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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549-1004
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) December 30, 1998
CAMBRIDGE ELECTRIC LIGHT COMPANY
(Exact name of registrant as specified in its charter)
2-7909
(Commission File Number)
Massachusetts 04-1144610
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Main Street, Cambridge, Massachusetts 02142-9150
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 225-4000
(Not Applicable)
(Former name, address and fiscal year, if changed since last report)
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CAMBRIDGE ELECTRIC LIGHT COMPANY
Item 2. Acquisition or Disposition of Assets
On December 30, 1998, Cambridge Electric Light Company (the Company), a
wholly-owned subsidiary of Commonwealth Energy System, completed the sale of
substantially all of its electric generating assets to Southern Energy
Kendall, L.L.C., a subsidiary of Southern Company, for approximately $60.2
million. These facilities represent 113 megawatts (mw) of electric capacity
and have an approximate book value of $10.2 million. This transaction is an
integral part of the Company's comprehensive electric industry restructuring
plan that was approved by the Massachusetts Department of Telecommunications
and Energy (DTE) and is consistent with the Electric Industry Restructuring
Act that was passed by the Massachusetts Legislature in November 1997.
The Company sold its Kendall Station facility (67 mw) and the adjacent
Kendall Jets (46 mw), located in Cambridge, MA.
A formal divestiture filing was submitted to the DTE and the Federal
Energy Regulatory Commission (FERC) on July 31, 1998 that requested approval
of the sale of the aforementioned generating assets to Southern Energy. This
filing was approved by the DTE on October 30, 1998 and by the FERC on November
12, 1998.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements of Businesses Acquired
Not applicable.
(b) Pro Forma Financial Information
The following unaudited pro forma condensed financial statements
for Cambridge Electric Light Company are filed with this report:
Pro Forma Condensed Balance Sheet of Cambridge Electric Light
Company at September 30, 1998
Pro Forma Condensed Statements of Income of Cambridge Electric
Light Company:
Year Ended December 31, 1997
Nine Months Ended September 30, 1998
The Pro Forma Condensed Balance Sheet of the Company at September
30, 1998 reflects the financial position of the Company after giving
effect to the disposition of the assets discussed in Item 2 and
assumes the disposition took place on September 30, 1998. The Pro
Forma Condensed Statements of Income for the fiscal year ended
December 31, 1997 and the nine months ended September 30, 1998 assume
that the disposition occurred on January 1, 1997 and are based on the
operations of the Company for the year ended December 31, 1997 and
the nine months ended September 30, 1998.
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CAMBRIDGE ELECTRIC LIGHT COMPANY
The unaudited pro forma condensed financial statements have been
prepared by the Company based upon assumptions deemed reasonable by
it. The unaudited pro forma condensed financial statements of the
Company presented herein are shown for illustrative purposes only and
are not indicative of the future financial position or future results
of operations of the Company, or the financial position or results of
operations of the Company that would have actually occurred had the
transaction been in effect as of the date or for the periods
presented. In particular, while the disposition of the assets
portrayed herein will impact the Company's results of operations,
such disposition is only one component of the restructuring that the
Company is undergoing at this time pursuant to the Act. In addition,
it should be noted that the Company's future financial statements
will reflect the disposition only from December 30, 1998, the closing
date. Additional information regarding the Act and the Company's
divestiture filing is included in the Company's 1997 Annual Report on
Form 10-K and 1998 Quarterly Reports on Form 10-Q.
The unaudited pro forma condensed financial statements should be
read in conjunction with the historical financial statements and
related notes of the Company.
(c) Exhibits
Exhibit 2. Plan of acquisition, reorganization, arrangement,
liquidation, or succession.
Filed herewith as Exhibit 4:
2.1 Asset Sale Agreement by and between Cambridge Electric
Light Company and Southern Energy New England, L.L.C.,
dated as of May 15, 1998.
(Exhibit 4, as filed herein, does not contain supplemental Exhibits
that are a part of the Agreement. However, the registrant agrees
to furnish supplementally a copy of any omitted exhibit to the
Securities and Exchange Commission upon request.)
Exhibit 99. Additional exhibits.
Filed herewith as Exhibit 1:
99.1 Pro Forma Condensed Balance Sheet of Cambridge Electric
Light Company at September 30, 1998
Filed herewith as Exhibit 2:
99.2 Pro Forma Condensed Statements of Income of Cambridge
Electric Light Company for the Year Ended December 31,
1997 and Nine Months Ended September 30, 1998
Filed herewith as Exhibit 3:
99.3 Notes to Unaudited Pro Forma Condensed Financial
Statements
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CAMBRIDGE ELECTRIC LIGHT COMPANY
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 hereunto duly authorized.
CAMBRIDGE ELECTRIC LIGHT COMPANY
(Registrant)
JAMES D. RAPPOLI
James D. Rappoli,
Financial Vice President
and Treasurer
Date: January 14, 1999
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Exhibit 1
CAMBRIDGE ELECTRIC LIGHT COMPANY
CONDENSED BALANCE SHEETS
SEPTEMBER 30, 1998
ASSETS
(ACTUAL AND PRO FORMA)
(Dollars in thousands)
(Unaudited)
Actual Adjustments Pro Forma
PROPERTY, PLANT AND EQUIPMENT,
at original cost $169,418 $(33,511) $135,907
Less - Accumulated depreciation 68,659 (23,289) 45,370
100,759 (10,222) 90,537
INVESTMENTS
Equity in nuclear electric
power companies 9,739 - 9,739
Other 5 - 5
9,744 - 9,744
CURRENT ASSETS
Cash 410 - 410
Accounts receivable 13,511 (657) 12,854
Unbilled revenues 2,404 - 2,404
Prepaid taxes -
Income 248 - 248
Property 2,545 - 2,545
Inventories and other 1,567 (740) 827
20,685 (1,397) 19,288
DEFERRED CHARGES 72,850 11,340 84,190
$204,038 $ (279) $203,759
See accompanying notes.
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Exhibit 1
(Continued)
CAMBRIDGE ELECTRIC LIGHT COMPANY
CONDENSED BALANCE SHEETS
SEPTEMBER 30, 1998
CAPITALIZATION AND LIABILITIES
(ACTUAL AND PRO FORMA)
(Dollars in thousands)
(Unaudited)
Actual Adjustments Pro Forma
CAPITALIZATION
Common Equity $50,613 $(17,000) $33,613
Long-term debt, including premiums, less
maturing debt and current sinking fund
requirements 7,301 25,000 32,301
57,914 8,000 65,914
CURRENT LIABILITIES
Interim Financing 36,500 (36,500) -
Other Current Liabilities -
Current sinking fund requirements 100 - 100
Accounts payable 10,957 (585) 10,372
Accrued local property and other taxes 3,375 (340) 3,035
Other 8,862 - 8,862
23,294 (925) 22,369
59,794 (37,425) 22,369
DEFERRED CREDITS
Accumulated deferred income taxes 15,573 (15,573) -
Purchased power contracts 59,603 - 59,603
Regulatory liability - 45,113 45,113
Unamortized investment tax credits
and other 11,154 (394) 10,760
86,330 29,146 115,476
COMMITMENTS AND CONTINGENCIES
$204,038 $ (279) $203,759
See accompanying notes.
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Exhibit 2
CAMBRIDGE ELECTRIC LIGHT COMPANY
CONDENSED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31, 1997
(ACTUAL AND PRO FORMA)
(Dollars in thousands)
(Unaudited)
Actual Adjustments Pro Forma
ELECTRIC OPERATING REVENUES $131,327 $(30,327) $101,000
OPERATING EXPENSES
Electricity purchased for resale,
transmission and fuel 87,322 (23,420) 63,902
Other operation and maintenance 26,348 (3,547) 22,801
Depreciation 4,335 (360) 3,975
Taxes -
Income 2,591 (706) 1,885
Local property 3,060 (452) 2,608
Payroll and other 885 (255) 630
124,541 (28,740) 95,801
OPERATING INCOME 6,786 (1,587) 5,199
OTHER INCOME 1,774 199 1,973
INCOME BEFORE INTEREST CHARGES 8,560 (1,388) 7,172
INTEREST CHARGES
Long-term debt 1,560 867 2,427
Other interest charges 1,784 (1,527) 257
3,344 (660) 2,684
NET INCOME $ 5,216 $ (728) $ 4,488
See accompanying notes.
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Exhibit 2
(Continued)
CAMBRIDGE ELECTRIC LIGHT COMPANY
CONDENSED STATEMENTS OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1998
(ACTUAL AND PRO FORMA)
(Dollars in thousands)
(Unaudited)
Actual Adjustments Pro Forma
ELECTRIC OPERATING REVENUES $ 88,257 $ (9,828) $ 78,429
OPERATING EXPENSES
Electricity purchased for resale,
transmission and fuel 51,575 (2,949) 48,626
Other operation and maintenance 18,436 (1,829) 16,607
Depreciation 5,782 (2,800) 2,982
Taxes -
Income 3,964 (1,187) 2,777
Local property 2,292 (334) 1,958
Payroll and other 571 (92) 479
82,620 (9,191) 73,429
OPERATING INCOME 5,637 (637) 5,000
OTHER INCOME 2,572 (982) 1,590
INCOME BEFORE INTEREST CHARGES 8,209 (1,619) 6,590
INTEREST CHARGES
Long-term debt 1,082 690 1,772
Other interest charges 1,446 (1,240) 206
2,528 (550) 1,978
NET INCOME $ 5,681 $ (1,069) $ 4,612
See accompanying notes.
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Exhibit 3
Cambridge Electric Light Company
Form 8-K
For Event Reported December 30, 1998
Notes to Unaudited Pro Forma
Condensed Financial Statements
Balance Sheet
1. The historical financial statements of Cambridge Electric Light
Company (the Company) as of September 30, 1998 have been adjusted to give
effect to the transaction between the Company and Southern Energy Kendall,
L.L.C., (Southern), a subsidiary of Southern Company, that occurred on
December 30, 1998. On that date, the Company completed the sale of its
generating assets to Southern. The pro forma financial statement
adjustments are based on the book value of the assets that were sold by
the Company.
The pro forma balance sheet also reflects the repayment of the
Company's long and short-term debt with proceeds from the sale of its
generating assets and proceeds from the planned issuance of long-term debt
by the Company ($25 million).
The equity component of the Company's capitalization structure has
been reduced through a payment to the Company's stockholder, Commonwealth
Energy System (the Parent), to reflect the lower level of plant assets of
the Company after the transaction.
2. A reconciliation of the cash proceeds from the sale of these assets
and the subsequent financing plan reflected in these financial statements
is as follows:
(Dollars in thousands)
Cash balance at September 30, 1998 $ 410
Proceeds from sale 60,199
Long-term debt issue 25,000
Payment to Parent to reflect reduced capitalization (17,000)
Tax liability related to sale (20,907)
Transaction costs (1,629)
Retirement of debt -
Short-term (26,500)
Long-term (10,000)
Lost revenue (4,002)
Other items (5,161)
Pro forma cash balance at September 30, 1998 $ 410
Income Statement
The net after-tax gain from the sale of the Company's generating
assets is reflected as a regulatory liability to its customers. The pro
forma income statement adjustments for electricity purchased for resale,
transmission and fuel and other operation and maintenance represent the
amounts resulting from the assets sold.
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Exhibit 3
(Continued)
Cambridge Electric Light Company
Other operation and maintenance for the twelve months ended December
31, 1997 includes a one-time charge of $2,490,000 for costs associated with a
personnel reduction program implemented during the second quarter of 1997.
Summary of Significant Pro Forma Adjustments
Debit Credit
(Dollars in thousands)
Entry 1:
Property, plant and equipment $33,511
Cash $60,199
Accumulated provision for depreciation 23,289
Stranded investment customer liability 50,744
Deferred tax reserve 21,208
Accrued income taxes 20,907
Provision for deferred taxes 301
Miscellaneous expense 767
To record the sale of the assets, the regulatory liability that represents
the gain from the sale pursuant to the Company's divestiture filing with the
DTE, and the accrual of income taxes associated with the sale.
Entry 2:
ITC reserve $ 394
Amortization of ITC $ 394
Deferred tax reserve $ 72
Provision for deferred taxes $ 72
To reverse excess taxes and ITC relating to generating assets that were
sold.
Entry 3:
Accrued income taxes $20,907
Transaction costs 1,629
Cash $22,536
To record the payment of income taxes and transaction costs associated
with the sale.
Entry 4:
Stranded investment customer liability $5,631
Deferred charges $5,631
To record a reduction in the regulatory liability to customers for
transaction costs and certain revenue.
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Exhibit 3
(Continued)
Cambridge Electric Light Company
Entry 5:
Common stock $17,000
Cash $17,000
Cash $25,000
Long-term debt $25,000
To record a reduction in the Parent's investment in the Company and the
issuance of long-term debt to reflect a more appropriate capitalization
structure.
Entry 6:
Short-term notes payable $26,500
Maturing long-term debt 10,000
Cash $36,500
To record the retirement of long and short-term debt.
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Exhibit 4
ASSET SALE AGREEMENT
BY AND BETWEEN
CAMBRIDGE ELECTRIC LIGHT COMPANY,
AND
SOUTHERN ENERGY NEW ENGLAND, L.L.C.
