), except in each case, to the
extent that such liabilities and obligations, but for a breach or default by
Seller, would have been paid, performed or otherwise discharged on or prior to
the Closing Date, or to the extent the same arise out of any such breach or
default, (v) all obligations of Seller with respect to Environmental
Commitments, (vi) all obligations of Seller under the Permitted Encumbrances
and (vii) all obligations of Seller to make transition payments in respect of
property taxes as required by Section 71 of Act.
<PAGE> 5
(e) all liabilities and obligations with respect to the FBU
Employees after the Closing Date for which the Buyer is responsible pursuant
to Section 10.6.
(f) All other liabilities expressly allocated to Buyer in this
Agreement or in any of the Related Agreements.
2.4 Excluded Liabilities. Notwithstanding the foregoing, Buyer shall not
--------------------
assume or be obligated to pay, perform or otherwise discharge the following
liabilities or obligations (the "Excluded Liabilities"):
(a) Any liabilities or obligations of Seller in respect of the
Excluded Assets or other assets of Seller which are not Assets;
(b) Any liabilities retained by Seller pursuant to Section 11.2 of
this Agreement;
(c) Any obligation in respect of income Taxes imposed by any
jurisdiction relating to any period ending on or prior to the Closing Date;
(d) Except to the extent specifically allocated to Buyer in this
Agreement, all liabilities or obligations of the Seller associated with the
use or operation of the Assets or the business conducted with the Assets on or
prior to the Closing;
(e) Any liabilities or obligations of Seller resulting from entering
into or performing its obligations pursuant to or consummating the
transactions contemplated herein or in any Related Agreements or any other
agreement entered into by Seller to facilitate the transactions contemplated
herein or therein;
(f) Any wages, overtime, employment taxes, severance pay, transition
payments in respect of employees, vacation pay, workers compensation benefits
or other similar obligations arising or accruing prior to the Closing Date,
including without limitation, those obligations of Seller set forth in Section
10.6, or liabilities or obligations relating to personal injury, death,
discrimination, wrongful discharge, unfair labor practice, grievance or
similar claim or cause of action accruing prior to or on or arising out of
events on or prior to the Closing Date;
(g) Any liabilities or obligations of Seller arising from the breach
by Seller on or prior to the Closing Date of any term or provision of any
contract, instrument or agreement relating to any of the Assets; or
(h) Any liabilities or obligations arising or accruing under any
Employee Benefit Plan, or under any employee benefit arrangement that is not
an Employee Benefit Plan, including, but not limited to the plans listed on
Schedule 3.14 hereof, any employment or consulting agreement, any arrangement
- -------------
providing insurance benefits, any incentive bonus or deferred bonus
<PAGE> 6
arrangement, any arrangement providing termination allowances, retirement,
severance or similar benefits, any equity compensation plan, any deferred
compensation plan, and any compensation policy or practice (i) which is
maintained, contributed to or required to be contributed to by Seller or any
entity that, together with Seller as of the relevant measuring date under
ERISA, is or was required to be treated as a single employer under Section 414
of the Code, an "ERISA Affiliate" (as defined in ERISA), or under which Seller
or any ERISA Affiliate may incur any liability and (ii) which covers the
employees, former employees, directors or former directors of Seller or any
ERISA Affiliate (referred to collectively as "Benefit Plans").
2.5 Closing. The sale of the Assets to Buyer, the payment of the
-------
Purchase Price to the Seller, and the consummation of the other respective
obligations of the parties hereunder shall take place at a closing (the
"Closing"), to be held at the offices of Seller, 36th floor, 800 Boylston
Street, Boston, Massachusetts, at 10:00 a.m. local time, or other mutually
acceptable time and location, on the date that is fifteen (15) days (or, if
the fifteenth day is not a Business Day, the next Business Day following such
fifteenth day) following the date on which all of the conditions precedent to
Closing set forth in Article 13 and Article 14 have been either satisfied or
waived by the Party for whose benefit such conditions precedent exist, such
satisfaction or waiver to be evidenced by a notice from each Party to the
other with respect to the conditions applicable to such Party. The date of
Closing is hereinafter called the "Closing Date." The Closing shall be
effective for all purposes as of 11:59 P.M. on the Closing Date.
2.6 Purchase Price and Payment. Buyer shall pay to Seller a total
--------------------------
purchase price of Six Hundred and Fifty-Seven Million Dollars ($657,000,000)
(the "Purchase Price"), consisting of (i) Five Hundred and Thirty-Six Million
Dollars ($536,000,000) as consideration for the Assets, plus or minus any
adjustments pursuant to the provisions of this Agreement, and (ii) One Hundred
and Twenty-One Million Dollars ($121,000,000) as reimbursement to Seller for
its projected payments under the Transition Agreement in excess of the
standard offer rate (the "Standard Offer Stabilization Fund"). The Purchase
Price shall be payable by Buyer to Seller at the Closing in immediately
available funds denominated in U.S. dollars. Seller will at or prior to
Closing designate the account or accounts of Seller to which the Buyer is to
wire transfer the Purchase Price.
2.7 Adjustments to Purchase Price. At the Closing, the Purchase Price
-----------------------------
shall be adjusted to account for the items set forth in this Section:
2.7.1 The Purchase Price shall be (a) increased to account for the
following items: (i) the net book value of all Inventories held by Seller as
of the Closing Date; provided, however, that the Inventories are useable in
accordance with applicable law and regulation, (ii) any of the capital
expenditures listed on Schedule 2.7.1 (the "Pre-Approved Capital
--------------
Expenditures") actually paid for by Seller between the Effective Date and the
Closing Date, and (iii) any operations and maintenance expenses paid or
incurred by Seller between the Effective Date and the Closing Date that Seller
would not have paid or incurred but for Buyer's request, which shall be set
forth in writing and be initialed by an officer of both Parties, and (b)
decreased to
<PAGE> 7
account for any Capital Commitments assumed by Buyer other than to the extent
that such Capital Commitments relate to Pre-Approved Capital Expenditures.
2.7.2 The Purchase Price shall be adjusted to account for the
items prorated as of the Closing Date pursuant to Sections 7.1 and 7.2.
2.7.3 (a) At least twenty (20) Business Days prior to the Closing
Date, Seller shall prepare and deliver to the Buyer an Estimated Closing
Statement (the "Estimated Closing Statement") that shall set forth Seller's
best estimate of all estimated adjustments to the Purchase Price required by
this Section 2.7 (the "Estimated Adjustment"). Within ten (10) Business Days
-----------
following the delivery of the Estimated Closing Statement by Seller to Buyer,
Buyer may object in good faith to the Estimated Adjustment in writing. If
Buyer objects to the Estimated Adjustment, the Parties shall attempt to
resolve such dispute by negotiation. If the Parties are unable to resolve
such dispute before two (2) Business Days prior to the Closing Date (or if the
Buyer fails to object to the Estimated Adjustment), the Purchase Price shall
be adjusted (the "Closing Adjustment") for the Closing by the amount of the
Estimated Adjustment not in dispute.
(b) Within thirty (30) days following the Closing Date, Seller shall
prepare and deliver to the Buyer a Post-Closing Statement (the "Post-Closing
Statement") that shall set forth all adjustments to the Purchase Price
required by this Section 2.7 (the "Proposed Post-Closing Adjustment"). Within
-----------
thirty (30) days following the delivery of the Post-Closing Statement by
Seller to Buyer, Buyer may object to the Proposed Post-Closing Adjustment in
writing. Seller agrees to cooperate with Buyer to provide Buyer and Buyer's
representatives information used to prepare the Post-Closing Statement and
information relating thereto. If Buyer objects to the Proposed Post-Closing
Adjustment, the Parties shall attempt to resolve such dispute by negotiation.
If the Parties are unable to resolve such dispute within thirty (30) days of
any objection by Buyer, the Parties shall appoint independent certified public
accountants who shall, at Seller's and Buyer's joint expense, review the
Proposed Post-Closing Adjustment and determine the appropriate adjustment to
the Purchase Price, if any. The Parties agree to cooperate with the
independent certified public accountants, at their own cost and expense, and
to provide the independent certified public accountants with such information
as the independent certified public accountants reasonably requests. The
finding of such independent certified public accountants shall be binding on
the Parties hereto. Upon determination of the appropriate adjustment (the
"Post-Closing Adjustment") by agreement of the parties or by binding
determination of the independent certified public accountants, if the Post-
Closing Adjustment is more or less than the Closing Adjustment, the Party
owing the difference shall deliver the such difference to the other Party no
later than two (2) business days after such determination in immediately
available funds or in any other manner as reasonably requested by the payee.
2.8 Allocation of Purchase Price. The Purchase Price paid in
----------------------------
consideration of the Assets will be allocated among the Assets in a manner to
be determined by the Parties. In the event that the parties cannot agree on a
mutually satisfactory allocation within forty-five (45) days following
<PAGE> 8
the execution of this Agreement, the Parties shall appoint independent
certified public accountants who shall, at Seller's and Buyer's joint expense,
determine the appropriate allocation. The finding of such independent
certified public accountants shall be binding on the Parties hereto. Upon
determination of the appropriate allocation by agreement of the parties or by
binding determination of the accounting firm, the Parties will file all tax
returns consistent with such allocation of the Purchase Price, and shall not
take any action or position inconsistent with such allocation; provided,
however, that if in any audit by the Internal Revenue Service or the taxing
authority of any state of any tax return of either Party such allocation is
finally determined to be different from the allocation as determined at the
Closing, Seller or Buyer may, but shall not be obligated to, take any position
or action inconsistent with such allocation as so finally determined.
2.9 [Reserved].
2.10 Closing Deliveries by Seller. At the Closing, Seller will deliver to
----------------------------
Buyer the various certificates, instruments, documents and agreements set
forth in subsections 2.10(a)-(p) below:
(a) One or more Deeds for the Real Property and Improvements,
substantially in the form of Exhibit B to the Agreement, modified as necessary
---------
to reflect any easements to be retained by Seller in the Real Property arising
from the Facilities of Seller remaining on the Real Property to be conveyed to
Buyer, without covenants or warranties of title, duly executed and
acknowledged by Seller and in recordable form;
(b) The Bill of Sale, substantially in the form of Exhibit C to the
---------
Agreement, for the tangible personal property included in the Assets, duly
executed by the Seller;
(c) The Assignment and Assumption Agreement, substantially in the
form of Exhibit D to the Agreement, for the transfer to the Buyer of the
---------
intangible Assets, duly executed by the Seller, and if necessary or desirable,
in recordable form;
(d) The Cross Easement Agreement, substantially in the form of
Exhibit E to the Agreement, duly executed and acknowledged by the Seller and
- ---------
in recordable form;
(e) The Interconnection and Operation Agreement, substantially in
the form of Exhibit F to the Agreement duly executed by the Seller;
---------
(f) The Asset Demarcation Agreement, substantially in the form of
Exhibit I to the Agreement, setting forth the agreed upon ownership
- ---------
demarcation points as described on Exhibit A thereto, duly executed by Seller.
(g) The Services Agreement, substantially in the form of Exhibit J
---------
to the Agreement duly executed by Seller;
<PAGE> 9
(h) Copies of all consents, waivers, or approvals obtained by the
Seller with respect to the Assets, the transfer of the Transferable Permits,
or the consummation of the transactions contemplated by the Agreement, to the
extent specifically required under the Agreement;
(i) A certificate from an authorized officer of the Seller, dated
the Closing Date, to the effect that, to the best of such officer's knowledge,
the conditions set forth in Section 13.1 have been satisfied;
(j) A copy, certified by the Clerk of the Seller, of corporate
resolutions authorizing the execution and delivery of the Agreement and all of
the agreements and instruments attached as exhibits thereto, and the
consummation of the transactions contemplated thereby;
(k) A certificate of the Clerk of the Seller which shall identify by
name and title and bear the signature of the officers of the Seller authorized
to execute and deliver the Agreement and the other agreements and instruments
contemplated thereby.
(l) An opinion from Ropes & Gray, counsel to the Seller, dated the
Closing Date and reasonably satisfactory in form to Buyer and its counsel,
covering substantially the matters set forth in Section 3.1, 3.2, 3.3 and 3.5;
(m) A FIRPTA Affidavit executed by the Seller; and
(n) Such other instruments of sale, transfer, conveyance and
assignment as the Buyer and its counsel may reasonably request in connection
with the sale of the Assets, provided however, that this subsection (n) shall
not require the Seller to prepare or obtain any surveys relating to the Real
Property.
(o) To the extent available, keys to all improvements, vehicles and
other Purchased Assets, original plans, specifications, instructions,
warranties, guaranties, books and records relating to any of the Assets, and
all original documents, Contracts, agreements, licenses, Permits and leases
being transferred to Buyer as part of the Assets (and all documents related
thereto) (collectively, the "Transferred Agreements").
(p) Notices signed by Seller to all other parties to the Transferred
Agreements, notifying them that the Transferred Agreements have been
transferred to the Buyer.
2.11 Closing Deliveries by Buyer. At the Closing, Buyer will deliver to
---------------------------
Seller the various certificates, instruments, documents and agreements set
forth in subsections 2.11(a)-(l) below:
(a) The Purchase Price;
<PAGE> 10
(b) The Assignment and Assumption Agreement, substantially in the
form of Exhibit D to the Agreement, for the assumption by the Buyer of the
---------
Assumed Liabilities, duly executed by the Buyer, and if necessary or
desirable, in recordable form;
(c) The Cross Easement Agreement, substantially in the form of
Exhibit E to the Agreement, duly executed and acknowledged by the Buyer and
- ---------
in recordable form;
(d) The Interconnection and Operation Agreement, substantially in
the form of Exhibit F to the Agreement duly executed by the Buyer;
---------
(e) The Asset Demarcation Agreement, substantially in the form of
Exhibit I to the Agreement, duly executed by Buyer.
- ---------
(f) The Services Agreement, substantially in the form of Exhibit J
---------
to the Agreement, duly executed by Buyer;
(g) A certificate from an authorized officer of the Buyer, dated the
Closing Date, to the effect that, to the best of such officer's knowledge, the
conditions set forth in Section 14.1 have been satisfied;
(h) A copy, certified by the Secretary of the Buyer, of resolutions
authorizing the execution and delivery of the Agreement and all of the
agreements attached as exhibits thereto, and the consummation of the
transactions contemplated thereby;
(i) A certificate of the Secretary of the Buyer which shall identify
by name and title and bear the signature of the officers of the buyer
authorized to execute and deliver the Agreement and the other agreements
contemplated thereby;
(j) An opinion from Latham & Watkins, counsel to the Buyer, and with
respect to matters of Massachusetts law, such local counsel selected by Buyer
as is reasonably acceptable to Seller and its counsel, dated the Closing Date
and reasonably satisfactory in form to Seller and its counsel, covering
substantially the matters set forth in Section 4.1, 4.2, 4.3 and 4.4;
(k) Evidence of Buyer's membership in NEPOOL; and
(l) All such other instruments of assumption as shall, in the
reasonable opinion of Seller and its counsel, be necessary for Buyer to assume
the Assumed Liabilities in accordance with this Agreement.
<PAGE> 11
ARTICLE 3
REPRESENTATIONS, WARRANTIES AND DISCLAIMERS OF SELLER
Seller represents and warrants, to Seller's Knowledge, that, except as
set forth in the Schedules to this Agreement, the following representations
and warranties are true and correct as of the date of this Agreement:
3.1 Organization, Existence and Authority. Seller is a duly organized
-------------------------------------
and validly existing corporation in good standing under the laws of the
Commonwealth of Massachusetts. Seller is duly authorized to conduct business
and is in good standing under the laws of the State of Maine. Seller has full
corporate power and authority to carry on its business as now conducted, to
own and operate the Assets, and to enter into, and carry out its obligations
under, this Agreement and the Related Agreements which are executed by Seller.
3.2 Execution, Delivery and Enforceability. The execution and delivery
--------------------------------------
of this Agreement and the Related Agreements which are executed by Seller, and
the consummation of the transactions contemplated hereby and thereby, have
been duly authorized by all necessary corporate actions required on the part
of Seller. Subject to the obtaining of Seller's Regulatory Approvals, and
assuming Buyer's due authorization, execution and delivery of this Agreement
and the Related Agreements which are executed by Buyer, and further assuming
the Agreement and the Related Agreements are enforceable against the Buyer,
this Agreement and the Related Agreements which are executed by Seller
constitute the valid and legally binding obligations of Seller, enforceable
against Seller in accordance with their terms, except as such enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws of general applicability relating to or affecting the enforcement
of creditors' rights, and by general equitable principles.
3.3 No Violation or Default. Subject to Seller obtaining Seller's
-----------------------
Regulatory Approvals, neither the execution and delivery of this Agreement or
any of the Related Agreements executed by Seller, nor the compliance by Seller
with any provision hereof or thereof, nor the consummation of the transactions
contemplated hereby or thereby will (a) violate, or conflict with, or result
in a breach of any provisions of the Restated Articles of Organization or
Bylaws of Seller, (b) violate any law, regulation, order, writ, injunction,
award, judgment or decree applicable to Seller or any of its assets, or (c)
conflict with, result in a breach of, constitute a default under, or give rise
to the right to terminate, accelerate, modify or cancel, or require any notice
under any agreement, contract, lease, license or other arrangement to which
Seller or any of its properties are bound, or with the giving of notice, the
passage of time, or both, would result in a default or give rise to any such
right, in any case except for matters that, in the aggregate, will not have a
Material Adverse Effect.
3.4 Contracts. Except (a) for the Contracts listed in Schedule 2.1(e),
--------- ---------------
or any other Schedule to this Agreement, and (b) for agreements with suppliers
entered into in the ordinary course of
<PAGE> 12
business, the Seller is not a party to any written contract, agreement,
personal property lease, commitment, understanding or instrument which is
material to the business or operations of the Assets and which are expected to
continue in force and effect after the Closing. Each Contract or agreement
referred to in clauses (a) and (b) above, (i) constitutes, or will at the
Closing constitute, a valid and binding obligation of Seller, (ii) is, and at
the Closing will be, in full force and effect, and (iii) except as disclosed
in Schedule 3.4, may be assigned to the Buyer pursuant to this Agreement 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 as set forth in the Schedule 3.4, there is not,
------------
under any Contract, any default or event which, with notice or lapse of time
or both, would constitute a default on the part of Seller, except such events
of default and other events as to which requisite waivers or have been
obtained, or which would not, in the aggregate, have a Material Adverse
Effect.
3.5 No Consents. Except as set forth on Schedule 3.5, subject to Seller
----------- ------------
obtaining Seller's Regulatory Approvals, no consent or approval of,
registration, filing with or notice to any Governmental Authority is required
to be obtained or made by Seller in connection with Seller's execution,
delivery and performance of this Agreement by Seller and the Related
Agreements which are executed by Seller, or the consummation of the
transactions contemplated hereby or thereby, which, if not obtained or made,
will prevent Seller from performing its material obligations hereunder or
thereunder.
3.6 Litigation. There is no pending or threatened action, litigation or
----------
proceeding, by any Governmental Authority, arbitration panel, private Person
or shareholder which is likely to result, or has resulted, in (a) the
institution of legal proceedings to prohibit, enjoin or restrain the
performance of this Agreement or any of the Related Agreements, or the
consummation of the transactions contemplated thereby in any material respect,
or (b) a claim for damages related to the Assets as a result of this Agreement
or any of the Related Agreements, or the consummation of the transactions
contemplated thereby, in either case except for matters that, in the
aggregate, will not have a Material Adverse Effect.
3.7 Brokers. All negotiations relating to this Agreement and the
-------
transactions contemplated hereunder have been carried on by Seller in such a
manner as not to give rise to any valid claim against Buyer or any of the
Assets (by reason of Seller's actions) for a brokerage commission, finder's
fee or other like payment to any Person.
3.8 Permits. Seller has all necessary Permits from Governmental
-------
Authorities that directly and specifically relate to the current use and
operation of the Assets by the Seller, except for matters that, in the
aggregate, will not have a Material Adverse Effect. A listing of material
Permits held by Seller (but excluding certain orders of condition and zoning
variances which are described in the Title Commitments), is included in
Schedule 3.8.
