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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
CANAL ELECTRIC COMPANY
(Exact name of registrant as specified in its charter)
2-30057
(Commission File Number)
Massachusetts 04-1733577
(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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CANAL ELECTRIC COMPANY
Item 2. Acquisition or Disposition of Assets
On December 30, 1998, Canal Electric Company (the Company), a wholly-
owned subsidiary of Commonwealth Energy System, completed the sale of its non-
nuclear electric generation assets to Southern Energy Canal, L.L.C., a
subsidiary of Southern Company, for approximately $401 million. These
facilities represent 848.5 megawatts (mw) of electric capacity and have an
approximate book value of $66 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 Canal Unit 1 (566 mw) and its one-half interest in Canal
Unit 2 (282.5 mw) located in Sandwich, 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
are filed with this report:
Pro Forma Condensed Balance Sheet of Canal Electric Company at
September 30, 1998
Pro Forma Condensed Statements of Income of Canal Electric
Company:
Year Ended December 31, 1997
Nine Months Ended September 30, 1998
The Pro Forma Condensed Balance Sheet of Canal Electric 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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CANAL ELECTRIC 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 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 addition, it should be noted that the Company's future
financial statements will reflect the disposition only from December
30, 1998, the closing date. A more complete description of the
events leading up to the disposition 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 Canal Electric
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 Canal Electric
Company at September 30, 1998
Filed herewith as Exhibit 2:
99.2 Pro Forma Condensed Statements of Income of Canal
Electric 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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CANAL ELECTRIC 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.
CANAL ELECTRIC COMPANY
(Registrant)
JAMES D. RAPPOLI
James D. Rappoli,
Financial Vice President
and Treasurer
Date: January 14, 1999
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EXHIBIT 1
CANAL ELECTRIC 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 $470,674 $(212,596) $258,078
Less - Accumulated depreciation and
amortization 212,897 (146,260) 66,637
257,777 (66,336) 191,441
Add - Construction work in progress 6,281 (3,857) 2,424
264,058 (70,193) 193,865
INVESTMENTS
Other 2,828 - 2,828
CURRENT ASSETS
Cash 24 - 24
Accounts receivable 16,185 (13,500) 2,685
Prepaid property taxes 1,336 (891) 445
Inventories and other 3,145 (595) 2,550
20,690 (14,986) 5,704
DEFERRED CHARGES 26,833 (10,964) 15,869
$314,409 $ (96,143) $218,266
See accompanying notes.
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EXHIBIT 1
(continued)
CANAL ELECTRIC 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 $102,918 $ (42,918) $ 60,000
Long-term debt, including premiums, less
current sinking fund requirements 83,568 (23,568) 60,000
186,486 (66,486) 120,000
CAPITAL LEASE OBLIGATIONS 10,800 - 10,800
CURRENT LIABILITIES
Interim Financing 3,150 (3,150) -
Other Current Liabilities -
Current sinking fund requirements 350 (350) -
Accounts payable 17,347 (13,500) 3,847
Accrued taxes -
Income 248 - 248
Local property and other 1,668 (1,112) 556
Other 7,134 - 7,134
26,747 (14,962) 11,785
29,897 (18,112) 11,785
DEFERRED CREDITS
Accumulated deferred income taxes 68,703 (9,532) 59,171
Unamortized investment tax credits
and other 18,523 (2,013) 16,510
87,226 (11,545) 75,681
COMMITMENTS AND CONTINGENCIES
$314,409 $ (96,143) $218,266
See accompanying notes.
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EXHIBIT 2
CANAL ELECTRIC COMPANY
CONDENSED STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
(Actual and Pro Forma)
(Dollars in thousands)
(Unaudited)
Actual Adjustments Pro Forma
ELECTRIC OPERATING REVENUES $214,123 $(176,424) $ 37,699
OPERATING EXPENSES
Fuel used in production 115,313 (113,745) 1,568
Electricity purchased for resale 5,601 (5,601) -
Other operation and maintenance 37,916 (29,602) 8,314
Depreciation 19,214 (12,620) 6,594
Taxes -
Income 9,178 (2,051) 7,127
Local property 2,770 (1,954) 816
Payroll and other 768 (349) 419
190,760 (165,922) 24,838
OPERATING INCOME 23,363 (10,502) 12,861
OTHER INCOME 468 751 1,219
INCOME BEFORE INTEREST CHARGES 23,831 (9,751) 14,080
INTEREST CHARGES
Long-term debt 7,910 (4,070) 3,840
Other interest charges 1,093 (585) 508
9,003 (4,655) 4,348
NET INCOME $ 14,828 $ (5,096) $ 9,732
See accompanying notes.