As of May 15, 1998
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TABLE OF CONTENTS
ARTICLE I.DEFINITIONS .. . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1. Definitions. . . . .. . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II.PURCHASE AND SALE. .. . . . . . . . . . . . . . . . . . . . . . 8
2.1. The Sale. . . .. . . . . . . . . . . . . . . . . . . . . . . 8
2.2. Excluded Assets . . . . . . . . . . . . . . . . . . . . . . . 9
2.3. Assumed Liabilities . . . . . . . . . . . . . . . . . . . . . 9
2.4. Excluded Liabilities . . . . . . . . . . . . . . . . . . . . .11
2.5. Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . .13
ARTICLE III.PURCHASE PRICE. . . . . . . . . . . . . . . . . . . . . . . . .13
3.1. Purchase Price . . . . . . . . . . . . . . . . . . . . . . . .13
3.2. Purchase Price Adjustment. . . . . . . . . . . . . . . . . . .13
3.3. Allocation of Purchase Price . . . . . . . . . . . . . . . . .14
3.4. Proration. . . . . . . . . . . . . . . . . . . . . . . . . . .15
ARTICLE IV.THE CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . .15
4.1. Time and Place of Closing. . . . . . . . . . . . . . . . . . .15
4.2. Payment of Purchase Price. . . . . . . . . . . . . . . . . . .16
4.3. Deliveries by the Seller . . . . . . . . . . . . . . . . . . .16
4.4. Deliveries by the Buyer. . . . . . . . . . . . . . . . . . . .16
ARTICLE V.REPRESENTATIONS AND WARRANTIES OF THE SELLER. . . . . . . . . . .17
5.1. Organization; Qualification. . . . . . . . . . . . . . . . . .17
5.2. Authority Relative to this Agreement . . . . . . . . . . . . .17
5.3. Consents and Approvals; No Violation . . . . . . . . . . . . .18
5.4. Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . .18
5.5. Financial Statements . . . . . . . . . . . . . . . . . . . . .19
5.6. Undisclosed Liabilities. . . . . . . . . . . . . . . . . . . .19
5.7. Absence of Certain Changes or Events . . . . . . . . . . . . .19
5.8. Title and Related Matters. . . . . . . . . . . . . . . . . . .19
5.9. Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
5.10. Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . .20
5.11. Environmental Matters. . . . . . . . . . . . . . . . . . . . .20
5.12. Labor Matters. . . . . . . . . . . . . . . . . . . . . . . . .21
5.13. ERISA: Benefit Plans . . . . . . . . . . . . . . . . . . . . .21
5.14. Real Estate. . . . . . . . . . . . . . . . . . . . . . . . . .21
5.15. Condemnation . . . . . . . . . . . . . . . . . . . . . . . . .22
5.16. Certain Contracts and Arrangements . . . . . . . . . . . . . .22
5.17. Legal Proceedings, etc.. . . . . . . . . . . . . . . . . . . .22
5.18. Operating Permits. . . . . . . . . . . . . . . . . . . . . . .22
5.19. Regulation as a Utility. . . . . . . . . . . . . . . . . . . .23
5.20. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
5.21. Entire Assets. . . . . . . . . . . . . . . . . . . . . . . . .23
ARTICLE VI.REPRESENTATIONS AND WARRANTIES OF THE BUYER. . . . . . . . . . .23
6.1. Organization . . . . . . . . . . . . . . . . . . . . . . . . .23
6.2. Authority Relative to this Agreement . . . . . . . . . . . . .24
6.3. Consents and Approvals: No Violation . . . . . . . . . . . . .24
6.4. Availability of Funds. . . . . . . . . . . . . . . . . . . . .24
6.5. Independent Evaluation . . . . . . . . . . . . . . . . . . . .24
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ARTICLE VII.COVENANTS OF THE PARTIES. . . . . . . . . . . . . . . . . . . .25
7.1. Conduct of Business. . . . . . . . . . . . . . . . . . . . . .25
7.2. Access to Information. . . . . . . . . . . . . . . . . . . . .26
7.3. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . .27
7.4. Further Assurances . . . . . . . . . . . . . . . . . . . . . .27
7.5. Public Statements. . . . . . . . . . . . . . . . . . . . . . .29
7.6. Consents and Approvals . . . . . . . . . . . . . . . . . . . .29
7.7. Fees and Commissions . . . . . . . . . . . . . . . . . . . . .30
7.8. Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . .30
7.9. Supplements to Schedules; Notice of Breach . . . . . . . . . .31
7.10. Employees. . . . . . . . . . . . . . . . . . . . . . . . . . .31
7.11. Risk of Loss . . . . . . . . . . . . . . . . . . . . . . . . .33
7.12. Environmental Matters. . . . . . . . . . . . . . . . . . . . .33
7.13. Real Estate Matters. . . . . . . . . . . . . . . . . . . . . .34
7.14. Creditworthiness of Buyer. . . . . . . . . . . . . . . . . . .35
ARTICLE VIII.CLOSING CONDITIONS . . . . . . . . . . . . . . . . . . . . . .35
8.1. Conditions to Each Party's Obligations
to Effect the Transactions. . . . . . . . . . . . . . . . . .35
8.2. Conditions to Obligations of the Buyer . . . . . . . . . . . .36
8.3. Conditions to Obligations of the Seller. . . . . . . . . . . .38
ARTICLE IX.INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . .39
9.1. Indemnification. . . . . . . . . . . . . . . . . . . . . . . .39
9.2. Defense of Claims. . . . . . . . . . . . . . . . . . . . . . .40
ARTICLE X.TERMINATION AND ABANDONMENT . . . . . . . . . . . . . . . . . . .43
10.1. Termination. . . . . . . . . . . . . . . . . . . . . . . . . .43
10.2. Procedure and Effect of Termination. . . . . . . . . . . . . .44
ARTICLE XI.MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . .44
11.1. Amendment and Modification . . . . . . . . . . . . . . . . . .44
11.2. Waiver of Compliance . . . . . . . . . . . . . . . . . . . . .44
11.3. No Survival. . . . . . . . . . . . . . . . . . . . . . . . . .45
11.4. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . .45
11.5. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . .46
11.6. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . .46
11.7. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . .46
11.8. Interpretation . . . . . . . . . . . . . . . . . . . . . . . .46
11.9. Schedules and Exhibits . . . . . . . . . . . . . . . . . . . .46
11.10. Entire Agreement . . . . . . . . . . . . . . . . . . . . . .46
11.11. No Third Party Beneficiaries . . . . . . . . . . . . . . . .46
11.12. No Relationship. . . . . . . . . . . . . . . . . . . . . . .47
11.13. Severability . . . . . . . . . . . . . . . . . . . . . . . .47
EXHIBITS
Exhibit A - Assumption Agreement
Exhibit B - Bill of Sale
Exhibit C - Deed
Exhibit D - FIRPTA Affidavit
Exhibit E - Interconnection and Site Agreement
Exhibit F - Wholesale Transition Service Agreement
Exhibit G - Form of Guaranty
Exhibit H - Real Estate Plan
<PAGE>
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ASSET SALE AGREEMENT
THIS ASSET SALE AGREEMENT, dated as of May 15, 1998, is by and
between Cambridge Electric Light Company, a Massachusetts corporation ("CEC")
(the "Seller"), and Southern Energy New England, L.L.C., a Delaware limited
liability company (the "Buyer"). The Buyer and the Seller are sometimes
referred to herein as a "Party" and collectively as the "Parties".
WHEREAS, the Buyer desires to purchase, and the Seller desires to
sell, the Assets (as defined herein) upon the terms and conditions hereinafter
set forth in this Agreement;
NOW, THEREFORE in consideration of the mutual covenants,
representations, warranties and agreements hereinafter set forth, and
intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
1.1. Definitions. (a) As used in this Agreement, the following
terms have the meanings specified in this Section 1.1(a).
(1) "Activity and Use Limitation (AUL)" means a Grant of
Environmental Restriction or Notice of an Activity and Use Limitation
recorded, registered or filed in accordance with 310 CMR 40.1070 through 310
CMR 40.1099.
(2) "Affiliate" has the meaning set forth in Rule 12b-2 of the
General Rules and Regulations under the Exchange Act.
(3) "Allowance" means (i) an authorization by the Administra-
tor of the United States Environmental Protection Agency under the Acid Rain
Program to emit up to one ton of sulfur dioxide during or after a specified
calendar year; or (ii) an authorization by the Massachusetts Department of
Environmental Protection under the state Nitrogen Oxides ("NOx") Budget
Program (310 C.M.R. 7.27) authorizing the emission of up to one ton of NOx
during the ozone season, May 1 through September 30 of each year.
(4) "Assets" means all of the right, title and interest in, to
and under the real and personal property, tangible or intangible, owned or
leased by the Seller and constituting Kendall Station or used principally in
connection with the Kendall Station, including, without limitation, the
following assets owned or leased by the Seller, but subject to the Easements
and excluding the Excluded Assets referred to in Section 2.2:
(i) the Real Estate (including all buildings, structures and
other improvements thereon) described on Schedule 5.14(i) (the "Real
Property");
(ii) all inventories of fuels, supplies, materials and spare
parts located on or in transit to Kendall Station on the Closing Date;
(iii) the machinery, equipment, vehicles, furniture and other
personal property located on the Real Property on the Closing Date,
including, without limitation, the items of personal property included
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in Schedule 1.1(a)(4)(iii) as being associated with Kendall Station;
(iv) the contracts, agreements and personal property leases
listed on Schedule 5.16(a) as being associated with Kendall Station or
described in Section 5.16(a)(iii), and which are assignable;
(v) the Operating Permits listed on Schedule 1.1(a)(39) that are
transferred to the Buyer on the Closing;
(vi) all books, operating records, engineering or design plans,
specifications, procedures and similar items of the Seller relating
specifically to the aforementioned assets other than books of account;
(vii) certain of the Allowances and/or Emission Reduction Credits
associated with Kendall Station as are set forth on Schedule
1.1(a)(4)(vii);
(viii) any assets purchased or to be purchased by the Seller
pursuant to Section 7.4(d);
(ix) all unexpired, transferable warranties received by the
Seller from third parties with respect to any of the Assets as of the
Closing Date;
(x) all intellectual property owned by the Seller and relating to
the Assets, including, without limitation, the rights of the Seller in
and to the name of the Kendall Station;
(xi) all rights of the Seller in and to any causes of action
against third parties relating to any Asset or Assumed Liabilities;
(xii) all guarantees and indemnification rights relating to the
Assumed Liabilities; and
(xiii) those capital improvements to the Assets identified on
Schedule 1.1(a)(4)(xiii), which Seller will undertake prior to the
Closing.
(5) "Assumption Agreement" means the Assumption Agreement
pursuant to which the Buyer assures and agrees to pay and perform certain
obligations and liabilities of the Seller associated with the Assets, in the
form of Exhibit A hereto.
(6) "Bill of Sale" means the Bill of Sale to be delivered at
the Closing with respect to the Assets which constitute personal property and
which are to be transferred at the Closing, substantially in the form of
Exhibit B hereto.
(7) "Business Day" shall mean any day other than Saturday,
Sunday and any day which is a legal holiday or a day on which banking
institutions in Boston, Massachusetts, are authorized by law or other
governmental action to close.
(8) "Buyer Representatives" means the Buyer's accountants,
counsel, environmental consultants, financial advisors and other authorized
representatives.
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(9) "CERCLA" means the Federal Comprehensive Environmental
Response, Compensation and Liability Act.
(10) "CMR" means the Code of Massachusetts Regulations.
(11) "Code" means the Internal Revenue Code of 1986, as amended
(12) "Confidentiality Agreement" means the Confidentiality
Agreement, dated November, 1997, between the Seller and the Buyer.
(13) "Deed" means the Deed to be delivered at the Closing with
respect to the Assets which constitute real property and which are to be
transferred at the Closing substantially in the form of Exhibit C-1 hereto.
(14) "Easements" means the reservations or grants or re-grants
of easements substantially in the forms comprising Exhibit C-2 hereto on
or prior to the Closing.
(15) "Emission Reduction Credits" means credits, in units that
are established by the environmental regulatory agency with jurisdiction over
the facility that has obtained the credits, resulting from a reduction in the
emission of air pollutants from an emitting source or facility (including,
without limitation, and to the extent allowable under applicable law,
reductions from shut-downs, control of emissions beyond that required by
applicable law, and fuel switching), that: (i) have been certified by the
Massachusetts Department of Environmental Protection as complying with the law
and regulations of the Commonwealth of Massachusetts governing the
establishment of such credits (including, without limitation, that such
emissions reductions are enforceable, permanent, quantifiable, real, and
surplus); or (ii) have been certified by any other applicable regulatory
authority as complying with the law and regulations governing the
establishment of such credits (including, without limitation, that such
emissions reductions are enforceable, permanent, quantifiable, real and
surplus). Emission Reduction Credits include certified air emissions
reductions, as described above, regardless of whether the regulatory agency
certifying such reductions designates such certified air emissions reductions
by a name other than "emissions reduction credits".
(16) "Encumbrances" means any mortgages, pledges, liens,
security interests, conditional and installment sale agreements, activity and
use limitations (except as provided in Section 7.12 hereof), conservation
easements, deed restrictions, encumbrances and charges of any kind.
(17) "Environmental Laws" means all Federal, state and local
laws, regulations, rules, ordinances, codes, decrees, judgments, directives,
or judicial or administrative orders relating to pollution or protection of
the environment, natural resources or human health and safety, including,
without limitation, laws relating to Releases or threatened Releases of
Hazardous Substances (including, without limitation, ambient air, surface
water, groundwater, and surface and subsurface strata) or otherwise relating
to the manufacture, processing, distribution, use, treatment, storage,
Release, transport or handling of Hazardous Substances.
(18) "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended.
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(19) "ERISA Affiliate" means any person that was or is required
to be treated as a single employer with the Seller under ss 414 of the Code.
(20) "Estimated Adjustment Amount" means the Seller's good
faith reasonable estimate of the Adjustment Amount, which estimate shall be
provided to the Buyer no later than two Business Days before the Closing.
(21) "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
(22) "Existing Release" means the Release of Hazardous
Substances specifically identified in the reports listed in Schedule
1.1(a)(22).
(23) "Federal Power Act" means the Federal Power Act of 1935.
(24) "FERC" means the Federal Energy Regulatory Commission.
(25) "FIRPTA Affidavit" means the Foreign Investment in Real
Property Tax Act Certification and Affidavit substantially in the form of
Exhibit D hereto.
(26) "Good Utility Practice" means any of the applicable
practices, methods and acts (i) required by NEPOOL, the Northeast Power
Coordinating Council, the North American Electric Reliability Council, the
NEPOOL Independent System Operator or the successor of any of them; (ii)
required by the policies and standards of the MDTE relating to emergency
operations; or (iii) otherwise engaged in or approved by a significant portion
of the electric utility industry during the relevant time period; which in
each case in the exercise of reasonable judgment in light of the facts known
or that should have been known at the time a decision was made, could have
been expected to accomplish the desired result in a manner consistent with
law, regulation, safety, environmental protection, economy, and expedition.
Good Utility Practice is intended to be acceptable practices, methods or acts
generally accepted in the region, and is not intended to be limited to the
optimum practices, methods or acts to the exclusion of all others.
(27) "Guarantor" shall mean Southern Energy, Inc.
(28) "Hazardous Substances" means (a) any petrochemical or
petroleum products, oil or coal ash, radioactive materials, radon gas,
asbestos in any form that is or could become friable, urea formaldehyde foam
insulation and transformers or other equipment that contain dielectric fluid
which may contain levels of polychlorinated biphenyls; (b) any chemicals,
materials or substances defined as or included in the definition of "hazardous
substances," "hazardous wastes," "hazardous materials," "restricted hazardous
materials," "extremely hazardous substances," "toxic substances,"
"contaminants" or "pollutants" or words of similar meaning and regulatory
effect; or (c) any other chemical, material or substance, exposure to which is
prohibited, limited or regulated by any applicable Environmental Law.
(29) "Holding Company Act" means the Public Utility Holding
Company Act of 1935, as amended.
(30) "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
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(31) "Income Tax" means any federal, state, local or foreign Tax
(a) based upon, measured by or calculated with respect to net income, profits
or receipts (including, without limitation, capital gains Taxes and minimum
Taxes) or (b) based upon, measured by or calculated with respect to multiple
bases (including, without limitation, corporate franchise taxes) if one or
more of the bases on which such Tax may be based, measured by or calculated
with respect to, is described in clause (a), in each case together with any
interest, penalties, or additions to such Tax.
(32) "Indentures" means the indentures listed on Schedule
1.1(a)(32) hereto.
(33) "Independent Accounting Firm" means such independent
accounting firm of national reputation mutually appointed by the Seller and
the Buyer.
(34) "Interconnection Agreement" means the Interconnection and
Site Agreement, substantially in the form of Exhibit E hereto.
(35) "Kendall Station" shall mean the electric generation
facilities known as Kendall Station and located in Cambridge, Massachusetts.
(36) "Kendall Steam Assets" shall mean the assets and facilities
owned by COM/Energy Steam Company and located at Kendall Station, including
those described on Schedule 1.1(a)(36).
(37) "Material Adverse Effect" means any change or changes in or
effect or effects on the Assets after the date of this Agreement that,
individually or in the aggregate, are materially adverse to the business,
operation or condition (financial or otherwise) of the Assets, including,
without limitation, any change or effect resulting from any governmental
action taken after the date hereof applicable generally to the owners and
operators of electric generating facilities in the Commonwealth of
Massachusetts; provided, that a "Material Adverse Effect" shall not include
(i) any change or effect resulting from changes in the international,
national, regional or local wholesale or retail markets for electric power,
(ii) any change or effect resulting from changes in the international,
national, regional or local markets for any fuel used at the Assets, (iii) any
change or effect resulting from changes in the North American, national,
regional or local electric transmission or distribution systems, (iv) any
change or effect the adverse impact of which is cured (including by the
payment of money) by the Seller before the Termination Date, (v) any change or
effect on the Assets affecting only the Seller and not the Buyer or the value
of the Assets to the Buyer, or (vi) any change or effect on the Assets
resulting solely from the Federal or state regulatory status of the Buyer or
any of its Affiliates.
(38) "MDTE" means the Massachusetts Department of
Telecommunications and Energy.
(39) "Operating Permits" means those permits, licenses and other
governmental authorizations that are necessary to operate the Assets as owned
and operated by the Seller as of the date of this Agreement, which are listed
on Schedule 1.1(a)(39).
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(40) "Permitted Encumbrances" means (i) those Encumbrances set
forth in Schedule 1.1(a)(40); (ii) the Easements; (iii) those exceptions to
title to the Assets listed in Schedule 5.8; (iv) all exceptions, restrictions,
easements, charges, rights of way and monetary and non-monetary encumbrances
which are matters of record as of the effective date of the Specimen Title
Policy or are set forth in an applicable FERC project license, or Department
of the Army, Army Corps of Engineers license or Commonwealth of Massachusetts,
Department of Environmental Protection Waterways license except for such
encumbrances which secure indebtedness; (v) with respect to any date before
the Closing Date, Encumbrances created by the Indentures; (vi) Encumbrances
incurred in connection with the Seller's purchase of properties or assets
after the date of the Balance Sheets securing all or a portion of the purchase
price therefor, provided that the aggregate amount of obligations secured by
such assets does not exceed $500,000; (vii) statutory liens for current taxes
or assessments not yet due or delinquent or the validity of which is being
contested in good faith by appropriate proceedings, provided that the
aggregate amount being so contested does not exceed $500,000; (viii)
mechanics, carriers, workers, repairers and other similar liens arising or
incurred in the ordinary course of business relating to obligations as to
which there is no default on the part of the Seller or the validity of which
are being contested in good faith by appropriate proceedings, provided that
the aggregate amount of the obligations underlying such liens does not exceed
$500,000; (ix) zoning, entitlement, conservation restriction and other land
use and environmental regulations by governmental authorities, provided that
the foregoing do not materially interfere with the current use of the Assets;
and (x) and such other liens, imperfections in or failure of title, charges,
easements, restrictions and encumbrances which do not materially detract from
the value of the Assets as currently used or materially interfere with the
present use of the Assets and do not, in the aggregate, have a Material
Adverse Effect.