- ------------
3.9 Compliance with Laws and Permits. Seller has received no written
--------------------------------
notice that Seller's current use and operation of the Facilities violates any
applicable laws, orders, ordinances, rules,
<PAGE> 13
regulations or Permits of any Governmental Authority in existence as of
execution of this Agreement, except for matters that, in the aggregate, will
not have a Material Adverse Effect.
3.10 Condemnation. Except as set forth on Schedule 3.10, Seller has
------------ -------------
received no written notice of any pending or threatened proceeding or
governmental action to condemn or take by power of eminent domain or otherwise
by any Governmental Authority all or any part of the Assets, which would be
reasonably likely to result in a Material Adverse Effect.
3.11 Title. Seller holds good and marketable title to all Assets
-----
constituting Real Property as specified in the Title Commitments, and holds
good and marketable title to all other Assets which it purports to own, free
and clear of all encumbrances, but subject to, in each case, the Permitted
Encumbrances.
3.12 Taxes. Seller has filed all returns, reports and declarations that
-----
are required to have been filed by it with respect to any Tax, and Seller has
paid all Taxes that have become due as indicated thereon, except where Seller
is contesting the same in good faith by appropriate proceedings, where the
failure so to file or pay could have a Material Adverse Effect. There is no
unpaid Tax due and payable that is unpaid which could adversely affect Buyer's
ownership, operation or use of the Assets or for which Buyer could become
liable.
3.13 Labor Matters. The Seller has previously delivered to the Buyer a
-------------
copy of the Collective Bargaining Agreement between the Seller and the Local
No. 369 of the Utility Workers Union of America ("Local 369"). Solely (in
each of the following clauses (a) through (d)) with respect to Local 369 as it
relates to the business or operations of the Assets, except to the extent set
forth in Schedule 3.13 and except for such matters as will not have a Material
-------------
Adverse Effect, to the Seller's knowledge (a) the Seller is in compliance with
all applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and hours; (b) the Seller has not received
written notice of any unfair labor practice complaint or charge against the
Seller pending before the National Labor Relations Board; (c) no arbitration
proceeding arising out of or under the Collective Bargaining Agreement is
pending against the Seller; and (d) no strike, work stoppage or slowdown is
pending or threatened and Seller has not experienced any work stoppage since
December 31, 1994.
3.14 Benefit Plans. Schedule 3.14 lists, as of the date of this
------------- -------------
Agreement, all deferred compensation, pension profit-sharing and retirement
plans, and all material bonus and other employee welfare benefit or fringe
benefit plans established or maintained by the Seller in respect of the FBU
Employees. Accurate and complete copies of all such benefit plans have been
made available to the Buyer.
3.15 Environmental Matters. Except as set forth in the documents listed
---------------------
in Schedule 3.15, there are no Environmental Conditions existing at the Sites,
-------------
except such Environmental Conditions which would not, in the aggregate, have a
Material Adverse Effect.
<PAGE> 14
3.16 Certain Notices.
---------------
(a) Seller has not received written notice that any of the
Improvements located on the Real Property are not presently used and operated
in compliance with all covenants, easements and restrictions affecting such
Real Property.
(b) Seller has not received written notice that it does not have all
easements and rights-of-way required from all Governmental Authorities having
jurisdiction over the Real Property or private parties required to make use of
utilities servicing the Real Property and to provide vehicular and pedestrian
ingress and egress to and from the Real Property.
(c) Seller has not received (i) any written notice from any
Governmental Authority having jurisdiction over all or any portion of the Real
Property regarding or in respect of any change in any applicable laws,
regulations, statutes, rules or restrictions relating to a change in the
permitted use of all or any portion of the Real Property or the business being
conducted thereat, or (ii) any written notice from adjacent landowners
regarding unrecorded easements and/or agreements or encroachments in respect
of all or any portion of the Real Property.
3.17 Disclaimers Regarding Assets. EXCEPT FOR ANY REPRESENTATIONS AND
----------------------------
WARRANTIES SET FORTH IN THIS ARTICLE 3, THE ASSETS ARE SOLD "AS IS, WHERE IS",
AND SELLER EXPRESSLY DISCLAIMS ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND
OR NATURE, EXPRESS OR IMPLIED, AS TO LIABILITIES, OPERATIONS OF THE
FACILITIES, THE TITLE, CONDITION, VALUE OR QUALITY OF THE ASSETS OR THE
PROSPECTS (FINANCIAL AND OTHERWISE), RISKS AND OTHER INCIDENTS OF THE ASSETS
AND SELLER SPECIFICALLY DISCLAIMS ANY REPRESENTATION OR WARRANTY OF
MERCHANTABILITY, USAGE, SUITABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE WITH
RESPECT TO THE 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 AS TO THE CONDITION OF THE ASSETS, OR ANY
PART THEREOF, OR WHETHER SELLER POSSESSES SUFFICIENT REAL PROPERTY OR PERSONAL
PROPERTY TO OPERATE THE ASSETS. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED
HEREIN, SELLER FURTHER SPECIFICALLY DISCLAIMS ANY REPRESENTATION OR WARRANTY
REGARDING THE ABSENCE OF HAZARDOUS SUBSTANCES OR LIABILITY OR POTENTIAL
LIABILITY ARISING UNDER ENVIRONMENTAL LAWS. WITHOUT LIMITING THE GENERALITY
OF THE FOREGOING, EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN, SELLER
EXPRESSLY DISCLAIMS ANY REPRESENTATION OR WARRANTY OF ANY KIND REGARDING THE
CONDITION OF THE ASSETS OR THE SUITABILITY OF THE FACILITY FOR OPERATION AS A
POWER PLANT AND NO SCHEDULE OR EXHIBIT TO THIS AGREEMENT, NOR ANY OTHER
MATERIAL OR INFORMATION PROVIDED BY OR COMMUNICATIONS MADE BY SELLER GROUP,
OR BY ANY BROKER OR INVESTMENT BANKER, WILL CAUSE OR
<PAGE> 15
CREATE ANY WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, CONDITION, VALUE OR
QUALITY OF THE ASSETS.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
4.1 Organization, Existence and Authority. Buyer is a duly organized and
-------------------------------------
validly existing corporation in good standing under the laws of the State of
Delaware. Buyer is, or by the Closing will be, qualified to do business in
the Commonwealth of Massachusetts. Buyer has full corporate power and
authority to carry on its business as now conducted, to purchase and operate
the Assets, and to enter into, and carry out its obligations under, this
Agreement and the Related Agreements which are executed by Buyer.
4.2 Execution, Delivery and Enforceability. The execution and delivery
--------------------------------------
of this Agreement and the Related Agreements which are executed by Buyer, and
the consummation of the transactions contemplated hereby and thereby, have
been duly authorized by all necessary corporate action required on the part of
Buyer. Subject to the obtaining of Buyer's Regulatory Approvals, and assuming
Seller's due authorization, execution and delivery of this Agreement and the
Related Agreements which are executed by Seller, and further assuming the
Agreement and the Related Agreements are enforceable against the Seller, this
Agreement and the Related Agreements which are executed by Buyer constitute
the valid and legally binding obligations of Buyer, enforceable against Buyer
in accordance with their terms, except as such enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium or other similar laws of
general applicability relating to or affecting the enforcement of creditors'
rights, and by general equitable principles.
4.3 No Violation or Default. Subject to Buyer obtaining Buyer's
-----------------------
Regulatory Approvals, neither the execution and delivery of this Agreement or
any of the Related Agreements executed by Buyer, nor the compliance by Buyer
with any provision hereof or thereof, nor the consummation of the transactions
contemplated hereby or thereby will (a) violate, or conflict with, or result
in a breach of any provisions of the Certificate of Incorporation or Bylaws of
Buyer, (b) violate any law, regulation, order, writ, injunction, award,
judgment or decree applicable to Buyer or any of its assets, or (c) conflict
with, result in a breach of, constitute a default under, or give rise to the
right to terminate, accelerate, modify or cancel, or require any notice under
any agreement, contract, lease, license or other arrangement to which Buyer or
any of its properties are bound, or with the giving of notice, the passage of
time, or both, would result in a default or give rise to any such right, in
any case except for matters that, in the aggregate, will not have a Material
Adverse Effect.
<PAGE> 16
4.4 No Consents. Other than Buyer's Regulatory Approvals, there is no
-----------
consent or approval of, registration or filing with or notice to any
Governmental Authorities required to be obtained or made by Buyer in
connection with Buyer's execution, delivery and performance of this Agreement
by Buyer and the Related Agreements which are executed by Buyer, or the
consummation of the transactions contemplated thereby, which, if not obtained
or made, would result in a Material Adverse Effect.
4.5 Litigation. There is no pending or threatened action, by any
----------
Governmental Authority, arbitration panel, third Person or shareholder which
is likely 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 Related Agreements, or the consummation of the transactions
contemplated thereby in any material respect, or (b) a claim for damages as a
result of this Agreement or any of the Related Agreements, or the consummation
of the transactions contemplated thereby. There is no pending or threatened
litigation, or proceeding, private or governmental, which is likely to have a
Material Adverse Effect.
4.6 Brokers. All negotiations relating to this Agreement and the
-------
transactions contemplated hereby have been carried on by Buyer in such a
manner as not to give rise to any valid claim against Seller or any of the
Assets (by reason of Buyer's actions) for a brokerage commission, finder's fee
or other like payment to any Person.
4.7 [Reserved].
4.8 No Knowledge of Seller's Breach. Buyer has no Knowledge of any
-------------------------------
breach by Seller of any representation or warranty of Seller, or of any other
condition or circumstance that would excuse Buyer from its timely performance
of its obligations hereunder. Buyer shall notify Seller promptly if any such
information comes to its attention prior to Closing.
4.9 Qualified Buyer. To Buyer's Knowledge, Buyer is qualified to obtain
---------------
any Permits necessary for the Buyer to own and operate the Assets and the
Facilities as of the Closing, to the extent such operation is either required
by any Related Agreement, or is contemplated by the Buyer.
4.10 Title Policy Commitment. Prior to the Effective Date, Buyer has
-----------------------
received title policy commitments ("Title Commitments") issued by the Title
Company with respect to the Real Property. Copies of the Title Commitments
are attached hereto as Schedule 4.10.
-------------
4.11 [Reserved].
4.12 "AS IS" Sale. The representations and warranties set forth in
------------
Article 3 constitute the sole and exclusive representations and warranties of
Seller in connection with the transactions contemplated hereby. There are no
representations, warranties, covenants, understandings or agreements among the
Parties regarding the Assets or their transfer other than those incorporated
<PAGE> 17
in this Agreement. Except for the representations and warranties expressly
set forth in this Article 3, Buyer disclaims reliance on any representations,
warranties or guarantees, either express or implied by Seller Group. EXCEPT
AS OTHERWISE EXPRESSLY PROVIDED HEREIN, BUYER ACKNOWLEDGES AND AGREES THAT THE
ASSETS ARE BEING ACQUIRED "AS IS, WHERE IS" ON THE CLOSING DATE, AND IN THEIR
CONDITION ON THE CLOSING DATE, AND THAT BUYER IS RELYING ON ITS OWN
EXAMINATION OF THE ASSETS, AND IS NOT RELYING ON ANY REPRESENTATION OR
WARRANTY MADE BY SELLER GROUP, OR ANY BROKER OR INVESTMENT BANKER.
4.13 Buyer's Affiliate. If Buyer elects to use an Affiliate to hold title
-----------------
to any or all of the Assets, Buyer shall be deemed to have made the
representations and warranties in this Article 4 on behalf of itself and any
such Affiliate, as if the Affiliate were a signatory to this Agreement.
ARTICLE 5
FURTHER ASSURANCES, REGULATORY MATTERS
AND AGREEMENTS PENDING CLOSING
5.1 Cooperation to Consummate Transaction.
-------------------------------------
(a) Subject to the terms and conditions of this Agreement, each of
the Parties will use Commercially Reasonable Efforts to take, or cause to be
taken, all action, and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations to consummate and
make effective the sale and delivery of the Assets pursuant to this Agreement.
(b) Seller and Buyer shall cooperate with each other to (i) promptly
prepare and file all necessary documentation, effect all necessary
applications, notices, petitions and filings and execute all agreements and
documents, (ii) use all Commercially Reasonable Efforts to obtain a transfer,
reissuance or issuance to Buyer of all necessary Permits, and (iii) to obtain
all consents, approvals, and authorizations of all Governmental Authorities
(including the Seller's Regulatory Approvals and Buyer's Regulatory Approvals)
and all other parties necessary or advisable to consummate the transactions
contemplated by this Agreement or required by the terms of any license,
franchise, permit, contract, lease or other instrument to which the Seller or
Buyer is a party or by which any of them is bound. With respect thereto,
Seller shall have the right to review and approve in advance all
characterizations of the information relating to the Assets; and each of
Seller and Buyer shall have the right to review in advance all
characterization of the information relating to the transactions contemplated
by this Agreement which appear in any filing made in connection with the
transactions contemplated hereby. Between the Effective Date and the Closing,
Buyer shall have the right to commence the regulatory approval processes
associated with the construction and operation of new electric generating
units and associated equipment at the Real Property. Seller shall assist
Buyer, under Buyer's reasonable direction, in obtaining all Permits required
(i) to own and operate the Assets as contemplated by this
<PAGE> 18
Agreement and the Related Agreements and (ii) to construct and operate such
new facilities, provided, however, that Buyer shall reimburse Seller for all
reasonable costs incurred by Seller in its assistance of Buyer hereunder.
Without waiving any rights under this Agreement or the Related Agreements,
after the Closing, Seller shall not oppose in any public forum Buyer's efforts
to obtain the permits described in the previous sentence, other than as may be
required to preserve system reliability or to comply with the requirements of
the ISO or NEPOOL.
5.2 Access to Information and Assets. Between the Effective Date and the
--------------------------------
Closing Date, Seller will, (i) during ordinary business hours and upon
reasonable notice, give Buyer Group reasonable access to all personnel,
Facilities, Sites, books, records, plans, offices and other facilities and
properties constituting the Assets to which Buyer is permitted access by law,
and the managerial personnel associated therewith, and permit the Buyer to
make reasonable inspections and investigations thereof as Buyer may reasonably
request, and (ii) furnish Buyer with such financial and operating data and
other information of Seller with respect to the Assets as Buyer may from time
to time reasonably request, including, without limitation, (a) information
related to Environmental Conditions, (b) a copy of all material reports,
schedules and other documents filed or received by Seller with respect to the
Assets or from the SEC, DPU, NRC, EPA or FERC, or any state or local
environmental or other regulatory agency, and (c) all such other information
as shall be necessary to enable Buyer to verify the accuracy of the
representations and warranties of Seller contained in this Agreement, to
verify that the covenants of Seller contained in this Agreement have been
complied with and to determine the conditions set forth in Article 13 have
been satisfied; provided, however that any such investigations shall be
conducted in such a manner as not to interfere unreasonably with the operation
of the Assets. Buyer shall have the right to make and take copies of all such
information. Seller shall not be required to take any action which would
constitute a waiver of the attorney-client privilege and Seller need not
supply Buyer with any information which Seller is under a legal obligation not
to supply; provided that Seller shall use Commercially Reasonable Efforts to
obtain a waiver of any such obligation and shall inform Buyer when it is not
providing any such information as a result thereof. Buyer shall have the
right to conduct or perform, at its sole cost and expense, environmental
testing at, in, on or underneath the Assets as Buyer may deem appropriate.
All information furnished to or obtained by Buyer or Buyer Group pursuant to
this Section 5.2 shall be subject to the provisions of Section 6.2 of this
Agreement.
5.3 Compliance with HSR Act. The Parties will comply with the provisions
-----------------------
of the HSR Act to the extent applicable to the transactions contemplated
hereunder. As promptly as possible after the date hereof, the Parties will
make the required filings under the HSR Act and any rules and regulations
promulgated thereunder, and it will be a condition precedent to closing for
both Seller and Buyer that all waiting periods under the HSR Act expire or
terminate prior to Closing. If any Governmental Authority having jurisdiction
under the HSR Act requires the filing of any additional information, each
Party will provide such information in a prompt and diligent manner. Each
Party agrees to make available to the other such information as each of them
may reasonably request relative to its business, assets and property as may be
required of each of them to file any additional information requested by such
agencies under the HSR Act and any such
<PAGE> 19
rules and regulations. Buyer will pay all filing fees under the HSR Act, but
each Party will bear its own costs of the preparation of any filing. Both
parties shall use Commercially Reasonable Efforts to cause any waiting period
under the HSR Act to expire, or to terminate with respect to the transaction
at the earliest possible time.
5.4 Advice of Changes. Prior to the Closing, each Party promptly will
-----------------
advise the other in writing with respect to any matter arising after execution
of this Agreement of which that Party obtains Knowledge and which, if existing
or occurring at the date of this Agreement, would have been required to be set
forth in any of the Schedules. Seller will promptly notify Buyer of any
development, event or fact causing a breach of any of its representations and
warranties in Article 3. Unless Buyer has the right to terminate this
Agreement pursuant to Section 15.1.2 below by reason of the development and
exercises that right within the period of fifteen (15) days after such right
accrues, the written notice pursuant to this Section 5.4 will be deemed to
have amended the appropriate Schedule, to have qualified the representations
and warranties contained in Article 3 above, and to have cured any
misrepresentation or breach of warranty that otherwise might have existed
hereunder by reason of the development.
ARTICLE 6
CONFIDENTIALITY
6.1 Public Announcement. Subject to the requirements imposed by any
-------------------
Governmental Authority or stock exchange, prior to the Closing Date, no press
release or other public announcement, or public statement or comment in
response to any inquiry, relating to the transactions contemplated by this
Agreement shall be issued or made by either Party without the approval of the
other Party. The Parties agree to cooperate in preparing such announcements.
6.2 Confidentiality. Each Receiving Party (and its officers, employees,
---------------
counsel, representatives and agents) will, using the same degree of care as
that Receiving Party takes to preserve and safeguard its own Proprietary
Information, maintain in confidence and not disclose to third Persons, any
Proprietary Information received from the Disclosing Party (or its officers,
employees, counsel, representatives and agents) in connection with the
transactions contemplated by this Agreement. Each Receiving Party may
disclose Proprietary Information received from the Disclosing Party (a) if and
to the extent requested by, or required by law, court order, subpoena or other
lawful order of a Governmental Authority with jurisdiction, provided that (i)
the Receiving Party first notifies the Disclosing Party in writing of such
request or requirement so that the Disclosing Party may seek a protective
order or other appropriate remedy and (ii) the Receiving Party will furnish
only that portion of such Proprietary Information which is requested or
legally required and will cooperate with the Disclosing Party's counsel to
enable the Disclosing Party to obtain a protective order or other reliable
assurance that confidential treatment will be accorded the Proprietary
Information, (b) with the prior written consent of the other Receiving Party,
or (c) in accordance with Section 6.3 below, (d) to its Affiliate and its
Affiliate's officers, directors, employees, agents, financial advisors,
attorneys and accountants,
<PAGE> 20
(collectively, "Representatives") who need to know such Proprietary
Information in order to assist the Receiving Party in or in connection with
the transactions contemplated by this Agreement, provided that the Receiving
Party will first inform each Representative of the confidential nature of such
information and such Representative orally agrees to comply with the terms
hereof to the same extent that would be required hereby if it was the
Receiving Party, (e) to third party consultants and potential lenders for the
foregoing purposes, provided that each consultant and potential lender first
enters into a written confidentiality agreement with the Receiving Party that
incorporates the terms hereof, or (f) in connection with any litigation or
dispute resolution procedure involving Proprietary Information and the
Receiving Party, provided that the Receiving Party will first use reasonable
efforts to ensure that confidential treatment will be accorded the Proprietary
Information during and after any proceedings regarding same. The Receiving
Party shall be responsible for the actions, uses, and disclosures of its
Representatives, consultants and potential lenders with respect to the
Proprietary Information. If this Agreement is terminated prior to Closing,
each Party will return promptly, if so requested by the other Party, any
Proprietary Information provided to it and will use Commercially Reasonable
Efforts to return any copies thereof that may have been provided to others in
accordance with this Section 6.2.