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EXHIBIT 2
(continued)
CANAL ELECTRIC 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 $134,821 $(106,453) $ 28,368
OPERATING EXPENSES
Fuel used in production 66,371 (65,234) 1,137
Electricity purchased for resale 417 (417) -
Other operation and maintenance 28,165 (21,929) 6,236
Depreciation 15,116 (10,170) 4,946
Taxes -
Income 5,939 (321) 5,618
Local property 2,024 (1,412) 612
Payroll and other 594 (280) 314
118,626 (99,763) 18,863
OPERATING INCOME 16,195 (6,690) 9,505
OTHER INCOME 403 816 1,219
INCOME BEFORE INTEREST CHARGES 16,598 (5,874) 10,724
INTEREST CHARGES
Long-term debt 5,933 (3,053) 2,880
Other interest charges 347 25 372
6,280 (3,028) 3,252
NET INCOME $ 10,318 $ (2,846) $ 7,472
See accompanying notes.
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Exhibit 3
Canal Electric 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 Canal Electric Company (the
Company) as of September 30, 1998 have been adjusted to give effect to the
transaction between the Company and Southern Energy Canal, L.L.C.,
(Southern), a subsidiary of Southern Company that occurred on December 30,
1998. On that date, the Company sold its non-nuclear 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 long and
short-term debt with proceeds from the sale of the generating assets and
proceeds from the planned issuance of long-term debt by the Company ($60
million).
2. A reconciliation of the cash proceeds from the sale of assets and the
subsequent financing plan reflected in these financial statements is as
follows:
(Dollars in thousands)
Cash balance September 30, 1998 $ 24
Proceeds from sale of assets 401,091
Retirement of long-term debt (83,918)
Payment of short-term debt (3,150)
Payment to parent company (190,722)
Tax liability related to sale (127,055)
Issuance of long-term debt 60,000
Equity buy back (42,918)
Transaction costs (20,939)
Miscellaneous items 7,587
Cash balance pro forma $ 24
Income Statement
The proceeds from the sale of Canal Units 1 and 2 of $401,091,000 less
the book value of $66,336,000 resulted in a book gain of $334,755,000
(before transaction costs of $20,939,000) and an after-tax gain of
$190,722,000 which was paid to the Company's stockholder, Commonwealth
Energy System (the Parent). The net after-tax gain from the sale of Canal
Units 1 and 2 will reduce the stranded costs ultimately charged to
customers of affiliates Commonwealth Electric Company and Cambridge
Electric Light Company pursuant to the Company's divestiture filing
approved by the DTE.
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Exhibit 3
(continued)
Canal Electric Company
The pro forma income statement adjustments for fuel used in
production, electricity purchased for resale and other operation and
maintenance represent the amounts resulting from the assets sold.
Summary of Significant Pro Forma Adjustments
Debit Credit
(Dollars in thousands)
Entry 1:
Cash $401,091
Depreciation reserve 146,260
Property, plant and equipment $212,596
Gain from sale 334,755
Current tax expense 127,055
Accrued income tax 127,055
Deferred tax reserve 9,532
Provision for deferred taxes 9,532
ITC reserve 2,013
Amortization of ITC 2,013
Retained Earnings 190,722
Dividends declared to Parent 190,722
To record the sale of assets, the related gain, income tax and the
reversal of excess taxes and ITC relating to the generating assets that
were sold and the establishment of a liability to the Parent that
represents the net after-tax gain from the sale, pursuant to the Company's
divestiture filing approved by the DTE.
Entry 2:
Dividends declared to Parent $190,722
Accrued income taxes 127,055
Transaction costs 20,939
Miscellaneous expense 7,584
Cash $346,300
To record payment to Parent, income taxes on gain from sale and
transaction costs associated with the sale.
Entry 3:
Common stock $ 42,918
Cash $ 42,918
To record a reduction in the Parent's investment in the Company to
reflect the lower level of assets resulting from the sale.