(41) "Person" means any individual, a partnership, a limited
liability company, a joint venture, a corporation, a trust, an unincorporated
organization and a governmental entity or any department or agency thereof.
(42) "Related Agreements" means the Interconnection Agreement and
the Transition Agreement.
(43) "Release" means release, spill, leak, discharge, dispose of,
pump, pour, emit, empty, inject, leach, dump or allow to escape into or
through air, water or soil, or otherwise into or through the environment.
(44) "Response Action" means all activities included in the
definitions of "assessment," "containment" and "removal" under Massachusetts
General Laws Chapter 21E and 310 CMR 40.000.
(45) "Response Action Outcome" means those outcomes defined under
Massachusetts General Laws Chapter 21E and 310 CMR 40.000.
(46) "SEC" means the Securities and Exchange Commission.
(47) "Securities Act" means the Securities Act of 1933, as
amended.
(48) "Seller's Agreements" means those agreements listed on
Schedule 5.16(a) or described in Section 5.16(a)(iii).
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(49) "Specimen Title Policy" means the proposed form of title
insurance policy included as Schedule 5.14(i) hereto.
(50) "Standard Offer Service" means the electric service required
to be provided by a Massachusetts retail electric distribution company to
certain retail customers who do not elect to purchase electricity from an
alternative supplier.
(51) "Subsidiary" when used in reference to any other Person
means any entity of which outstanding securities having ordinary voting power
to elect a majority of the Board of Directors or other Persons performing
similar functions of such entity are owned directly or indirectly by such
other Person.
(52) "Tax Return" means any return, report, information return or
other document (including any related or supporting information) required to
be supplied to any authority with respect to Taxes.
(53) "Taxes" means all taxes, charges, fees, levies, penalties or
other assessments imposed by any United States federal, state or local or
foreign taxing authority, including, but not limited to, income, gross
receipts, license, stamp, occupancy, water, excise, property, sales, transfer,
use, franchise, payroll, unemployment, withholding, social security or any
other taxes of any kind whatsoever, including any interest, penalties or
additions attributable thereto.
(54) "Transition Agreement" means the Wholesale Transition
Service Agreement of even date herewith, between the Buyer and the Seller, in
the form of Exhibit F hereto.
(55) "WARN Act" means the Federal Worker Adjustment Retraining
and Notification Act of 1988.
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(b) Each of the following terms has the meaning specified in the
Section set forth opposite such term:
Term Section
Adjustment Amount 3.2(a)
Adjustment Statement 3.2(a)
Assumed Liabilities 2.3
Balance Sheet(s) 5.5
Benefits Plans 5.13(a)
Buyer Recitals
Buyer Required Regulatory Approvals 6.3(b)
Capital Improvement Amount 3.1
Closing 4.1
Closing Amount 4.2
Closing Date 4.1
Conditions 4.1
Direct Claim 9.2(c)
Employee(s) 7.10
Excluded Assets 2.2
Excluded Liabilities 2.4
Final Order 8.1 (c)
Indemnifiable Loss 9.1(a)
Indemnifying Party 9.1(d)
Indemnitee 9.1(c)
Independent Appraiser 3.3
Inventory Adjustment Amount 3.2(a)
Purchase Price 3.1
Real Estate 5.14
Seller Recitals
Seller Required Regulatory Approvals 5.3(b)
Termination Date 10.1(b)
ARTICLE II.
PURCHASE AND SALE
2.1. The Sale. Upon the terms and subject to the satisfaction of
the conditions contained in this Agreement, at the Closing, the Seller will
sell, assign, convey, transfer and deliver to the Buyer, and the Buyer will
purchase and acquire from Seller, free and clear of all Encumbrances (except
for Permitted Encumbrances) all of the Seller's right, title and interest in,
to and under the Assets.
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2.2. Excluded Assets. Notwithstanding any provision herein to the
contrary, the Assets shall not include the following (herein referred to as
the "Excluded Assets"):
(a) the Kendall Steam Assets;
(b) all cash, cash equivalents, bank deposits, accounts
receivable, and any income, sales, payroll or other tax receivables;
(c) certificates of deposit, shares of stock, securities, bonds,
debentures, evidences of indebtedness, interests in joint ventures,
partnerships, limited liability companies and other entities;
(d) the names "Commonwealth Energy System," "COM/Energy,"
"COM/Electric," "Commonwealth Electric Company," "Canal Electric Company,"
"Cambridge Electric Light Company," or any related or similar trade names,
trademarks, service marks or logos;
(e) the transmission, distribution, substation and communication
facilities and related support equipment that are generally located at or
adjacent to the Kendall Station and belonging to the Seller or one or more of
its Affiliates and utilized in the electric transmission and distribution
businesses of the Seller as identified in the diagram attached as Exhibit 1 to
the Interconnection Agreement; and those assets listed on Schedule 2.2(e)
hereto;
(f) any refund or credit (i) related to real or personal
property Taxes paid prior to the Closing Date in respect of the Assets,
whether such refund is received as a payment or as a credit against future
real or personal property Taxes payable, or (ii) arising under any Seller's
Agreement and relating to a period before the Closing Date;
(g) except to the extent specifically required by law, all
personnel records relating to employees of the Seller who become employees of
the Buyer; and
(h) the other rights and assets, if any, described or referred
to in Schedule 2.2(h).
2.3. Assumed Liabilities. On the Closing Date, the Buyer shall
deliver to the Seller the Assumption Agreement, pursuant to which the Buyer
shall assume and agree to discharge all of the liabilities and obligations of
the Seller, which relate to the Assets, other than the Excluded Liabilities,
in accordance with the respective terms and subject to the respective
conditions thereof, including, without limitation, the following liabilities
and obligations:
(i) all liabilities and obligations of the Seller under (a) the
Seller's Agreements, the real property leases, and the Operating Permits
in accordance with the terms thereof, (b) the contracts, leases and
other agreements entered into by the Seller with respect to the Assets
which would be required to be disclosed on Schedule 5.16(a) but for the
exception provided in clause (iii) of Section 5.16(a) of this Agreement,
in accordance with the terms thereof, and (c) the contracts, leases and
other agreements entered into by the Seller with respect to the Assets
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after the date hereof consistent with the terms of this Agreement
(including, without limitation, agreements with respect to liabilities
for real or personal property Taxes on any of the Assets entered into by
the Seller and any local governmental authority); except in each case,
to the extent such liabilities and obligations, but for a breach or
default by the 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;
(ii) all liabilities and obligations associated with the Assets in
respect of Taxes for which the Buyer is liable pursuant to Section 7.8;
(iii) any liabilities and obligations associated with the Assets
for which the Buyer has indemnified the Seller pursuant to Section
9.1(b);
(iv) all liabilities and obligations with respect to the Employees
to be employed by the Buyer relating to any period after the Closing
Date for which the Buyer is responsible pursuant to Section 7.10;
(v) any liability, obligation or responsibility under or related
to former, current or future Environmental Laws or the common law,
whether such liability or obligation or responsibility is known or
unknown, contingent or accrued, arising as a result of or in connection
with (a) any violation or alleged violation of Environmental Law, prior
to the Closing Date, with respect to the ownership or operation of the
Assets; (b) loss of life, injury to persons or property or damage to
natural resources (whether or not such loss, injury or damage arose or
was made manifest before the Closing Date or arises or becomes manifest
after the Closing Date), caused (or allegedly caused) by the presence or
Release of Hazardous Substances at, on, in, under, adjacent to or
migrating from the Assets prior to the Closing Date, including, but not
limited to, Hazardous Substances contained in building materials at the
Assets or in the soil, surface water, sediments, groundwater, landfill
cells, or in other environmental media at or adjacent to the Assets; and
(c) the investigation and/or remediation (whether or not such
investigation or remediation commenced before the Closing Date or
commences after the Closing Date) of Hazardous Substances that are
present or have been Released prior to the Closing Date at, on, in,
under, adjacent to or migrating from the Assets, including, but not
limited to, Hazardous Substances contained in building materials at the
Assets or in the soil, surface water, sediments, groundwater, landfill
cells, or in other environmental media at or adjacent to the Assets;
provided, as to all of the above, that nothing set forth in this
subsection shall require the Buyer to assume any liabilities that are
expressly excluded in Section 2.4;
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(vi) any liability, obligation or responsibility under or related
to former, current or future Environmental Laws or the common law,
whether such liability or obligation or responsibility is known or
unknown, contingent or accrued, arising as a result of or in connection
with (a) any violation or alleged violation of Environmental Law, after
the Closing Date, with respect to the ownership or operation of the
Assets; (b) compliance with applicable Environmental Laws after the
Closing Date with respect to the ownership or operation of the Assets;
(c) loss of life, injury to persons or property or damage to natural
resources caused (or allegedly caused) by the presence or Release of
Hazardous Substances at, on, in, under, adjacent to or migrating from
the Assets after the Closing Date, including, but not limited to,
Hazardous Substances contained in building materials at or adjacent to
the Assets or in the soil, surface water, sediments, groundwater,
landfill cells, or in other environmental media at the Assets; (d) loss
of life, injury to persons or property or damage to natural resources
caused (or allegedly caused) by the off-site disposal, storage,
transportation, discharge, Release, recycling, or the arrangement for
such activities, of Hazardous Substances, after the Closing Date, in
connection with the ownership or operation of the Assets; (e) the
investigation and/or remediation of Hazardous Substances that are
present or have been released after the Closing Date at, on, in, under,
adjacent to or migrating from the Assets, including, but not limited to,
Hazardous Substances contained in building materials at the Assets or in
the soil, surface water, sediments, groundwater, landfill cells or in
other environmental media at or adjacent to the Assets; and (f) the
investigation and/or remediation of Hazardous Substances that are
disposed, stored, transported, discharged, Released, recycled, or the
arrangement of such activities, after the Closing Date, in connection
with the ownership or operation of the Assets, at any off-site location;
provided, that nothing set forth in this subsection shall require the
Buyer to assume any liabilities that are expressly excluded in Section
2.4; and
(vii) (a) any Tax relating to any period after the Closing Date
that may be imposed by any state or local governmental authority on the
ownership, sale, operation or use of the Assets relating to any period
after the Closing Date, (b) real or personal property Taxes relating to
any period after the Closing Date, and (c) Permitted Encumbrances.
2.4. Excluded Liabilities. The Buyer shall not assume or be
obligated to pay, perform or otherwise discharge the following liabilities or
obligations:
(i) any liabilities or obligations of the Seller in respect of any
Excluded Assets or other assets of the Seller which are not Assets;
(ii) any liabilities or obligations in respect of Taxes for which
the Seller is liable pursuant to Section 7.8;
(iii) any liabilities, obligations, or responsibilities relating
to the disposal, storage, transportation, discharge, Release, or
recycling, by or for the Seller, of Hazardous Substances at any off-site
location, which occurred prior to the Closing Date, provided that
"off-site location" does not include any location contaminated by
Hazardous Substances migrating from or to the Assets;
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(iv) any liabilities, obligations or responsibilities relating to
the Easements including, without limitation, liabilities related to the
disposal, discharge or Release of Hazardous Substances, whether such
liabilities, obligations or responsibilities arose from the ownership or
operation of said property, equipment or machinery prior to or after the
Closing Date, unless caused by the Buyer's activities, operations or
equipment or such activities, operations or equipment of the Buyer's
contractors, agents or affiliates;
(v) any liabilities or obligations which are or would be required
to be accrued by the Seller on a balance sheet of the Seller as of the
Closing Date prepared in accordance with generally accepted accounting
principles;
(vi) any liabilities or obligations relating to any personal
injury, discrimination, wrongful discharge, unfair labor practice or
similar claim or cause of action which relate to the ownership or
operation by the Seller of the Assets prior to the Closing Date;
(vii) any liabilities or obligations of the Seller or any ERISA
Affiliate of the Seller under any Benefit Plan of the Seller or any
ERISA Affiliate of the Seller covering any employees of the Seller or
any ERISA Affiliate of the Seller including, without limitation, any
liabilities or obligations under the Consolidated Omnibus Reconciliation
Act of 1985, as amended;
(viii) any liabilities or obligations associated with the Response
Actions required to be performed by the Seller under Section 7.12 and
any costs incurred by federal, state or local governmental authorities
imposed on the Buyer or the Seller in connection therewith;
(ix) any liability of the Seller arising out of a breach by the
Seller of any of its obligations under this Agreement or any Related
Agreement or Seller's Agreement;
(x) any fines or penalties imposed by governmental agencies
resulting from an investigation or proceeding pending prior to the
Closing; or illegal acts, willful misconduct or gross negligence of the
Seller prior to the Closing other than with respect to the liabilities
described in Sections 2.3(v) and (vi);
(xi) any payment obligations of the Seller for goods delivered or
services rendered prior to the Closing other than such obligations with
respect to payment for capital improvements to Kendall Station which
would have been included in the Capital Improvement Amount had such
payment obligations been expended by or for the account of the Seller
prior to the Closing;
(xii) any liabilities or obligations imposed upon, assumed or
retained by the Seller or any of its Affiliates pursuant to any Related
Agreement;
(xiii) any liabilities or obligations of the Seller resulting from
entering into or performing its obligations pursuant to or consummating
the transactions contemplated herein or in any Related Agreement;
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(xiv) other than such obligations with respect to payment for
capital improvements to Kendall Station (which would have been included
in the Capital Improvement Amount had such payment obligations been
expended by or for the account of the Seller prior to the Closing), any
obligations for wages, overtime, employment taxes, severance pay,
transition payments in respect of compensation or similar benefits
accruing or arising prior to the Closing under any term or provision of
any contract, instrument or agreement relating to any of the Assets; and
(xv) any liabilities or obligations of the Seller arising from the
breach by the Seller on or prior to the Closing of any term or provision
of any contract, instrument or agreement relating to any of the Assets.
All such liabilities and obligations not being assumed pursuant to
Section 2.4 are herein called the "Excluded Liabilities."
2.5. Guaranty. Certain obligations of the Buyer shall be
guaranteed by the Guarantor pursuant to the form of Guaranty attached hereto
as Exhibit G.
ARTICLE III.
PURCHASE PRICE
3.1. Purchase Price. The purchase price for the Assets shall be
an amount equal to the sum of (i) $60,199,000, plus (ii) the Adjustment
Amount, plus (iii) any amounts expended by the Seller under Section 7.4(d)
hereof, plus (iv) any Capital Improvement Amount (the "Purchase Price"). For
purposes hereof, the Capital Improvement Amount shall be any amounts expended
by Seller between the date hereof and the Closing for capital improvements to
the Assets which are not set forth on Schedule 1.1(a)(4)(xiii), provided, that
no such amounts shall be added to the Purchase Price unless the capital
improvements relating thereto were required to be made by Good Utility
Practice, and unless the Seller shall first have advised Buyer in writing of
the capital improvements proposed to be made and Buyer shall have consented
thereto in writing, which consent Buyer shall not unreasonably withhold.
3.2. Purchase Price Adjustment. (a) Within thirty (30) days after
the Closing, the Seller shall prepare and deliver to the Buyer a statement (an
"Adjustment Statement") which reflects the net book value, as reflected on the
books of the Seller as of the Closing Date, of (i) all fuel inventory used at
or in connection with the Assets (the "Adjustment Amount") and (ii) the
Capital Improvement Amount. The Adjustment Statement shall be prepared using
the same generally accepted accounting principles, policies and methods as the
Seller has historically used in connection with the calculation of the items
reflected on such Adjustment Statement. The Buyer agrees to cooperate with
the Seller in connection with the preparation of each Adjustment Statement and
related information, and shall provide to the Seller such books, records and
information as may be reasonably requested from time to time.