6.3 Regulatory Agencies. Upon the Disclosing Party's prior written
-------------------
approval (which will not be unreasonably withheld), the Receiving Party may
provide Proprietary Information to the DPU, the FERC or any other Governmental
Authority with jurisdiction, as necessary to obtain any consents, waivers or
approvals as may be required for the Receiving Party to undertake the
transactions contemplated herein. The Receiving Party will seek confidential
treatment for such Proprietary Information provided to any such Governmental
Authority and the Receiving Party will notify the Disclosing Party as far in
advance as is practicable of its intention to release to any such Governmental
Authority any such Proprietary Information.
6.4 Survival. The obligations of the Parties in this Article 6 shall be
--------
in full force and effect for three (3) years from the date hereof and will
survive the termination of this Agreement, the discharge of all other
obligations owed by the Parties to each other, any transfer of title to the
Assets and the Closing of the transactions contemplated in this Agreement.
Nothing herein shall affect the obligations of the Parties under the
Confidentiality Agreement previously executed.
6.5 Buyer Contact with Vendors and Employees; Cooperation. Buyer agrees
-----------------------------------------------------
that, prior to the Closing Date, it will not contact any vendors, suppliers,
employees or other contracting parties of Seller or its Affiliates with
respect to any aspect of the Assets or the transactions contemplated hereby
without the prior written consent of Seller, such consent not to be
unreasonably withheld. Seller shall fully cooperate with Buyer regarding the
hiring by Buyer of Seller's employees covered by the Collective Bargaining
Agreement and Seller shall use Commercially Reasonable Efforts to facilitate
the orderly hiring by Buyer of other employees of Seller employed in
connection with the Assets to whom Buyer elects to offer employment.
<PAGE> 21
ARTICLE 7
TAXES, PRORATIONS AND CLOSING COSTS
7.1 Taxes. Buyer will pay all sales and transfer taxes arising in
-----
connection with the sale and transfer of the Assets, including without
limitation (a) Massachusetts state sales tax, and (b) the Massachusetts excise
tax on deeds imposed by M.G.L. c. 64D, 1, and Buyer will, at its own expense,
file, to the extent required by applicable law, all necessary tax returns,
reports, information returns or other documents required to be supplied to any
Governmental Authority with respect to such sales and transfer taxes. Seller
and Buyer shall each pay their own income Taxes.
7.1.1 Closing Adjustment. Real and personal property Taxes relating
------------------
to the Assets for the taxable period in which the Closing occurs will be
equitably prorated (in the event that final assessed tax amounts are not
available for the Closing, the proration will be based upon the tax bill for
the last full finally assessed tax year) between Buyer and Seller, as follows:
Seller shall be responsible for all such Taxes assessed for any period up to
and including the Closing Date, and Buyer shall responsible for all such Taxes
for period commencing with the day after the Closing and thereafter, and the
net amount thereof shall be added to, or deducted from, the Purchase Price, as
the case may be. All Taxes will be prorated on the assumption that an equal
amount of Taxes applies to each day of the year, regardless of how any
installment payments are billed or made, except that Buyer will bear all
supplemental or other state and local real and personal property Taxes,
including any reassessments, which arise out of a change in ownership of the
Assets. Within 30 Business Days after any such Taxes prorated on an estimated
basis are finally assessed, the Seller shall pay to the Buyer or the Buyer
shall pay to the Seller, as the case may be, its proportionate share of any
difference between the estimated and assessed taxes.
7.1.2 Abatements, Refunds and Credits. Notwithstanding anything in
-------------------------------
Section 2.1(k) to the contrary, Seller shall be entitled to any abatements,
refunds or credits of Taxes relating to the Assets for the period prior to and
including the Closing Date. Buyer will promptly notify and forward to Seller
the amounts of any such abatements, refunds or credits received by Buyer
within fifteen (15) days after receipt thereof. Any abatements, refunds and
credits of Taxes relating to a period both prior to and after the Closing
shall be shared (net of the reasonable costs of obtaining such abatements,
refunds and credits) proportionately between Seller and Buyer based on the
portion of the taxable period in question that each owned the Assets.
7.1.3 Tax Audits. After the Closing, Buyer will notify Seller in
----------
writing, within fifteen (15) days after its receipt of any correspondence,
notice or other communication from a Governmental Authority or any
representative thereof, of any pending or threatened tax audit, or any pending
or threatened judicial or administrative proceeding that involves Taxes
relating to the Assets for the period prior to the Closing, and furnish Seller
with copies of all correspondence received from any such Governmental
Authority in connection with any audit or
<PAGE> 22
information request with respect to any such Taxes relating to the Assets for
the period prior to the Closing.
7.1.4 Tax Claims. Notwithstanding any provision of this Agreement
----------
to the contrary, with respect to any claim for abatement, refund, audit,
examination, notice of deficiency or assessment or any judicial or
administrative proceeding that involves Taxes relating to the Assets for the
period either entirely prior to the Closing or both prior to and after the
Closing (collectively, a "Tax Claim"), Buyer will reasonably cooperate with
Seller in making or contesting any Tax Claim, including making available
original books, records, documents and information for inspection, copying
and, if necessary, introduction as evidence at any such Tax Claim contest and
making employees available on a mutually convenient basis to provide
additional information or explanation of any material provided hereunder with
respect to such Tax Claim, or to testify at proceedings relating to such Tax
Claim. Seller will control all proceedings taken in connection with any Tax
Claim that pertains entirely to the period through the Closing, and Seller and
Buyer will jointly control all proceedings taken in connection with any Tax
Claim pertaining to the period both prior to and after the Closing. Buyer has
no right to settle or otherwise compromise any Tax Claim which pertains
entirely to the period prior to the Closing; and neither Party has the right
to settle or otherwise compromise any Tax Claim which pertains to the period
both prior to and after the Closing, without the other Party's prior written
consent.
7.2 Proration of Income and Expenses. Except as set forth in Section
--------------------------------
7.1, all items of income and expense relating to the business operations of
the Facilities and Assets that are normally prorated, including water and
sewer use charges, other charges in the nature of utility services, rents,
permit, license, registration, compliance or other fees for Permits, and items
payable by or to Seller under any of the Contracts for the period prior to and
including the Closing Date will be for the account of Seller, and all such
items of income and expense, for the period after the Closing Date will be for
the account of Buyer, all as determined by the accrual method of accounting.
7.3 Proration Method. For purposes of calculating prorations, Seller
----------------
will be deemed to own the Assets, and be entitled to the income therefrom and,
subject to the provisions of Article 9 hereof, responsible for the expenses
thereof for the entire day upon which the Closing occurs, and Buyer shall be
so entitled and responsible for all periods thereafter. All prorations will
be made on the basis of the actual number of days of the month which will have
elapsed as of the day of the Closing and based upon a three hundred sixty-five
(365) day year. Seller and Buyer shall furnish each other with such documents
and other records as may be reasonably requested in order to confirm all
adjustment and proration calculations made pursuant to this Article 7.
7.4 Costs and Expenses. Except to the extent specifically provided
------------------
herein, whether or not the transactions contemplated hereby are consummated,
all costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be borne by the party incurring such
costs and expenses. Notwithstanding anything to the contrary herein, Buyer
<PAGE> 23
will be responsible for (a) all costs and expenses associated with the
obtaining of any title insurance policy and all endorsements thereto that the
Buyer elects to obtain, and (b) all filing fees under the HSR Act. Seller and
Buyer each represent and warrant to the other, respectively, that, except for
Goldman, Sachs & Co. and Reed Consulting Group, Inc., which are acting for and
at the expense of the Seller, no broker, finder or other person is entitled to
any brokerage fees, commissions or finder's fees in connection with the
transaction contemplated hereby by reason of any action taken by the party
making such representation. Each of Seller and Buyer will pay to the other,
or otherwise discharge, and will indemnify and hold the other harmless from
and against, any and all claims or liabilities for all brokerage fees,
commissions, and finders' fees (other than as described above) incurred by
reason of any action taken by the indemnifying party.
ARTICLE 8
CASUALTY AND CONDEMNATION
8.1 Casualty Loss. If from the date hereof through the Closing, the
-------------
Assets are damaged by fire or other casualty (each such event, an "Event of
Loss"), or are taken by a Governmental Authority by exercise of the power of
eminent domain (each, a "Taking"), then the following provisions shall apply:
8.1.1 Minor Loss. The occurrence of (i) any one or more Events of
----------
Loss, of which the aggregate costs to restore, repair or replace are
reasonably estimated at an amount less than or equal to two percent (2%) of
the Purchase Price, and/or (ii) any one or more Takings, of which the
aggregate condemnation proceeds equal an amount less than or equal to two
percent (2%) of the Purchase Price, shall have no effect on the transactions
contemplated hereby.
8.1.2 Major Loss. Upon the occurrence of (i) any one or more Events
----------
of Loss, of which the aggregate costs to restore, repair or replace are
reasonably estimated at an amount in excess of two percent (2%) of the
Purchase Price, or (ii) any one or more Takings, of which the aggregate
condemnation proceeds equal an amount in excess of two percent (2%) of the
Purchase Price (a "Major Loss"), Seller shall have, in the case of a Major
Loss relating to one or more Events of Loss, the option, exercised by notice
to Buyer, to restore, repair or replace the damaged Assets prior to Closing.
If Seller elects to restore, repair or replace the Assets relating to a Major
Loss, which election shall be made by notice to Buyer within fifteen (15) days
following the occurrence of the Major Loss, the completion of the repair,
replacement or restoration will be a condition to the Closing and the Closing
Date shall be postponed at the election of Seller for the amount of time
reasonably necessary to complete the restoration, repair or replacement, not
to exceed one hundred and eighty (180) days without Buyer's consent. If
Seller elects not to restore, repair or replace the Assets affected by a Major
Loss, or such Major Loss is the result of one or more Takings, the provisions
of Section 8.1.3 will apply.
<PAGE> 24
8.1.3 Equitable Adjustment. In the event that Seller elects not to
--------------------
restore, repair or replace a Major Loss, or in the event that Seller, having
elected to repair, replace or restore the Major Loss, fails to complete the
repair, replacement or restoration within the one hundred eighty (180) days,
or in the event that a Major Loss is the result of one or more Takings, then
the parties shall, within thirty (30) days following Seller's election,
failure to complete, or the occurrence of such Takings, as the case may be,
negotiate in good faith an equitable adjustment in the Purchase Price to
reflect the impact of the Major Loss, as mitigated by any repair, replacement
or restoration work actually completed by Seller, on the Assets being sold to
Buyer, and proceed to Closing. To assist Buyer in its evaluation of any and
all Events of Loss, Seller shall provide Buyer such access to the Assets and
such information as Buyer may reasonably request in connection therewith.
8.1.4 Buyer's Election. In the event that the parties fail to reach
----------------
agreement on an equitable adjustment of the Purchase Price within the thirty
(30) days provided in Section 8.1.3, then Buyer shall have the election,
exercisable by notice to Seller within fifteen (15) days immediately following
the expiration of the thirty (30) day period, to either (a) proceed with the
consummation of the transaction at Closing, with a reduction in the Purchase
Price consistent with Seller's last offer communicated to Buyer, in which
event Seller shall assign over or deliver to Buyer at Closing all condemnation
proceeds or insurance proceeds which the Seller receives, or to which Seller
becomes entitled by virtue of the Events of Loss, less any costs and expenses
reasonably incurred by Seller in obtaining such condemnation proceeds or
insurance proceeds, or (b) terminate this Agreement, in which event this
Agreement shall terminate and neither Party shall thereafter have any
obligation or liability to the other by reason of this Agreement. If Buyer
fails to make the election within the fifteen (15) day period, Buyer will be
deemed to have made the election to proceed with the Closing.
ARTICLE 9
OPERATION PENDING CLOSING
9.1 Operation and Maintenance of Assets Pending Closing. From the
---------------------------------------------------
Effective Date through the Closing, except as expressly contemplated generally
by this Agreement or to the extent Buyer otherwise consents in writing, Seller
shall operate and maintain the Assets in the ordinary course in accordance
with Prudent Utility Practices, and, without limiting the generality of the
foregoing, Seller shall not, without the prior written consent of the Buyer:
9.1.1 Transfers. Sell, lease (as lessor), transfer or otherwise
---------
dispose of any material Assets, other than Assets used, consumed or replaced
in the ordinary course of business, or encumber, pledge, mortgage or impose or
suffer to be imposed on any of the Assets any other Encumbrance other than the
Permitted Encumbrances;
<PAGE> 25
9.1.2 Inventory Levels. Make any material change in the levels of
----------------
Inventories customarily maintained by the Seller with respect to the Assets,
except for such changes which are consistent with Prudent Utility Practices;
9.1.3 Tax Agreements. Enter into or amend any real or personal
--------------
property tax agreement or settlement.
9.1.4 Fuel Contracts. Enter into any commitment for the purchase or
--------------
sale of fuel (whether commodity or transportation) having a term greater than
six months and not terminable on or before the Closing Date either (i)
automatically, or (ii) by option of Seller (or, after the Closing, by Buyer)
in its sole discretion, if the aggregate payment under such commitment and all
other outstanding commitments not previously approved by Buyer would be
expected to exceed $5 million;
9.1.5 Modification of Contracts and Permits. Modify, amend or
-------------------------------------
voluntarily terminate prior to the expiration date any of the Contracts or any
of the Permits in any material respect, other than (a) in the ordinary course
of business, to the extent consistent with Prudent Utility Practices, (b) with
cause, to the extent consistent with Prudent Utility Practices, or (c) as may
be required in connection with transferring Seller's rights or obligations
thereunder to Buyer pursuant to this Agreement; or
9.1.6 Allowances and Credits. Sell, lease, reduce or otherwise
----------------------
dispose of Allowances or Air Emission Credits, except, in the case of Air
Emission Credits, in the ordinary operation of the Facilities or to NEPOOL in
connection with the summer capacity short-fall regulation, 310 C.M.R. 7.53.
9.1.7 Enter Into Contracts. Enter into any oral or written
--------------------
contract, agreement, commitment or arrangement which individually exceeds
$1,000,000 or in the aggregate exceeds $10,000,000, unless it is terminable by
Seller and its assignee without penalty or premium upon not more than 30 days
notice.
9.1.8 Labor Matters. Solely (in each of the following clauses (a)
-------------
through (d)) with respect to Local 369 as it relates to the business or
operations of the Assets and except as otherwise required by the terms of the
Collective Bargaining Agreement (as defined in Section 10.6), (a) hire at, or
transfer to the Assets, any new employees prior to the Closing, other than to
fill vacancies in existing positions in the reasonable discretion of Seller,
(b) increase salaries or wages prior to the Closing, (c) take any action prior
to the Closing to affect a change in the Collective Bargaining Agreement, or
(d) take any other action prior to the Closing to amend or terminate any
Benefit Plans (as defined in Section 3.14) or adopt any other benefit plan,
program, arrangements or practice providing benefits for or compensation to or
on behalf of Seller's employees at the Assets.
<PAGE> 26
9.2 Capital Expenditures. Notwithstanding anything in Section 9.1 to the
--------------------
contrary, Seller may, in its sole discretion, make or incur an obligation to
make (i) subject to the adjustment provisions set forth in Section 2.7.1(a),
Pre-Approved Capital Expenditures, and (ii) subject to the adjustment
provisions set forth in Section 2.7.1(b), such other capital and maintenance
expenditures as Seller shall deem necessary.
ARTICLE 10
AGREEMENTS RELATIVE TO PERIOD AFTER CLOSING
10.1 Post Closing Cooperation by Buyer. The Parties recognize that,
---------------------------------
notwithstanding the transfer of the Assets to the Buyer, Seller will need
access to certain information, records and assistance with respect to the
Assets relating to the period prior to Closing. Accordingly, the Parties
agree as follows:
10.1.1 Information and Administrative Support. For a period of five
--------------------------------------
(5) years after the Closing (or, if requested in writing by Seller within five
(5) years after the Closing, until the closing of the examination of Seller's
federal and state income tax returns for all periods prior to and including
the Closing, if later), Buyer agrees that it will, promptly following the
request of Seller and at Seller's expense, provide such information and
administrative support as will be reasonably requested by Seller to enable
Seller to comply with its obligations with respect to the issuance of Forms
W-2, 1099 and other tax reports, reports and notices relating to pension,
profit sharing, health and other plans, income tax returns, preparation of
financial statements and completion of Seller's audit for the two fiscal years
ended December 31 following the Closing Date, and other similar matters.
10.1.2 Books and Records. For a period of five (5) years after the
-----------------
Closing (or, if requested in writing by Seller within five (5) years after the
Closing, until the closing of the examination of Seller's federal and state
income tax returns for all periods prior to and including the Closing, if
later), Buyer will not dispose of any Records relating to any of the Assets
delivered to it by Seller without first giving notice to Seller of its intent
to so dispose of such Records, and permitting Seller to retain or copy such
Records at Seller's expense as Seller may select. During such period, Buyer
will permit Seller to examine and make copies, at Seller's expense, of such
Records for any reasonable purpose, including any litigation now pending or
hereafter commenced against Seller, or the preparation of income or other tax
returns.
10.1.3 Employees. For a period of five (5) years after the Closing,
---------
each of Buyer and Seller will make available to the other on a reasonable
basis and as requested from time to time by the other party after Closing,
those of its employees with knowledge of, or relevant to, the matters
described in Sections 5.1 and 5.2 and this Section 10.1 for the purpose of
consultation, investigation or testimony in connection therewith.
10.2 Further Assurances.
------------------
<PAGE> 27
(a) From time to time after the Closing Date, without further
consideration, the Seller, will, at its own expense, execute and deliver such
documents to the Buyer as the Buyer may reasonably request in order to more
effectively convey and transfer to, and vest in, the Buyer the Seller's title
to the Assets (as described in Section 2.10). From time to time after the
date hereof, the Buyer will, at its own expense, execute and deliver such
documents to the Seller as the Seller may reasonably request in order to more
effectively consummate the sale of the Assets pursuant to this Agreement.
(b) To the extent that Seller's rights under any Contract may not be
assigned without the consent of another Person, which consent has not been
obtained by the Closing Date, this Agreement shall not constitute an agreement
to assign the same, if an attempted assignment would constitute a breach
thereof, or be unlawful. Seller and Buyer agree that if any consent to an
assignment of any Contract shall not be obtained, or if any attempted
assignment would be ineffective or would impair Buyer's rights and obligations
under the Contract in question, so that Buyer would not in effect acquire the
benefit of all such rights and obligations, Seller, to the maximum extent
permitted by law and such Contract, shall, concurrently with or promptly after
the Closing, appoint Buyer to be the Seller's agent with respect to such
Contract, and Seller shall, to the maximum extent permitted by law and such
Contract, enter into such reasonable arrangements with Buyer as are necessary
to provide Buyer with the benefits and obligations of such Contract, provided
that Buyer shall not have any obligation to offer or pay any consideration in
order to obtain any such consents, and provided further that Seller shall not
make any agreement, arrangement or other understanding affecting the Assets or
their operation as a condition for obtaining and such consents without the
prior written consent of Buyer. Seller and Buyer shall cooperate and use
Commercially Reasonable Efforts after the Closing to obtain an assignment of
such Contract to Buyer.
(c) To the extent that Seller's rights under any warranty or
guaranty described in Section 2.1(i) may not be assigned without the consent
of another Person, which consent has not been obtained by the Closing Date,
this Agreement shall not constitute an agreement to assign the same, if an
attempted assignment would constitute a breach thereof, or be unlawful.
Seller and Buyer agree that if any consent to an assignment of any such
warranty or guaranty shall not be obtained, or if any attempted assignment
would be ineffective or would impair Buyer's rights and obligations under the
warranty or guaranty in question, so that Buyer would not in effect acquire
the benefit of all such rights and obligations, Seller, shall use Commercially
Reasonable Efforts, at Buyer's sole cost and expense, to the extent permitted
by law and such warranty or Guaranty, to enforce such warranty or guaranty for
the benefit of Buyer so as to the maximum extent possible to provide Buyer
with the benefits and obligations of such warranty or guaranty.