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Exhibit 3
(continued)
Canal Electric Company
Debit Credit
(Dollars in thousands)
Entry 4:
Long-term debt $ 83,568
Current sinking fund requirement 350
Interim financing 3,150
Cash $ 87,068
To record the retirement of long and short-term debt.
Entry 5:
Cash $ 60,000
Long-term debt $ 60,000
To record the issuance of new long-term debt.
Entry 6:
Accounts Payable $ 13,500
Accounts Receivable $ 13,500
To reduce accounts payable and accounts receivable to reflect a more
appropriate level for the Company's continuing operations.
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Exhibit 4
ASSET SALE AGREEMENT
BY AND BETWEEN
CANAL ELECTRIC 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
3.5. Special Provisions Regarding NOx Compliance Expenditures . . . .15
ARTICLE IV.THE CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . .16
4.1. Time and Place of Closing. . . . . . . . . . . . . . . . . . . .16
4.2. Payment of Purchase Price. . . . . . . . . . . . . . . . . . . .16
4.3. Deliveries by the Seller . . . . . . . . . . . . . . . . . . . .16
4.4. Deliveries by the Buyer. . . . . . . . . . . . . . . . . . . . .17
ARTICLE V.REPRESENTATIONS AND WARRANTIES OF THE SELLER . . . . . . . . . . .17
5.1. Organization; Qualification. . . . . . . . . . . . . . . . . . .18
5.2. Authority Relative to this Agreement . . . . . . . . . . . . . .18
5.3. Consents and Approvals; No Violation . . . . . . . . . . . . . .18
5.4. Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
5.5. Financial Statements . . . . . . . . . . . . . . . . . . . . . .19
5.6. Undisclosed Liabilities. . . . . . . . . . . . . . . . . . . . .19
5.7. Absence of Certain Changes or Events . . . . . . . . . . . . . .20
5.8. Title and Related Matters. . . . . . . . . . . . . . . . . . . .20
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. . . . . . . . . . . . . . . . . . . . . . . .22
5.15. Condemnation . . . . . . . . . . . . . . . . . . . . . . .22
5.16. Certain Contracts and Arrangements . . . . . . . . . . . .22
5.17. Legal Proceedings, etc.. . . . . . . . . . . . . . . . . .22
5.18. Operating Permits. . . . . . . . . . . . . . . . . . . . .23
5.19. Regulation as a Utility. . . . . . . . . . . . . . . . . .23
5.20. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . .23
5.21. Entire Assets. . . . . . . . . . . . . . . . . . . . . . .23
ARTICLE VI.REPRESENTATIONS AND WARRANTIES OF THE BUYER . . . . . . . . . . .24
6.1. Organization . . . . . . . . . . . . . . . . . . . . . . . . . .24
6.2. Authority Relative to this Agreement . . . . . . . . . . . . . .24
6.3. Consents and Approvals: No Violation . . . . . . . . . . . . . .24
6.4. Availability of Funds. . . . . . . . . . . . . . . . . . . . . .25
6.5 Independent Evaluation . . . . . . . . . . . . . . . . . . . . .25
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
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7.5. Public Statements. . . . . . . . . . . . . . . . . . . . . . . .29
7.6. Consents and Approvals . . . . . . . . . . . . . . . . . . . . .29
7.7. Fees and Commissions . . . . . . . . . . . . . . . . . . . . . .30
7.8. Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . .31
7.9. Supplements to Schedules; Notice of Breach . . . . . . . . . . .31
7.10. Employees. . . . . . . . . . . . . . . . . . . . . . . . .31
7.11. Risk of Loss . . . . . . . . . . . . . . . . . . . . . . .33
7.12. Environmental Matters. . . . . . . . . . . . . . . . . . .34
7.13. Real Estate Matters. . . . . . . . . . . . . . . . . . . .35
7.14. Creditworthiness of Buyer. . . . . . . . . . . . . . . . .36
ARTICLE VIII.CLOSING CONDITIONS. . . . . . . . . . . . . . . . . . . . . . .36
8.1. Conditions to Each Party's Obligations
to Effect the Transactions. . . . . . . . . . . . . . . .36
8.2. Conditions to Obligations of the Buyer . . . . . . . . . . . . .37
8.3. Conditions to Obligations of the Seller. . . . . . . . . . . . .39
ARTICLE IX.INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . .40
9.1. Indemnification. . . . . . . . . . . . . . . . . . . . . . . . .40
9.2. Defense of Claims. . . . . . . . . . . . . . . . . . . . . . . .41
ARTICLE X.TERMINATION AND ABANDONMENT. . . . . . . . . . . . . . . . . . . .43
10.1. Termination. . . . . . . . . . . . . . . . . . . . . . . .43