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(b) The Buyer may dispute the Adjustment Amount or the Capital
Improvement Amount; provided, however, that the Buyer shall notify the Seller
in writing of the disputed amount, and the basis of such dispute, within ten
(10) Business Days of the Buyer's receipt of the Adjustment Statement. In the
event of a dispute with respect to any part of the Adjustment Amount or
Capital Improvement Amount, the Buyer and the Seller shall attempt to
reconcile their differences and any resolution by them as to any disputed
amounts shall be final, binding and conclusive on the parties. If the Buyer
and the Seller are unable to reach a resolution of such differences within 30
days of receipt of the Buyers' written notice of dispute to the Seller, the
Buyer and the Seller shall submit the amounts remaining in dispute for
determination and resolution to the Independent Accounting Firm, which shall
be instructed to determine and report to the parties, within 30 days after
such submission, upon such remaining disputed amounts, and such report shall
be final, binding and conclusive on the parties hereto with respect to the
amounts disputed. The fees and disbursements of the Independent Accounting
Firm shall be allocated between the Buyer and the Seller so that the Buyer's
share of such fees and disbursements shall be in the same proportion that the
aggregate amount of such remaining disputed amounts so submitted by the Buyer
to the Independent Accounting Firm that is unsuccessfully disputed by the
Buyer (as finally determined by the Independent Accounting Firm) bears to the
total amount of such remaining disputed amounts so submitted by the Buyer to
the Independent Accounting Firm. The parties shall at their own cost and
expense cooperate with the Independent Accounting Firm, provide the
Independent Accounting Firm with such books, records and information and make
available to the Independent Accounting Firm its personnel associated
therewith as may be reasonably requested from time to time.
(c) (x) Within ten (10) Business Days after the Buyer's receipt
of the Adjustment Statement, the Buyer shall pay all undisputed amounts, or if
there is a dispute with respect to any amount on such Adjustment Statement,
within five (5) Business Days after the final determination of such disputed
amounts, the Buyer shall pay such disputed amount as finally determined to be
payable with respect to such Adjustment Statement, less (y) the Estimated
Adjustment Amount; provided, however, that if such amount shall be less than
zero then the Seller will pay to the Buyer the amount by which such amount is
less than zero. Any amount paid under this Section 3.2(c) shall be paid with
interest for the period commencing on the Closing Date, through the date of
payment, calculated at the prime rate of BankBoston in effect on such Closing
Date, and in cash by federal or other wire transfer of immediately available
funds.
3.3. Allocation of Purchase Price. The Buyer and the Seller shall
use their good faith efforts to agree to allocate the Purchase Price among the
items constituting the Assets within 45 days of the date of this Agreement.
The Buyer or the Seller may obtain the services of a mutually acceptable
independent engineer or appraiser to assist it in determining the fair value
of the Assets for purposes of such allocation, the cost of which shall be
borne equally by the parties. Each of the Buyer and the Seller agrees to file
Internal Revenue Service Form 8594, and all federal, state, local and foreign
Tax Returns, in accordance with any allocation agreed to pursuant to this
Section 3.3, and to report the transactions contemplated by the Agreement for
federal Income Tax and all other tax purposes in a manner consistent with any
such agreed-upon allocation. Each of the Buyer and the Seller agrees to
provide the other promptly with any other information required to complete
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Form 8594. Each of the Buyer and the Seller shall notify and provide the
other with reasonable assistance in the event of an examination, audit orother
proceeding regarding any agreed-upon allocation of the Purchase Price.
3.4. Proration. (a) The Buyer and the Seller agree that all of
the items normally prorated, including those listed below, relating to the
business and operation of the Assets will be prorated as of the Closing Date,
with the Seller liable to the extent such items relate to any time period
through the Closing Date, and the Buyer liable to the extent such items relate
to periods subsequent to the Closing Date:
(i) personal property, real estate, occupancy and water Taxes,
assessments and other charges, if any, on or with respect to the
business and operation of the Assets;
(ii) rent, Taxes and other items payable by or to the Seller under
any of the Seller's Agreements assigned to and assumed by the Buyer
hereunder which are associated with the Assets;
(iii) any permit, license, registration, compliance assurance fees
or other fees with respect to any Operating Permit associated with the
Assets;
(iv) sewer rents and charges for water, telephone, electricity and
other utilities.
(b) In connection with the prorations referred to in (a) above,
in the event that actual figures are not available at the Closing Date, the
proration shall be based upon the actual Taxes or fees for the preceding year
(or appropriate period) for which actual Taxes or fees are available and such
Taxes or fees shall be reprorated upon request of either the Seller, on the
one hand, or the Buyer, on the other hand, made within sixty (60) days of the
date that the actual amounts become available. The Seller and the Buyer agree
to 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 Section 3.4.
ARTICLE IV.
THE CLOSING
4.1. Time and Place of Closing. Upon the terms and subject to
the satisfaction of the conditions contained in Article VIII of this Agreement
(the "Conditions"), the closing of the sale of the Assets contemplated by this
Agreement (the "Closing") will take place at the offices of LeBoeuf, Lamb,
Greene & MacRae, L.L.P., 260 Franklin Street, Boston, Massachusetts 02110, at
10:00 A.M. (local time) on such date, not earlier than November 15, 1998, as
the parties may agree which date is as soon as practicable, but no later than
fifteen Business Days, following the date on which all of the Conditions have
been satisfied or waived; or at such other place or time as the parties may
agree. The date and time at which the Closing actually occurs is hereinafter
referred to as the "Closing Date."
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4.2. Payment of Purchase Price. Upon the terms and subject to the
satisfaction of the conditions contained in this Agreement, in consideration
of the aforesaid sale, assignment, conveyance, transfer and delivery of the
Assets, the Buyer will pay or cause to be paid to the Seller at the Closing an
amount in United States dollars equal to the sum of (i) $60,199,000 plus (ii)
the Estimated Adjustment Amount, plus (iii) any amounts expended by the Seller
pursuant to Section 7.4(d) hereof (the "Closing Amount"), by wire transfer of
immediately available funds or by such other means as are agreed upon by the
Seller and the Buyer. The balance of the Purchase Price, or, alternatively,
any amounts owing by the Seller to the Buyer, in each case determined in
accordance with Section 3.2 hereof, shall be paid in accordance with such
Section 3.2.
4.3. Deliveries by the Seller. At the Closing, the Seller will
deliver the following to the Buyer:
(a) The Bill of Sale, duly executed by the Seller;
(b) All consents, waivers or approvals obtained by the Seller as
of the Closing with respect to the Assets or the consummation of the
transactions connected to the sale of the Assets contemplated by this
Agreement, to the extent specifically required hereunder;
(c) Each Related Agreement duly executed by each Affiliate of
Seller party thereto;
(d) An opinion of counsel and certificate (as contemplated by
Section 8.2(d) and 8.2(e)) with respect to the Assets;
(e) The Deed duly executed and acknowledged by the Seller and in
recordable form;
(f) The FIRPTA Affidavit executed by the Seller;
(g) All such other instruments of assignment or conveyance as
shall, in the reasonable opinion of the Buyer and its counsel, be necessary to
transfer to the Buyer the Assets in accordance with this Agreement and, where
necessary or desirable, in recordable form; and
(h) Such other agreements, documents, instruments and writings
as are required to be delivered by the Seller at or prior to the Closing Date
pursuant to this Agreement or otherwise required in connection herewith.
4.4. Deliveries by the Buyer. At the Closing, the Buyer will
deliver the following to the Seller:
(a) The Closing Amount, by wire transfer of immediately
available funds or such other means as are agreed upon by the Seller and the
Buyer;
(b) The Assumption Agreement duly executed by the Buyer;
(c) Each Related Agreement duly executed by the Buyer;
(d) An opinion of counsel and certificate (as contemplated by
Section 8.3(c) and 8.3(e)) with respect to the Assets;
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(e) All such other instruments of assumption as shall, in the
reasonable opinion of the Seller and its counsel, be necessary for the Buyer
to assume the Assumed Liabilities, in accordance with this Agreement; and
(f) Such other agreements, documents, instruments and writings
as are required to be delivered by the Buyer at or prior to the Closing Date
pursuant to this Agreement or otherwise required in connection herewith.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller represents and warrants to the Buyer as follows (all
such representations and warranties, except those regarding the Seller, being
made to the best knowledge of the Seller; for purposes hereof, the "best
knowledge" of the Seller shall mean that knowledge which the members of the
Seller's management had or should have had following the conduct of an
appropriate due diligence investigation with respect to the matter in
question).
5.1. Organization; Qualification. The Seller is a corporation
duly organized, validly existing and in good standing under the laws of the
Commonwealth of Massachusetts and has all requisite corporate power and
authority to own, lease, and operate its properties and to carry on its
business as is now being conducted. The Seller is duly qualified or licensed
to do business as a foreign corporation and is in good standing in each
jurisdiction in which the property owned, leased or operated by it or the
nature of the business conducted by it makes such qualification necessary,
except in each case in those jurisdictions where the failure to be so duly
qualified or licensed and in good standing would not have a Material Adverse
Effect. The Seller has heretofore delivered to the Buyer complete and correct
copies of its Articles of Organization and Bylaws as currently in effect.
5.2. Authority Relative to this Agreement. The Seller has full
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby
have been duly and validly authorized by the Board of Directors of the Seller
and no other corporate proceedings on the part of the Seller are necessary to
authorize this Agreement or to consummate the transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered by
the Seller, and assuming that this Agreement constitutes a valid and binding
agreement of the Buyer, and subject to the receipt of the Seller Required
Regulatory Approvals and the Buyer Required Regulatory Approvals, constitutes
a valid and binding agreement of the Seller, enforceable against the Seller in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, moratorium or other similar laws affecting
or relating to enforcement of creditors' rights generally or general
principles of equity.
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5.3. Consents and Approvals; No Violation. (a) Other than
obtaining the Seller Required Regulatory Approvals and the Buyer Required
Regulatory Approvals, neither the execution and delivery nor the performance
of this Agreement by the Seller will (i) conflict with or result in any breach
of any provision of the Articles of Organization or Bylaws of the Seller, (ii)
require any consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority, except (x) where
the failure to obtain such consent, approval, authorization or permit, or to
make such filing or notification, would not have a Material Adverse Effect or
(y) for those requirements which become applicable to the owner of the Assets
as a result of the specific regulatory status of the Buyer (or any of its
Affiliates) or as a result of any other facts that specifically relate to the
business or activities in which the Buyer (or any of its Affiliates) is or
proposes to be engaged; (iii) result in a default (or give rise to any right
of termination, cancellation or acceleration) under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, license,
agreement or other instrument or obligation to which the Seller is a party or
by which the Seller, or any of the Assets may be bound, except for such
defaults (or rights of termination, cancellation or acceleration) as to which
requisite waivers or consents have been obtained or which, in the aggregate,
would not have a Material Adverse Effect; or (iv) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to the Seller, or
any of its assets, which violation would have a Material Adverse Effect.
(b) Except for (i) the approvals under the Federal Power Act for
the transactions contemplated by this Agreement and the Related Agreements
listed in Schedule 5.3 hereto, (ii) orders by the MDTE approving the
transactions contemplated by this Agreement and the Related Agreements and
(iii) the filings by the Seller and the Buyer required by the HSR Act and the
expiration or earlier termination of all waiting periods under the HSR Act
(the filings and approvals referred to in clauses (i) through (iii) are
collectively referred to as the "Seller Required Regulatory Approvals"), no
declaration, filing or registration with, or notice to, or authorization,
consent or approval of any governmental or regulatory body or authority is
necessary for the execution, delivery and performance of this Agreement by the
Seller or for the consummation by the Seller of the transactions contemplated
hereby, other than such declarations, filings, registrations, notices,
authorizations, consents or approvals which, if not obtained or made, will
not, in the aggregate, have a Material Adverse Effect.
5.4. Reports. Since January 1, 1995, the Seller has filed or
caused to be filed, or will, prior to the Closing, file or cause to be filed
with the SEC, the MDTE, and the FERC, as the case may be, all material forms,
statements, reports and documents (including all exhibits, amendments and
supplements thereto) required to be filed by it with respect to the business
and operations of the Seller as it relates to the Assets under each of the
Securities Act, the Exchange Act, applicable Massachusetts public utility
laws, the Federal Power Act, and the Price-Anderson Act and the respective
rules and regulations thereunder, all of which complied in all material
respects with all applicable requirements of the appropriate act and the rules
and regulations thereunder in effect on the date each such report was filed,
and there are no material misstatements or omissions in respect of such
reports.
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5.5. Financial Statements. Seller has made available to the Buyer
its balance sheet, as of December 31, 1997. Such balance sheet (including the
related notes thereto) is referred to herein as the "Balance Sheet." The
Balance Sheet presents fairly, as of December 31, 1997, the financial position
of the Seller in conformity with generally accepted accounting principles
applied on a consistent basis, except as otherwise noted therein.
5.6. Undisclosed Liabilities. Except as set forth in Schedule
5.6, the Seller has no liability or obligation relating to the business or
operations of the Assets, secured or unsecured (whether absolute, accrued,
contingent or otherwise, and whether due or to become due), of a nature
required by generally accepted accounting principles to be reflected in a
corporate balance sheet or disclosed in the notes thereto, which are not
accrued or reserved against in the Balance Sheet or disclosed in the notes
thereto in accordance with generally accepted accounting principles, except
those which either (i) were incurred in the ordinary course of business
whether before or after the date of the Balance Sheet, or (ii) are not in the
aggregate material to the Assets, or (iii) are Excluded Liabilities.
5.7. Absence of Certain Changes or Events. Except (i) as set
forth in Schedule 5.7, or in the reports, schedules, registration statements
and definitive proxy statements filed by either of the Seller or Commonwealth
Energy System with the SEC and (ii) as otherwise contemplated by this
Agreement, since the date of the Balance Sheet there has not been: (a) any
Material Adverse Effect; (b) any damage, destruction or casualty loss, whether
covered by insurance or not, which had a Material Adverse Effect; (c) any
entry into any agreement, commitment or transaction (including, without
limitation, any borrowing, capital expenditure or capital financing) by the
Seller which is material to the business or operations of the Assets, except
agreements, commitments or transactions in the ordinary course of business or
as contemplated herein; or (d) any change by the Seller in accounting methods,
principles or practices except as required or permitted by generally accepted
accounting principles.
5.8. Title and Related Matters. Except as set forth in Schedule
5.8 and except for Permitted Encumbrances, the Seller has marketable record
title to the Real Estate as specified in the Specimen Title Policy. Except as
set forth in Schedule 5.8 and except for Permitted Encumbrances, the Seller
has good and valid title to the other Assets which it purports to own that are
reflected in the Balance Sheet (other than those which have been disposed of
since the date thereof in the ordinary course of business), free and clear of
all Encumbrances. None of the Permitted Encumbrances materially adversely
affect the existing use of the Real Estate, as such use (i.e. the creation of
additional generating capacity) may be expanded to that portion of the Real
Estate shown on Exhibit H attached hereto; provided, however, as to any
Easement which is subject to relocation pursuant to Section 7.13(b), the
existence of such Easement shall not constitute a breach of this Section 5.8.
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5.9. Leases. Schedule 5.9 lists, as of the date of this
Agreement, all real property leases under which the Seller is a lessee or
lessor and which (x) are to be transferred and assigned to the Buyer on the
Closing Date, and (y) (i) provide for annual payments of more than $500,000 or
(ii) are material to the business, operations or financial condition of the
Assets. Except as set forth in Schedule 5.9, all such leases are valid,
binding and enforceable in accordance with their terms, and are in full force
and effect; there are no existing material defaults by the Seller thereunder;
and no event has occurred which (whether with or without notice, lapse of time
or both) would constitute a material default by the Seller thereunder.
5.10. Insurance. Except as set forth in Schedule 5.10, all
material policies of fire, liability, worker's compensation and other forms of
insurance owned or held by and insuring the Assets are in full force and
effect, all premiums with respect thereto covering all periods up to and
including the date as of which this representation is being made have been
paid (other than retroactive premiums which may be payable with respect to
comprehensive general liability and workers' compensation insurance policies),
and no notice of cancellation or termination has been received with respect to
any such policy which was not replaced on substantially similar terms prior to
the date of such cancellation. Except as described in Schedule 5.10, as of
the date of this Agreement, the Seller has not in the prior 12 month period
been refused any insurance with respect to the Assets nor has its coverage
been limited by any insurance carrier to which it has applied for any such
insurance or with which it has carried insurance during the last twelve
months.