Notwithstanding the foregoing, Seller shall not be obligated to bring or file
suit against any third party, provided that if Seller shall determine not to
bring or file suit after being requested by Buyer to do so, Seller shall
assign, to the extent permitted by law of any applicable agreement or
contract, its rights in respect of the claims so that Buyer may bring or file
such suit.
<PAGE> 28
10.3 Notification of Transfer. After the Closing, Buyer, with the
------------------------
cooperation of and following consultation with Seller, will notify promptly
all relevant Governmental Authorities and all third Persons of the change in
ownership of the Assets resulting from the transactions contemplated herein,
to the extent required by applicable law or the specific underlying
agreements.
10.4 NEPOOL. Buyer shall on or prior to the Closing become a member of
------
NEPOOL.
10.5 Local Area Transmission Support. The Parties intend that the ISO
-------------------------------
will have the primary responsibility for ensuring that the operation of the
Assets is performed in a manner that is consistent with maintaining a level of
system reliability that is comparable to the level achieved when the Assets
were operated by Seller. In order to effectuate the ISO's oversight of the
operation of the Assets, Buyer agrees to maintain membership in good standing
in NEPOOL, and to submit to the governance of the ISO as established by the
NEPOOL Agreement. For a period of twelve (12) months following the
termination of the Transition Agreement, Buyer will submit to Seller any plan
to effect a permanent or long-term shut-down or substantial reduction in
existing generation capacity no less than thirty (30) days prior to such
shut-down or reduction. If Seller notifies Buyer within the aforementioned
thirty (30) day period that implementation of Buyer's plan has been determined
to have a material adverse effect on the stability, reliability or operating
characteristics of Seller's system or provision of electric service, then
Buyer shall not proceed to implement such plan until Buyer and Seller have
engaged in good faith negotiations for a period of thirty (30) days, or such
shorter period as is required, to negotiate an agreement resolving the matter
on terms acceptable to the Parties. Other than as may be required to preserve
system reliability or to comply with the requirements of the ISO or NEPOOL,
Seller shall not interfere with Buyer's efforts to expand or modify generation
capacity at any of the Sites.
10.6 Employees. (a) Except as provided in Section 10.6(c), Buyer is
---------
required to offer employment, effective as of the Closing Date, to only those
employees of Seller who are members of Local 369 and whose employment
responsibilities primarily relate to the Assets. All such offers of
employment shall be made in accordance with (i) all applicable laws and
regulations, and (ii) the Collective Bargaining Agreement and the Local 369
AOU, as defined in Section 10.6(b) below.
(b) Schedule 10.6(b) sets forth the collective bargaining agreement,
----------------
and amendments thereto, to which Seller is a party with Local 369 in
connection with the Assets (collectively, the "Collective Bargaining
Agreement"), and the Agreement of Understanding between Seller and Local 369
(the "Local 369 AOU"). On the Closing Date, Buyer will assume the Collective
Bargaining Agreement, as amended by the AOU, as it relates to Local 369
Employees to be employed at the Assets and comply with all applicable
obligations thereunder and will accept and fulfill all obligations under the
Local 369 AOU that are designated for Buyer, including but not limited to the
obligation of Buyer to recognize the union as the collective bargaining agent.
In the event that Buyer shall sell the Assets to a third party prior to
May 15, 2000, Buyer shall require such third party to assume and comply with
each of the
<PAGE> 29
obligations set forth in the "Successor Clause and Continued Employment"
section of the Local 369 AOU. Under the terms of the Local 369 AOU,
compliance by Buyer with its obligations under this Section 10.6(b) may not be
waived by Seller without the consent of Local 369. Except as provided in the
Local 369 AOU, Seller shall retain any and all liability under the Group
Welfare Benefits Plan for Retirees of Boston Edison.
(c) Buyer is required to offer employment to those employees of
Seller, other than members of Local 369, who were employed in non-managerial
positions to provide services for operation of the Assets at any time during
the three month period prior to the Closing Date, at levels of wages and
overall compensation not lower than the employees' prior levels for a period
of six months. Each person who becomes employed by Buyer pursuant to Section
10.6(a) or Section 10.6(c) shall be referred to herein as a "FBU Employee."
To the extent that the number of FBU Employees of the Seller in a
non-managerial position (other than members of Local 369) employed by the
Buyer at the Closing exceeds thirty (30), following the Closing Date, Seller
shall reimburse Buyer for the wages paid by Buyer, and the cost to Buyer of
benefits provided, to each such employee in excess of thirty (30), based on
the average actual wages and benefits provided to all such non-managerial
employees (other than members of Local 369). To the extent such number of
employees exceeds thirty (30), Seller's obligation with respect to such
employees shall continue for a period of one year from the Closing Date or
until any such employee's earlier termination of employment. To the extent
such number of employees exceeds forty (40), such obligation with respect to
any such employee in excess of forty (40) shall continue for an additional
year from the Closing Date or until any such employee's earlier termination
of employment.
(d) Any individual covered as of the Closing Date pursuant to the
provisions of COBRA under any Benefit Plan that is a Group Health Plan, or
with respect to whom a qualifying event, as defined under COBRA, has occurred
on or prior to the Closing Date and who later elects continuation coverage
under COBRA for such qualifying event, shall continue to be covered under such
Group Health Plan after Closing in accordance with the provisions of COBRA and
such Group Health Plan for such qualifying event. On or before the Closing
Date, Seller shall relocate or terminate the employment of all of its
employees whose responsibilities primarily relate to the Assets and shall be
solely responsible for payments of all wages and compensation including
without limitation accrued vacation pay, bonuses, severance pay, overtime, all
benefits under any Benefit Plan that become payable on account of such
termination of employment or any other amounts to which those employees may be
entitled for services rendered prior to their termination or by virtue of
their termination; provided, however, that Seller shall be responsible for any
severance benefits under the Local 369 AOU payable to the FBU Employees who
are members of the Local 369 who voluntarily resign from Buyer after
completing at least 30 days of employment with Buyer, within six (6) months of
the Closing Date who are eligible for such severance benefits. Seller agrees
to timely perform and discharge all requirements under the WARN Act and under
applicable state and local laws and regulations for the notification of its
employees arising from the sale of the Assets to Buyer up to and including the
Closing Date for those employees who will become FBU Employees effective as of
the Closing Date. After the
<PAGE> 30
Closing Date, Buyer shall be responsible for performing and discharging all
requirements under the WARN Act and under applicable state and local laws and
regulations for the notification of its employees with respect to the Assets.
ARTICLE 11
ENVIRONMENTAL MATTERS
11.1 Environmental Conditions. Except as otherwise provided herein, the
------------------------
Parties intend that the Buyer be solely responsible for any and all
Environmental Conditions with respect to the Sites and the Assets, as well as
for any and all Remediation resulting from any such Environmental Conditions
other than with respect to the Excluded Assets. Seller shall have no
liability to Buyer for the existence of any Environmental Condition at the
Sites or with respect to the Assets, and shall not have any obligation to
undertake any Remediation of any such Environmental Condition.
11.2 Obligations of Seller. Seller shall retain responsibility for
---------------------
Environmental Conditions, including any Remediation, with respect to the
Excluded Assets. Seller shall also retain responsibility for all matters
arising out of the transportation and disposal of Hazardous Substances from
the Sites to an Offsite Disposal Facility on or before the Closing Date and
for any civil or criminal fines or penalties for violations of Environmental
Laws arising from the operation of the Facilities prior to the Closing.
11.3 Environmental Commitments. As part of the Settlement Agreement,
-------------------------
Seller has made certain environmental commitments regarding the operation of
the Facilities. Such commitments are described in Attachment 6 of the
Settlement Agreement, and a copy is attached hereto as Schedule 11.3 (the
-------------
"Environmental Commitments"). Buyer agrees to comply with such Environmental
Commitments in accordance with their terms, to the extent applicable to the
Facilities. Buyer acknowledges that the performance of the Environmental
Commitments is a condition of the Settlement Agreement. The Parties agree
that Buyer's obligation with respect to the Environmental Commitments shall
survive the Closing, and shall be specifically enforceable by Seller to the
extent that such Environmental Commitments have not been superseded by other
laws and so long as such Environmental Commitments remain enforceable against
Seller or Buyer by relevant Governmental Authorities.
ARTICLE 12
INDEMNIFICATION, RELEASE AND RELATED MATTERS
12.1 Indemnification by Seller. Seller will indemnify, defend and hold
-------------------------
harmless Buyer from and against all Claims asserted against or suffered by the
Buyer relating to, resulting from or arising out of the following:
<PAGE> 31
(a) any breach by the Seller of any covenant, agreement or
obligation of the Seller contained in this Agreement;
(b) the failure of Seller to perform its obligations under Section
11.2;
(c) the Excluded Liabilities;
(d) any Third Party Claims against Buyer based on Seller's ownership
or operation of (i) to the extent not expressly assumed by Buyer pursuant to
the terms of the Agreement or the Related Agreements, the Assets prior to the
Closing, and (ii) the Excluded Assets after the Closing; or
(e) any liability which may be asserted by third parties with
respect to the Assets as a result of non-compliance with any Bulk Sales Laws.
12.2 Indemnification by Buyer. Buyer will indemnify, defend and hold
------------------------
harmless Seller from and against all Claims asserted against or suffered by
the Seller relating to, resulting from or arising out of the following:
(a) any breach by the Buyer of any covenant, agreement or obligation
of the Buyer contained in this Agreement;
(b) the Assumed Liabilities;
(c) the failure of the Buyer to perform its obligations under this
Agreement, including without limitation Sections 11.1 and 11.3;
(d) any Third Party Claims arising out of, or related to, the
assignment or purported assignment of Contracts, warranties or guarantees, or
any agreements or arrangements between the parties concerning the same; or
(e) any Third Party Claims against Seller based on Buyer's ownership
or operation of the Facilities and Assets after the Closing.
12.3 Buyer's Release of Seller. Except as provided in Section 12.1,
-------------------------
Buyer, for itself and on behalf of the Buyer Group, does hereby release, hold
harmless and forever discharge each member of the Seller Group from any and
all Claims of any kind or character, whether known or unknown, hidden or
concealed, resulting from or arising out of any Environmental Condition, other
than the Environmental Conditions retained by the Seller under Section 11.2.
Buyer hereby waives any and all rights and benefits that it now has, or in the
future may have conferred upon it by virtue of any statute or common law
principle of 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, which if known would have materially affected such
party's settlement
<PAGE> 32
with the obligor. In this connection, the Buyer hereby acknowledges that
factual matters now unknown to it may have given or may hereafter give rise
to Claims that are presently unknown, unanticipated and unsuspected, and it
further agrees that this release has been negotiated and agreed upon in light
of that awareness and it nevertheless hereby intends to release each member
of the Seller Group from the Claims described in the first sentence of this
Section.
12.4 Notice of Claim. Promptly after obtaining Knowledge of a Claim for
---------------
which it is entitled to indemnity under this Article 12, the Party seeking
indemnification hereunder (the "Indemnitee") will notify the Party against
whom indemnification is sought (the "Indemnitor") in writing of such Claim,
including any Third Party Claim (a "Notice of Claim"). A Notice of Claim will
specify, in reasonable detail, the facts known to the Indemnitee regarding the
Claim. Subject to the terms of this Agreement, the failure to provide (or
timely provide) a Notice of Claim will not affect the Indemnitee's rights to
indemnification, except to the extent the Indemnitor is prejudiced thereby;
provided, however, the Indemnitor is not obligated to indemnify the Indemnitee
for the increased amount of any Claim which would otherwise have been payable
to the extent that the increase resulted from the failure to deliver timely
a Notice of Claim.
12.5 Defense of Third Party Claims. The Indemnitor will have the right to
-----------------------------
conduct and control, at its expense, the defense, compromise or settlement of
any Third Party Claim or demand set forth in a Notice of Claim with counsel of
its choice. If the Indemnitor fails to notify the Indemnitee in writing
within thirty (30) days that it intends to undertake a defense or contest a
Third Party Claim with due diligence, or the Indemnitor fails to take
reasonable steps necessary to defend diligently such Third Party Claim within
twenty (20) days after receiving notice from the Indemnitee that the
Indemnitee believes the Indemnitor has failed to take such steps, the
Indemnitee may undertake its own defense, compromise or settlement and the
Indemnitor will be bound by the result obtained by the Indemnitee. Without
the prior written consent of the Indemnitee (which consent shall not be
unreasonably withheld), the Indemnitor shall not enter into any settlement of
any Third Party Claim for 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 firm offer is
made to settle any Third Party Claim without leading to liability or the
creation of a financial or other obligation on the part of the Indemnitee for
which the Indemnitee is not entitled to indemnification hereunder and the
Indemnitor desires to accept and agree to such offer, the Indemnitor shall
give written notice to the Indemnitee to that effect. If the Indemnitee fails
to consent to such firm offer within twenty (20) days after its receipt of
such notice, the Indemnitee may continue to contest or defend such Third Party
Claim and, in such event, the maximum liability of the Indemnitor shall be the
amount of such settlement offer, plus reasonable costs and expenses paid or
incurred by the Indemnitee up to the date of such notice. Notwithstanding the
foregoing, the Indemnitee shall have the right to pay, compromise or settle
any Third Party Claim at any time, provided that in such event the Indemnitee
shall waive any right to indemnity therefor hereunder unless the Indemnitee
shall have first sought the consent of the Indemnitor in writing to such
payment, settlement or compromise and such consent was unreasonably withheld
or delayed, in which event no claim
<PAGE> 33
for indemnity therefor hereunder shall be waived. This Section 12.5 is
subject to the rights of any insurance carrier that is defending the Third
Party Claim.
12.6 Cooperation. The Party defending the Third Party Claim will (a)
-----------
consult with the other Party throughout the pendency of the Third Party Claim
regarding the investigation, defense, settlement, compromise, trial, appeal or
other resolution thereof; and (b) afford the other Party the opportunity, by
notice, to participate and be associated in the defense of the Third Party
Claim through counsel chosen by such other Party at its own expense in the
defense of any Third Party Claim as to which a Party has elected to conduct
and control the defense thereof; provided, however, if the named parties to
any such proceedings (including any impleaded parties) include both the
Indemnitee and Indemnitor and representation of the Indemnitee and Indemnitor
by the same counsel would be inappropriate due to actual or potential
differing interests between them, then the Indemnitee shall have the right to
retain its own counsel at the cost and expense of the Indemnitor. The Parties
will cooperate in the defense of the Third Party Claim. The Indemnitee will
make available to the Indemnitor or its representatives all Records and other
materials reasonably required for use in contesting any Third Party Claim
(subject to the confidentiality provisions) and will furnish such testimony
and attend such conferences, discovery proceedings, hearings, trials, and
appeals as may be reasonably requested by the Indemnitor in connection
therewith. If requested by the Indemnitor, the Indemnitee will cooperate with
the Indemnitor and its counsel in contesting any Third Party Claim that the
Indemnitor elects to contest or, if appropriate, in making any counterclaim
against the Person asserting the claim or demand, or any cross-complaint
against any Person. The Indemnitor will reimburse the Indemnitee for any
expenses incurred by Indemnitee in cooperating with or acting at the request
of the Indemnitor.
12.7 Mitigation and Limitation on Claims. Notwithstanding anything to the
-----------------------------------
contrary contained herein:
12.7.1 Reasonable Efforts to Mitigate. The Indemnitee will use
------------------------------
Commercially Reasonable Efforts to mitigate all losses, damages and the like
relating to a Claim, including availing itself of any defenses, limitations,
rights of contribution, claims against third Persons and other rights at law
or equity. The Indemnitee's Commercially Reasonable Efforts shall include the
reasonable expenditure of money to mitigate or otherwise reduce or eliminate
any loss or expense for which indemnification would otherwise be due, and the
Indemnitor shall reimburse the Indemnitee for the Indemnitee's reasonable
expenditures in undertaking the mitigation.
12.7.2 Net of Insurance and Tax Benefits. Any Claim is limited to
---------------------------------
the amount of actual damages sustained by the Indemnitee, net of (i) the
dollar amount of any insurance or other proceeds actually receivable by the
Indemnitee or any of its Affiliates with respect to the Claim, and (ii) income
tax benefits to the Indemnitee, to the extent realized by the Indemnitee. Any
party seeking indemnity hereunder shall use Commercially Reasonable Efforts to
seek coverage (including both costs of defense and indemnity) under applicable
insurance policies with respect to any such Claims.
<PAGE> 34
12.7.3 [Reserved].
12.7.4 Applicability. The indemnification obligations of the
-------------
Parties described in this Article 12 apply only with respect to matters
arising under this Agreement, excluding the Related Agreements. Any Claims
arising under or pursuant to a Related Agreement shall be governed by the
indemnification obligations, if any, in the respective Related Agreement under
which the Claim arises.
12.8 No Recourse. To the extent the transfer, conveyance, assignment and
-----------
delivery of Assets to Buyer as provided in this Agreement is accomplished by
deeds, assignments, easements, leases, licenses, bills of sale, or other
instruments of transfer and conveyance, whether executed at the Closing or
thereafter, these instruments are made without representation or warranty by,
or recourse against, Seller, except as expressly provided in this Agreement or
in any such instrument.
12.9 Survival of Representations and Warranties. The representations and
------------------------------------------
warranties of Seller contained in Article 3, and the representations and
warranties of Buyer contained in Article 4 will remain in effect until the
Closing Date, at which time these representations and warranties will
terminate, and will be of no further force or effect.
12.10 Survival of Indemnification Provisions. The provisions of this
--------------------------------------
Article 12 shall survive the Closing.
12.11 Remedies Exclusive. From and after the Closing, the remedies set
------------------
forth in this Article 12 constitute the sole and exclusive remedy for any and
all Claims relating to this Agreement and are in lieu of any and all other
rights and remedies which the Seller or the Buyer may have under this
Agreement or otherwise for monetary relief with respect to any breach or
failure to perform or with respect to the Assumed or Excluded Liabilities,
other than equitable remedies or fraud. Each Party waives any provision of
law to the extent that it would limit or restrict the agreements contained in
this Article 12. Nothing herein shall prevent either Party from terminating
this Agreement in accordance with Article 15.
ARTICLE 13
CONDITIONS PRECEDENT TO OBLIGATIONS OF
BUYER AT THE CLOSING
The obligations of Buyer under this Agreement to complete the
purchase of the Assets and assume the Assumed Liabilities are subject to the
satisfaction or waiver by Buyer, on or prior to the Closing, of each of the
following conditions precedent:
<PAGE> 35
13.1 Warranties and Covenants. The representations and warranties of
------------------------
Seller hereunder shall be true and correct in all material respects when made
and as of the Closing Date. Seller shall have performed or complied in all
material respects with all covenants, agreements and conditions contained in
this Agreement on its part required to be performed or complied with at or
prior to the Closing.
13.2 Regulatory Approvals. Buyer shall have received all Buyer's
--------------------
Regulatory Approvals (as listed on Schedule 13.2), in each case without terms
-------------
and conditions that unacceptably affect the Buyer in Buyer's reasonable
discretion, except for any matters that, in the aggregate, have no Material
Adverse Effect.
13.3 No Litigation. No suit, action or other proceeding against any Party
-------------
or its Affiliates or any of the Assets shall be pending before any
Governmental Authority which seeks to restrain or prohibit any of the
transactions contemplated by this Agreement, except for matters that, in the
aggregate, will not have a Material Adverse Effect, or to obtain material
damages or other material relief in connection with this Agreement or the
transactions contemplated hereby. No preliminary or permanent injunction or
other order or decree by any Governmental Authority which prevents the
consummation of the sale of the Assets contemplated hereby shall have been
issued and remain in effect (each party agreeing to use its reasonable best
efforts to have any such injunction, order or decree lifted), and no statute,
rule or regulation shall have been enacted by any Governmental Authority which
prohibits the consummation of the sale of the Assets.
13.4 Seller's Closing Deliveries. Seller shall have delivered, or caused
---------------------------
to be delivered, to Buyer at the Closing Seller's closing deliveries described
in Section 2.10.
13.5 HSR Act. The condition precedent set forth in Section 5.3 shall have
-------
been satisfied.