10.2. Procedure and Effect of Termination. . . . . . . . . . . .44
ARTICLE XI.MISCELLANEOUS PROVISIONS. . . . . . . . . . . . . . . . . . . . .45
11.1. Amendment and Modification . . . . . . . . . . . . . . . .45
11.2. Waiver of Compliance.. . . . . . . . . . . . . . . . . . .45
11.3. No Survival. . . . . . . . . . . . . . . . . . . . . . . .45
11.4. Notices. . . . . . . . . . . . . . . . . . . . . . . . . .45
11.5. Assignment . . . . . . . . . . . . . . . . . . . . . . . .46
11.6. Governing Law. . . . . . . . . . . . . . . . . . . . . . .47
11.7. Counterparts . . . . . . . . . . . . . . . . . . . . . . .47
11.8. Interpretation . . . . . . . . . . . . . . . . . . . . . .47
11.9. Schedules and Exhibits . . . . . . . . . . . . . . . . . .47
11.10. Entire Agreement . . . . . . . . . . . . . . . . . . . . .47
11.11. No Third Party Beneficiaries . . . . . . . . . . . . . . .47
11.12. No Relationship. . . . . . . . . . . . . . . . . . . . . .47
11.13. Severability . . . . . . . . . . . . . . . . . . . . . . .47
EXHIBITS
Exhibit A - Assumption Agreement
Exhibit B - Bill of Sale
Exhibit C - Deed
Exhibit C-2 - Easements
Exhibit D - FIRPTA Affidavit
Exhibit E - Interconnection and Site Agreement
Exhibit F - Wholesale Transition Service Agreement
Exhibit G - Guaranty
<PAGE>
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ASSET SALE AGREEMENT
THIS ASSET SALE AGREEMENT, dated as of May 15, 1998, is by
and between Canal Electric Company, a Massachusetts corporation (the
"Seller"), and Southern Energy New England, L.L.C., a Delaware limited
liability company (the "Buyer"). Buyer and 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
Administrator 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 Canal
Station or used principally in connection with the Canal 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");
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(ii) all inventories of fuels, supplies, materials and spare
parts located on or in transit to Canal 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 in Schedule 1.1 (a)(4)(iii) as being
associated with Canal Station;
(iv) the contracts, agreements and personal property leases
listed on Schedule 5.16(a) as being associated with Canal Station
or described in Section 5.16(a)(iii), and which are assignable;
(v) the Operating Permits listed on Schedule 1.1 (a)(38)
that are transferred to 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 Canal 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 Seller and relating
to the Assets, including, without limitation, the rights of the
Seller in and to the name of the Canal 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) hereto, 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.
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(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.
(9) "Canal Station" means the electric generation
facilities known as the Canal Station located in Sandwich,
Massachusetts.
(10) "CERCLA" means the Federal Comprehensive Environmental
Response, Compensation and Liability Act.
(11) "CMR" means the Code of Massachusetts Regulations.
(12) "Code" means the Internal Revenue Code of 1986, as
amended.
(13) "Confidentiality Agreement" means the Confidentiality
Agreement, dated November, 1997, between Seller and the Buyer.
(14) "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.
(15) "Easements" means the reservations or grants or re-
grants of easements substantially in the forms comprising Exhibit C-2
hereto.
(16) "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".
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(17) "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.
(18) "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.
(19) "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
(20) "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.
(21) "Estimated Adjustment Amount" means the Seller's good
faith reasonable estimate of the Adjustment Amount and the Capital
Improvement Amount, which estimate shall be provided to the Buyer no
later than two Business Days before the Closing.
(22) "Exchange Act" means the Securities Exchange Act of
1934, as amended.
(23) "Existing Release" means the Release of Hazardous
Substances specifically identified in the reports listed in Schedule
1.1(a)(23).