5.11. Environmental Matters. Except as disclosed in Schedule 5.11
or in any public filing by any of the Seller or Commonwealth Energy System
pursuant to the Securities Act or the Exchange Act:
(a) The Seller as of the date of this Agreement is in compliance
with applicable Environmental Laws with respect to the business and operation
of the Assets except for such failures to be in compliance with applicable
Environmental Laws, which, in the aggregate, are not reasonably likely to have
a Material Adverse Effect;
(b) The Seller has not received any written request for
information, or been notified that it is a potentially responsible party under
CERCLA or Chapter 21E of the Massachusetts General Laws with respect to any
portion of the Assets that has not been resolved or settled except for such
liability under such laws as would not be reasonably likely to have a Material
Adverse Effect; and
(c) The Seller has not entered into or agreed to any consent
decree or order, and is not subject to any judgment, decree, or judicial order
relating to compliance with any Environmental Law with respect to the Assets
except for such consent decrees, orders or judgments that, in the aggregate,
would not be reasonably likely to have a Material Adverse Effect.
The representations and warranties made in this Section 5.11, in
Section 5.18 with respect to Operating Permits and in Section 7.12, are the
Seller's exclusive representations and warranties relating to environmental
matters.
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5.12. Labor Matters. Schedule 5.12 lists, and the Seller has
previously delivered to the Buyer copies of, all collective bargaining
agreements and other agreements or commitments to be applicable to the Buyer
pursuant to Section 7.10 to which the Seller is a party or is subject and
which relate to the business or operation of the Assets. Solely (in each of
the following clauses (a) through (f)) with respect to the business or
operation of the Assets, except to the extent set forth in Schedule 5.12 and
except for such matters as will not have a Material Adverse Effect, (a) the
Seller is in compliance with all applicable laws respecting employment and em-
ployment practices, occupational health and safety, terms and conditions of
employment and wages and hours; (b) the Seller has not received written notice
of any unfair labor practice complaint against the Seller pending before the
National Labor Relations Board; (c) there is no labor strike, slowdown or
stoppage actually pending or threatened against or affecting the Seller; (d)
the Seller has not received notice that any representation petition respecting
the employees of the Seller has been filed with the National Labor Relations
Board; (e) no severance, grievance or arbitration proceeding arising out of or
under collective bargaining agreements is pending against the Seller and (f)
the Seller has not experienced any primary work stoppage since at least 1981.
5.13. ERISA: Benefit Plans. (a) Except as set forth in Schedule
5.13, the Seller has fulfilled its obligations under the minimum funding
requirements of Section 302 of ERISA, and Section 412 of the Code, with
respect to each deferred compensation, pension, profit-sharing and retirement
plan, including multi-employer plans, welfare benefit plans and bonus and
other employee benefit or fringe benefit plans maintained or with respect to
which contributions are made by the Seller or an ERISA Affiliate of the Seller
in respect of employees employed at the Kendall Station ("Benefit Plans").
Accurate and complete copies of all such Benefit Plans, including multi-
employer plans (as defined in Section 3(37) of ERISA), have been made
available to the Buyer.
(b) Except as set forth in Schedule 5.13, the Seller has fulfilled its
obligations under the minimum funding requirements of Section 302 of ERISA,
and Section 412 of the Code, with respect to each Benefit Plan which is an
"employee pension benefit plan" (as defined in Section 3(2) of ERISA). Each
Benefit Plan is in compliance in all material respects with the presently
applicable provisions of ERISA and the Code. The Seller has not incurred any
liability to the Pension Benefit Guaranty Corporation in connection with any
Benefit Plan which is subject to Title IV of ERISA. Except as set forth in
Schedule 5.13(a), no withdrawal liability has been incurred by or asserted
against the Seller with respect to any Benefit Plan which is a multi-employer
plan.
5.14. Real Estate. The Specimen Title Policy included herewith as
Schedule 5.14(i) contains a description of, and exhibits indicating the
location of, the real property owned by the Seller and included in the Assets
(the "Real Estate"). Copies of the plans with respect to the Real Estate
identified on Schedule 5.14(ii) have heretofore been delivered by the Seller
to the Buyer.
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5.15. Condemnation. Except as set forth in Schedule 5.15, neither
the whole nor any part of the Real Estate or any other real property or rights
leased, used or occupied by the Seller in connection with the ownership or
operation of the Assets is subject to any pending suit for condemnation or
other taking by any public authority, and no such condemnation or other taking
has been threatened.
5.16. Certain Contracts and Arrangements. (a) Except (i) as listed
in Schedules 1.1(a)(32), 5.9, 5.16(a) or 7.10(b), (ii) for contracts,
agreements, personal property leases, commitments, understandings or
instruments which will expire prior to the Closing Date, and (iii) for
agreements with suppliers entered into in the ordinary course of business, the
Seller are not a party to any written contract, agreement, personal property
lease, commitment, understanding or instrument which is material to the
business or operation of the Assets.
(b) Except as disclosed in Schedule 5.16(b), each of the
Seller's Agreements (i) constitutes a valid and binding obligation of the
Seller and of the other parties thereto, and (ii) is in full force and effect.
(c) Except as set forth in Schedule 5.16(c), there is not, under
any of the Seller's Agreements, any default or event which, with notice or
lapse of time or both, would constitute a default on the part of the Seller,
except, with respect to the Seller's Agreements only, such events of default
and other events as to which requisite waivers or consents have been obtained
or which would not, in the aggregate, have a Material Adverse Effect.
5.17. Legal Proceedings, etc. Except as set forth in Schedule 5.17
or in any filing made by Commonwealth Energy System or the Seller pursuant to
the Securities Act or the Exchange Act, there are no claims, actions,
proceedings or investigations pending or threatened against or relating to the
Seller before any court, governmental or regulatory authority, arbitration
panel or body acting in an adjudicative capacity, which, if adversely
determined, would be reasonably likely to have a Material Adverse Effect
either singly or in the aggregate. Except as set forth in Schedule 5.17 or in
any filing made by Commonwealth Energy System or the Seller pursuant to the
Securities Act or the Exchange Act, the Seller is not subject to any
outstanding judgments, rules, orders, writs, injunctions or decrees of any
court or governmental or regulatory authority which individually or in the
aggregate have a Material Adverse Effect.
5.18. Operating Permits. (a) The Seller has all the Operating
Permits, except where the failure to have such Operating Permits is not
reasonably likely to have a Material Adverse Effect. Except as set forth in
Schedule 5.11, the Seller has not received any written notification that it is
in violation of any of such Operating Permits, or any law, statute, order,
rule, regulation, ordinance or judgment of any governmental or regulatory body
or authority applicable to the Seller, except for notifications of violations
which would not, in the aggregate, be reasonably likely to have a Material
Adverse Effect. The Seller is in substantial compliance with all Operating
Permits, laws, statutes, orders, rules, regulations, ordinances, or judgments
of any governmental or regulatory body or authority applicable to it, except
for violations which, in the aggregate, do not have or are not reasonably
likely to have a Material Adverse Effect.
(b) Schedule 1.1(a)(39) sets forth all Operating Permits.
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5.19. Regulation as a Utility. The Seller is an "electric company"
within the meaning of Chapter 164 of the Massachusetts General Laws, and a
"public utility company" within the meaning of the Holding Company Act.
5.20. Taxes. With respect to the Assets (i) all Tax Returns
required to be filed other than those Tax Returns the failure of which to file
would not have a Material Adverse Effect have been filed, and (ii) all
material Taxes shown to be due on such Tax Returns have been paid in full.
Except as set forth in Schedule 5.20, no notice of deficiency or assessment
has been received from any taxing authority with respect to liabilities for
Taxes of the Seller in respect of the Assets, which have not been fully paid
or finally settled, and any such deficiency shown in such Schedule 5.20 is
being contested in good faith through appropriate proceedings. Except as set
forth in Schedule 5.20, there are no outstanding agreements or waivers
extending the applicable statutory periods of limitation for Taxes associated
with the Assets for any period. None of the Assets is property that is
required to be treated as being owned by any other person pursuant to the so-
called safe harbor lease provisions of former Section 168(f)(8) of the Code,
and none of the Assets is "tax-exempt use" property within the meaning of
Section 168(h) of the Code.
5.21. Entire Assets. Except as expressly set forth in Schedule
5.21, the Assets (including Real Estate) include all of the material assets or
properties that, individually or in the aggregate, are used in, or are
necessary for, the operation of the Kendall Station.
EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH IN
THIS ARTICLE V, THE ASSETS ARE BEING SOLD AND TRANSFERRED "AS IS, WHERE IS"
AND THE SELLER IS NOT MAKING ANY OTHER REPRESENTATIONS OR WARRANTIES, WRITTEN
OR ORAL, STATUTORY, EXPRESS OR IMPLIED, CONCERNING SUCH ASSETS, INCLUDING, IN
PARTICULAR, ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE, ALL OF WHICH ARE HEREBY EXPRESSLY EXCLUDED AND DISCLAIMED.
ARTICLE VI.
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the Seller as follows:
6.1. Organization. The Buyer is a limited liability company duly
organized, validly existing and in good standing under the laws of the State
of Delaware and has all requisite power and authority to own, lease and
operate its properties and to carry on its business as is now being conducted.
The Buyer has heretofore delivered to the Seller complete and correct copies
of its Certificate of Organization and LLC Operating Agreement (or other
similar governing documents), as currently in effect.
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6.2. Authority Relative to this Agreement. The Buyer has full
power and authority to execute and deliver this Agreement and to consummate
the transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have
been duly and validly authorized by the Members of the Buyer and no other
proceedings on the part of the Buyer are necessary to authorize this Agreement
or to consummate the transactions contemplated hereby. This Agreement has
been duly and validly executed and delivered by the Buyer, and assuming that
this Agreement constitutes a valid and binding agreement of the Seller,
subject to the receipt of the Buyer Required Regulatory Approvals and the
Seller Required Regulatory Approvals, constitutes a valid and binding
agreement of the Buyer, enforceable against the Buyer in accordance with its
terms, except that such enforceability may be limited by applicable
bankruptcy, insolvency, moratorium or other similar laws affecting or relating
to enforcement of creditors' rights generally or general principles of equity.
6.3. Consents and Approvals: No Violation. (a) Except as set
forth in Schedule 6.3, and other than obtaining the Buyer Required Regulatory
Approvals and the Seller Required Regulatory Approvals, neither the execution
and delivery of this Agreement by the Buyer nor the purchase by the Buyer of
the Assets pursuant to this Agreement will (i) conflict with or result in any
breach of any provision of the Certificate of Organization and LLC Operating
Agreement (or other similar governing documents) of the Buyer, (ii) require
any consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority, (iii) result in a
default (or give rise to any right of termination, cancellation or
acceleration) under any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, agreement, lease or other instrument or obligation
to which the Buyer or any of its subsidiaries is a party or by which any of
their respective assets may be bound, except for such defaults (or rights of
Termination, cancellation or acceleration) as to which requisite waivers or
consents have been obtained.
(b) Except (i) as set forth in Schedule 6.3, and (ii) for the
filings by the Buyer and the Seller required by the HSR Act and the expiration
or earlier termination of all waiting periods under the HSR Act (the filings
and approvals referred to in clauses (i) and (ii) are collectively referred to
as the "Buyer Required Regulatory Approvals"), no declaration, filing or
registration with, or notice to, or authorization, consent or approval of any
governmental or regulatory body or authority is necessary for the consummation
by the Buyer of the transactions contemplated hereby, other than such
declarations, filings, registrations, notices, authorizations, consents or
approvals which, in the aggregate, would not have a material adverse effect on
any of the Buyer's material obligations hereunder.
6.4. Availability of Funds. The Buyer has sufficient funds
available to it or has received or will receive prior to the Closing Date
binding written commitments from responsible financial institutions to provide
sufficient funds on the Closing Date to pay the Purchase Price.
6.5. Independent Evaluation. The Buyer has been afforded an
opportunity by the Seller to conduct an investigation of the Assets,
including, without limitation, the opportunity to review the environmental
reports and analyses with respect to the Assets described in Schedule 5.11,
the opportunity to conduct a physical inspection of the Assets, and the
opportunity to discuss matters with respect to the Assets with officers and
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employees of, and advisors and consultants to, the Seller, including the
Seller's environmental consultants, and has conducted an independent
evaluation of the Assets based upon the results of such investigation. The
Buyer has not relied upon any representations or warranties with respect to
the Assets other than those specifically set forth herein.
ARTICLE VII.
COVENANTS OF THE PARTIES
7.1. Conduct of Business. Except as described in Schedule 7.1,
during the period from the date of this Agreement to the Closing Date, the
Seller will operate the Assets according to its ordinary and usual course of
business consistent with Good Utility Practice. Without limiting the
generality of the foregoing, and, except as contemplated in this Agreement or
as described in Schedule 7.1, prior to the Closing Date, without the prior
written consent of the Buyer, the Seller will not with respect to the Assets:
(i) (x) create, incur or assume any amount of indebtedness for
money borrowed (including obligations in respect of capital leases),
other than in the ordinary course of business and except for Permitted
Encumbrances and indebtedness which does not create any Encumbrance on
the Assets; or (y) assume, guarantee, endorse or otherwise become liable
or responsible (whether directly, contingently or otherwise) for the
obligations of any other Person except in the ordinary course of
business;
(ii) make any material change in the levels of fuel inventory
and stores inventory customarily maintained by the Seller with respect
to the Assets except for such changes which are consistent with Good
Utility Practice;
(iii) sell, lease (as lessor), transfer or otherwise dispose of,
any of the Assets other than assets used, consumed or replaced in the
ordinary course of business consistent with Good Utility Practice and
not mortgage or pledge, or impose or suffer to be imposed any
Encumbrance on, any of the Assets, other than Permitted Encumbrances;
(iv) amend any of the Seller's Agreements or enter into any
other agreements for the sale of power from the Assets having a term
extending more than thirty days beyond the Closing Date;
(v) enter into or amend any real or personal property Tax
agreement, treaty or settlement;
(vi) enter into any commitment for the purchase or sale of fuel
(whether commodity or transportation) having a term that extends beyond
the Closing Date if the aggregate payment under such commitment
following the Closing Date is expected to exceed $10 million or if the
aggregate payments under such commitment and all other then outstanding
commitments not previously consented to by the Buyer would be expected
to exceed $30 million following the Closing Date;
(vii) amend any Operating Permit;
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(viii) enter into any agreement or commitment with any Affiliate
that survives the Closing; or
(ix) enter into any written or oral contract, agreement,
commitment or arrangement with respect to any of the transactions set
forth in the foregoing paragraphs (i) through (ix).
7.2. Access to Information. (a) Between the date of this
Agreement and the Closing Date, the Seller will, during ordinary business
hours and upon reasonable notice (i) give the Buyer and the Buyer
Representatives reasonable access to its managerial personnel and to all
books, records, plants, offices and other facilities and properties
constituting the Assets to which the Buyer is permitted access by law; (ii)
permit the Buyer to make such reasonable inspections thereof as the Buyer may
reasonably request; (iii) furnish the Buyer with such financial and operating
data and other information with respect to the Assets in the possession of the
Seller as the Buyer may from time to time reasonably request; (iv) furnish the
Buyer a copy of each material report, schedule or other document filed or
received by the Seller or any of the Seller's Affiliates with respect to the
Assets with the SEC, MDTE, or FERC; provided, however, that (A) any such
investigation shall be conducted in such a manner as not to interfere
unreasonably with the operation of the Assets, (B) the Seller shall not be
required to take any action which would constitute a waiver of the attorney/-
client privilege and (C) the Seller need not supply the Buyer with any
information which the Seller is under a legal obligation not to supply; and
(v) give the Buyer access to the environmental reports identified in Schedule
5.11 and Operating Permits and other permits and licenses for the Assets.
Notwithstanding anything in this Section 7.2 to the contrary, (i) the Seller
will only furnish or provide such access to personnel and medical records as
is required by law, and (ii) the Buyer shall not have the right to perform or
conduct any environmental sampling or testing at, in, on, or underneath the
Assets without the approval of the Seller.
(b) All information furnished to or obtained by the Buyer and
the Buyer Representatives pursuant to this Section 7.2 shall be subject to the
provisions of the Confidentiality Agreement and shall be treated as
"Proprietary Information" (as defined in the Confidentiality Agreement).
(c) For a period of ten years after the Closing Date, the Seller
and its representatives shall have reasonable access to all of the books and
records related to the Assets transferred to the Buyer hereunder to the extent
that such access may reasonably be required by the Seller in connection with
matters relating to or affected by the operation of the Assets prior to the
Closing Date; provided, however, that the Seller shall first enter into a
definitive confidentiality agreement with the Buyer with respect thereto on
such terms and conditions as the Buyer may reasonably require. Such access
shall be afforded by the Buyer upon receipt of reasonable advance notice and
during normal business hours. The Seller shall be solely responsible for any
costs or expenses incurred by it pursuant to this Section 7.2(c). If the
Buyer shall desire to dispose of any such books and records prior to the
expiration of such ten-year period, the Buyer shall, prior to such
disposition, give the Seller a reasonable opportunity at the Seller's expense,
to segregate and remove such books and records as the Seller may select.