13.6 No Termination. Neither Party has exercised any termination right
--------------
such Party is entitled to exercise pursuant to Article 15.
13.7 Transition Agreement. The Transition Agreement shall be in full
--------------------
force and effect.
ARTICLE 14
CONDITIONS PRECEDENT TO OBLIGATIONS OF
SELLER AT THE CLOSING
The obligations of Seller under this Agreement to complete the sale
and transfer of the Assets to Buyer are subject to the satisfaction or waiver
by Seller, on or prior to the Closing, of each of the following conditions
precedent:
14.1 Warranties and Covenants. The representations and warranties of
------------------------
Buyer hereunder shall be true and correct in all material respects when made
and as of the Closing Date. Buyer shall
<PAGE> 36
have performed or complied in all material respects with all covenants,
agreements and conditions contained in this Agreement on its part required to
be performed or complied with at or prior to the Closing.
14.2 Regulatory Approvals. Seller shall have received all Seller's
--------------------
Regulatory Approvals (as listed on Schedule 14.2), in each case without terms
-------------
and conditions that unacceptably affect the Seller in Seller's reasonable
discretion, except for any matters that, in the aggregate, have no Material
Adverse Effect.
14.3 DPU Approval. The DPU Approval shall have occurred and all the terms
------------
and conditions of the DPU Approval shall be acceptable to Seller in its sole
discretion.
14.4 No Litigation. No suit, action or other proceeding against any Party
-------------
or its Affiliates shall be pending before any court or Governmental Authority
which seeks to restrain or prohibit any of the transactions contemplated by
this Agreement, except for matters that, in the aggregate, will not have a
Material Adverse Effect, or to obtain material damages or other material
relief in connection with this Agreement or the transactions contemplated
hereby. No preliminary or permanent injunction or other order or decree by
any Governmental Authority which prevents the consummation of the sale of the
Assets contemplated hereby shall have been issued and remain in effect (each
party agreeing to use its reasonable best efforts to have any such injunction,
order or decree lifted), and no statute, rule or regulation shall have been
enacted by any Governmental Authority which prohibits the consummation of the
sale of the Assets.
14.5 Buyer's Closing Deliveries. Buyer shall have delivered, or caused to
--------------------------
be delivered, to Seller at the Closing, the documents and payments referenced
in Section 2.11.
14.6 HSR Act. The condition precedent set forth in Section 5.3 shall have
-------
been satisfied.
14.7 No Termination. Neither Party has exercised any termination right
--------------
such Party is entitled to exercise pursuant to Article 15.
14.8 Transition Agreement. The Transition Agreement shall be in full
--------------------
force and effect.
ARTICLE 15
TERMINATION AND REMEDIES
15.1 Termination. This Agreement may be terminated at any time prior to
-----------
the Closing Date by notice from one Party to the other under the following
circumstances:
15.1.1 by Seller if there has been a material misrepresentation or
breach by Buyer with respect to any material representations and warranties,
or a material default or breach by Buyer in the performance of any of Buyer's
covenants or other obligations contained in this Agreement,
<PAGE> 37
and such misrepresentation, default or breach is not cured by the earlier of
the Closing Date or the date thirty (30) days after receipt by Buyer of notice
specifying particularly such misrepresentation, default or breach, and such
violation or breach has not been waived by Seller;
15.1.2 by Buyer if there has been a material misrepresentation or
breach by Seller with respect to any material representations and warranties,
or a material default or breach by Seller in the performance of any of
Seller's covenants contained in this Agreement, and such misrepresentation,
default 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 particularly
such misrepresentation, default or breach, and such violation or breach has
not been waived by Buyer;
15.1.3 by Seller on thirty (30) days' notice any time after the
issuance of the DPU Approval, if Seller in its sole discretion finds one or
more of the terms and conditions of the DPU Approval unacceptable;
15.1.4 by Buyer, if (i) any of Buyer's Regulatory Approvals, the
receipt of which is a condition to the obligations of Buyer to consummate the
Closing as set forth in Section 13.2, shall have been denied or shall have
been granted subject to terms or conditions that unacceptably affect Buyer, in
Buyer's reasonable discretion, except for any matters that, in the aggregate,
have no Material Adverse Effect, and all appeals of such determination shall
have been taken and have been unsuccessful, (ii) one or more courts of
competent jurisdiction shall have issued an order, judgment or decree
permanently restraining, enjoining or otherwise prohibiting the Closing, which
order, judgment or decree shall have become final and non-appealable, (iii)
any statute, rule or regulation shall have been enacted by any Governmental
Authority which, directly or indirectly, prohibits the consummation of the
transactions contemplated hereby or (iv) the DPU fails to issue an order
(notwithstanding the fact that such order may be subject to appeal) approving
the transactions contemplated by the Agreement and the reasonableness of the
proceeds received by Seller within the period of time provided for the
issuance of such approval in the Settlement Agreement, as finally approved by
the DPU.
15.1.5 by Seller, if (i) any of Seller's Regulatory Approvals, the
receipt of which is a condition to the obligations of Seller to consummate the
Closing as set forth in Section 14.2, shall have been denied or shall have
been granted subject to terms or conditions that unacceptably affect Seller,
in Seller's reasonable discretion, except for any matters that, in the
aggregate, have no Material Adverse Effect, and all appeals of such
determination shall have been taken and have been unsuccessful, (ii) the DPU
fails to issue an order (notwithstanding the fact that such order may be
subject to appeal) approving the transactions contemplated by the Agreement
and the reasonableness of the proceeds received by Seller within the period of
time provided for the issuance of such approval in the Settlement Agreement,
as finally approved by the DPU, (iii) one or more courts of competent
jurisdiction shall have issued an order, judgment or decree permanently
restraining, enjoining or otherwise prohibiting the Closing, which order,
judgment or decree shall have become final and non-appealable, or (iv) any
statute, rule or
<PAGE> 38
regulation shall have been enacted by any Governmental Authority which,
directly or indirectly, prohibits the consummation of the transactions
contemplated hereby;
15.1.6 by Buyer in accordance with Section 8.1;
15.1.7 by Seller if there shall have occurred any change that is
materially adverse to the business, operations, condition (financial or
otherwise) of Buyer.
15.1.8 by mutual agreement of Seller and Buyer; or
15.1.9 by Seller or Buyer if the Closing has not occurred on or
before December 31, 1998, provided that the right to terminate this Agreement
under this Section 15.1.9 shall not be available to any party whose failure to
fulfill any obligation under this Agreement has been the cause of, or resulted
in, the failure of the Closing to occur on or before such date.
15.2 Effect of Termination Without Default. If this Agreement is
-------------------------------------
terminated pursuant to any of Sections 15.1.3 through 15.1.9, then all further
obligations and liabilities of the Parties hereunder will terminate, except as
otherwise expressly provided in this Agreement, and thereafter neither Party
shall have any recourse against the other by reason of this Agreement.
ARTICLE 16
MISCELLANEOUS AGREEMENTS
16.1 Dispute Resolution. Prior to instituting any litigation or
------------------
alternative dispute resolution mechanism, the Parties will attempt in good
faith to resolve any dispute or claim promptly by referring any such matter to
their respective chief executive officers for resolution. Either Party may
give the other Party written notice of any dispute or claim. Within ten (10)
days after delivery of said notice, the executives will meet at a mutually
acceptable time and place, and thereafter as often as they reasonably deem
necessary to exchange information and to attempt to resolve the dispute or
claim within thirty (30) days.
16.2 Bulk Transfer Laws. Without admitting the applicability of the bulk
------------------
transfer laws of any jurisdiction, the Parties agree that they will not comply
with any applicable bulk transfer or similar law in connection with the
transactions contemplated by this Agreement.
16.3 Notices. All notices, requests, demands and other communications
-------
under this Agreement shall be in writing and shall be delivered in person,
against receipt, or sent by postage prepaid, return receipt requested, or by
overnight delivery by a courier service providing evidence of receipt, and
properly addressed as follows:
If to Seller:
<PAGE> 39
Boston Edison Company
800 Boylston Street
Boston, Massachusetts 02199
Attention: Douglas S. Horan, Esq.
Senior Vice President and General Counsel
With a copy to:
Ropes & Gray
One International Place
Boston, Massachusetts 02110-2624
Attention: David A. Fine, Esq.
If to Buyer:
Sithe Energies, Inc.
450 Lexington Avenue, 37th Floor
New York, New York 10017
Attention: David Tohir
Senior Vice President
With a copy to:
Latham & Watkins
1001 Pennsylvania Avenue, Suite 1300
Washington, D.C. 20004
Attention: Harrison Wellford, Esq.
All notices and other communications required or permitted under this
Agreement shall be effective upon delivery. Any Party may from time to time
change its address for the purpose of notices to that Party by a similar
notice specifying a new address.
16.4 Assignability. This Agreement is binding upon and inures to the
-------------
benefit of the successors and assigns of the Parties, but is not assignable by
either Party without the prior written consent of the other Party, which
consent may be granted or withheld in such Party's sole discretion.
Notwithstanding the foregoing sentence, (a) Buyer may assign all or a portion
of this Agreement or the Related Agreements to an Affiliate without such
consent; provided, however, that in the event of such assignment, (i) Buyer
shall guarantee by execution of a Guaranty substantially in the form of
Exhibit H hereto the full and timely performance of all obligations of such
- ---------
Affiliate under this Agreement and all Related Agreements, as so assigned,
(ii) Buyer shall deliver to Seller a copy, certified by its Secretary, of
resolutions authorizing the execution and delivery of
<PAGE> 40
such Guaranty, (iii) Buyer shall deliver to Seller a certificate of the
Secretary of Buyer identifying by name and title and bearing the signatures of
the officers of Buyer authorized to execute and deliver the Guaranty and (iv)
Buyer shall deliver to Seller an opinion from Latham & Watkins, counsel to
Buyer, dated as of the date of such assignment and reasonably satisfactory in
form to Seller and its counsel, substantially to the effect that the Guaranty
is a valid and binding obligation of Buyer, subject to substantially the same
exceptions as set forth in Section 4.2; and (b) Buyer may assign on or after
the Closing, its rights and remedies (but not obligations) to any Person(s)
providing financing to Buyer or any assignee of Buyer in connection with the
acquisition of the Assets, and to the extent requested by such Person(s),
Seller shall consent to such assignment and acknowledge such Person's rights
to succeed to the rights and remedies (but not the obligations) of Buyer
hereunder.
(a) Buyer may collaterally assign its rights in this Agreement and
the Related Agreements to its lender(s), and its lenders may exercise their
rights under any such collateral assignment, without Seller's prior written
consent. In the event of such collateral assignment, Seller agrees to execute
for the benefit of such lender(s) a consent and agreement regarding such
assignment as is customary in the financings of domestic energy infrastructure
projects.
16.5 No Survival. Subject to the provisions of Section 15.1 and 15.2,
-----------
each and every representation, warranty and covenant contained in this
Agreement (other than matters that are expressly stated or intended to survive
the Closing, which shall expire in accordance with their terms) shall expire
with, and be terminated and extinguished by the Closing and the transfer of
the Assumed Liabilities pursuant to this Agreement, and such representations,
warranties and covenants shall not survive the Closing Date; and none of the
Seller, the Buyer or any officer, director, trustee or affiliate of any of
them shall be under any liability whatsoever with respect to any such
representation, warranty or covenant.
16.6 No Third Party Beneficiaries. Nothing in this Agreement, whether
----------------------------
express or implied, is intended to confer any rights or remedies under or by
reason of this Agreement on any Persons other than the Parties and their
respective permitted successors and assigns, nor is anything in this Agreement
intended to relieve or discharge the obligation or liability of any third
Persons to any Party, nor give any third Persons any right of subrogation or
action against any Party.
16.7 No Joint Venture. Nothing in this Agreement creates or is intended
----------------
to create an association, trust, partnership, joint venture or other entity or
similar legal relationship between the Parties, or impose a trust, partnership
or fiduciary duty, obligation, or liability on or with respect to either
Party. Except as provided in Section 10.2(b), neither Party is or shall act
as or be the agent or representative of the other Party.
16.8 Construction of Agreement. Ambiguities or uncertainties in the
-------------------------
wording of this Agreement will not be construed for or against any Party, but
will be construed in the manner that most accurately reflects the Parties'
intent as of the Effective Date they executed this Agreement. The Parties
acknowledge that they have been represented by counsel in connection
<PAGE> 41
with the review and execution of this Agreement, and, accordingly, there shall
be no presumption that this Agreement or any provision hereof be construed
against the Party that drafted this Agreement.
16.9 Effect of Closing. If a Party elects to proceed with the Closing
-----------------
knowing that any condition in its favor has not been satisfied, or that other
Party has breached any representation, warranty or covenant, the condition
that is unsatisfied or the representation, warranty or covenant which is
breached will be deemed waived by such Party as of the Closing Date, and such
Party will be deemed to fully release and forever discharge the other Party on
account of any and all claims, demands or charges, known or unknown, with
respect to the same. Nothing in this provision shall affect those matters
specifically stated to survive or to occur after the Closing pursuant to this
Agreement.
16.10 Conflicts. In the event of any conflicts or inconsistencies between
---------
the terms of this Agreement and the terms of any of the Related Agreements,
the terms of this Agreement will control.
16.11 Consent to Jurisdiction. Each of Seller and Buyer consents to the
-----------------------
nonexclusive jurisdiction of any local, state or federal court located within
the City of Boston, Suffolk County, Commonwealth of Massachusetts, for
adjudication of any suit, claim, action or other proceeding at law or in
equity relating to this Agreement, or to any transaction contemplated hereby.
Seller and Buyer each accepts, generally and unconditionally, the nonexclusive
jurisdiction of the aforesaid courts and waives any objection as to venue, and
any defense of forum non conveniens.
16.12 Changes in Law. If and to the extent that, during the period between
--------------
the Effective Date and the Closing Date, any laws or regulations that govern
any aspect of this Agreement shall change, so as to make any aspect of this
transaction unlawful, then the Parties agree to make such modifications to
this Agreement as may be reasonably necessary for the Agreement to accommodate
any such legal or regulatory changes.
16.13 Entire Agreement. This Agreement (including the Exhibits and
----------------
Schedules to this Agreement, which are incorporated herein by reference), the
Related Agreements and the Confidentiality Agreement contain the entire
agreement between the Parties with respect to the transactions contemplated
hereby, and supersede all negotiations, representations, warranties,
commitments, offers, contracts and writings prior to the Effective Date,
written or oral.
16.14 Amendment. No waiver and no modification or amendment of any
---------
provision of this Agreement is effective unless made in writing and duly
signed by the Parties.
16.15 No Waiver. Except as provided in Section 16.9, no waiver of any
---------
breach or default hereunder shall be considered valid unless in writing and
signed by the Party making the waiver, and no such waiver shall be deemed a
waiver of any subsequent breach or default of the same or similar nature.
<PAGE> 42
16.16 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which is an original, but all of which together
constitute one and the same instrument.
16.17 Severability. If any provision hereof is held invalid or
------------
unenforceable by any Governmental Authority of competent jurisdiction, or as a
result of future legislative action, this holding or action will be strictly
construed and will not affect the validity or effect of any other provision
hereof, and the Parties shall endeavor in good faith to replace such invalid
or unenforceable provision with a valid and enforceable provision which
achieves the purposes intended by the Parties to the greatest extent permitted
by law. To the extent permitted by law, and except as otherwise provided in
this Section 16.17, the Parties waive, to the maximum extent permissible, any
provision of law that renders any provision hereof prohibited or unenforceable
in any respect.
16.18 Interpretation. In this Agreement, unless a clear contrary intention
--------------
appears: (a) the singular number includes the plural number and vice versa;
(b) reference to any Person includes such Person's successors and assigns but,
if applicable, only if such successors and assigns are permitted by this
Agreement, and reference to a Person in a particular capacity excludes such
Person in any other capacity; (c) reference to any gender includes each other
gender; (d) reference to any agreement (including this Agreement), document or
instrument means such agreement, document or instrument as amended or modified
and in effect from time to time in accordance with the terms thereof and, if
applicable, the terms hereof; (e) reference to any Article, Section, Schedule
or Exhibit means such Article, Section, Schedule or Exhibit to this Agreement,
and references in any Article, Section, Schedule, Exhibit or definition to any
clause means such clause of such Article, Section, Schedule, Exhibit or
definition; (f) "hereunder," "hereof," "hereto" and words of similar import
are references to this Agreement as a whole and not to any particular Section
or other provision hereof or thereof; (g) "including" (and with correlative
meaning "include") means including without limiting the generality of any
description preceding such term; (h) relative to the determination of any
period of time, "from," means "from and including," "to" means "to but
excluding" and "through" means "through and including;" (i) reference to any
law (including statutes and ordinances) means such law as amended, modified
codified or reenacted, in whole or in part, and in effect from time to time,
including rules and regulations promulgated thereunder, and (j) all accounting
terms not otherwise defined herein shall have the meanings assigned to them in
accordance with U. S. generally accepted accounting principles.
16.19 Captions. The captions of the various Articles, Sections, Exhibits
--------
and Schedules of this Agreement have been inserted only for convenience of
reference and do not modify, explain, enlarge or restrict, or in any way
affect the construction or interpretation of any of the provisions of this
Agreement.
<PAGE> 43
16.20 Governing Law. The validity, interpretation and effect of this
-------------
Agreement are governed by and will be construed in accordance with the laws of
the Commonwealth of Massachusetts without regard to principles of conflicts of
law.
<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Agreement as a
sealed instrument, by and through their respective duly authorized
representatives, as of the date first above written.
BOSTON EDISON COMPANY
By: /s/ Thomas J. May
---------------------------------------------
Name: Thomas J. May
Title: Chairman and Chief Executive Officer
SITHE ENERGIES, INC.
By: /s/ Barry Sullivan
---------------------------------------------
Name: Barry Sullivan
Title: Vice Chairman
<PAGE>
TRANSITION AGREEMENT
BETWEEN
SITHE ENERGIES, INC.
AND
BOSTON EDISON COMPANY
FOR THE PURCHASED FACILITIES
----------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C>
ARTICLE 1. Definitions................................................. 1
ARTICLE 2. Purchase and Sale of each Facility's Capacity,
Energy and Ancillary Services............................... 3
ARTICLE 3. Dispatch.................................................... 4
ARTICLE 4. Term, Termination........................................... 4
ARTICLE 5. Capacity, Energy and Ancillary Services Purchase Rates...... 6
ARTICLE 6. Delivery of Facility's Capacity, Energy and Ancillary
Services by Seller.......................................... 7
ARTICLE 7. Billing, Meter Reading...................................... 8
ARTICLE 8. Limitation of Liability; Indemnification; Insurance;
Relationship of Parties..................................... 8
ARTICLE 9. Miscellaneous Provisions.................................... 9
ARTICLE 10. Assignment................................................. 10
ARTICLE 11. Force Majeure.............................................. 10
ARTICLE 12. Default.................................................... 11
ARTICLE 13. Governing Law, Dispute Resolution.......................... 12
ARTICLE 14. Waiver..................................................... 12
ARTICLE 15. Corporate Authorization.................................... 13
ARTICLE 16. Notice..................................................... 13
</TABLE>
<PAGE> 1
TRANSITION AGREEMENT
BETWEEN
SITHE ENERGIES, INC. AND BOSTON EDISON COMPANY
-----------------------------------------------
AGREEMENT entered into this tenth day of December, 1997 by and between
Sithe Energies, Inc., a Delaware Corporation (hereafter referred to as
"Seller"), and Boston Edison Company, a Massachusetts corporation having its
principal place of business at 800 Boylston Street, Boston, Massachusetts
02199, (hereafter referred to as "Company").
WHEREAS, Seller wishes to sell to Company and Company wishes to purchase
from Seller, electric capacity, energy, and ancillary services following the
closing pursuant to the Purchase and Sale Agreement dated December 10th ,1997
by and between Company and Seller (the "Purchase and Sale Agreement") pursuant
to which Seller will purchase the Facilities, as hereinafter defined, from the
Company, and Seller and Company will enter into the Interconnection and
Operation Agreement of even date herewith (the "Interconnection Agreement").