(24) "Federal Power Act" means the Federal Power Act of
1935.
(25) "FERC" means the Federal Energy Regulatory Commission.
(26) "FIRPTA Affidavit" means the Foreign Investment in
Real Property Tax Act Certification and Affidavit substantially in the
form of Exhibit D hereto.
(27) "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
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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.
(28) "Guarantor" shall mean Southern Energy, Inc.
(29) "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.
(30) "Holding Company Act" means the Public Utility Holding
Company Act of 1935, as amended.
(31) "HSR Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
(32) "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.
(33) "Indentures" means the indentures listed on Schedule
1.1(a)(33) hereto.
(34) "Independent Accounting Firm" means such independent
accounting firm of national reputation mutually appointed by the
Seller and the Buyer.
(35) "Interconnection Agreement" means the Interconnection
and Site Agreement, substantially in the form of Exhibit E hereto.
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(36) "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.
(37) "MDTE" means the Massachusetts Department of
Telecommunications and Energy.
(38) "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)(38).
(39) "Permitted Encumbrances" means (i) those Encumbrances
set forth in Schedule 1.1(a)(39); (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
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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.
(40) "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.
(41) "Power Sales Agreements" means those unit contracts
between the Seller and each of Cambridge Electric Light Company,
Commonwealth Electric Company, Boston Edison Company, New England
Power Company and Montaup Electric Company, pursuant to which the
Seller sells the output from Unit 1 of the Canal Station to Cambridge
Electric Light Company and Commonwealth Electric Company, Boston
Edison Company, New England Power Company and Montaup Electric
Company, such contracts having an initial term presently running from
July 1, 1968 through October 10, 2002.
(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).
(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.
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(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.
(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
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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.
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) all cash, cash equivalents, bank deposits, accounts
receivable, and any income, sales, payroll or other tax
receivables;
(b) certificates of deposit, shares of stock, securities,
bonds, debentures, evidences of indebtedness, interests in joint
ventures, partnerships, limited liability companies and other
entities;
(c) 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;
(d) the transmission, distribution, substation and
communication facilities and related support equipment that are
generally located at or adjacent to the Canal Station and
belonging to Canal or one or more of its Affiliates and utilized
in the electric transmission and distribution businesses of Canal
or such Affiliates as identified in the diagram attached as
Exhibit 1 to the Interconnection Agreement; and those assets to
be sold to Commonwealth Electric Company on or before the Closing
listed on Schedule 2.2(d) hereto;
(e) 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;
(f) except to the extent specifically required by law, all
personnel records relating to employees of the Seller who become
employees of the Buyer; and
(g) the other rights and assets, if any, described or
referred to in Schedule 2.2(g).
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 Power Sales Agreements, the real
property leases, and the Operating Permits in accordance with the
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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 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
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Closing Date, provided that "off-site location" does not include
any location contaminated by Hazardous Substances migrating from
or to the Assets;
(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 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 Seller under Section
7.12 and any costs incurred by federal, state or local
governmental authorities imposed on Buyer or 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 Canal Station which would have been included in the Capital
Improvement Amount had such payment obligations been expended by
or for the account of 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;
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(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;
(xiv) 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 other than such obligations with
respect to payment for capital improvements to Canal Station
which would have been included in the Capital Improvement Amount
had such payment obligations been expended by or for the account
of Seller prior to the Closing; 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 hereunder
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) $401,091,000, plus (ii)
the Adjustment Amount, plus (iii) any amounts expended by 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 (x) 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) and (y) that are made
pursuant to Section 3.5. Notwithstanding the foregoing, no such
amounts shall be added to the Purchase Price unless the capital
improvements relating thereto were required to be made by either Good
Utility Practice or Section 3.5, and (except for capital improvements
made pursuant to Section 3.5) 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 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
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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.
(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 the 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 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
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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 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 or other 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.
3.5. Special Provisions Regarding NOx Compliance
Expenditures. (a) On or prior to the Closing Date, Buyer may request
that Seller undertake certain capital expenditures that are necessary
to bring the Assets into full or partial compliance with Nitrogen
Oxide ("NOx") standards which become applicable to the Assets in 1999.