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7.3. 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.
7.4. Further Assurances. (a) Subject to the terms and conditions
of this Agreement, each of the parties hereto will use its 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 of the Assets
pursuant to this Agreement. Notwithstanding anything in the previous sentence
to the contrary, and pursuant to Section 7.6(c), the Seller and the Buyer
shall use their commercially reasonable efforts to transfer the existing
Operating Permits (or to obtain reissued or new Operating Permits) to the
Buyer effective as of the Closing. From time to time after the date hereof,
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 vest in the Buyer the Seller's title to the Assets
(as described in Section 5.8). 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) In the event that any Asset shall not have been conveyed to
the Buyer at the Closing, the Seller shall, subject to Section 7.4(d), use its
best efforts to convey such asset to the Buyer as promptly as is practicable
after the Closing. In the event that any Easement shall not have been
retained by the Seller after the Closing, the Buyer shall use its best efforts
to grant such Easement to the Seller as promptly as is practicable after the
Closing.
(c) To the extent that the Seller's rights under any Seller's
Agreement may not be assigned without the consent of another Person which
consent has not been obtained, this Agreement shall not constitute an
agreement to assign the same if an attempted assignment would constitute a
breach thereof or be unlawful, and the Seller, at its expense, shall use its
commercially reasonable efforts to obtain any such required consent(s) by the
Closing. The Seller and the Buyer agree that if any consent to an assignment
of any Seller's Agreement shall not be obtained or if any attempted assignment
would be ineffective or would impair the Buyer's rights and obligations under
the Seller's Agreement in question so that the Buyer would not in effect
acquire the benefit of all such rights and obligations, the Seller, to the
maximum extent permitted by law and such Seller's Agreement, shall after the
Closing, unless the Seller elects to comply with Section 7.4(d) hereof,
appoint the Buyer to be the Seller's agent with respect to such Seller's
Agreement, and the Seller shall, to the maximum extent permitted by law and
such Seller's Agreement, enter into such reasonable arrangements with the
Buyer as are necessary to provide the Buyer with the benefits and obligations
of such Seller's Agreement from the Closing. The Seller and the Buyer shall
cooperate and shall each use their commercially reasonable efforts after the
Closing to obtain an assignment of such Seller's Agreement to the Buyer.
(d) To the extent that any personal property lease relating to
any assets which are principally used by the Seller for generation purposes at
the Assets and listed in Schedule 5.16(a), cannot be assigned to the Buyer or
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are not subject to arrangements described in Section 7.4(c), the Seller will
use its commercially reasonable efforts to acquire the assets relating to such
lease at market terms and conditions and to include them in the Assets before
the Closing Date. The Seller will not commit to any such acquisition that
would require the Buyer to pay more than $100,000 individually or $500,000 in
the aggregate pursuant to Sections 3.1 or 4.2 without the Buyer's prior
written consent.
(e) Performance and timing of all capital improvements,
including with respect to the planning, scope and acceptance criteria
associated with such improvements, proposed to be made by the Seller at the
Kendall Station after the date of this Agreement, including, without
limitation, the capital improvements set forth in Schedule 1.1(a)(4)(xiii),
will be subject to the consent of the Buyer, which consent will not be
unreasonably withheld or delayed.
(f) Commencing on the execution of this Agreement, the Buyer
shall have the right to review and provide advice in connection with the day
to day operation of the Kendall Station, including, without limitation, in
connection with fuel and inventory procurement and maintenance, and have a
designated representative of the Buyer at the Kendall Station, provided,
however, that the Buyer shall not unreasonably interfere with the Seller's use
of the Assets. In the event the Buyer provides such advice, the Seller will
use commercially reasonable efforts to cooperate with such advice, provided,
however, that such efforts shall not require the Seller to incur any
additional costs or expenses and provided further, that the Seller shall at
all times prior to the Closing retain the right to operate the Assets in
accordance with Good Utility Practice.
(g) To the extent that any of the Seller's rights under any
guaranties, warranties and indemnifications applicable to the Assets or the
Assumed Liabilities are nontransferable or nonassignable, the Seller shall use
its commercially reasonable efforts to secure to the Buyer the benefits
thereof in some other manner (including the exercise of the rights of the
Seller thereunder) upon the request of the Buyer. At the Buyer's written
request, the Seller shall pursue claims under such guaranties, warranties and
indemnifications in such manner and to such extent as the Buyer shall from
time to time direct, and the Seller shall cooperate with the Buyer in such
pursuit, including providing the Buyer with all applicable documentation and
making the Seller's officers, employees and agents reasonably available for
the purpose of providing evidence (by affidavit, deposition or otherwise) in
connection therewith. The Buyer shall reimburse the Seller for all reasonable
costs and expenses incurred by the Seller in connection with such pursuit and
cooperation. Notwithstanding the foregoing, the Seller shall not be obligated
to bring or file suit against any third party, provided that if the Seller
shall determine not to bring or file suit after being so requested by the
Buyer, the Seller shall assign its rights in respect of any such claim so that
the Buyer may bring or file such suit.
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7.5. Public Statements. The Parties shall consult with each
other prior to issuing any public announcement, statement or other disclosure
with respect to this Agreement or the transactions contemplated hereby and
shall not issue any such public announcement, statement or other disclosure
prior to such consultation, except as may be required by law and except that
the parties may make public announcements, statements or other disclosures
with respect to this Agreement and the transactions contemplated hereby to the
extent and under the circumstances in which the Parties are expressly
permitted by the Confidentiality Agreement to make disclosures of "Proprietary
Information" (as defined in the Confidentiality Agreement).
7.6. Consents and Approvals. (a) The Seller and the Buyer shall
each file or cause to be filed with the Federal Trade Commission and the
United States Department of Justice any notifications required to be filed
under the HSR Act and the rules and regulations promulgated thereunder with
respect to the transactions contemplated hereby. The Parties shall consult
with each other as to the appropriate time of filing such notifications and
shall use their best efforts to make such filings at the agreed upon time, to
respond promptly to any requests for additional information made by either of
such agencies, and to cause the waiting periods under the HSR Act to terminate
or expire at the earliest possible date after the date of filing.
(b) The Seller and the Buyer shall cooperate with each other and
(i) promptly prepare and file all necessary documentation, (ii) effect all
necessary applications, notices, petitions and filings and execute all
agreements and documents, and (iii) use all commercially reasonable efforts to
obtain all necessary consents, approvals and authorizations of all other
parties, in the case of each of the foregoing clauses (i), (ii), and (iii),
necessary or advisable to consummate the transactions contemplated by this
Agreement (including, without limitation, the Seller Required Regulatory
Approvals and the Buyer Required Regulatory Approvals) or required by the
terms of any note, bond, mortgage, indenture, deed of trust, license,
franchise, permit, concession, contract, lease or other instrument to which
the Seller or the Buyer is a party or by which any of them is bound or to
obtain any additional governmental permits, licenses or other consents that
the Buyer considers useful in connection with the operation or ownership of
the Assets. The Seller shall have the right to review and approve in advance
all characterizations of the information relating to Assets; and each of the
Seller and the Buyer shall have the right to review in advance all
characterizations of the information relating to the transactions contemplated
by this Agreement which appear in any filing made in connection with the
transactions contemplated hereby.
(c) The Buyer shall assume primary responsibility for securing
the transfer or reissuance of the Operating Permits effective as of the
Closing Date. The Seller shall cooperate with the Buyer's efforts in this
regard and the Seller shall use all commercially reasonable efforts to assist
in the transfer or reissuance when so requested by the Buyer. In the event
that the Buyer is unable, despite commercially reasonable efforts, to obtain a
transfer or reissuance of one or more Operating Permits as of the Closing
Date, the Buyer may use the Operating Permits issued to the Seller provided
(i) the Buyer notifies the Seller prior to Closing, (ii) the Buyer continues
to make commercially reasonable efforts to obtain a transfer or reissuance of
such Operating Permits after the Closing and (iii) the Buyer indemnifies the
Seller for any losses, claims or penalties suffered by the Seller in
connection with any Operating Permit that is not transferred or reissued as of
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the Closing Date resulting from the Buyer's operation of the Assets following
the Closing Date. In no event shall the Buyer use or otherwise rely on an
Operating Permit issued to the Seller beyond one year after Closing unless the
Buyer has, after exercising its reasonable efforts, been unable to obtain same
and such reliance is not prohibited by law.
(d) The Seller shall advise, inform and consult with the Buyer
regarding all matters which may affect in any material respect the Buyer's
ownership and operation of the Assets after the Closing or the Assumed
Liabilities. In this regard, the Seller agrees not to enter into any
agreement or arrangement with respect to the Assets with any person,
including, without limitation, with any governmental or regulatory authority,
whether in connection with the obtaining of the Seller's Required Regulatory
Approvals or otherwise, which may reasonably be expected to cause a material
adverse effect for the Buyer or the Assets without first consulting with the
Buyer and obtaining the Buyer's consent; provided, that nothing herein shall
be deemed to inhibit the Seller from doing whatever it determines to be
necessary to comply with any requirements of law applicable to it or the
Assets.
7.7. Fees and Commissions. The Seller and the Buyer each
represent and warrant to the other that, except for Goldman, Sachs & Co.,
which is acting for and at the expense of the Seller, and Credit Suisse First
Boston, which is acting for and at the expense of the Buyer, 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. The Seller and the
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 finder's fees (other than as described
above) incurred by reason of any action taken by such party.
7.8. Tax Matters. (a) All transfer and sales Taxes incurred in
connection with this Agreement and the transactions contemplated hereby shall
be borne by the Buyer, and the Buyer, at its own expense, will file, to the
extent required by applicable law, all necessary Tax Returns and other
documentation with respect to all such transfer or sales taxes, and, if
required by applicable law, the Seller will join in the execution of any such
Tax Returns or other documentation. Prior to the Closing Date, the Seller
will provide to the Buyer, to the extent possible, an appropriate certificate
of no Tax due from each applicable taxing authority.
(b) With respect to Taxes to be prorated in accordance with
Section 3.4 of this Agreement only, the Buyer shall prepare and timely file
all Tax Returns required to be filed with respect to the Assets, if any, and
shall duly and timely pay all such Taxes shown to be due on such Tax Returns.
The Buyer's preparation of any such Tax Returns shall be subject to the
Seller's approval, which approval shall not be unreasonably withheld. The
Buyer shall make such Tax Returns available for the Seller's review and
approval no later than 25 Business Days prior to the due date for filing such
Tax Return. Within 20 Business Days after receipt of such Tax Return, the
Seller shall pay to the Buyer the Seller's proportionate share of the amount
shown as due on such Tax Return determined in accordance with the Section 3.4
of this Agreement.
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(c) Each of the Buyer and the Seller shall provide the other
with such assistance as may reasonably be requested by the other party in
connection with the preparation of any Tax Return, any audit or other
examination by any taxing authority, or any judicial or administrative
proceedings relating to liability for Taxes, and each will retain and provide
the requesting party with any records or information which may be relevant to
such return, audit or examination, proceedings or determination. Any
information obtained pursuant to this Section 7.8(c) or pursuant to any other
Section hereof providing for the sharing of information or review of any Tax
Return or other schedule relating to Taxes shall be kept confidential by the
parties hereto.
7.9. Supplements to Schedules; Notice of Breach. Prior to the
Closing Date, the Seller shall supplement or amend the Schedules required by
Section 2.4 and Article V with respect to any matter relating to the Assets
which was or would be required to be set forth or described in such Schedules.
No supplement or amendment of any Schedule made pursuant to this Section shall
be deemed to cure any breach of any representation or warranty made in this
Agreement unless the parties agree thereto in writing. Each party agrees to
advise the other party promptly in writing of any matter or occurrence of
which it becomes aware which may constitute a breach by either party of any
representation, warranty or covenant contained in this Agreement, or of any
reason of which it becomes aware why a condition to the performance of either
party's obligations hereunder may not be satisfied on or before the Closing
Date.
7.10. Employees. (a) the Buyer is required to offer employment,
from and after the Closing Date, to those employees employed by the Seller
immediately prior to the Closing (including any such employees absent from
active service by reason of illness, disability or leave of absence whether
paid or unpaid) who are members of Local 392, Utility Workers' Union of
America, AFL-CIO (the "Local 392") in job classifications identified in
Schedule 7.10(a) hereto 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 Memorandum of Understanding as defined in Section 7.10(b) below.
Each person who becomes employed by the Buyer pursuant to this Section 7.10(a)
shall be referred to herein as a "Union Employee."
(b) Schedule 7.10(b) sets forth the collective bargaining
agreement, and amendments thereto, to which the Seller is a party with Local
392 in connection with the Assets (collectively, the "Collective Bargaining
Agreement"), and the Memorandum of Understanding between the Seller and Local
392 (the "MOU"). From and after the Closing Date, the Buyer will comply with
all applicable obligations under the Collective Bargaining Agreement, System
Personnel Policies, and any other existing labor agreements as they relate to
the Union Employees covered thereby to be employed at the Assets to the extent
such obligations are identified in Schedule 7.10(b). Further, the Buyer will
accept and fulfill all obligations under the MOU that are designated for the
Buyer, including but not limited to the obligation of the Buyer to recognize
Local 392 as the collective bargaining agent of the Union Employees to the
extent such obligations are identified in Schedule 7.10(b).
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In the event that the Buyer shall sell the Assets to a third party
prior to the expiration of the existing Collective Bargaining Agreement, or
any Buyer-negotiated extension thereof, the Buyer shall require such third
party to assume and comply with the obligations of the Buyer hereunder,
including but not limited to the requirement to offer employment to the Union
Employees employed by the Buyer immediately prior to the change in owner, the
obligation to recognize Local 392 as the collective bargaining agent of the
Union Employees, and to comply with all applicable obligations under the
Collective Bargaining Agreement, System Personnel Policies, and any other
existing labor agreements, to the extent such obligations are identified in
Schedule 7.10(b), as they relate to the Union Employees covered thereby to be
employed at the Assets.
(c) The Buyer is required to provide benefits to the Union
Employees equivalent to those provided under the Collective Bargaining
Agreement for the term of the Collective Bargaining Agreement. The Buyer
shall have the right to use different benefit providers and to establish its
own employee benefit plans and plan administration to provide Union Employees
with a level of benefits equivalent to the level of benefits set forth in the
Collective Bargaining Agreement. For purposes of health care coverage, the
Buyer shall waive all limitations as to pre-existing condition exclusions and
waiting periods for Union Employees who become employees of the Buyer unless
such exclusions would have applied to the Union Employees had they remained
employed by the Seller.
The Buyer shall recognize service time with the Seller for
purposes of eligibility and vesting in any benefit plan, program, or fringe
benefit arrangement in the event that the Buyer shall sell the Assets to a
third party prior to the expiration of the existing collective bargaining
agreement or negotiated extension thereof, the Buyer shall require such third
party to comply with this obligation.
Notwithstanding the Buyer's assumption of the Collective
Bargaining Agreement and the MOU, the Buyer shall not assume sponsorship or
any other obligation under any Benefit Plan of the Seller or any ERISA
Affiliate of the Seller in connection with the assumption of such agreements
or in connection with hiring any of the Union or Nonunion Employees. All
benefits accrued under such Benefit Plans and all benefits currently payable
as of the Closing Date shall be and remain the obligation of the Seller.
(d) The Buyer is not required to employ any employees of the
Seller other than the Union Employees (the "Nonunion Employees"); provided,
that with respect to any Nonunion Employee who is employed by The Buyer whose
employment is terminated by The Buyer within six months following the Closing
Date, the Buyer shall pay severance benefits at least equal to those that
would have been payable by the Seller if the Nonunion Employee had remained
employed by the Seller until the date of such termination, under severance
plans, policies, or agreements of the Seller in effect immediately prior to
the Closing.
(e) The 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 The Buyer up to and including the Closing Date for those employees
who will become employees from and after the Closing Date. After the Closing
Date, The Buyer shall be responsible for performing and discharging all
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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.
(f) The Seller shall pay all the Seller's employees that are to
be employed by the Buyer, all compensation, bonus, severance, vacation and
holiday compensation, workers' compensation or other employment benefits which
have accrued to such employees through and including the Closing Date prior to
the date such employees become employees of the Buyer.