NOW, THEREFORE, in consideration of the mutual promises and agreements
contained herein, Seller and Company hereby agree as follows:
ARTICLE 1. Definitions
When used with initial capitalizations, whether in the singular or
in the plural, the following terms shall have meanings set forth
below. Any term not defined herein has the meaning set forth in
the Purchase and Sale Agreement, dated December 10th, 1997
(a) Agreement: This document, including its appendices, as amended
----------
from time to time.
(b) Capability Audit: The procedure used pursuant to the NEPOOL
-----------------
Agreement to determine the Summer Net Capability and the Winter
Net Capability of the Facility as currently set forth in the
NEPOOL Procedures entitled Criteria, Rules and Standards No. 4,
Rating and Auditing Generating Capability (CRS - 4) dated
November 1, 1996.
(c) Capacity: Seller's Summer Net Capability and/or Winter Net
---------
Capability as demonstrated by each Facility, during its last
applicable Capability Audit(s).
(d) Delivery Point: The point where Company's transmission or
---------------
distribution system connects with Seller's Facility as specified
in the Interconnection Agreement or a point designated by mutual
agreement of Parties.
(e) Facilities: The physical plant and land, described as Facilities
-----------
in the Purchase and Sale Agreement dated December 10th, 1997
including all protective and other associated
<PAGE> 2
equipment and future improvements necessary to produce electric
Capacity, energy and ancillary services (including but not limited
to the following products defined by NEPOOL, operable capacity, 10
minute spinning reserve, 10 minute non-spinning reserve, 30 minute
operating reserve, and automatic generator control). Each Facility
is summarized under the heading Unit Name in Exhibit A and Exhibit
B of this agreement
(f) FERC: The Federal Energy Regulatory Commission
----
(g) ISO-NE: The Independent System Operator of New England provided
------
for in the NEPOOL Agreement, or its successor.
(h) MDPU: The Massachusetts Department of Public Utilities.
----
(i) NEPOOL: The New England Power Pool, established by the NEPOOL
------
Agreement, or its successor.
(j) NEPOOL Agreement: The Agreement, dated September 1, 1971, as
-----------------
amended from time to time, governing the operation of NEPOOL, as
in full force and effect.
(k) NEPOOL Standards: All Criteria, Rules and Standards (CRS), NEPOOL
----------------
Automated Billing System Procedures (NABS) and Operating
Procedures (OP) issued or adopted by NEPOOL, ISO-NE and its
satellite agencies, or their successors, as amended from time to
time.
(l) Party: Seller or Company.
-----
(m) Prime Rate: That rate as announced by BankBoston (or its
----------
successor) as its prime rate in effect on the first day of the
month.
(n) Prudent Utility Practice: Any practices, methods and acts engaged
------------------------
in or approved by a significant portion of the electric utility
industry during the relevant time period, or any of the practices,
methods and acts which, in the exercise of reasonable judgment in
light of facts known at the time the decision was made, could have
been expected to accomplish the desired result at a reasonable
cost consistent with good business practices, reliability, safety
and expedition and giving due regard for the requirements of
governmental agencies having jurisdiction. Prudent Utility
Practice is not intended to be limited to the optimum practice,
method, or act to the exclusion of all others, but rather to be
acceptable practices, methods, or acts generally accepted in the
electric utility industry.
(o) Retail Access Date (RAD): The earlier of (a) the date on which
------------------------
all retail customers of all investor-owned electric companies in
Massachusetts can first purchase the electricity component of
their electric service from a supplier of their choice or (b) the
date, designated by Company, on which all of Company's retail
customers can first purchase the electricity component of their
electric service from a supplier of their choice. At the date of
execution hereof the Retail Access Date is expected to occur
during 1998.
<PAGE> 3
(p) Summer Net Capability (Capability): The Maximum Claimed
----------------------------------
Capability, as defined in NEPOOL CRS - 4 , of the Facility during
the Summer Capability Period, expressed in kilowatts, and as
determined by Capability Audit, exclusive of capacity required for
Facility use.
(q) Summer Capability Period: June 1st through September 30th, or
------------------------
such other period as established by NEPOOL from time to time.
(r) Winter Net Capability (Capability): The Maximum Claimed
----------------------------------
Capability, as defined in NEPOOL CRS - 4 , of each Facility during
the Winter Capability Period, expressed in kilowatts, and as
determined by Capability Audit, exclusive of the capacity required
for Facility use.
(s) Winter Capability Period: October 1st through May 31st, or such
------------------------
other period as established by NEPOOL from time to time.
ARTICLE 2. Purchase and Sale of each Facility's Capacity, Energy and
Ancillary Services
(a) Seller shall make each Facility available for economic dispatch by
ISO-NE and shall continue to operate each Facility as a producer
of electric Capacity, energy and ancillary services. Seller shall
not sell Capacity, energy or ancillary services from any Facility
to any other entity while this Agreement is in effect, except as
otherwise provided in this Agreement. Seller will use
commercially reasonable efforts to maintain each Facility's
Capability at the level demonstrated by the most recent Capability
Audit and use its commercially reasonable efforts to make
available to Company, on an ongoing basis, the energy and
ancillary services of the Facility. Seller will use Prudent
Utility Practices in all aspects of the management and operation
of each Facility.
(b) Seller agrees to sell and to deliver and Company agrees to
purchase and to accept delivery of each Facility's Capacity, as
demonstrated by the Facility, during its most recent Capability
Audit performed prior to the effective date of the Purchase and
Sale Agreement, and any energy and ancillary services generated by
the Facility, for Company's own use and/or sale to others for the
term of this Agreement. Company is not obligated to purchase
Capacity above the level demonstrated by the most recent
Capability Audit performed prior to the effective date of the
Purchase and Sale Agreement; provided, however, Seller may sell to
third parties Capacity from the Facility to the extent the same is
not sold to Company hereunder.
(c) Periodically after the execution of this Agreement, Seller shall
undergo Capability Audits pursuant to NEPOOL Standards to
demonstrate and audit the Summer Net Capability and/or the Winter
Net Capability of each Facility. The Capability Audit shall be
performed pursuant to NEPOOL Standards; or standards mutually
agreed by the Parties if NEPOOL ceases to establish such
standards. Seller agrees to provide the
<PAGE> 4
necessary documentation of the results of the demonstrations and
audits (NX-17's and supporting material).
(d) Seller and Company shall agree to scheduling the timing of planned
maintenance activities, which effectively reduce the output of
each Facility and are not the result of automatic initiation or
emergencies. Seller shall provide adequate notification of such
planned maintenance activities by telephone or fax to Company's
designated agent.
ARTICLE 3. Dispatch
(a) Seller will provide to Company all operating and cost information
necessary for verification of any forms to be provided to ISO-NE.
Company will submit all forms to ISO-NE.
(b) Seller's and Company's designated agent shall mutually agree to
any revision to the existing ISO-NE NX-12A Forms to be submitted
to ISO-NE in accordance with the provisions of the NEPOOL
Agreement and NEPOOL Standards.
(c) Whenever Company's system or the systems with which it is directly
interconnected experience an emergency, as designated by the
affected utility, or whenever it is necessary to aid in the
restoration of service on Company's system or on the systems with
which it is directly or indirectly interconnected, or, whenever
requested by ISO-NE, Seller or its designee will curtail or
interrupt the delivery of all or a portion of the production of
electricity at the Facilities.
(d) Whenever any Seller's Facility experiences an emergency, Seller or
its designee shall have the right to curtail or interrupt all or a
portion of Seller's obligation hereunder, provided such
curtailment or interruption shall continue only for so long as
reasonably necessary to deal with the emergency, and provided
Seller promptly notifies Company of the occurrence of such an
emergency.
(e) Seller shall comply with all NEPOOL Standards applicable to
Seller.
ARTICLE 4. Term, Termination
(a) The obligations of the parties under this agreement shall commence
on the Closing Date as defined in the Purchase and Sale Agreement
date and, subject to the termination provisions set forth in this
Agreement, shall continue until the later of (1) the date which is
30 days after the official commencement of the operations of the
NEPOOL spot markets for installed capacity, operable capacity,
energy, spinning and non-spinning reserves and automatic generator
control, as signified by the first day that resources are allowed
to bid into each market on a non-trial or non-experimental basis,
and 2) the Retail Access Date, but in no event will termination
occur within six (6) months of the Closing Date. The Company will
provide Seller on a monthly basis its most current
<PAGE> 5
forecast of the Retail Access Date and the commencement date of
the operations of the NEPOOL spot markets. Notwithstanding the
foregoing, Company may terminate this Agreement at any time by
providing six (6) months written notice but in no event will
termination occur within six (6) months of the Closing Date. In
addition, the applicable provisions of this Agreement shall remain
in effect after termination hereof to the extent necessary to
provide for final billings, billing adjustments, and payments.
In the event that Company has not completed the standard offer
auction by the Retail Access Date, Seller and Company shall enter
into good faith negotiations for an extension of this Agreement
upon written notification to Seller by Company, which notification
shall occur no less than forty-five (45) days prior to the Retail
Access Date. The extension shall be on the same terms as this
Agreement provided that the price and term may be modified.
Notwithstanding the foregoing, neither Seller nor Company shall be
obligated to enter into an extension of this Agreement.
In the event that the Retail Access Date has not occurred one year
after the effective date of this Agreement, Seller at its own
discretion may apply for a cost of service tariff with FERC, which
Company shall substitute for the rate in effect at that time if
approved.
(b) If the MDPU or any reviewing court or governmental agency, imposes
any condition, limitation or qualification under any provisions of
law which, individually or in the aggregate, precludes Company or
Seller from performing this Agreement, then the precluded party
may, at its option, terminate this Agreement.
(c) Notwithstanding the foregoing, the obligations of the Parties
under this Agreement are subject to and contingent upon receipt
and approval (in each Party's sole discretion) of an order of the
MDPU approving this Agreement and an order of the FERC accepting
this Agreement.
(d) Thirty (30) days prior to the expected termination date of this
Transition Agreement Company will have the ability to exercise a
"call option" for the installed Capacity of the Facilities. This
call option will provide Company with the right to contract for
this installed Capacity for up to 12 months to satisfy
requirements imposed upon it resulting from it being deemed a Load
Serving Entity by the ISO-NE. This call option will be for up to
the full Capacity value of the Facilities, less the amount of
Capacity bid by Seller and accepted by Company to serve Company's
standard offer service. The amount of Capacity to be contracted
for and the number of months for the term of the purchase will be
determined by Company upon exercising the option, and the price
paid under the contract will be $8.00 (eight dollars) per kW per
month.
<PAGE> 6
ARTICLE 5. Capacity, Energy and Ancillary Services Purchase Rates
(a) Company shall pay Seller monthly, according to the following
formula:
TMA = C + O + F
t
where:
TMA = Total monthly amount due in month (t)
t
1 2
C = P x ( 7.5% + 14.2% ) R
a
-------------------------- x ----
12 R
P = The purchase price applicable to the unit as shown
in Exhibit A.
R = Each Facility's actual Summer Net Capability, during
a the months of the Summer Capability Period or the
Facility's actual Winter Net Capability during the
months of the Winter Capability Period as
demonstrated by Facility, during its most recent
Capability Audit but in no event greater than R.
R = Each Facility's Summer Net Capability, during the
months of the Summer Capability Period or the
Facility's Winter Net Capability during the months
of the Winter Capability Period as demonstrated by
Facility, during its most recent Capability Audit
performed prior to the effective date of the
Purchase and Sale Agreement.
O = M R
a
---- x ----
12 R
M = The annual O&M expense to the unit as shown in
Exhibit B.
F = (U x B) + A:
U = Total fuel usage, by fuel type, in the current month
for generation of electricity expressed in MMBtu
minus the fuel usage attributable to existing fuel
supply and transportation contracts transferred by
Company to Seller.
[FN]
________________________
1 The first year tax depreciation of 7.5%.
2 A return on capital of 14.2%.
<PAGE> 7
B = The monthly fuel cost expressed in $/MMBtu.
For the Mystic units #4, #5, #6 and #7 and the New
Boston units #1 and #2, when the fuel being used is
oil, the price of fuel is the quotient obtained by
dividing the average of the daily low price during
the applicable month for No. 6 Oil 1% Sulfur Cargo
expressed in $/barrel, as reported in Platt's
Oilgram for New York/Boston, by 6.4 MMBtu/barrel.
For Mystic 7 and the New Boston units #1 and #2,
when the fuel being used is natural gas, the price
of fuel is the sum of the average of the daily
settlement prices for the last three days that the
NYMEX Contract for the month of delivery trades,
expressed in $/MMBtu, plus the actual costs of gas
transportation expressed in $/MMBtu. The NYMEX
Contract shall mean the New York Mercantile Exchange
natural gas Futures Contract as approved by the
Commodity Futures Trading Commission for the
purchase and sale of natural gas at Henry Hub.
For all the jet units the price of fuel is the
quotient obtained by dividing the sum of the average
of the daily low price during the applicable month
for Boston No. 2 Oil 0.3% Sulfur expressed in cents/
gallon, as reported in The Journal of Commerce, plus
$0.015/gallon, by 0.1375 MMBtu/gallon.
A = The actual expense associated with the fuel usage
attributable to existing fuel supply and
transportation contracts transferred by Company to
Seller.
(b) Company is not obligated to reimburse Seller for fuel supply or
transportation expenses incurred under "take or pay" arrangements
unless such "take or pay" arrangements have been assigned to
seller pursuant to the terms and conditions of the Purchase and
Sale Agreement, dated December 10th, 1997, or otherwise approved
by the Company.
(c) This rate shall apply regardless of whether Company takes delivery
of any electric energy during the applicable month, provided
Seller has maintained and operated the Facility in accordance with
this Agreement and Prudent Utility Practice during the applicable
month.
ARTICLE 6. Delivery of Facility's Capacity, Energy and Ancillary Services by
Seller
Seller shall deliver each Facility's Capacity, energy and ancillary
services to the Delivery Point. Seller is responsible for maintaining
metering and telemetering equipment at each Facility. The metering
equipment shall be capable of registering and recording instantaneous,
and time-differentiated electric energy and other related data from the
Facility, and shall comply with the requirements of NEPOOL's CRS - 13.
The telemetering shall be capable of transmitting such
<PAGE> 8
data to location(s) specified by Company. All interconnection and
metering arrangements shall be as specified in the Interconnection
Agreement.
ARTICLE 7. Billing, Meter Reading
(a) Each day, Seller shall be required to provide Company with hourly
integrated megawatt hour readings for each hour of the previous
day. Seller shall record hourly meter readings and log sheets
and, upon Company's request, provide copies of daily meter
recordings and log sheets by electronic means with hard copy
back-up.
(b) Seller shall submit, by fax or other agreeable same day delivery
mechanism, an invoice for all applicable Article 5 charges to
Company as soon as practicable after the end of each calendar
month that shall include the time and date of the meter readings.
This invoice shall include such reasonable detail to enable the
Company to determine the basis for the charges of such month.
Seller and Company agree to provide additional information
reasonably requested by the other party as necessary for billing
purposes or data verification. Invoices may be rendered on an
estimated basis. Each invoice shall be subject to adjustment for
any errors in arithmetic, computing, estimating or otherwise.
Seller and Company shall include any such invoicing adjustments as
promptly as practicable.
(c) All payments shown to be due on such invoice shall be due and
payable not later than the Due Date, defined as twenty (20) days
after the date of invoice.
(d) Any undisputed amounts unpaid after the Due Date shall bear
interest at a rate equal to the Prime Rate then in effect on the
Due Date, compounded on a monthly basis. Company may dispute all
or any part of any invoice by written notification to Seller
within 30 days of receipt of such invoice.
(e) Seller shall keep complete and accurate records and meter readings
of its operations and shall maintain such data for a period of at
least one (1) year after invoice for the final billing is
rendered. Company shall have the right, upon five (5) business
days prior notice, during normal business hours, to examine and
inspect all such records and meter readings in so far as may be
necessary for the purpose of ascertaining the reasonableness and
accuracy of all relevant data, estimates or statements of charges
submitted to it hereunder but shall not impair or interfere with
the operation of the Facility owned by Seller.
ARTICLE 8. Limitation of Liability; Indemnification; Insurance; Relationship
of Parties
(a) Notwithstanding subarticle (b) hereof or any other provision of
this Agreement to the contrary, neither Company nor Seller nor
their respective officers, directors, agents, employees, parent,
subsidiaries or affiliates or their officers, directors, agents or
employees shall be liable or responsible to the other Party or its
parent, subsidiaries,
<PAGE> 9
affiliates, officers, directors, agents, employees, successors or
assigns, or their respective insurers, for incidental, indirect,
exemplary, punitive or consequential damages, connected with or
resulting from performance or non-performance of this Agreement,
or anything done in connection therewith including, without
limitation, claims in the nature of lost revenues, income or
profits (other than payments expressly required and properly due
under this Agreement), and increased expense of, reduction in or
loss of power generation production or equipment used therefor,
irrespective of whether such claims are based upon breach of
warranty, tort (including negligence, whether of Seller, Company
or others), strict liability, contract, operation of law or
otherwise.
(b) Each Party (the "Indemnifying Party") shall defend, indemnify and
save the other Party (the "Indemnified Party"), its officers,
directors, agents, employees and affiliates and their respective
officers, directors, agents and employees harmless from and
against any and all claims, liabilities, demands, judgments,
losses, costs, expenses (including reasonable attorneys' fees),
suits, or damage arising by reason of bodily injury, death or
damage to third party property sustained by any person or entity
(whether or not a party to this Agreement) caused by an action of
negligence or willful misconduct of the Indemnifying Party or an
officer, director, agent or employee of Indemnifying Party.
(c) Seller shall maintain insurance coverage at its sole expense.
(d) The rights, obligations and protections afforded by subarticles
(a) and (b) above shall survive the termination, expiration or
cancellation of this Agreement, and shall apply to the full extent
permitted by law.
(e) Nothing in this Agreement shall be construed as creating any
relationship between the Parties other than that of independent
contractors for the sale and purchase of capacity and associated
electric energy and ancillary services generated at the
Facilities. The Parties do not intend to create any rights, or
grant any remedies to, any third party beneficiary of this
Agreement.
ARTICLE 9. Miscellaneous Provisions
(a) The Parties hereto agree that time shall be of the essence in this
Agreement.
(b) This Agreement may not be modified or amended except in writing
signed by or on behalf of both Parties by their duly authorized
officers, and if applicable, any required regulatory approvals.
(c) It shall be the responsibility of Seller to take all necessary
actions to satisfy any regulatory requirements which may be
imposed on Seller by any federal statute, rule or regulation
concerning the sale of Capacity, energy, and ancillary services.
Company shall cooperate with Seller and provide information or
such other assistance, without cost to Company, as may be
reasonably necessary for Seller to satisfy regulatory
<PAGE> 10
requirements relating specifically and only to the sale of
Capacity, energy, and ancillary services from each Facility.
Seller shall cooperate with Company and provide information or
such other assistance, without cost to Seller, as may be
reasonably necessary for Company to satisfy regulatory
requirements relating specifically and only to the purchase of
electric Capacity, energy and ancillary services from the
Facility.
(d) Seller agrees to operate and maintain each Facility in accordance
with Prudent Utility Practice.
(e) Seller agrees to provide daily fuel usage reports upon Company's
request, in such detail as Company may reasonably require. Seller
shall submit on a monthly basis its invoices which identify the
monthly cost of fuel used in the generation of electricity (Actual
Fuel Costs) including:
1) Invoice price of fuel less any cash or other discounts.
2) Freight, switching, demurrage and other transportation
charges, not including, however, any charges for unloading
from the shipping medium.
3) Excise taxes, purchasing agents' commissions, insurance and
other expenses directly assignable to cost of fuel.
4) Operating, maintenance and depreciation expenses and ad
valorem taxes on Seller-owned transportation equipment used to
transport fuel from the point of acquisition to the unloading
point.
5) Lease or rental costs of transportation equipment used to
transport fuel from the point of acquisition to the unloading
point.
6) Other fuel related information Company may reasonably request.
(f) Upon Company's request, Seller shall provide Company with the
relevant information necessary to support an updated ISO-NE NX-4
Form to be submitted to NEPOOL.