Seller shall undertake such capital expenditures on behalf of Buyer as
reasonably directed by Buyer; provided, that in no event shall Seller
be obligated to commence such capital expenditures prior to November
15, 1998; and provided, further, that if Seller does not commence such
capital expenditures by such date, then the Purchase Price shall be
reduced by $1.35 million (but not by more than $6.75 million in the
aggregate in any twelve month period) for each 30 day period or
portion thereof preceding the Closing during which such capital
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expenditures have not commenced in a manner reasonably satisfactory to
Buyer.
(b) Any amounts expended by Seller under Section 3.5(a),
including interest thereon as provided for therein, shall constitute a
Capital Improvement Amount. In the event that the Closing does not
occur due to a default by Buyer of its obligations hereunder as a
result of which the Seller is entitled to terminate this Agreement
pursuant to Section 10.1(e), Buyer shall be liable for and shall pay
to Seller all amounts which would have been included in the Capital
Improvement Amount under Section 3.5(a) as of the date of termination
had this Agreement not been terminated.
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."
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) $401,091,000 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;
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(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;
(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 Seller's management had or should have had
following the conduct of an appropriate due diligence investigation
with respect to the matter in question).
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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.
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
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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 (including, without limitation, with respect to the
assignment to the Buyer of the Power Sales 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 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.
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.
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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.
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 the Seller or Commonwealth Energy
System pursuant to the Securities Act or the Exchange Act:
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(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.
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 employment 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 1973.
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 Seller in respect of
employees employed at the Canal 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
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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, 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.
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)(33), 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 is 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
Power Sales Agreements and 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 Power Sales Agreements or 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,
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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 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)(38) sets forth all Operating Permits.
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 Canal 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
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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.
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.
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(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
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 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;
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(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 Power Sales Agreements or 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 (30) 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;
(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 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 Seller or any of 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
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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 Confidenti-
ality 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 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.
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.
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(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 Power
Sales Agreement or 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
Power Sales Agreement or 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 Power Sales Agreement or
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 Power Sales Agreement or
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 Power Sales Agreement or Seller's
Agreement, and the Seller shall, to the maximum extent permitted by
law and such Power Sales Agreement or 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 Power
Sales Agreement or 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
Power Sales Agreement or 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 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 Canal Station after the date of this Agreement, including,
without limitation, the capital improvements set forth on 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 Canal Station, including, without
limitation, in connection with fuel and inventory procurement and
maintenance, and have a designated representative of the Buyer at the
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Canal 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 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.
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
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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) Buyer shall assume primary responsibility for securing
the transfer or reissuance of the Operating Permits effective as of
the Closing Date. 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
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) Buyer notifies the
Seller prior to Closing, (ii) Buyer continues to make commercially
reasonable efforts to obtain a transfer or reissuance of such
Operating Permits after the Closing and (iii) 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 the Closing Date resulting from Buyer's operation of
the Assets following the Closing Date. In no event shall Buyer use or
otherwise rely on an Operating Permit issued to Seller beyond one year
after Closing unless 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 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
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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.
(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) Buyer is required to offer
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employment, from and after the Closing Date, to those employees
employed by 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 480, Utility Workers' Union of America, AFL-CIO (the "Local
480") 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 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 Seller is a party with
Local 480 in connection with the Assets (collectively, the "Collective
Bargaining Agreement"), and the Memorandum of Understanding between
Seller and Local 480 (the "MOU"). From and after the Closing Date,
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, Buyer will
accept and fulfill all obligations under the MOU that are designated
for Buyer, including but not limited to the obligation of Buyer to
recognize Local 480 as the collective bargaining agent of the Union
Employees to the extent such obligations are identified in Schedule
7.10(b).
In the event that 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, 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 480, 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) 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. 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, Buyer shall waive all
limitations as to pre-existing condition exclusions and waiting
periods for Union Employees who become employees of Buyer unless such
exclusions would have applied to the Union Employees had they remained
employed by the Seller.
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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 Buyer shall sell the
Assets to a third party prior to the expiration of the existing
collective bargaining agreement or negotiated extension thereof, 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) Buyer is not required to employ any employees of
Seller other than the Union Employees (the "Nonunion Employees");
provided, that with respect to any Nonunion Employee who is employed
by Buyer whose employment is terminated by 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 Seller if the
Nonunion Employee had remained employed by Seller until the date of
such termination, under severance plans, policies, or agreements of
the Seller in effect immediately prior to the Closing.