(g) To mitigate potential concerns that the Seller's employees
who may be hired by the Buyer under this Agreement may have with respect to
the Buyer, the parties will arrange meetings and interviews with such
employees (in groups and/or individually) and the Buyer at mutually convenient
times to provide the Buyer the opportunity to address such concerns promptly
after the execution of this Agreement.
7.11. Risk of Loss. (a) From the date hereof through the Closing
Date, all risk of loss or damage to the property included in the Assets shall
be borne by the Seller.
(b) If, before the Closing Date all or any portion of the Assets
are taken by eminent domain, or is the subject of a pending or (to the
knowledge of the Seller) contemplated taking which has not been consummated,
the Seller shall notify the Buyer promptly in writing of such fact. If such
taking would have a Material Adverse Effect, the Buyer and the Seller shall
negotiate in good faith to settle the loss resulting from such taking
(including, without limitation, by making a fair and equitable adjustment to
the Purchase Price) and, upon such settlement, consummate the transactions
contemplated by this Agreement pursuant to the terms of this Agreement. If no
such settlement is reached within sixty (60) days after the Seller has
notified the Buyer of such taking, then the Buyer or the Seller may terminate
this Agreement pursuant to Section 10.1(g).
(c) If, before the Closing Date all or any material portion of
the Assets are damaged or destroyed by fire or other casualty, the Seller
shall notify the Buyer promptly in writing of such fact. If such damage or
destruction would have a Material Adverse Effect and the Seller has not
notified the Buyer of its intention to cure such damage or destruction within
fifteen (15) days after its occurrence, the Buyer and the Seller shall
negotiate in good faith to settle the loss resulting from such casualty
(including, without limitation, by making a fair and equitable adjustment to
the Purchase Price) and, upon such settlement, consummate the transactions
contemplated by this Agreement pursuant to the terms of this Agreement. If no
such settlement is reached within sixty (60) days after the Seller has
notified the Buyer of such casualty, then the Buyer or the Seller may
terminate this Agreement pursuant to Section 10.1(g).
7.12. Environmental Matters. (a) The Massachusetts Department of
Environmental Protection has identified the following Massachusetts
Contingency Plan (310 C.M.R. 40.000) release sites at the Assets which have
not yet been closed under the MCP: Release Tracking Number (RTN): 3-15754, 3-
15243 and 3-0052, as identified on Schedule 7.12 attached hereto. The Seller
shall perform all Response Actions necessary to achieve a Class A or B
Response Action Outcome ("RAO") under the Massachusetts Contingency Plan for
Existing Releases at RTN 3-15243, 3-0052 and 3-15754. The Seller may use an
Activity and Use Limitation (AUL) to achieve one or more of the RAOs.
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However, the Seller shall not use an AUL that would impair the use of the
Assets for commercial or industrial activities or which would otherwise impair
the Buyer's operation or use of the Assets as operated and used by the Seller
as of the date of this Agreement, and the Seller shall be responsible for all
costs of preparing and submitting the AUL. The Buyer agrees to exercise
reasonable efforts to cooperate with the Seller's performance of the response
actions and the preparation and filing of the RAOs. The Buyer also agrees to
record promptly one or more AULs prepared by the Seller in the Middlesex
Registry of Deeds. The Seller agrees to perform necessary and reasonable
Response Actions to cure deficiencies, if any, identified by DEP in connection
with any audit performed within five (5) years of the Closing of RTN 3-15243,
3-0052 or 3-15754. The Seller shall have no obligation to perform, or pay
for, Response Actions at the Assets beyond what is required by this Section
7.12(a) or Section 7.12(c).
(b) The Seller shall have the right and license, from time to
time and at any time, to perform response actions or related support
activities at the Assets after the Closing; provided, however, that the
Seller's performance shall not unreasonably interfere with the Buyer's use of
the Assets. This access right will be at no cost to the Seller. The Seller
shall give the Buyer written notice of the nature of such action and the
date(s) on which such action is to be conducted no later than three (3) days
prior to initiating such action; in emergency situations, however, the Seller
need only give the Buyer such notice as is reasonable under the circumstances.
The Buyer shall, at the Seller's reasonable request from time to time,
cooperate with and give the Seller, its employees, consultants and
representatives reasonable access during normal business hours to portions of
the Assets necessary to perform such work.
(c) The Seller shall use commercially reasonable efforts to
obtain prior to the Closing insurance coverage on terms and conditions
reasonably acceptable to the Buyer which covers liabilities caused by Releases
at the Assets prior to the Closing which are not Existing Releases. If the
Seller is able to secure such environmental insurance coverage, it will assign
any recoveries under this policy to The Buyer and will add The Buyer as an
additional named insured. By way of example, but not by way of limitation,
such insurance coverage with a term of no less than ten years, a policy
aggregate of no less than $10,000,000, a deductible of no more than $500,000,
and a total premium of no more than $750,000 shall be deemed to be
commercially reasonable under this paragraph 7.12(c). Seller shall be solely
responsible for any and all Response Actions required to address any Releases
which are not Existing Releases but which occur prior to the Closing that may
be identified by any investigation undertaken by or at the request of an
insurance company for the purpose of procuring insurance coverage under this
paragraph 7.12(c).
7.13. Real Estate Matters. (a) Prior to the Closing, the Seller
shall take such actions as may be specified in the Specimen Title Policy that
are to be performed by the Seller so as to enable such Specimen Title Policy
to be issued to the Buyer.
(b) Seller agrees that upon the written request of Buyer it will
consent and will cause its electric company and steam company Affiliates to
consent to the relocation of the Easements so long as (i) Buyer irrevocably
agrees to bear the cost of such relocation, (ii) such relocation will be to
space within Buyer's ownership and will not materially adversely affect the
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operation of Seller's or Seller's Affiliate's transmission and distribution
business (except for down time associated with the cut over for such
relocation process in accordance with Good Utility Practices), and (iii) the
proposed relocation is consistent with Good Utility Practice. Seller further
agrees to condition any grant or assignment by it of the Easements on the
express agreement of its transferee to be bound by the terms and conditions of
this Section 7.13(b).
(c) As to any Easements not currently of record or reserved or
granted back to Seller at Closing, all of which are to be granted by Buyer at
Closing immediately after transfer of title to Buyer and prior to any mortgage
or other encumbrance, such Easements shall include standard cross-indemnity
provisions relating to personal injury, death, or property damage occurring as
a result of gross negligence or willful misconduct in the use of such
Easement, whereby each party agrees to indemnify the other for the
consequences of its own gross negligence or willful misconduct of those for
whom the indemnifying party is legally responsible.
(d) Those Easements to Seller's Affiliates attached as part of
Exhibit C-2 shall be granted substantially in the forms set forth and shall be
recorded prior to Closing.
7.14. Creditworthiness of Buyer. On the Closing, Buyer shall meet
the creditworthiness criteria set forth in Section 9.1 of the Transition
Agreement, provided, however, if Buyer does not meet such criteria, this
Section 7.14 shall be satisfied if Buyer has a net worth of $100 million at
the Closing and maintains the net worth of $100 million for two (2) years
after the Closing. To the extent the Buyer's net worth falls below $100
million during such two (2) year period, Buyer shall provide a guarantee from
a creditworthy entity or an irrevocable letter of credit, limited in each such
instance to the amount by which $100 million exceeds Buyer's net worth. Such
guarantee or letter of credit shall terminate at the end of such two year
period.
ARTICLE VIII.
CLOSING CONDITIONS
8.1. Conditions to Each Party's Obligations to Effect the
Transactions. The respective obligations of each party to effect the sale of
the Assets shall be subject to the fulfillment at or prior to the Closing Date
of the following conditions:
(a) The waiting period under the HSR Act shall have expired or
been terminated with no order, decree, judgment or injunction enjoining or
prohibiting the consummation of the transactions contemplated hereby having
been issued;
(b) No preliminary or permanent injunction or other order or
decree by any federal or state court which prevents or is reasonably likely to
prevent the consummation of the sale of the Assets contemplated hereby shall
be pending or shall have been issued and remain in effect (each party agreeing
to use its reasonable efforts to have any such injunction, order or decree
lifted) and no statute, rule or regulation shall have been enacted or
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interpreted by any State or Federal government or governmental agency in the
United States which prohibits the consummation of the sale of the Assets;
(c) All Federal, State and local government consents and approvals
required for the consummation of the sale of the Assets, including, without
limitation, the Seller Required Regulatory Approvals and the Buyer Required
Regulatory Approvals, shall have been obtained as Final Orders, each
reasonably acceptable in form and substance to the party that sought the
consent or approval granted by such Final Order; for purposes of this
Agreement, a "Final Order" means a final order that is not subject to
rehearing or judicial review; and for purposes of this clause(c), a Final
Order shall be deemed to be reasonably acceptable to the party seeking the
same if it complies in all material respects with the terms and conditions of
such party's application therefor and contains no additional terms or
conditions which would have a material adverse effect on such party;
(d) All consents and approvals for the consummation of the sale
of the Assets contemplated hereby required under the terms of any note, bond,
mortgage, indenture, contract or other agreement to which the Seller or the
Buyer, or any of their subsidiaries, are a party shall have been obtained,
other than those (i) which if not obtained, would not, in the aggregate, have
a Material, Adverse Effect, or (ii) which are governed by Section 7.4(c); and
(e) Chapter 164 of the Massachusetts General Laws, as amended by
Chapter 164 of the Acts of 1997, shall remain in full force and effect in
substantially the form it is in effect on the date of this Agreement, insofar
as the provisions thereof apply to the Seller, the Buyer or the transactions
contemplated by this Agreement or the Related Agreements.
(f) Each "Closing" as defined in (i) the Asset Sale Agreement
between Canal Electric Company and the Buyer regarding the sale and purchase
of the Canal Station (as defined therein) and related assets and (ii) the
Asset Sale Agreement between Montaup Electric Company and the Buyer regarding
the sale of Montaup Electric Company's 50% joint ownership interest in Canal
Unit 2 and related assets shall have occurred or shall occur concurrently with
the Closing hereunder.
8.2. Conditions to Obligations of the Buyer. The obligation of
the Buyer to effect the purchase of the Assets contemplated by this Agreement
shall be subject to the fulfillment at or prior to the Closing Date of the
following additional conditions:
(a) A Material Adverse Effect shall not have occurred and be
continuing;
(b) The Seller shall have performed and complied in all material
respects with the covenants and agreements contained in this Agreement which
are required to be performed and complied with by the Seller on or prior to
the Closing Date, and the representations and warranties of the Seller which
are set forth in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and as of the Closing Date as though
made at and as of the Closing Date;
(c) There shall be no Encumbrances on the Assets by virtue of
the Indentures;
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(d) The Buyer shall have received certificates from authorized
officers of the Seller, dated the Closing Date, to the effect that, to the
best of such officer's knowledge, the conditions set forth in Sections 8.2(a),
(b) and (c) have been satisfied;
(e) The Buyer shall have received an opinion from counsel to the
Seller, dated the Closing Date and satisfactory in form and substance to the
Buyer, substantially to the effect that:
(1) The Seller is a corporation organized, existing and in good
standing under the laws of the Commonwealth of Massachusetts and the
Seller has the corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby; and
the execution and delivery of this Agreement and the consummation of the
sale of the Assets contemplated hereby have been duly authorized by all
requisite corporate action taken on the part of the Seller;
(2) The Affiliates of the Seller party to the Related Agreements
are corporations organized, existing and in good standing under the laws
of the Commonwealth of Massachusetts with the requisite corporate power
and authority to execute the Related Agreements to which they are a
party and to consummate the transactions contemplated thereby; the
execution and delivery of the Related Agreements to which each is a
party and the consummation of the transactions contemplated thereby have
been duly authorized by all requisite corporate action on the part
thereof; and the Related Agreements have been executed and delivered by
each thereof;
(3) This Agreement and the Related Agreements have been executed
and delivered by the Seller and (assuming that the Seller Required
Regulatory Approvals and the Buyer Required Regulatory Approvals are
obtained) this Agreement and the Related Agreements are valid and
binding obligations of the Seller or the appropriate Affiliate of the
Seller, as the case may be, enforceable against them in accordance with
their terms, except (A) that such enforcement may be subject to
bankruptcy, insolvency, reorganization, moratorium or other similar laws
now or hereafter in effect relating to creditors' rights, and (B) that
the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to certain equitable defenses and to the
discretion of the court before which any proceeding therefore may be
brought;
(4) The execution, delivery and performance of this Agreement
and the Related Agreements by the Seller and the appropriate Affiliate
of the Seller will not constitute a violation of the Articles of
Organization or Bylaws, as currently in effect, of the Seller or such
Affiliate;
(5) The Bill of Sale, the Deed and the other documents described
in Section 4.3 are in proper form to transfer to the Buyer title to the
Assets; and
(6) No declaration, filing or registration with, or notice to,
or authorization, consent or approval of any governmental authority is
necessary for the consummation by the Seller of the Closing other than
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(i) the Seller Required Regulatory Approvals, all of such Seller Required
Regulatory Approvals having been obtained and being in full force and effect
with such terms and conditions as shall have been imposed by any applicable
governmental authority, and (ii) such declarations, filings, registrations,
notices, authorizations, consents or approvals which, if not obtained or made,
would not, in the aggregate have a Material Adverse Effect.
As to any matter contained in such opinion which involves the laws
of any jurisdiction other than the Federal laws of the United States or the
laws of the Commonwealth of Massachusetts, such counsel may rely upon opinions
of counsel admitted in such other jurisdictions. Any opinions relied upon by
such counsel as aforesaid shall be delivered together with the opinion of such
counsel. Such opinion may expressly rely as to matters of fact upon
certificates furnished by the Seller and appropriate officers and directors of
the Seller and by public officials.
8.3. Conditions to Obligations of the Seller. The obligation of
the Seller to effect the sale of the Assets contemplated by this Agreement
shall be subject to the fulfillment at or prior to the Closing Date of the
following additional conditions:
(a) The Buyer shall have performed in all material respects its
covenants and agreements contained in this Agreement which are required to be
performed on or prior to the Closing Date;
(b) The representations and warranties of the Buyer which are
set forth in this Agreement shall be true and correct in all material respects
as of the date of this Agreement and as of the Closing Date as though made at
and as of the Closing Date;
(c) The Seller shall have received a certificate from an
authorized officer of the Buyer, dated the Closing Date, to the effect that,
to the best of such officers' knowledge, the conditions set forth in Sections
8.3(a) and (b) have been satisfied;
(d) The Seller shall have received an opinion from counsel for
the Buyer, dated the Closing Date and satisfactory in form and substance to
the Seller and its counsel, substantially to the effect that:
(1) The Buyer is a limited liability company organized, existing
and in good standing under the laws of the State of Delaware and has the
power and authority to execute and deliver this Agreement and the
Related Agreements and to consummate the transactions contemplated
hereby and thereby; and the execution and delivery of this Agreement and
the Related Agreements and the consummation of the sale of the Assets
contemplated hereby have been duly authorized by all requisite action
taken on the part of the Buyer;
(2) This Agreement and the Related Agreements have been executed
and delivered by the Buyer and (assuming that the Seller Required
Regulatory Approvals and the Buyer Required Regulatory Approvals are
obtained) are valid and binding obligations of the Buyer, enforceable
against the Buyer in accordance with their terms, except (A) that such
enforcement may be subject to bankruptcy, insolvency, reorganization,
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moratorium or other similar laws now or hereafter in effect relating to
creditors' rights and (B) that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to certain
equitable defenses and to the discretion of the court before which any
proceeding therefore may be brought;
(3) The execution, delivery and performance of this Agreement
and the Related Agreements by the Buyer will not constitute a violation
of the Certificate of Organization or LLC Operating Agreement (or other
similar governing documents), as currently in effect, of the Buyer;
(4) Assumption Agreement and other instruments described in
Section 4.4 are in proper form for the Buyer to assume the Assumed
Liabilities; and
(5) No declaration, filing or registration with, or notice to,
or authorization, consent or approval of any governmental authority is
necessary for the consummation by the Buyer of the Closing other than
the Buyer Required Regulatory Approvals, all of such Buyer Required
Regulatory Approvals having been obtained and being in full force and
effect with such terms and conditions as shall have been imposed by any
applicable governmental authority.
As to any matter contained in such opinion which involves the laws
of any jurisdiction other than the federal laws of the United States and the
Commonwealth of Massachusetts, such counsel may rely upon opinions of counsel
admitted to practices in such other jurisdictions. Any opinions relied upon
by such counsel as aforesaid shall be delivered together with the opinion of
such counsel. Such opinion may expressly rely as to matters of facts upon
certificates furnished by appropriate officers and directors of the Buyer and
its Affiliates and by public officials.