(g) Seller agrees to provide, at no cost to Company, any and all
necessary forms, data, and other information reasonably requested
by Company for submittal to ISO-NE, NEPOOL, or any governmental,
or regulatory agency or authority having jurisdiction.
Notwithstanding the foregoing, the Company will have final
approval rights over these submissions.
ARTICLE 10. Assignment
(a) Neither Party shall have the right to assign this Agreement or its
rights or obligations hereunder without the express written consent
of the other Party. Such consent shall not be unreasonably withheld.
(b) Notwithstanding the provisions in Section 10(a) above:
(i) Either party may assign this Agreement to any Affiliate
to whom the Facilities are transferred, without the other
party's prior consent; provided that the assigning party
shall not be released from liability hereunder without
the other party's prior written consent
<PAGE> 11
(ii) Seller may collaterally assign its rights in this
Agreement to its lenders, in accordance with the
provisions of Section 16.4 of the Purchase and Sale
Agreement, dated December 10th, 1997
ARTICLE 11. Force Majeure
(a) If either Party is rendered wholly or partly unable to perform its
obligations under this Agreement because of a Force Majeure event,
that Party shall be excused from whatever performance is affected
by the Force Majeure event to the extent so affected, provided
that the non-performing Party shall: (1) provide prompt notice to
the other Party of the occurrence of the Force Majeure event
giving an estimation of its expected duration and the probable
impact on the performance of its obligations hereunder and
submitting good and satisfactory evidence of the existence of the
Force Majeure, (2) exercise all reasonable efforts to continue to
perform its obligations hereunder, (3) expeditiously take action
to correct or cure the Force Majeure and submit good and
satisfactory evidence that it is making all reasonable efforts to
correct or cure the Force Majeure event, (4) exercise all
reasonable efforts to mitigate or limit damages to the other Party
to the extent such action will not adversely effect its own
interests and (5) provide prompt notice to the other Party of the
cessation of the Force Majeure; and, provided further, that any
obligations of either party which arose before the occurrence of
the Force Majeure event causing non-performance shall not be
excused as a result of the occurrence of a Force Majeure event.
(b) "Force Majeure" means the failure or imminent threat of failure of
facilities or equipment, flood, freeze, earthquake, storm, fire,
lighting, other acts of God, epidemic, war, acts of a public
enemy, riot, civil disturbance or disobedience, strike, lockout,
work stoppages, other industrial disturbance or dispute, sabotage,
restraint by court order or other public authority, and action or
non-action by, or failure or inability to obtain the necessary
authorizations or approvals from, any governmental agency or
authority, which by the exercise of due diligence such Party could
not reasonably have been expected to avoid and by exercise of due
diligence its effect can not be overcome. Nothing contained
herein shall be construed so as to require the Parties to settle
any strike, lockout, work stoppage or any industrial disturbance
or dispute in which it may be involved, or to seek review of or
take an appeal from any administrative or judicial action. In no
event shall the lack of funds or an inability to obtain funds or
any action by any governmental authority that disallows, prevents
or limits the recovery through rates of all or any portion of the
charges imposed by this Agreement be a Force Majeure.
ARTICLE 12. Default
(a) "Event of Default" shall mean, in relation to a Party (the
"Defaulting Party"):
<PAGE> 12
(i) the Defaulting Party fails to perform any of its material
obligations hereunder, and such failure is not excused by
Force Majeure and continues for thirty (30) days after the
Defaulting Party receives written notice from the Non-
Defaulting Party of such failure; provided, however, if a
period in excess of thirty (30) days is required to cure
such failure, the Defaulting Party shall have additional
amount of time, not to exceed 180 days, as may be necessary
to cure such failure provided that the Defaulting Party
uses reasonable diligence to remedy such failure; or
(ii) the Defaulting Party makes an assignment or general
arrangement for the benefit of creditors, files a petition
in, or otherwise commences any proceeding in, bankruptcy or
under similar law, otherwise becomes bankrupt (however
evidenced) or is unable to pay its debt as they fall due.
(b) Upon an Event of Default, the Non-Defaulting Party may resort to
all remedies available at law or in equity, including, without
limitation, (i) the termination of service, (ii) specific
enforcement of the provisions of this Agreement, and (iii) the
recovery of damages except to the extent such damages are waived
or limited pursuant to this Agreement.
ARTICLE 13. Governing Law, Dispute Resolution
(a) The interpretation and performance of this Agreement shall be in
accordance with and controlled by the law of the Commonwealth of
Massachusetts.
(b) If any dispute, disagreement, claim or controversy exists between
Seller and Company arising out of or relating to this Agreement,
such disputed matter shall be submitted to a committee comprised
of one designated agent of each Party. Such committee shall be
instructed to attempt to resolve the matter within twenty (20)
days thereafter. If Company's and Seller's designees do not agree
upon a decision within thirty (30) days after the submission of
the matter to them, either Party may institute formal legal
proceedings.
ARTICLE 14. Waiver
The failure of either Party to require compliance with any provision of
this Agreement shall not affect that Party's right to later enforce the
same. It is agreed that the waiver by either Party of performance of any
of the terms of this Agreement, or of any breach thereof, shall not be
held or deemed to be a waiver by that Party of any subsequent failure to
perform the same, or any other term or condition of this Agreement, or of
any breach thereof.
<PAGE> 13
ARTICLE 15. Corporate Authorization
Prior to or simultaneous with the execution of this Agreement, the
Parties shall provide sufficient evidence to each other that each has the
legal power and authority to perform this Agreement, that their
respective officers executing this Agreement have been duly authorized to
do so and that this Agreement, upon execution and delivery, shall be
legally binding and enforceable.
ARTICLE 16. Notice
Except as otherwise provided herein, any notice, invoice or other
communication which is required or permitted by this Agreement shall be
in writing and delivered by personal service, telecopy, or mailed
certified or registered first class mail, postage prepaid, properly
addressed as follows:
a) In the case of Company to:
Boston Edison Company
800 Boylston Street
Boston, Massachusetts 02199 U.S.A.
Attention: Manager - Power Contracts Department
Telecopy No: 617-424-3407
b) In the case of Seller to:
Sithe Energies, Inc.
450 Lexington Avenue
New York, New York 10017
Attention: David Tohir, Senior V.P.
Telecopy No: 212-450-9025
Another address or addressee may be specified in a notice duly given as
provided. Each notice, invoice or other communication which shall be
mailed, delivered or transmitted in the manner described above shall be
deemed sufficiently given and received for all purposes at such time as
it is delivered to the addressee (with return receipt, the delivered
receipt, the affidavit of the messenger or with respect to a telecopy,
the answer back, being deemed conclusive evidence of such delivery) or at
such time as delivery is refused by the addressee upon presentation.
<PAGE>
IN WITNESS WHEREOF the Parties have executed this Agreement as of the
date first written above.
SITHE ENERGIES, INC.
By: /s/ Barry Sullivan
-------------------------------
Name: Barry Sullivan
Title: Vice Chairman
BOSTON EDISON COMPANY
By: /s/ Thomas J. May
---------------------------------------------
Name: Thomas J. May
Title: Chairman and Chief Executive Officer
<PAGE>
INTERCONNECTION AND OPERATION AGREEMENT BETWEEN
BOSTON EDISON COMPANY
AND
SITHE ENERGIES, INC.
______________________________________________________________________________
This Interconnection and Operation Agreement, dated as of December 10th,
1997 is between Boston Edison Company, a Massachusetts corporation and
electric company, having its principal place of business at 800 Boylston
Street, Boston Massachusetts 02199 ("Edison") and Sithe Energies, Inc., a
Delaware corporation, having its principal place of business at 450 Lexington
Avenue, New York, New York 10017 ("Buyer" or "Sithe"), (each, a "Party").
WHEREAS, Edison has sold its fossil Generating Facilities to Buyer
pursuant to a Purchase and Sale Agreement, dated as of the date hereof (the
"Purchase and Sale Agreement").
WHEREAS, the Generating Facilities and their associated interconnections
with the transmission grid, either directly or via distribution facilities,
were designed and constructed to work efficiently within a vertically
integrated electric utility structure; and
WHEREAS, these interconnections will be used primarily for the transfer
of electricity from the Buyer's Generating Facilities to the Transmission
System (either directly or via Edison's Distribution System) of Edison, but
may also be capable of providing a delivery path to the Buyer's Unit(s) to
provide the power for testing, starting, and station service loads of said
Generating Facilities; and
<PAGE> 2
WHEREAS, on or before the Closing Date as defined in the Purchase and
Sale Agreement, the Parties have entered into a separate Asset Demarcation
Agreement (ADA), which defines the demarcation of ownership with respect to
the Interconnection Facilities, and a separate Cross-Easement Agreement, which
defines the terms of access for the continued operation and maintenance of
those facilities owned by one Party but located on the property of the other,
the purpose of this Agreement is to delineate responsibility for the provision
of Interconnection Services for the maintenance and operation of the
Interconnection Facilities.
NOW, THEREFORE, in consideration of the mutual promises and agreements
contained herein, Edison and Sithe agree to provide for the relationship
between the Parties regarding the provision of Interconnection Services
between the Parties as follows:
1. Definitions
-----------
1.1 Asset Demarcation Agreement - That portion of the Purchase and
Sale Agreement which describes in detail all of the Generation
Assets, and the transmission, distribution and support facilities
(Purchased Interconnection Facilities) which Edison is selling to
Buyer. With respect to Interconnection Services, the Asset
Demarcation Agreement defines the ownership boundaries associated
with each Purchased Asset and the basis for inclusion of certain
assets in the sale.
1.2 Decommissioned - With respect to any unit or units at any
Generation Facility, the permanent cessation of power generation
functions, and associated demolition, removal and/or restoration
of the site, to the extent required by applicable law.
1.3 Distribution Facilities or Systems - Electrical equipment
(typically operating at 4,000, 14,000 or 24,000 volts) associated
with the delivery of electric energy for utilization at these or
lower voltages.
1.4 Energy Management Center - Edison's system control and dispatch
center.
<PAGE> 3
1.5 Excluded Assets - Those assets identified in Section 2.2 of the
Purchase and Sale Agreement.
1.6 Generating Assets or Facilities - The property, infrastructure and
facilities associated with the production of electricity that have
been sold by Edison to Buyer pursuant to the Purchase and Sale
Agreement.
1.7 Generation Asset Modifications - With respect to any existing or
future unit or units at any of the Assets (as defined in the
Purchase and Sale Agreement) the alteration of the generation
output or capability at any of the Assets, including without
limitation, the Decommissioning, mothballing, retirement,
expansion, repowering or other development of generation.
1.8 Edison Interconnection Facilities - The electrical and related
Distribution and Transmission Facilities of Edison that link the
Generation Facilities with the PTF Transmission System.
1.9 Interconnection Services - The services, including, but not
limited to, operation and maintenance, switching and support of
equipment associated with the Interconnection Facilities of Buyer
and its interconnection to Edison's Transmission and/or
Distribution Systems.
1.10 ISO - Independent System Operator as described in Schedule 1.1 of
the Purchase and Sale Agreement.
1.11 Non-PTF Transmission Facilities - The non looped transmission
facilities rated at or below 115 kV that do not contribute to the
movement of energy across the New England Grid.
<PAGE> 4
1.12 NPCC - The Northeast Power Coordinating Council, the reliability
coordinating council representing all segments of the electric
supply industry for the northeastern states/provinces of the US
and Canada.
1.13 Prudent Utility Practice - Those practices identified in Schedule
1.1 of the Purchase and Sale Agreement.
1.14 Purchased Interconnection Facilities - The Transmission and
Distribution Assets of the Buyer specifically identified in
Schedules A through J of the Asset Demarcation Agreement.
1.15 PTF Transmission Facilities - The transmission grid facilities,
also known as Regional Transmission Facilities, defined as pool
transmission in NEPOOL's "Pool Transmission Facilities": document.
Generally, for Edison, these facilities are rated 115 kV or above
and allow energy from significant power sources to move freely on
the New England Transmission Grid.
1.16 REMVEC - Rhode Island, Eastern Massachusetts and Vermont Energy
Control, an operating satellite of the New England Power Pool
(NEPOOL) and the ISO.
1.17 Transmission Facilities - Those assets and facilities identified
in Section 2.2(a) of the Purchase and Sales Agreement.
1.18 Transmission System - A system of circuit breakers, disconnect
devices, transformers, electrical buses, substations and overhead
and underground transmission lines which function as a network for
the transport and delivery of bulk electric power. In particular,
this term refers to the 115 kV, 230 kV and 345 kV facilities of
Edison.
<PAGE> 5
2. Term
----
The obligations of the Parties under this agreement shall commence on the
Closing Date as defined in the Purchase and Sale Agreement and shall
remain in effect until such time as both Parties mutually agree to
terminate, unless earlier terminated in accordance with Section 5.4
hereof, provided, however, that the agreement shall terminate with
respect to any Generation Facility, or unit thereof, upon the date such
Generation Facility or unit is Decommissioned. The parties shall
negotiate in good faith to amend this Agreement if a change in law or
other circumstance substantially affects Edison's provision of
Interconnection Services.
Nothing in this Agreement shall require Sithe to own any asset or
equipment, operate or maintain any asset or equipment, provide any
service to Edison or any other person, or take any other action that
could reasonably be expected to result in Sithe being regulated as a
public utility, electric utility, transmission company, distribution
company, or other entity subject to regulation under the Public Utility
Holding Company Act, the Federal Power Act (other than with respect to
wholesale rates under Section 205 thereof), or applicable public utility
regulation in the affected states. The Parties agree to negotiate in
good faith to modify this Agreement to prevent such regulatory impacts
from occurring and/or to seek waivers from such regulations, as
necessary, and to make such modifications as may reasonably be necessary
to avoid Sithe becoming regulated as a public utility.
3. Continuing Obligations and Responsibilities
-------------------------------------------
3.1 Facility and Equipment Maintenance
----------------------------------
Each Party shall be responsible for maintaining its own property,
facilities, equipment and systems, defined as "Improvements" in
Appendix I and the Schedules attached thereto, of the Asset
Demarcation Agreement in a safe and efficient manner, in
accordance with NEPOOL and NPCC criteria and guidelines, Prudent
Utility Practice, applicable standards, and in accordance with
applicable law.
<PAGE> 6
Each Party shall coordinate inspections and maintenance of its
respective Interconnection Facilities with each other so as to
minimize the unavailability of transmission to the Generating
Assets and maximize the reliability and security of the
Transmission System.
For those Transmission and Distribution Assets and Purchased
Interconnection Facilities associated with the Interconnection
Facilities, Edison shall have the right to (i) request that Buyer
test, calibrate or verify Buyer's equipment or software and (ii)
monitor or inspect that equipment or software governing the
operation and maintenance of that equipment of Buyer that is
connected to Edison's Transmission System. Buyer shall have the
same right with respect to the Interconnection Facilities of
Edison. Said tests, calibrations, or inspections shall be
performed consistent with applicable standards and procedures and
the results shall be provided to the other Party upon request.
Buyer shall maintain and coordinate protective relaying for its
Generating Facilities and Purchased Interconnection Facilities
with that of Edison's Transmission System consistent with the NPCC
Bulk Power System Protection Criteria and applicable sections of
the NEPOOL Agreement.
Where practicable, each Party shall provide the other Party with
spare parts available in inventory at its cost in the event of
emergencies or equipment failures.
Both Edison and Buyer shall comply with REMVEC and Edison's
switching and tagging procedures (see Appendix I) and shall
coordinate with REMVEC and the Edison Energy Management Center,
as appropriate for the safe operation, isolation and reconnection
of the elements of the interconnection.
3.2 New Construction or Modifications
---------------------------------
Edison shall be permitted to construct or modify its Excluded
Assets, specifically in the switchyard and Buyer shall be
permitted to construct or modify its Purchased Interconnection
Facilities, in accordance with Prudent Utility Practice. However,
no new construction or modifications may be made which might
reasonably be expected to adversely impact the other Party without
providing prior written notice and detailed documentation of the
work. The Party desiring to perform said work shall provide
drawings, plans, and specifications to the other Party at least
30 days in advance of the work.
<PAGE> 7
Nothing herein shall be construed to absolve either Party from
obtaining any required permits, licenses, and/or approvals,
including approval under the Restated NEPOOL Agreement 18.4,
prior to making the proposed changes.
3.3 Buyer's Generation Asset Modifications
--------------------------------------
Notwithstanding any other provision of this Agreement, the
Purchase and Sale Agreement or the Related Agreements, Buyer shall
have the right to effect Generation Asset Modifications, in its
sole discretion, subject to the provisions of this section 3.4.
Buyer shall provide Seller with three (3) month notice prior to
commencing any Generation Asset Modification and shall provide
Seller with a copy of any publicly available permitting filing
promptly following such filing. The parties shall negotiate in
good faith to amend this Agreement in the event of any such
Generation Asset Modification, to the extent necessary to comply
with applicable ISO and NEPOOL requirements.
3.4 Inspections
-----------
Each Party shall be permitted, at its own expense, to inspect or
observe maintenance activities, equipment tests, installation,
construction or modifications to the other Party's Interconnection
Facilities, which might reasonably be expected to affect the
observing Party's operations. If the observing Party notes any
deficiencies, it shall inform the other Party in writing and any
corrections necessitated by Prudent Utility Practice shall be made
within a reasonable time.
Joint use transmission and telecommunication structural facilities
essential to both Generating Facilities and Transmission System
such as foundations, fences, towers and antennas, shall be
routinely inspected by the owner and maintained in accordance with
Prudent Utility Practice.
3.5 Interconnection Service
-----------------------
Edison shall provide Transmission and Distribution System access
and Interconnection Service for the existing Generating
Facilities. Transmission Services for PTF Transmission Facilities
for the output of the Generating Facilities shall be
<PAGE> 8
provided under the terms of the NEPOOL Open Access Transmission
Tariff or that of Edison if the NEPOOL Open Access Tariff is not
yet in place for Edison's PTF Transmission System. Significant
changes in the Generating Facilities or their capacity will
require Buyer to follow the NEPOOL 18.4 procedure. New or
significantly expanded generating capacity will require a separate
application for interconnection under the terms of Edison's and
the NEPOOL Open Access Transmission Tariff.
Edison shall provide, operate, and maintain its Interconnection
Facilities so as to provide the Buyer's Generating Facilities with
reasonably continuous access to Edison's Transmission System, and
thereby to the regional network within NEPOOL. Such access shall
be subject to automatic and instantaneous interruption upon the
activation of protective relaying devices designed to protect any
of the Generating Facilities, its step-up transformer, the
Interconnection Facilities, or the Transmission System, and may be
subject to extended outages due to equipment failure. Whenever
such service is interrupted due to equipment failures within its
Transmission or Distribution Systems, Edison shall restore service
on an expedited basis consistent with Prudent Utility Practice.
Any revenue loss associated with such interruption of the access
of the Generating Facilities to the Transmission or Distribution
System shall be borne by Buyer.
The Parties shall each comply with all applicable standards and
NEPOOL and ISO requirements regarding, but not limited to,
maintenance outage coordination, voltage schedules, generator
power factor, control and reporting of output and line flow data
and major equipment status, and metering accuracy. Buyer shall
additionally be obligated to comply with ISO directives regarding
operation during emergency conditions.
If Buyer fails to operate and maintain its Purchased
Interconnection Facilities as provided in this Agreement, Edison
shall be permitted to discontinue Interconnection Services until
such failure has been corrected, to the extent that such failure
may reasonably be expected to adversely affect Edison's
Transmission System, provided that Edison comply with the notice
and termination provisions set forth in FERC's regulations.
<PAGE> 9
3.6 Edison Provided Local Services
------------------------------
Edison shall provide Buyer access to metered reserve or generating
station service power via Edison's Transmission and Distribution
Systems. Such generating station service power shall be treated
as a wholesale commercial load on Edison's system which shall not
be subject to access charges, and may be supplied by any energy
provider. The Generating Facility is not eligible to receive
Standard Offer Service or Default Service from Edison.
Whenever generating station service power access is interrupted
due to equipment failures within Edison's facilities, Edison shall
restore such access on an expedited basis consistent with Prudent
Utility Practice.