(e) Seller agrees to timely perform and discharge all
requirements under the WARN Act and under applicable state and local
laws and regulations for the notification of its employees arising
from the sale of the Assets to Buyer up to and including the Closing
Date for those employees who will become employees from and after the
Closing Date. After the Closing Date, Buyer shall be responsible for
performing and discharging all requirements under the WARN Act and
under applicable state and local laws and regulations for the
notification of its employees with respect to the Assets.
(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
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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): 4-13791 and 4-13525. Seller shall perform all
Response Actions necessary to achieve a Response Action Outcome
("RAO") under the Massachusetts Contingency Plan for Existing Releases
at RTN 4-13791 and 4-13525. For the areas marked as MW-2 Disposal
Site Area, MW-4 Disposal Site Area, MW-7 Disposal Site Area, and MW-14
Disposal Site Area and RICWIL Disposal Site Area on Schedule 7.12,
Seller shall achieve a Class A or B RAO for Existing Releases. No
condition or requirement of the RAO described herein shall
unreasonably impair the Buyer's operation and use of the Assets as
operated and used by Seller as of the date of this Agreement and
Seller shall be responsible for all costs of complying with the RAOs
described herein, including, without limitation, all costs of
satisfying and performing all conditions and requirements of the Class
C RAO subject to the limitations described below, performing
groundwater monitoring, institutional and engineering controls, and
any contingent remedy. For the areas marked MW-8 Disposal Site Area
on Schedule 7.12, Seller shall use commercially reasonable efforts
(such efforts to be mutually determined and approved by Buyer and
Seller, such approval not to be unreasonably withheld by either party)
to obtain a Class A or B RAO including (a) performing necessary and
appropriate Response Actions pursuant to the Massachusetts Contingency
Plan; and (b) seeking reclassification of the groundwater at the site
if requested by Buyer. Seller's obligation to use commercially
reasonable efforts to achieve a Class A or B RAO shall terminate upon
Seller's aggregate expenditure of $500,000 or the five (5) year
anniversary of the Closing, whichever comes first. If Seller is
unable to obtain a Class A or B RAO at MW-8 Disposal Site Area
pursuant to the obligations and limitations described above, Seller
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shall submit a Class C RAO with DEP thereby terminating any further
obligation of the Seller for MW-8 Disposal Site Area, and, in such
case, Seller shall pay to Buyer the balance, if any, of $500,000 minus
the expenditures by Seller hereunder for efforts to obtain a Class A
or B RAO. Buyer agrees to exercise reasonable efforts to cooperate
with Seller's performance of the Response Actions and the preparation
and filing of the RAOs. 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 4-13791 and 4-13525. 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) 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. Seller shall give 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, Seller need only give Buyer such notice
as is reasonable under the circumstances. Buyer shall, at Seller's
reasonable request from time to time, cooperate with and give Seller,
its employees, consultants and representatives, reasonable access
during normal business hours to portions of the Assets necessary to
perform such work.
(c) 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 Seller is able to secure such environmental insurance
coverage, it will assign any recoveries under this policy to Buyer and
will add 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,
Seller shall take such actions as may be specified in the Specimen
Title Policy that are to be performed by 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 Affiliate 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 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
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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).
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 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;
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(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 Cambridge Electric Light Company and the Buyer
regarding the sale and purchase of the Kendall 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;
(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
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the Assets contemplated hereby have been duly authorized by all
requisite corporate action taken on the part of the Seller;
(2) The Affiliates of 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 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 (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.
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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, 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
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(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 Section 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 Canal Station after the Closing.
(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 Canal
Station prior to or after the Closing.
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(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 Seller contained in Sections 5.1, 5.2 and 5.3 and the
representations and warranties of 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) Buyer and 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.
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
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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.
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.
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(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, enjoining 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).
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:
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(a) In the event of termination of this Agreement by
Seller pursuant to Section 10.1(e), then 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 Buyer.
(b) In the event of termination of this Agreement by Buyer
pursuant to Section 10.1(d), then 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 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
plus, in the case of Buyer, any amounts it is required to pay to
Seller under Section 3.5(b).
(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.
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
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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:
Canal Electric 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
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.
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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.
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.
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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.
CANAL ELECTRIC 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