ARTICLE IX.
INDEMNIFICATION
9.1. Indemnification. (a) The Seller will indemnify, defend and
hold harmless the Buyer from and against any and all claims, demands or suits
(by any Person), losses, liabilities, damages (including consequential or
special damages), obligations, payments, costs and expenses (including,
without limitation, the costs and expenses of any and all actions, suits,
proceedings, assessments, judgments, settlements and compromises relating
thereto and reasonable attorneys' fees and reasonable disbursements in
connection therewith) to the extent the foregoing are not covered by insurance
(each, an "Indemnifiable Loss"), asserted against or suffered by the Buyer
relating to, resulting from or arising out of (i) any breach by the Seller of
any covenant or agreement of the Seller contained in this Agreement, (ii) the
Excluded Liabilities, (iii) any breach by the Seller of any representation or
warranty set forth in Sections 5.1, 5.2 or 5.3 hereof, (iv) the failure of the
Seller to comply with any bulk sales or transfer laws, or (v) the gross
negligence or willful misconduct of the Seller, its Affiliates, or their
respective contractors while on the Buyer's property (including, without
limitation, any easement provided the Seller in the Deed or other document)
associated with the Kendall Station after the Closing.
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(b) The Buyer will indemnify, defend and hold harmless the
Seller from and against any and all Indemnifiable Losses asserted against or
suffered by the Seller relating to, resulting from or arising out of (i) any
breach by the Buyer of any covenant or agreement of the Buyer contained in
this Agreement, (ii) the Assumed Liabilities, (iii) any breach by the Buyer of
any representation or warranty set forth in Article VI hereof, or (iv) the
gross negligence or willful misconduct of the Buyer, its Affiliates, or their
respective contractors while on the Seller's premises associated with the
Kendall Station prior to or after the Closing.
(c) Any Person entitled to receive indemnification under this
Agreement (an "Indemnitee") having a claim under these indemnification
provisions shall make a good faith effort to recover all losses, damages,
costs and expenses from insurers of such Indemnitee under applicable insurance
policies so as to reduce the amount of any Indemnifiable Loss hereunder. The
amount of any Indemnifiable Loss shall be reduced (i) to the extent that
Indemnitee receives any insurance proceeds with respect to an Indemnifiable
Loss and (ii) to take into account any net Tax benefit recognized by the
Indemnitee arising from the recognition of the Indemnifiable Loss and any
payment actually received with respect to an Indemnifiable Loss.
(d) The expiration, termination or extinguishment of any
covenant, representation, warranty or agreement shall not affect the parties'
obligations under this Section 9.1 if the Indemnitee provided the Person
required to provide indemnification under this Agreement (the "Indemnifying
Party") with proper notice of the claim or event for which indemnification is
sought prior to such expiration, termination or extinguishment.
(e) Except as provided in clause (f) of this Section 9.1 and in
Section 10.2, the rights and remedies of the Seller and the Buyer under this
Article IX are exclusive and in lieu of any and all other rights and remedies
which the Seller and the Buyer may have under this Agreement or otherwise for
monetary relief with respect to (i) any breach or failure to perform any
covenant or agreement set forth in this Agreement, (ii) the Assumed
Liabilities or the Excluded Liabilities, as the case may be, (iii) the
representations and warranties of the Seller contained in Sections 5.1, 5.2
and 5.3 and the representations and warranties of the Buyer contained in
Article VI, or (iv) any liabilities described in Sections 9.1(a)(iv),
9.1(a)(v) or 9.1(b)(iv) hereof.
(f) The Buyer and the Seller each agree that notwithstanding any
provisions in this Agreement to the contrary, all parties to this Agreement
retain their remedies at law or in equity with respect to willful or
intentional breaches of this Agreement.
9.2. Defense of Claims. (a) If any Indemnitee receives notice
of the assertion of any claim or of the commencement of any claim, action, or
proceeding made or brought by any person who is not a party to this Agreement
or any Affiliate of a party to this Agreement (a "Third Party Claim") with
respect to which indemnification is to be sought from an Indemnifying Party,
the Indemnitee shall give such Indemnifying Party reasonably prompt written
notice thereof, but in any event not later than ten (10) calendar days after
the Indemnitee's receipt of notice of such Third Party Claim. Such notice
shall describe the nature of the Third Party Claim in reasonable detail and
shall indicate the estimated amount, if practicable, of the Indemnifiable Loss
that has been or may be sustained by the Indemnitee.
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The party defending the Third Party Claim shall (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. The parties shall cooperate in the defense of
the Third Party Claim. The Indemnitee shall make available to the
Indemnifying Party or its representatives all records and other materials
reasonably required for use in contesting any Third Party Claim (subject to
such confidentiality provisions as the Indemnitee may reasonably require) and
shall furnish such testimony and attend such conferences, discovery
proceedings, hearings, trials and appeals as may be reasonably requested by
the Indemnifying Party in connection therewith. If requested by the
Indemnifying Party, the Indemnitee shall cooperate with the Indemnifying Party
and its counsel in contesting any Third Party Claim that the Indemnifying
Party 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 Indemnifying Party shall reimburse the Indemnitee for any
expenses incurred by Indemnitee in cooperating with or acting at the request
of the Indemnifying Party.
(b) If within ten (10) calendar days after an Indemnitee
provides written notice to the Indemnifying Party of any Third Party Claim the
Indemnitee receives written notice from the Indemnifying Party that such
Indemnifying Party has elected to assume the defense of such Third Party Claim
as provided in Section 9.2(a), the Indemnifying Party shall not be liable for
any legal expenses subsequently incurred by the Indemnitee in connection with
the defense thereof; provided, however, that if the Indemnifying Party fails
to take reasonable steps necessary to defend diligently such Third Party Claim
within twenty (20) calendar days after receiving notice from the Indemnitee
that the Indemnitee believes the Indemnifying Party has failed to take such
steps, the Indemnitee may assume its own defense, and the Indemnifying Party
shall be liable for all reasonable expenses thereof. Without the prior
written consent of the Indemnitee, the Indemnifying Party shall not enter into
any settlement of any Third Party Claim which would lead to liability or
create any financial or other obligation on the part of the Indemnitee for
which the Indemnitee is not entitled to indemnification hereunder. If a firm
offer is made to settle a 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
Indemnifying Party desires to accept and agree to such offer, the Indemnifying
Party shall give written notice to the Indemnitee to that effect. If the
Indemnitee fails to consent to such firm offer within ten (10) calendar 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
Indemnifying Party as to such Third Party Claim 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 hereunder unless the Indemnitee shall have first sought the
consent of the Indemnifying Party in writing to such payment, settlement or
compromise and such consent was unreasonably withheld or delayed, in which
event no claim for indemnity therefor hereunder shall be waived.
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(c) Any claim by an Indemnitee on account of an Indemnifiable
Loss which does not result from a Third Party Claim (a "Direct Claim") shall
be asserted by giving the Indemnifying Party reasonably prompt written notice
thereof, stating the nature of such claim in reasonable detail and indicating
the estimated amount, if practicable, but in any event not later than ten (10)
calendar days after the Indemnitee becomes aware of such Direct Claim, and the
Indemnifying Party shall have a period of thirty (30) calendar days within
which to respond to such Direct Claim. If the Indemnifying Party does not
respond within such thirty (30) calendar day period, the Indemnifying Party
shall be deemed to have accepted such claim. If the Indemnifying Party rejects
such claim, the Indemnitee shall be free to seek enforcement of its rights to
indemnification under this Agreement.
(d) If the amount of any Indemnifiable Loss, at any time
subsequent to the making of an indemnity payment in respect, thereof, is
reduced by recovery, settlement or otherwise under or pursuant to any
insurance coverage, or pursuant to any claim, recovery, settlement or payment
by or against any other entity, the amount of such reduction, less any costs,
expenses or premiums incurred in connection therewith (together with interest
thereon from the date of payment thereof at the prime rate then in effect of
BankBoston), shall promptly be repaid by the Indemnitee to the Indemnifying
Party. Upon making any indemnity payment, the Indemnifying Party shall, to the
extent of such indemnity payment, be subrogated to all rights of the
Indemnitee against any third party in respect of the Indemnifiable Loss to
which the indemnity payment relates; provided, however, that (i) the
Indemnifying Party shall then be in compliance with its obligations under this
Agreement in respect of such Indemnifiable Loss and (ii) until the Indemnitee
recovers full payment of its Indemnifiable Loss, any and all claims of the
Indemnifying Party against any such third party on account of said indemnity
payment are hereby made expressly subordinated and subjected in right of
payment to the Indemnitee's rights against such third party. Without limiting
the generality or effect of any other provision hereof, each such Indemnitee
and Indemnifying Party shall duly execute upon request all instruments
reasonably necessary to evidence and perfect the above-described subrogation
and subordination rights. Nothing in this Section 9.2(d) shall be construed to
require any party hereto to obtain or maintain any insurance coverage.
(e) A failure to give timely notice as provided in this Section
9.2 will not affect the rights or obligations of any party hereunder except
if, and only to the extent that, as a result of such failure, the party which
was entitled to receive such notice was actually prejudiced as a result of
such failure.
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ARTICLE X.
TERMINATION AND ABANDONMENT
10.1. Termination. (a) This Agreement may be terminated at any
time prior to the Closing Date by mutual written consent of the Seller and the
Buyer.
(b) This Agreement may be terminated by the Seller or the Buyer
if the Closing shall not have occurred on or before eighteen months following
the date of this Agreement (the "Termination Date"); provided that the right
to terminate this Agreement under this Section 10.1(b) 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.
(c) This Agreement may be terminated by either the Seller or the
Buyer if (i) any governmental or regulatory body, the consent of which is a
condition to the obligations of the Seller and the Buyer hereunder, shall have
determined not to grant its consent, or shall condition such consent upon any
material change to the terms or conditions of this Agreement or the Related
Agreements or upon any other condition that materially affects the value of
the transactions contemplated hereunder for either party, and all appeals of
such determination shall have been taken and have been unsuccessful, (ii) one
or more courts of competent jurisdiction in the United States or any State
shall have issued an order, judgment or decree permanently restraining, en-
joining or otherwise prohibiting the Closing, and such order, judgment or
decree shall have become final and nonappealable or (iii) any statute, rule or
regulation shall have been enacted by any State or Federal government or
governmental agency in the United States which prohibits the consummation of
the Closing.
(d) This Agreement may be terminated by the Buyer, if there has
been a material violation or breach by the Seller of any agreement, covenant,
representation or warranty contained in this Agreement which has not been
waived by the Buyer and such violation or breach constitutes a Material
Adverse Effect.
(e) This Agreement may be terminated by the Seller, if there has
been a material violation or breach by the Buyer of any agreement, covenant,
representation or warranty contained in this Agreement which has rendered the
satisfaction of any condition to the obligations of the Seller to effect the
Closing impossible and such violation or breach has not been waived by the
Seller.
(f) This Agreement may be terminated by the Seller, if there has
been a material adverse change in the financial condition of the Buyer.
(g) This Agreement may be terminated by either of the Seller or
the Buyer in accordance with the provisions of Section 7.11(b) or (c).
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10.2. Procedure and Effect of Termination. In the event of
termination of this Agreement and abandonment of the transactions contemplated
hereby by either or both of the Parties pursuant to Section 10.1, written
notice thereof shall forthwith be given by the terminating Party to the other
Party and this Agreement shall terminate and the transactions contemplated
hereby shall be abandoned, without further action by any of the Parties
hereto. If this Agreement is terminated as provided herein, such termination
shall be without any liability of the Seller or the Buyer to the other in
respect of such termination, except as follows:
(a) In the event of termination of this Agreement by the Seller
pursuant to Section 10.1(e), then the Seller shall have the right to pursue
all remedies available to it in equity or at law in connection with the
violation or breach of this Agreement by the Buyer.
(b) In the event of termination of this Agreement by The Buyer
pursuant to Section 10.1(d), then the Buyer shall have the right to pursue all
remedies available to it in equity or at law in connection with the violation
or breach of this Agreement by the Seller.
(c) Notwithstanding anything herein to the contrary, neither the
Buyer nor the Seller shall be liable to the other for any losses, damages or
expenses under Section 10.2(a) or Section 10.2(b) in an amount in excess of
ten percent (10%) of the Purchase Price.
(d) Notwithstanding anything herein to the contrary, neither
party shall be liable to the other for any punitive, consequential, special,
incidental or indirect damages, including, without limitation, loss of revenue
or opportunity.
ARTICLE XI.
MISCELLANEOUS PROVISIONS
11.1. Amendment and Modification. Subject to applicable law, this
Agreement may be amended, modified or supplemented only by written agreement
of the Seller and the Buyer.
11.2. Waiver of Compliance. Except as otherwise provided in this
Agreement, any failure of any of the parties to comply with any obligation,
covenant, agreement or condition herein may be waived by the party entitled to
the benefit thereof only by a written instrument signed by the party granting
such waiver, but such waiver or failure to insist upon strict compliance with
such obligation, covenant, agreement or condition shall not operate as a
waiver of, or estoppel with respect to, any subsequent or other failure.
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11.3. No Survival. Each and every representation, warranty and
covenant contained in this Agreement (other than the covenants and obligations
contained in Sections 3.2, 3.3, 3.4, 7.2(b), 7.3, 7.4, 7.6(c), 7.7, 7.8, 7.10,
7.12 and 7.13 and in Articles IX, X and XI (which covenants shall expire in
accordance with their terms) and other than the representations and warranties
contained in Sections 5.1, 5.2, 5.3 and Article VI, which shall survive the
Closing for a period of one year), shall expire with, and be terminated and
extinguished by the consummation of the sale of the Assets 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.
11.4. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally or by
facsimile transmission, telexed or mailed by overnight courier or registered
or certified mail (return receipt requested), postage prepaid, to the parties
at the following addresses (or at such other address for a party as shall be
specified by like notice; provided that notices of a change of address shall
be effective only upon receipt thereof):
(a) If to the Seller, to:
Cambridge Electric Light Company
One Main Street
Cambridge, MA 02142
Attention: Michael Sullivan, Esq.
General Counsel
with a copy to:
David S. Balabon, Esq.
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
260 Franklin Street
Boston, MA 02110
(b) if to the Buyer, to:
Southern Energy New England, L.L.C.
900 Ashwood Parkway
Suite 500
Atlanta, GA
Attention: Randall E. Harrison
Vice President
with a copy to:
Robert C. Marshall, Esq.
Troutman Sanders
NationsBank Plaza, Suite 5200
600 Peachtree Street NE
Atlanta, GA 30308
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and
Andrew J. Newman, Esq.
Rubin and Rudman, L.L.P.
50 Rowes Wharf
Boston, MA 02110
11.5. Assignment. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor
any of the rights, interests or obligations hereunder shall be assigned by any
party hereto, other than to an Affiliate, including by operation of law,
without the prior written consent of the other party, nor is this Agreement
intended to confer upon any other Person except the parties hereto any rights
or remedies hereunder.
11.6. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Massachusetts
(regardless of the laws that might otherwise govern under applicable
Massachusetts principles of conflicts of law) as to all matters, including but
not limited to matters of validity, construction, effect, performance and
remedies.
11.7. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.8. Interpretation. The article and section headings contained
in this Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement.
11.9. Schedules and Exhibits. All Exhibits and Schedules referred
to herein are intended to be and hereby are specifically made a part of this
Agreement.
11.10. Entire Agreement. This Agreement embodies the entire
agreement and understanding of the Parties hereto in respect of the
transactions contemplated by this Agreement and supersede any and all prior
oral or written expressions, understandings or agreements between or among the
Parties with respect thereto.
11.11. 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 Person 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
Person to any Party, nor give any third Person any right of subrogation or
action against any Party.
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11.12. No Relationship. Nothing in this Agreement creates or
is intended to create an association, trust, partnership, joint venture or any
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. Neither Party is or shall act as or be the agent or
representative of the other Party.
11.13. 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.
IN WITNESS WHEREOF, the Seller and the Buyer have caused this
agreement to be signed by their respective duly authorized officers as of the
date first above written.
CAMBRIDGE ELECTRIC LIGHT COMPANY
By: /s/JAMES D. RAPPOLI
Name: James D. Rappoli
Title: Financial Vice President and Treasurer
SOUTHERN ENERGY NEW ENGLAND, L.L.C.
By: /s/RANDALL E. HARRISON
Name: Randall E. Harrison
Title: Vice President