3.7 Metering
--------
Edison shall provide, own, operate and monitor the revenue
metering to establish generating station service (also referred to
as reserve station service) delivered to Buyer. Buyer shall pay
for such metering and, at it's expense, provide meter enclosures
and required wiring in compliance with Edison's metering policy
C-35 attached as Appendix II.
Buyer is responsible for revenue metering equipment and associated
instrument transformers to establish the net output of the
Generating Facilities which is delivered to the Edison
Distribution or Transmission System. Buyer shall own, operate and
maintain such equipment, conduct annual meter accuracy tests and
prepare all calibration reports for said equipment measuring
energy transfers between Buyer and Edison. If at any time, the
metering equipment is found to be inaccurate by more than that
allowed for by NEPOOL CRS-13, NEPEX Metering and Telemetering
(dated 12/15/95) or subsequent appropriate ISO standards, the
Buyer shall make the metering equipment accurate, and any meter
billings for the period of inaccuracy shall be adjusted insofar
as it can be reasonably determined.
Each Party shall be provided with the results of routine testing
of the other Party's equipment for measuring energy transfers. In
addition to annual routine testing, either Party shall have the
metering equipment tested upon the request of and in the presence
of
<PAGE> 10
a representative of the other Party. If such metering equipment
proves accurate within the specifications of CRS-13, the expense
of the test shall be borne by the Party that requested the test.
Buyer shall supply Edison with daily tabulations of hourly
generator MWh output, on the same schedule this data is required
by the ISO, for Edison's territory load calculation purposes for
as long as Edison requires this data.
3.8 Buyer Provided Services
-----------------------
In those instances where power for either the Transmission or the
Distribution substation located at the site is provided through
the Generating Facilities of Buyer, Buyer shall provide Edison
access to such until such time as arrangements can be made to
separate this service. During this interim period, access shall
be maintained to power in the quantities, at the levels and in the
substation locations where such power was provided from
immediately prior to the execution of this Agreement. Whenever
substation service power access is interrupted due to equipment
failures within Buyer's Generating Facilities, Buyer shall restore
such power on an expedited basis consistent with Prudent Utility
Practice.
3.8 Communications
--------------
Buyer shall establish and maintain appropriate channels of
communication as required by the ISO and the Energy Management
Center.
Edison shall have the right to modify or upgrade communications
equipment on Buyer's Generating Facilities as required for
Transmission or Distribution System operations.
3.10 Notifications
-------------
3.10.1 Emergency
---------
Each Party shall provide prompt verbal notification of
emergencies which may reasonably be expected to affect
the other Party's operations, followed by written
notification. Buyer shall notify the Energy Management
Center of any observed fires, break-ins, or threats to
Interconnection Facilities.
<PAGE> 11
3.10.2 Transmission Service Interruptions
----------------------------------
If operation of Buyer's Generating Facilities might
reasonably be expected to have an adverse impact or
interfere with the safe and reliable operation of the
Transmission System, Edison shall be permitted to
discontinue transmission service until the condition has
been corrected, provided that Edison follow the notice
and termination provisions set forth in FERC's
regulations and Edison shall promptly notify the Buyer,
in advance if possible, of such action.
3.10.3. Non-Dispatchability
-------------------
If Buyer's Generating Facilities are not dispatchable by
NEPOOL or the ISO, Buyer shall notify the Energy
Management Center in advance and provide a schedule of
when generation is expected to be resumed.
3.11 Safety
------
Each Party shall be solely responsible for the safety and
supervision of its own employees, agents, representatives and
subcontractors. Buyer will observe all applicable safety
standards, procedures and practices of OSHA and Edison (See
Appendix I) when entering or working in the interconnection
switchyard on the Purchased Assets and shall immediately report
any injuries to the appropriate agencies and to the Energy
Management Center.
4. Operations
----------
4.1 Buyer's Transmission System Operating Obligations
-------------------------------------------------
Buyer shall become a NEPOOL participant and shall operate all of
its Purchased Interconnection Facilities connected to Edison's
Transmission System in a safe, reliable, and efficient manner, in
accordance with Prudent Utility Practice, applicable law and
regulations, and the requirements of NEPOOL, the ISO, and the
NPCC.
<PAGE> 12
Operation of all devices interconnecting to Edison's Transmission
System by either Party shall be under the control, whether direct
or permissive, of the Energy Management Center. Specifically,
Buyer will retain physical control from its generator control room
over the circuit breakers that connect its Generating Facilities
to the transmission ring bus(es) at the generating stations during
those times when the Generating Facilities are either being
synchronized to or removed from the network. Buyer must
coordinate with and submit to the direction of the Energy
Management Center. Edison will provide all other switching and
grounding associated with isolating Buyer's Interconnection
Facilities at Buyer's expense.
4.2 Edison's Transmission System Operating Obligations
--------------------------------------------------
Edison shall operate all equipment that could reasonably be
expected to have an impact on Buyer's operations in a safe and
efficient manner and in accordance with all applicable laws and
Prudent Utility Practice.
4.3 Auditing of Accounts and Records
--------------------------------
Each Party shall have the right to audit each other's accounts and
records pertaining to transactions under this Agreement.
5. Cost Responsibilities and Billing Procedures
--------------------------------------------
5.1 Interconnection Cost Responsibilities
-------------------------------------
As part of the purchase price of the Generating Facilities the
Generating Facility will be entitled to use Boston Edison's
existing Distribution and Non PTF Transmission Facilities to
receive power from and to deliver power to the company's Regional
Transmission Facilities at no additional charge for the use of the
existing Distribution or Non PTF Transmission Facilities. Buyer
will pay no access charges associated with the Generating
Facilities and will not be entitled to receive standard offer
service from Edison. If Buyer requests an upgrade to the existing
Distribution or Non PTF interconnection to the Generating
Facility, Buyer will be responsible for the cost of the upgrade
and no further charge will be made for the use of the upgraded
facilities. Buyer will be responsible for appropriate Regional
Transmission charges under NEPOOL's Open Access Transmission
Tariffs for power transmitted over the PTF Transmission
Facilities.
<PAGE> 13
For each Generating Facility, Buyer will be responsible for the
cost of ensuring that its revenue metering meets the requirements
of CRS 13. Metering shall be provided as needed for accurate
accounting at the ISO of unit output, station service, and
interchange with Edison's Transmission System. If the existing
metering fails to meet CRS 13 standards at the date of this
Agreement Edison shall at its own cost use due diligence to
provide metering that meets the requirements of CRS 13 as soon as
practicable thereafter, but in no case shall the completion date
of the metering changes be later than six months after the date
of this Agreement.
In lieu of charging Buyer a rate based upon system wide Non-PTF
Transmission Facilities, a portion of Buyer's payments under the
Purchase and Sale Agreement will be attributed to the right to use
the Non-PTF Transmission Facilities serving the Generating
Facilities based upon an allocation of the depreciated value of
those Facilities.
5.2 Billing Procedures
------------------
The Parties shall prepare monthly invoices for reimbursable
services, if any, provided to the other Party.
5.3 Interest on Unpaid Balances
---------------------------
Interest on unpaid balances shall be calculated in accordance with
FERC regulations, 18 C.F.R. 35.19a (a)(2)(iii).
5.4 Default
-------
"Event of Default" shall mean, in relation to a Party (the
"Defaulting Party): failure to make any payment that is required
hereunder when due or failure to observe or perform any of its
material obligations hereunder, and such failure continues for
sixty (60) days after the Defaulting Party receives written notice
from the Non-Defaulting Party of such failure. Upon an Event of
Default, the Non-Defaulting Party may terminate this Agreement
provided that they comply with the notice and termination
provisions set forth in the FERC's regulations.
<PAGE> 14
If there is a billing dispute, obligations pursuant to this
Agreement shall continue, but the amount in dispute shall be paid
into escrow until the dispute is resolved.
If either party fails to perform its obligations under this
Agreement, the other Party may seek specific performance to the
extent that monetary damages are determined by a court of
competent jurisdiction to be an inadequate remedy.
6. Documentation
-------------
The Parties shall provide each other with appropriate documentation
whenever one Party makes an alteration, change or modification to its
property, equipment or facilities that could reasonably be expected to
affect the other Party or whenever it is necessary to maximize
operational efficiencies and promote safety and environmental compliance.
Edison shall provide Buyer with a set of drawings that represent
equipment or facilities that shall be jointly used or operated.
7. Confidentiality
---------------
Any information specific to the operation of the Generating Facilities
which Edison may require in the course of its business shall be provided
to Edison and its use shall be governed by the NEPOOL Information Policy
(CRS-45) and by the Code of Conduct under FERC Order 889.
8. Damage to Equipment, Facilities and Property
--------------------------------------------
Each Party shall be responsible for all physical damage to or destruction
of equipment/facilities solely owned by it and its affiliates, regardless
of whether the damage is caused by itself, the other Party or the other
Party's affiliates, except to the extent of the other Party's negligence
or willful or wanton acts or omissions or except as otherwise provided in
this Agreement.
<PAGE> 15
9. Indemnification
---------------
9.1 Indemnification
---------------
Each Party shall defend, indemnify and hold harmless the other
Party from and against any claims and/or liability for damage to
property, injury to or death of any person, or any other liability
incurred by the other Party caused wholly or in part by the
negligent, willful or wanton act or omission of the indemnifying
Party, its affiliates, subcontractors, employees and agents
arising out of or connected with the operation of its own or the
other Party's or either Party's affiliates' facilities, equipment
and property described in this Agreement, regardless of whether
caused in part by the Party indemnified hereunder, to the extent
that the indemnifying Party has agreed to assume responsibility
and liability under this Agreement; provided, however, that in the
case where the indemnified Party has contributed to the damage or
injury, the indemnification shall be reduced based upon the
relative degree of fault of the Parties.
9.2 Indemnification Procedures
--------------------------
Any Party desiring to make a claim for indemnification pursuant
to this Section 9 must first provide notice to the other Party in
writing of the basis of the claim. Such written notice must be
sent by registered or certified mail, postage prepaid, to the
other Party as indicated in Section 18. Such notice must be given
within one hundred twenty days (120) of the occurrence of the
event giving rise to the claim for indemnification. After
receiving written notice of a claim for indemnification, neither
Party shall compromise or settle such claim except by written
agreement signed by an officer of the Party authorized to
compromise or settle such claims.
10. Insurance
---------
Each Party shall maintain, at its own cost, fire, liability, worker's
compensation and such other forms of insurance, in such amounts and on
such terms and conditions as is customary and reasonable in the electric
utility industry. Each Party shall maintain a certificate or other
written evidence of insurance and shall make available a copy of such
certificate upon request by the other Party. All insurance shall provide
for not less than thirty (30) days' notice of cancellation, change,
<PAGE> 16
amendment or nonrenewal of such insurance. Each Party must notify the
other Party within five (5) days of receiving a notice of cancellation,
change, amendment or nonrenewal of any insurance policy.
11. Force Majeure
-------------
For purposes of this Agreement, the term "Force Majeure" shall mean any
of the following: statute or regulation; action of a court or public
authority having or purporting to have jurisdiction in the premises;
loss or impairment of the supply of electricity; any Act of God, fire,
explosion, civil disturbance, labor dispute, or the public enemy; failure
of any major supplier to perform; restraint by a court or regulatory
agency; or any other cause, whether or not similar thereto, beyond the
reasonable control of and without the fault or negligence of the Party
claiming Force Majeure. Except for the obligations of either Party to
make payments under this Agreement for prior obligations, if either Party
is rendered wholly or partly unable to perform its obligations under this
Agreement because of a Force Majeure event, that Party shall be excused
from whatever performance is affected by the Force Majeure event to the
extent so affected; provided, however, that the period of excused
performance shall only last as long as the period of Force Majeure and
provided that the non-performing Party shall: (1) provide prompt notice
to the other Party of the occurrence of the Force Majeure giving an
estimation of its expected duration and the probable impact on the
performance of its obligations hereunder and submitting good and
satisfactory evidence of the existence of the Force Majeure; and (2)
exercise all reasonable efforts to continue to perform its obligations
hereunder; (3) expeditiously take action to correct or cure the Force
Majeure and submit good and satisfactory evidence that it is making all
reasonable efforts to correct or cure the Force Majeure; (4) exercise all
reasonable efforts to mitigate or limit damages to the other Party to the
extent such action will not adversely effect its own interest; and (5)
provide prompt notice to the other Party of the cessation of the Force
Majeure.
12. Dispute Resolution
------------------
The Parties shall attempt in good faith to resolve between themselves any
disputes that may arise hereunder. In the event that the Parties are
unable to resolve any such dispute, the matter shall be immediately
referred to the executives of the Parties who have authority to resolve
the dispute. If these executives are unable to agree upon a solution
within thirty (30) days, the Parties shall have recourse to mediation,
arbitration, or other alternative dispute resolution device of their
mutual selection. If the Parties cannot agree on an alternative dispute
resolution device, arbitration shall
<PAGE> 17
be selected. Any arbitration shall be conducted in accordance with the
commercial arbitration rules of the American Arbitration Association
unless otherwise agreed upon. The award rendered by any Arbitrator
shall, to the extent applicable law permits, be final and binding and
judgment may be entered upon it in accordance with the applicable law in
any court or regulatory body having jurisdiction thereof. Remedies and
damages shall be provided by mutual agreement or in accordance with the
procedures of the American Arbitration Association, as appropriate. Any
arbitration, mediation or other dispute resolution proceeding shall be
kept strictly privileged and confidential, except as necessary for the
enforcement of a decision or award of damages.
13. Amendments
----------
This Agreement may not be amended or modified except in writing by or on
behalf of the Parties by their duly authorized officers. The Parties
shall negotiate in good faith to amend this Agreement if a change in law
or other circumstances substantially affects Edison's provision of
Interconnection Services.
14. Assignment/Change in Corporate Identity
---------------------------------------
This Agreement shall inure to the benefit of and bind the respective
successors and permitted assigns of the Parties hereto, but no assignment
by either Party shall be made or become effective without the prior
written consent of the other Party, except that this Agreement may be
assigned without such consent to an affiliate or successor of either
Party, or to a person acquiring all or a controlling interest in the
business assets of such Party.
No assignment or transfer of rights shall relieve the assigning Party
from full liability and financial responsibility for performance unless
the assignee or transferee agrees in writing and the other Party has so
consented in writing.
If Buyer terminates its existence as a corporate entity, by merger,
acquisition, sale, consolidation or otherwise, or if substantially all
of Buyer's assets are transferred to another entity, without complying
with this Agreement, Edison shall have the right to seek equitable relief
to enjoin Buyer's successor from using the property in any manner that
interferes with, impedes or restricts Edison's ability to operate its
Transmission and/or Distribution Systems and Edison shall have the right
to operate all or part of the Purchased Interconnection Facilities
necessary to maintain its Transmission and Distribution Systems.
<PAGE> 18
15. Subcontractors
--------------
Subcontracting shall be permitted provided that all subcontractors shall
be required to comply with this Agreement. The hiring Party shall still
be fully responsible for its obligations under this Agreement.
16. Limitation of Liability
-----------------------
Neither Party shall be liable to the other for incidental, punitive,
special, indirect, multiple or consequential damages connected with or
resulting from the performance or non-performance of Agreement.
17. Governing Law
-------------
The rights of the Parties and the construction and effect of the terms of
this Agreement shall be subject to and determined in accordance with the
laws of the Commonwealth of Massachusetts.
18. Notices and Communications Regarding this Agreement
---------------------------------------------------
Notices and communications regarding this Agreement or the underlying
service shall be sent in writing by United States mail or facsimile,
confirmed with hard copy to follow by mail to:
Boston Edison Company
800 Boylston Street
Boston, MA 02199
Facsimile (617) 424-2605
And to Buyer
Sithe Energies, Inc.
450 Lexington Avenue, 37th. Floor,
New York City, NY 10017
Facsimile: 212-450-9025
<PAGE>
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by
and through their respective duly authorized representatives as of the day and
year first above written
BOSTON EDISON COMPANY SITHE ENGERGIES INC.
Name: ____________________ Name: ________________________
By: /s/ Thomas J. May By: /s/ Barry J. Sullivan
________________________ ___________________________
Title: President Title: Vice Chairman
_______________________ __________________________
<PAGE> 17
<TABLE>
Exhibit 12.1
Boston Edison Company
Computation of Ratio of Earnings to Fixed Charges
Twelve Months Ended March 31, 1998
(in thousands)
<S> <C>
Net income from continuing operations $146,566
Income taxes 83,930
Fixed charges 114,726
--------
Total $345,222
========
Interest expense $105,334
Interest component of rentals 9,392
--------
Total $114,726
========
Ratio of earnings to fixed charges 3.01
====
</TABLE>
<PAGE> 18
<TABLE>
Exhibit 12.2
Boston Edison Company
Computation of Ratio of Earnings to Fixed Charges
and Preferred Stock Dividend Requirements
Twelve Months Ended March 31, 1998
(in thousands)
<S> <C>
Net income from continuing operations $146,566
Income taxes 83,930
Fixed charges 114,726
--------
Total $345,222
========
Interest expense $105,334
Interest component of rentals 9,392
--------
Subtotal 114,726
--------
Preferred stock dividend requirements 19,320
--------
Total $134,046
========
Ratio of earnings to fixed charges and preferred
stock dividend requirements 2.58
====
</TABLE>
<PAGE> 19
Exhibit 15.1
Report of Independent Accountants
To the Stockholders and Directors
of Boston Edison Company
We have reviewed the accompanying consolidated balance sheet of Boston Edison
Company (the Company) and subsidiaries as of March 31, 1998 and the related
statements of income for the three-month periods ended March 31, 1998 and 1997
and cash flows for the three-month periods ended March 31, 1998 and 1997.
These financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying financial statements in order for them to
be in conformity with generally accepted accounting principles.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
April 23, 1998
<PAGE> 20
Exhibit 99.1
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Boston Edison Company
Registration on Form
S-3, S-4 and Form S-8
We are aware that our report dated April 23, 1998 on our review of the interim
financial information of Boston Edison Company for the period ended March 31,
1998 and included in this Form 10-Q is incorporated by reference in the
Company's registration statements on Form S-3 (File Nos. 33-57840 and 33-
59693), Form S-8 (File Nos. 33-00810, 33-7558, 33-38434, 33-48424, 33-48425,
33-59662, 33-59682 and 33-58457) and on Form S-4 filed by Boston Edison
Holdings, currently known as BEC Energy (File No. 333-23439). Pursuant to
Rule 436(c) under the Securities Act of 1933, this report should not be
considered a part of the registration statements prepared or certified by us
within the meaning of Sections 7 and 11 of that Act.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
April 23, 1998
<TABLE> <S> <C>
<ARTICLE> UT
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 2,821,849
<OTHER-PROPERTY-AND-INVEST> 208,600
<TOTAL-CURRENT-ASSETS> 276,998
<TOTAL-DEFERRED-CHARGES> 269,466
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 3,576,913
<COMMON> 48,515
<CAPITAL-SURPLUS-PAID-IN> 696,363
<RETAINED-EARNINGS> 325,783
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,070,661
78,250
83,000
<LONG-TERM-DEBT-NET> 957,039
<SHORT-TERM-NOTES> 108,500
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 90,500
<LONG-TERM-DEBT-CURRENT-PORT> 100,267
2,000
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,086,696
<TOT-CAPITALIZATION-AND-LIAB> 3,576,913
<GROSS-OPERATING-REVENUE> 394,555
<INCOME-TAX-EXPENSE> 15,814
<OTHER-OPERATING-EXPENSES> 328,132
<TOTAL-OPERATING-EXPENSES> 343,946
<OPERATING-INCOME-LOSS> 50,609
<OTHER-INCOME-NET> (2,788)
<INCOME-BEFORE-INTEREST-EXPEN> 47,821
<TOTAL-INTEREST-EXPENSE> 24,962
<NET-INCOME> 22,859
2,919
<EARNINGS-AVAILABLE-FOR-COMM> 19,940
<COMMON-STOCK-DIVIDENDS> 22,802
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 104,902
<EPS-PRIMARY> 0.41
<EPS-DILUTED> 0.41
</TABLE>
